Piliero Mazza & Pargament, PLLC Vol. IV, Issue 4 July/August 2002

An Update for Federal Contractors and Commercial Businesses

  A R T I C L E S


  Homeland Security


  Supreme Court Ruling Expands "Direct Threat" Defense to Employers in ADA Action


  Moving Closer to E-Government


  Small Businesses Get Another Chance at Tax Relief


Homeland Security

There's much to watch on Capitol Hill this month as Congress finishes up the Fiscal Year 2002 Supplemental Appropriations bill, corporate accountability and continues to work on the FY 2003 budget. But what seems to have the Hill abuzz is the legislative process involved in the creation of the Department of Homeland Security (DHS). 

The massive undertaking of creating a new, cabinet-level department began a little over a month ago, on June 18, 2002, when Congress received President Bush's legislative agenda for the creation of DHS. Since then, Congress has been working feverishly to have a working document for the President's signature by September 11, 2002. The following is an attempt to chronicle the bill from its inception to where it stands today while keeping an eye out for small business and government contracting interests.

With the President's legislative agenda as a blueprint for the DHS, the House of Representatives began work on June 18th  with H. Res. 447 that created the nine-member bi-partisan House Select Committee for Homeland Security. Majority Leader Richard Armey (R-TX) was appointed chairman and House Minority Whip Nancy Pelosi as ranking member. On June 25th, Maj. Leader Armey, with 119 cosponsors, introduced the President's legislation as H.R. 5005 and referred the legislation to 12 standing House committees that will be impacted by the new legislation. Although these committees will offer recommendations, the Select Committee will have the final say as to what is actually presented for vote on the House floor. 

In a sense, the Senate's work on the Department of Homeland Security began several months ago. On May 2, 2002, Senators Joseph Lieberman (D-CT), Bob Graham (D-FL), and Arlen Specter (R-PA) introduced S.2452. The bill would establish a Department of National Homeland Security at the cabinet level and would direct the department secretary to develop policies and procedures. This bill is quite similar to the President's legislative package with differences in how to coordinate information sharing among agencies and how to incorporate first responders from local law enforcement and other agencies. The Government Affairs Committee, chaired by Sen. Lieberman, has asked for input from standing committees, but will be responsible for legislation to be presented to the full Senate. Its work began on June 20 with the testimony from Homeland Security Director Thomas Ridge. The Committee expects to have a bill ready by July 24.

House committee members began testifying before the House Select Committee on July 17. While the member's testimonies generally supported the concept of DHS, there were areas of concern as to its implementation.

One concern was that after the agencies become part of the new department, their non-security missions would be neglected. This is especially true concerning the transfer of the Coast Guard, the Federal Emergency Management Agency (FEMA), the Immigration and Naturalization Services (INS), and the Customs Services to DHS as requested by the Administration. Committee recommendations varied significantly concerning these agencies. For example, the Senate Government Reform Committee agreed to move the Coast Guard, FEMA and INS, but the House Transportation and Infrastructure Committee opposed moving the Coast Guard and FEMA. The House Judiciary Committee would divide the INS between enforcement and services and recommended moving only enforcement. It also would move only a portion of FEMA to the new department. The House Ways and Means Committee would move the Customs Services to DHS but Treasury would continue to have the authority for the collection of revenue from Customs and those revenues would continue to be used as previously authorized.

Although most of the committee work concerns the big picture items of homeland security that may create contracting opportunities, there are also some specific areas of interest. The Senate Government Reform Committee recommended a provision for shielding private industry from the Freedom of Information Act when they voluntarily share cyber attack information with the Federal government. Another provision allows the sharing of security information between companies within the same industry without being subject to antitrust laws.

With regard to procurements, Rep. Davis (R-VA) was successful in adding an aspect of his Streamlined Acquisition Reform Act (which the Administration has opposed) as an amendment. His amendment would allow other transactions (OTs) for the purchasing of goods and services. OTs are not subject to most regulatory oversight.

Also included were incentive awards of up to $20,000 for innovative solutions to homeland defense problems. Twenty-five percent of the incentive awards in a fiscal year would be reserved for small business.

In addition, the House Science Committee recommended that an office be created within DHS for an Undersecretary for Science and Technology that could impact the environmental industry. The undersecretary would be responsible for coordinating science and technology throughout the department and for conducting research and development support for the department’s mission.

After hearing from the standing committees, the House Select Committee began mark-up on July 19.  During the session, several amendments were introduced, but in most cases, the amendments were defeated along party lines. In addition, the mark contained an item not previously mentioned: the setting of limits on a company's liability for harm caused by products supplied by the company to DHS. Rep. Martin Frost's (D-TX) amendment to remove the item failed by a four to five vote. The Committee is expected to complete its work in time to have the bill ready for the full House by July 24.

On July 19, Sen. Lieberman submitted a substitute amendment to S. 2452. His bill also includes the Coast Guard, FEMA, the Customs Service, and the Transportation Safety Agency in DHS. The Senate Governmental Affairs Committee is expected to begin markup on July 24.

