Staffing Company Seeks Additional Expenses Incurred From U.S. Gov.

Just In Time Staffing, a staffing services company, filed suit in the United Court of Federal Claims (COFC) against the United States government for expenses it incurred during labor negotiations in connection with a government contract. The U.S. government filed a motion to dismiss because Just in Time Staffing did not state a claim on which relief could be granted and the COFC did not have subject matter jurisdiction.

Rule of Law

When a court is asked to dismiss a case for lack of subject matter jurisdiction, all factual allegations in the complaint are accepted as true and they are construed in the most favorable light for the plaintiff. The plaintiff is required to bear the burden of establishing jurisdiction by preponderance of the evidence. In order for Just In Time Staffing to “survive a motion to dismiss,” its complaint needed to have included sufficient factual allegations that, if true, would ‘state a claim to relief that is plausible on its face.’”

Background

Just In Time Staffing was awarded a contract with the U.S. Army Health Medical Command’s Health Contracting Activity (MEDCOM) in 2014. The contract was to provide medical clerks and administrative staffing services to the Carl R. Darnell Army Medical Center in Fort Hood, Texas. The International Union of Operating Engineers Local Union 351, AFL-CIO (Union) filed a petition with the National Labor Relations Board (NLRB” to require Just In Time’s “non-government employee subcontractors to vote to become members of a labor union.” The Plaintiff spent over $105,000 in consulting and legal expenses for negotiating a Collective Bargaining Agreement (CBA) with the labor union. Plaintiff’s expenses included $92,000 for hiring a labor attorney to negotiate with the union. Just In Time Staffing requested MEDCOM not exercise the contract’s first option year because the terms of the CBA would have caused the Plaintiff to perform at an economic loss. MEDCOM agreed not to exercise the contract’s first option year but denied a request for equitable adjustment (REA) for costs of labor relations negotiations the Plaintiff requested.

Just In Time filed and amended its complaint in July 2017. The amended complaint stated the plaintiff was impermissibly required to exercise government authority; entitled to an equitable adjustment, attorney fees and costs; defendant breached the contract; and the defendant breached the duty to disclose superior knowledge. The U.S. government filed an amended motion to dismiss in August 2017. In November 2017, the Court heard oral arguments and then in May 2019, transferred to the judge who ruled on it.

U.S. Court of Federal Claims Conclusion Had Jurisdiction

In its June 11, 2019 decision, the COFC found it had jurisdiction to hear the case based on the Tucker Act. It was the court’s contention that the case fell within the Contract Disputes Act (CDA) because the contract required the plaintiff to provide administrative staffing services to MEDCOM. Under the CDA, jurisdiction requires that a claim be submitted to a contracting officer and that the officer be issued a final decision on that claim. The Court has jurisdiction over a claim if it arises from the “same operative facts” and requests the same relief as a claim presented of the Claim officer. The Court must determine whether each claim, not the entire case, satisfies the jurisdictional standard.

The Court determined it has jurisdiction to adjudicate the plaintiff’s inherently governmental function claim and equitable adjustment claims. The amended complaint was presented to the Contracting Officer for a final decision. The plaintiff demonstrated its performance of inherently governmental functions by negotiating with the union on the government’s behalf. The Court stated the defendant misunderstood the plaintiff’s claim by arguing the plaintiff’s claims was against its own employees or labor union. The Court however, noted the plaintiff’s claim is against the government, allowing the Court to hold jurisdiction. The Court noted the REA does not state the “Government’s conduct caused a constructive contract change,” but it does provide the facts which the constructive contract claim is based. The plaintiff’s claim that the court had jurisdiction to hear its equitable adjustment claim was presented to the Contracting Officer and the claim presented to the officer was a written demand for which the officer issued a final decision.

Plaintiff’s Failure to State a Claim Upon Which Relief May Be Granted

The Court concluded Just In Time Staffing did not allege sufficient facts to show it performed an inherently governmental function negotiation with the labor union. According to the Federal Acquisition Regulation (FAR), contracts are not to be used for the performance of “inherently governmental functions.” This type of function is one that is related to the public interest to mandate performance by Government employees. The National Labor Relations Act (NLRA) requires employers to conduct labor relations with their own employees. The Court noted the plaintiff’s employees that attempted to unionize were the plaintiff’s, not the government, as indicated in the “non-personal services” nature of the contract. The Court also stated the plaintiff’s duty under the NLRA to negotiate with its employees did not make the U.S. government responsible for its additional expenses.

The Court held the plaintiff was not entitled to an equitable adjustment due to a constructive change in the contract. In order to claim for a constructive change, Just In Time Staffing would need to have shown it performed work beyond the contract requirements, and the additional work was ordered by the government. The Court concluded Just In Time did not undertake a governmental function and had the duty to “confer in good faith” with the labor union, nor did the government order the additional work.

The U.S. government’s amended motion to dismiss was granted and Just In Time’s complaint was dismissed. However, Just in Time filed an amended contract claim with the contracting officer and that claim is still pending.

If you have questions about this case, or find yourself in a similar situation, contact Whitcomb Selinsky PC at (866) 476-4558.