Force Account Labor & Equipment Costs, Section 705(c)

Appeal Brief

Summary Paragraph

In response to the coronavirus (COVID-19) pandemic, as part of Grants Manager Project 722364, the Maple Grove Hospital Corporation (Applicant) requested force account labor, including $129,130.00 in Public Assistance (PA) for premium pay. To support its claim, the Applicant provided a predisaster labor policy and a post-disaster labor policy, which outlined the provisions of its premium pay. FEMA issued a Determination Memorandum (DM) finding that $84,410.00 claimed for premium pay based on the Applicant’s predisaster labor policy was eligible for PA but $44,720.00 for the additional amount paid based on the post-disaster labor policy was ineligible. The Applicant appealed, seeking $84,410.00 for the increased rate of the premium pay costs denied by FEMA. The Applicant claimed that its premium pay costs are eligible because it followed predisaster pay policies. FEMA denied the appeal, finding that the Applicant’s predisaster and post-disaster labor policies did not include non-discretionary criteria. Consequently, FEMA denied the Applicant’s total claim of $129,130.00 for premium pay, including $44,720.00 previously identified as eligible in the DM. FEMA noted that no funds had been awarded or obligated under the project prior to the first appeal decision. The Applicant submits its second appeal, requesting $129,130.00, claiming that its premium pay costs are tied to a predisaster, non-discretionary labor policy. The Minnesota Department of Public Safety (Recipient) transmitted the Applicant’s appeal expressing its support and asserting that, under section 705(c) of the Stafford Act, FEMA is barred from seeking reimbursement through the state for the $44,720.00 previously identified as eligible. 

Authorities

• Stafford Act §§ 403(a)(3), 705(c).
• 42 U.S.C. § 5205(c)(1).
• 44 C.F.R § 206.225(a)(1), 2 C.F.R. § 200.403(g).
• PAPPG, at 21, 23, and 133.
• Medical Care Policy, at 4.
• FP 205-081-2, Stafford Act Section 705(c), at 1-2, 5.
• Oregon Shakespeare Festival Association, FEMA-4499-DR-OR, at 3.

Headnotes

• FEMA determines the eligibility of overtime, premium pay, and compensatory time costs based on the applicant’s predisaster written labor policy, provided, among other things, the policy has set non-discretionary criteria for when the applicant activates various pay types.
  • The Applicant did not demonstrate that its predisaster written labor policy sets non-discretionary criteria for when it activates premium pay.
• FEMA is barred from deobligating payments made for a project to a state or local government if the payment was authorized by an approved agreement.
• Payments were not made for the project, and the Applicant is private non-profit. 

Conclusion

FEMA finds the claimed premium pay costs were not provided under a labor policy that meets FEMA requirements. In addition, section 705(c) of the Stafford Act does not apply.

Appeal Letter

Appeal Analysis

Background

The coronavirus (COVID-19) pandemic resulted in a major disaster declaration for the state of Minnesota on April 7, 2020, with an incident period of January 20, 2020, through May 11, 2023. The Maple Grove Hospital Corporation (Applicant), a private nonprofit (PNP) entity that operates a medical care facility, sought Public Assistance (PA) for costs associated with its COVID-19 response activities. FEMA prepared Grants Manager Project (GMP) 722364 to capture the Applicant’s claimed work and costs. The claimed costs included $129,130.00 for incentive opportunity premium pay (premium pay), which was offered to employees in addition to their overtime pay as an incentive to work extra shifts.[1] In support, the Applicant provided a memorandum dated August 2, 2019 (predisaster labor policy), which introduced the premium pay as a trial plan to fill shifts in the event of unanticipated, urgent needs. The predisaster labor policy, which specified tiered premium pay rates, stipulated that the plan “may be initiated and approved by on-call leadership…on a shift-by-shift basis” and “if deemed necessary, management has the right to discontinue the incentive trial.”^[2] The Applicant also submitted memorandums dated after the disaster (post-disaster labor policies), which increased the premium pay rates outlined in the predisaster policy.^[3]

On February 8, 2024, FEMA issued a Determination Memorandum (DM) denying $84,410.00 for premium pay costs that were based on the increased rates contained in the Applicant’s post-disaster labor policy. FEMA stated that, per PA policy, it may reimburse premium pay based on the Applicant’s predisaster written labor policy, provided the policy, among other things, has set non-discretionary criteria for when it activates the pay, and if these requirements are not met, FEMA limits PA funding to the Applicant’s non-discretionary, uniformly applied pay rates. Thus, FEMA found that $84,410.00 in costs based on the increased premium pay rates from the post-disaster labor policies were ineligible for PA. However, FEMA stated that $44,720.00 in premium pay was eligible for PA because the Applicant’s predisaster labor policy established the rates associated with those costs.

First Appeal

The Applicant appealed, seeking PA reimbursement of $84,410.00 for the premium pay costs denied by FEMA. The Applicant discussed the challenges of staffing the hospital in response to COVID-19 and explained that its premium pay program was created as a flexible tool, establishing a minimum premium rate that could be adjusted with market trends. The Applicant maintained that its claimed premium pay costs were eligible because it followed a predisaster pay policy, and the costs were reasonable and equitable based on the extenuating circumstances created by COVID-19. In a letter dated April 8, 2024, the Minnesota Homeland Security and Emergency Management (Recipient) forwarded the Applicant’s appeal with its support. 