After the House and Senate have decided on their respective versions of the legislation, the bills will then head to conference where the conference committee will iron out the differences. At this rapid pace, it is quite likely that Congress will have legislation ready for the President's signature by September 11, 2002.



Supreme Court Ruling Expands Direct Threat Defense
to Employers in ADA Action

On June 10, 2002, the United States Supreme Court issued a unanimous decision in Chevron U.S.A., Inc. v. Echazabal, expanding the definition of direct threat under the Americans with Disabilities Act (ADA).  This decision reversed a September 2000 ruling of the Federal Court of Appeals for the Ninth Circuit.

Mario Echazabal worked for an independent contractor at one of Chevron's oil refineries. Based upon reports from its doctors that Mr. Echazabal's continued employment in the refinery would aggravate his existing liver condition, Chevron asked that he be either reassigned to a job which would not involve exposure to toxins or removed from the refinery.  In response to this request, the contractor terminated Mr. Echazabal.

The ADA creates an affirmative defense for employers taking action under a qualification standard "shown to be job-related for the position in question and . . . consistent with business necessity." Such a qualification standard may include "a requirement that an individual shall not pose a direct threat to the health or safety of the other individuals in the workplace," if the individual cannot perform the job safely with a reasonable accommodation.

At issue before the Supreme Court was whether Chevron could restrict Mr. Echazabal from working in the refinery on the grounds that working there would pose a direct threat to his own health. The lower court, relying on the plain statutory language of the ADA, held that the direct threat defense applied only when the employee posed a risk to the health and safety of others. 

The Supreme Court disagreed, holding that the ADA permits employers to deny employment to individuals with disabilities when such employment would pose a direct threat to the employee's own health or safety.

The Court's decision in Echazabal obviously provides employers with greater latitude in making hiring and termination decisions with regard to individuals who pose direct safety threats in the scope of their employment. Employers can consider threats to the safety and health of the disabled individuals themselves, as well as risks to co-workers and others. However, employers should be mindful that the defense may only be invoked on the basis of an individualized assessment using the most current medical knowledge. The Court held that the direct threat defense must be "based on a reasonable medical judgment that relies on the most current medical knowledge and/or the best available objective evidence," and upon an expressly "individualized assessment of the individual's present ability to safely perform the essential functions of the job."

If you have any questions regarding the Echazabal case or any related issues, please contact Jeffrey J. Pargament or Frank C. Gulin at (202) 857-1000.




On June 27, 2002, the Senate passed the E-Government Act of 2001 (S. 803). The bill, introduced by Senator Joseph Lieberman (D-CT) on May 1, 2001, seeks to enhance the management and promotion of electronic government services and processes by establishing the Office of Electronic Government within the Office of Management and Budget. It also seeks to establish a broad framework of measures that require using Internet-based information technology to enhance citizen access to government information and services. In addition, this bill would authorize $345 million over four years to implement interagency e-government projects and studies. S. 803 has been referred to the Committee on Government Reform in the House of Representatives for further consideration.

In addition to the passage of S. 803, Senators Lieberman and Thompson (R-TN) established a website entitled " e-government: An Experiment in Interactive Legislation." This new website, part of the Senate Committee on Government Affairs website, discusses the importance of taking advantage of the increased productivity and reduced costs that can be achieved through the Internet.

The President has also jumped onto the E-Government bandwagon.  On July 10, 2002, President Bush distributed a memo to the heads of executive departments and agencies stressing the importance of e-government initiatives. Like Senators Lieberman and Thompson, President Bush noted that using e-government initiatives is an important step to having a more responsive and cost-effective government.

What does this move toward e-government mean for government contractors?  It will depend on which government entity the contractor is dealing with. Recently, the General Services Board of Contract Appeals took the first step in allowing parties to file and access documents online.  However, this will not apply to all documents. Public documents may be filed and accessed via the Internet, while confidential documents would not. On the other hand, the Defense Finance Accounting Service, which previously accepted contract documents sent via e-mail, will no longer accept these documents because of security concerns. Therefore, the move toward e-government can be expected to be an incremental process which will occur on an agency-by-agency basis.



Small Businesses Get Another Chance At Tax Relief

On July 11, 2002, Representative William "Bill" Thomas (R-CA), Chairman of the House Ways and Means Committee, introduced legislation that, among other things, would increase the amount a business can expense in a fiscal year. Although the bill, entitled the American Competitiveness and Corporate Accountability Act of 2002, primarily addresses issues relative to helping U.S. companies compete in the global market, the expensing provision is similar to small business legislation introduced in April by Representative Wally Herger (R-CA). Both bills would amend Section 179 of the Internal Revenue Code concerning depreciation of assets by increasing the amount that a company can expense from $25,000 to $40,000.

The technology industry urged Chairman Thomas to include the expensing language in his legislation. The current five-year depreciation schedule on computer equipment is seen as out of step with the reality of the industry and its rapidly changing technology that frequently makes computer equipment obsolete before it is fully depreciated.


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