Salary and bonus cap for ETA-funded recipients

Accessible letter PDF: https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2006/TEGL05-06_508.pdf

CLASSIFICATION
         EMPLOYMENT AND TRAINING                             Workforce Investment System –
      ADMINISTRATION ADVISORY SYSTEM                         System Wide
         U.S. DEPARTMENT OF LABOR                            CORRESPONDENCE SYMBOL
              Washington, D.C. 20210                         OPDR
                                                             DATE August 15, 2006

TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 5-06

TO:            ALL EMPLOYMENT AND TRAINING ADMINISTRATION (ETA)
               GRANTEES, CONTRACTORS AND OTHER RECIPIENTS OF ETA
               APPROPRIATED FUNDS

FROM:          EMILY STOVER DeROCCO /s/
               Assistant Secretary

SUBJECT:       Implementing the Salary and Bonus Limitations in Public Law 109-234

1.    Purpose. To inform states and other Employment and Training Administration (ETA)-fund
      recipients and sub-recipients of a new limitation on salary and bonus payments that can be
      made with funds appropriated to ETA and provide guidance on implementing this new
      provision.

2.    References. Pub. Law 109-234

3.    Background. On June 15, 2006, President Bush signed into law an emergency
      supplemental appropriations bill, Public Law 109-234. Section 7013 of this public law
      limits salary and bonus compensation for individuals who are paid by funds appropriated to
      the Employment and Training Administration and provided to recipients and sub-
      recipients. Specifically, section 7013 states:

           None of the funds appropriated in Public Law 109-149 or prior Acts under the
           heading ‘Employment and Training’ that are available for expenditure on or after
           the date of enactment of this section shall be used by a recipient or subrecipient
           of such funds to pay the salary and bonuses of an individual, either as direct costs
           or indirect costs, at a rate in excess of Executive Level II, except as provided for
           under section 101 of Public Law 109-149. This limitation shall not apply to
           vendors providing goods and services as defined in OMB Circular A-133.
           Where States are recipients of such funds, States may establish a lower limit for
           salaries and bonuses of those receiving salaries and bonuses from subrecipients
           of such funds, taking into account factors including the relative cost-of-living in
           the State, the compensation levels for comparable State or local government
           employees, and the size of the organizations that administer Federal programs
           involved including Employment and Training Administration programs.

4.    Policy Guidance. This policy guidance provides the workforce investment system with
      information on programs that are impacted by this provision; the effective date and cycles
      of funding that are impacted; covered individuals and transactions; the application of the

     limitation; related grant and contract modifications; action required; and where to direct
     inquiries.

5.   Programs Impacted by this Provision. The new salary and bonus limitation applies to all
     programs and activities undertaken through grants and contracts funded by an
     appropriation to ETA. Therefore, this limitation applies to all programs administered by
     ETA, unless the program falls within an exception outlined below.

     The salary and bonus limitation also applies to programs funded by an ETA appropriation,
     but administered by another agency. For example, certain programs funded by ETA
     appropriations are administered by the Department of Labor’s Veterans Employment and
     Training Service or the Department of the Interior. ETA will inform agencies which
     administer such programs of this new requirement. Any questions should be directed to the
     administering agency.

     A recipient or sub-recipient may receive funds from ETA that are a combination of funds
     appropriated to ETA and funds that are not appropriated to ETA. In this situation, the
     limitations of section 7013 as described in this TEGL apply to the portion of the funding
     that is appropriated to ETA.

     Exceptions:

     This limitation does not apply to programs funded by H-1B grant funds. These funds are
     received from employer paid fees and are not appropriated. Therefore, the programs they
     fund are not covered by the salary and bonus limitation. Examples of such programs
     include activities funded through the WIRED Initiative and some High Growth Job
     Training Initiative grants.

     The limitation also does not apply to the Disaster Unemployment Assistance (DUA)
     program. These funds are appropriated to the Federal Emergency Management Agency
     (FEMA) and transferred to ETA.

     WIA incentive grants financed only through Department of Education appropriations are
     not covered by this limitation.

     Public law 109-234 specifically states that it does not change the limitations that Public
     Law 109-149 section 101 previously set for individuals paid through the Job Corps
     program. These limitations are still in effect. Questions concerning the applicability of the
     new provision to any Job Corps funds should be directed to Job Corps officials.

     Any limitation on payments to individuals contained in grants or contracts with ETA which
     are more restrictive than Public Law 109-234 are not changed by Public Law 109-234. For
     example, any limitation on consultant fees in grants or contracts are generally more

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     restrictive than the limitations in Public Law 109-234, when broken down as an hourly
     rate, and will continue to apply.