On September 30, 2024, the FEMA Region 5 Regional Administrator denied $129,130.00 in claimed premium pay costs because the costs were not tied to a labor policy that met the non-discretionary criteria. FEMA stated that the Applicant’s predisaster labor policy included discretionary criteria for when it should be activated. FEMA found that the Applicant’s predisaster labor policy specifically stipulated that premium pay was activated and offered according to manager discretion and may be cancelled if management deems necessary. Additionally, FEMA stated that the Applicant’s decision to increase the premium pay rates during the disaster showed that the labor policy allowed for discretion. Thus, FEMA denied the Applicant’s appeal for $84,410.00. FEMA further noted that because the predisaster labor policy included discretionary criteria, FEMA had erred in previously approving the $44,720.00 that represented the predisaster rate. FEMA noted that no funds had been awarded or obligated under GMP 722364 and a new version of the project would be developed to account for the first appeal decision.

Second Appeal

The Applicant submits it second appeal for $129,130.00 stating that its premium pay costs meet FEMA’s policy requirements. The Applicant emphasizes that its incentive program was in effect prior the COVID-19 pandemic and that the decision to pay increased rates during the pandemic had no effect on whether the Incentive Opportunity policy was uniformly applied. Additionally, the Applicant explains that although the Incentive Opportunity Plan refers to initiation and approval by department leadership, it had no choice but to initiate the policy during the pandemic. Moreover, the Applicant states that FEMA’s denial in its first appeal response is inconsistent with FEMA’s appeal policy. The Applicant states it was improper for FEMA to expand the scope of the appeal to reevaluate the eligibility of the $44,720.00 it did not appeal. 

In a letter dated January 10, 2025, transmitted the Applicant’s appeal to FEMA. The Recipient expresses support for the Applicant’s appeal and states that under section 705(c) of the Robert T. Stafford Disaster Relief and Emergency Assistance (Stafford) Act, FEMA is barred from seeking reimbursement through the state.[4]

Discussion

Force Account Labor & Equipment Costs

FEMA is authorized to provide assistance for emergency protective measures to save lives and protect public health and safety.^[5] In response to COVID-19, certain labor costs associated with medical staff providing treatment to COVID-19 patients may be eligible.^[6] FEMA determines the eligibility of overtime, premium pay, and compensatory time costs based on the applicant’s predisaster written labor policy, provided the policy: (1) does not include a contingency clause that payment is subject to Federal funding; (2) is applied uniformly regardless of a Presidential declaration; and (3) has set non-discretionary criteria for when the Applicant activates various pay types.^[7]If these requirements are not met, FEMA limits PA funding to the Applicant’s non-discretionary, uniformly applied pay rates.[8] Costs must be directly tied to the performance of eligible work and adequately documented.^[9] It is the applicant’s responsibility to provide documentation to substantiate its claim as eligible and to clearly explain how those records support its appeal.^[10]

Here, the Applicant requests reimbursement for premium pay costs paid to its employees during the disaster. However, the Applicant did not demonstrate that its predisaster written labor policy sets non-discretionary criteria for when it activates premium pay. The predisaster labor policy stipulates that the Applicant may choose to activate its premium pay on a shift-by-shift basis, based on the judgment of on-call leadership. Additionally, if deemed necessary, management has the right to discontinue the premium pay policy. Likewise, the Applicant chose to increase the premium pay rates after the disaster, which further demonstrates the discretionary nature of the labor policy, and shows the policy was not uniformly applied regardless of a Presidential declaration. Although this type of flexibility may be necessary to meet the fluctuating circumstances of a hospital, the Applicant’s predisaster labor policy does not satisfy FEMA’s policy criteria. Thus, the Applicant’s premium pay costs totaling $129,130.00 are ineligible for PA.^[11]

The Applicant also contends that FEMA’s denial of $44,720.00 that was initially approved in the DM was improper. However, because the Applicant’s labor policies (whether predisaster or post-disaster) do not comply with FEMA requirements for reimbursement, none of the Applicant’s premium pay costs are eligible for PA. Thus, FEMA was correct to deny the amount mistakenly identified as eligible in the DM.[12] 

Section 705(c)

Section 705(c) of the Stafford Act provides that a state or local government is not liable for reimbursement or any other penalty for any payment made pursuant to the Stafford Act if: (1) the payment was authorized by an approved agreement specifying the costs; (2) the costs were reasonable; and (3) the purpose of the grant was accomplished.[13] The approved agreement specifying the costs for a particular project consists of the obligated project worksheet together with the governing FEMA-State Agreement.[14]

The Recipient asserts that section 705(c) of the Stafford Act bars FEMA from seeking reimbursement of the originally approved $44,720.00. However, FEMA policy clarifies that section 705(c) does not apply to PNPs.^[15]Additionally, FEMA is not seeking reimbursement, as it never obligated funding for the premium pay costs at issue; thus, the first condition of 705(c) is not met.[16] Consequently, FEMA is not barred from denying funding for these costs.

Conclusion

The claimed premium pay costs were not provided under a labor policy that meets FEMA policy requirements. In addition, section 705(c) of the Stafford Act does not apply. Therefore, this appeal is denied.