6.   Effective Date and Funding Cycles Impacted. The limitation on salaries and bonuses
     applies to funds appropriated in Fiscal Year 2006 under Public Law 109-149 and prior year
     appropriation funds under the heading ‘Employment and Training’ that remain available
     for expenditure. It applies to funds that are available for expenditure on or after June 15,
     2006. It does not apply to funds expended before June 15, 2006.

7.   Covered Individuals and Transactions. The provision in Public Law 109-234 limits the use
     of funds used by a recipient or sub-recipient to pay for salary and bonuses of an individual.
      Examples of recipients include entities and their funded partners that receive contracts and
     grants from ETA. Examples of sub-recipients include sub-contractors or sub-grantees.
     Any salary or bonus payments made by a recipient or a sub-recipient to an individual are
     covered by this limitation. This limitation applies to such payments regardless of whether
     they are paid as a direct or an indirect cost.

     However, according to the law this limitation does not apply to “vendors” as defined in
     OMB Circular A-133. A vendor means a dealer, distributor, merchant, or other seller
     providing goods or services that are required for the conduct of a Federal program.
     Characteristics indicative of a payment for goods and services received by a vendor are
     when the organization: (1) Provides the goods and services within normal business
     operations; (2) Provides similar goods or services to many different purchasers; (3)
     Operates in a competitive environment; (4) Provides goods or services that are ancillary to
     the operation of the Federal program; and (5) Is not subject to compliance requirements of
     the Federal program.

     For example, an office supply business that provides "off the shelf" paper, printers,
     computers, software, etc. to other businesses, individuals, as well as to grant programs
     would be a vendor. Also, a training institution which provides one of its accounting
     courses/classes to any interested individual as well as to clients of an ETA funded grant
     program is acting as a vendor. However, when that same training institution develops and
     delivers a training course specifically for an ETA funded program it is acting as a sub-
     recipient even if others are allowed to attend and pay for the course/class at the institution's
     tuition rate.

8.   Application of the Limitation. The law sets the limit on salaries and bonuses at a rate
     equivalent to no more than Executive Level II. A salary table providing this rate is listed
     on the Federal Office of Personnel Management Web site (www.opm.gov) under Federal
     Salaries & Wages. These levels are adjusted annually and the Web site is updated
     annually. For FY 2006, the limit is set at $165,200. The Public Law 109-234 limitation
     does not apply to benefits that are not salary and bonuses. For example, fringe benefits,
     insurance premiums or pension plans paid by a recipient or sub-recipient are not included
     in this calculation.

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      Individuals can receive payments from funds not impacted by section 7013 in addition to
      funds that are impacted by 7013. For example an entity may receive funds from other
      Federal programs, from the state, from municipalities, or even private funds. In those
      instances the total sum of any employee’s salary and bonuses may be higher than Executive
      Level II. However, in instances where funds impacted by section 7013 only pay a portion
      of the salary, the section 7013-impacted funds may only be charged for the share of the
      employee’s salary attributable to the work on the section 7013-impacted grant or contract.
      That portion cannot exceed the Executive Level II rate. For example, if 25 percent of an
      employee’s time is attributable to work performed under grants covered by the provision
      and the annual Executive Level II amount is $165,200, no more than $41,300 can be
      charged to ETA during the year.

      If not already done, all affected recipients or sub-recipients must implement these
      requirements retroactively to the date of enactment, June 15, 2006. This provision means
      that salary payments will need to be adjusted back to June 15, 2006.

      Bonuses: The restriction applies to both salaries and bonuses. The sum of all bonuses
      received over the previous 12-month period when added to the employee’s salary may not
      at any time exceed the limitation. For example, an employee paid at a $162,000 may not
      receive bonuses in any 12-month period that exceeds $3,200, assuming the limitation of
      $165,200.

      When states are the recipients of the funds, states can set a limit below Executive Level II
      for salaries paid by sub-recipients. However, states should take the factors listed in section
      7013 into account when re-designating the limit.

9.    Grant and Contract Modifications. Please be advised ETA will modify appropriate grants
      and contracts to conform to the new requirements of Public Law 109-234.

10.   Action Required. All recipients of ETA appropriated funds should become familiar with
      the requirements of Public Law 109-234. States shall inform all staff, sub-recipients (sub-
      grantees and contractors) and Local Workforce Investment Boards of the contents of these
      instructions. Discretionary grantees should similarly familiarize themselves, their sub-
      recipients (sub-grantees and sub-contractors) with this guidance. If not already done, all
      affected ETA fund recipients or sub-recipients must implement these new requirements
      retroactively to the date of enactment, June 15, 2006.

11.   Inquiries. States, discretionary grantees and other ETA appropriated fund recipients should
      direct all inquiries to their Grant Officer, Contract Officer or Federal Project Officer.

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