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WHAT CONTRACTORS MUST KNOW IN 2015: KEY CHANGES IN LABOR/EMPLOYMENT LAWS

Presentation for National 8(a) Association 2015 Summer Conference by Robert Tompkins, Howard Trickey, and Sarah Curtis

June 17, 2015

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Overview

» “Fair Play and Safe Workplaces” Proposed Rule» New OFCCP Sex Discrimination Guidance» New Government Contractor Minimum Wage

Requirements» New Human Trafficking Requirements» Whistleblower Protection Trends» Protecting Trade Secrets – The requirements and

limitations of the Procurement Integrity Act

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Fair Pay And Safe Workplaces

» Executive Order issued by Obama in July 2014 » Proposed Rule issued May 28 – comments due July

27» Requires disclosure of violations of numerous labor

and employment laws » Prohibits pre-dispute arbitration agreements for some

contractors» Imposes “Transparent” paycheck standards » Significant impact on relationship between primes and

subs

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Fair Pay And Safe Workplaces: Self-Disclosure Requirement

» Contractors and subs must report violations to Contracting Officers (COs)

» 15 categories of labor and health and safety laws covered, including: - FLSA - OSHA

- NLRA - Davis-Bacon

- SCA - FMLA

- Title VII - ADA

- ADEA - “Equivalent” state laws

» Primes must report on subcontractors, assist with compliance and impose remedial measures

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Proposed Rule: Report Contents

» If an offeror discloses a violation or violations, it must then submit specific information concerning the violation. This information, which contractors must update semi-annually, is to include:

- the labor law violated- the case number, inspection number, charge number, docket

number, or other unique identification number- the date rendered- the name of the court, arbitrator(s), agency, board, or commission

rendering the determination or decision- a copy of the violation determination (unless otherwise publicly

available)- any additional information the prospective contractor believes is

necessary to demonstrate responsibility, such as remedial measures or mitigating circumstances

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Proposed Rule: Must Include Violations Even If Not Final

» Even determinations, decisions or judgments that are subject to appeal or further review must be reported by contractors. More specifically, the proposed FAR amendments state:- An administrative merits determination is a notice or finding of an

enforcement agency following an investigation. It may be final or it may be subject to appeal or further review.

- An arbitral award or decision is an arbitrator or arbitral panel determination that a labor law violation has occurred, or that enjoined or restrained a violation, including determinations that are not final or are subject to being confirmed, modified, or vacated by a court and including determinations resulting from private or confidential proceedings.

- A civil judgment is a judgment or order issued by a federal or state in court determining that a labor law violation occurred or enjoining or restraining a violation, including those that are not final or are subject to appeal. Summary judgment decisions and/or injunction decisions are included in this category.

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Proposed Rule: Violations Will Be Publicly Available In FAPIIS

» Disclosure of basic information about the labor violations will be made publicly available in the Federal Awardee Performance and Integrity Information System (FAPIIS)

» The government is also working on development of a single website for reporting labor law violations under the new regulations

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Fair Pay And Safe Workplaces: Self-Disclosure Requirement

» Three-year look back » All contracts with value exceeding $500,000» Must update disclosures every six months» Impact pre-award: COs must consider information in

pre-award responsibility determinations» Impact post-award: COs must consider whether

further enforcement action is necessary (i.e., compliance agreements, contract termination, debarment)

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Proposed Rules: Primes’ Responsibilities In Subcontracting

» Prime contractors must evaluate labor violation information when determining subcontractor responsibility in connection with subcontracts (other than those for commercially available off-the-shelf items) with an estimated value exceeding $500,000 ˗ Applies to subcontractors at any tier and the FAR clause

must be flowed down to noncommercial subcontracts meeting the threshold

˗ Contractors may decide to conduct the evaluations for all qualifying subcontractors at any tier, or devise and manage a program imposing the requirements on higher-tier subcontractors

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Proposed Rules: Primes’ Responsibilities In Subcontracting (cont’d)

» Subcontractors must represent whether they have any labor law violations and, if they do, provide the same information about the violations as prime contractors must supply the CO

» Prime contractors must then evaluate their subcontractors’ responsibilities using the analysis applied by COs: ˗ Prime contractors must determine whether their subcontractors’

disclosures warrant further action, including requiring a new or enhanced labor compliance agreement, requiring compliance assistance, or discontinuing the subcontract relationship

˗ The proposed regulations state that prime contractors may seek assistance from DOL in making the requisite subcontractor responsibility determination, but neither the proposed regulations nor the DOL Guidance contains much detail about how this consultation is to work

» Entirely unprecedented dynamic

» What do you do if you compete with your prime/sub on other work? How will you get/protect this information?

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Fair Pay And Safe Workplaces: Additional Requirements

» Contractors must provide “transparent” paychecks to workers covered by FLSA, Davis Bacon, & SCA˗ To include hours worked, regular pay, overtime pay,

deductions

» Prohibition on pre-dispute arbitration agreements˗ Applies to primes and subs with contracts for

noncommercial items over $1 million

˗ Bars arbitration agreements for claims under Title VII, sexual harassment or assault

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Fair Pay And Safe Workplaces: Implementation

» Application to specific contracts will not occur until an interim or final rule amending the FAR is issued ˗ Proposed Rule was issued on May 28, 2015

˗ DOL Guidance was published simultaneous

» Implementation may be delayed by legal challenges such as: ˗ EO and proposed rule exceeds constitutional authority

˗ EO and proposed rule runs contrary to existing statutes

» Congressional action also may follow (i.e., a “no funds” amendment blocking further implementation)

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Fair Pay And Safe Workplaces: Implementation (cont’d)

» Congressional hearing addressing the complexity of and potential burdens imposed on federal contractors

» White House Fact Sheet states EO will be “implemented on new contracts in stages, on a prioritized basis, during 2016”

» NPRM issued May 28, 2015, with comments due July 27, 2015

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Fair Pay And Safe Workplaces: Preparation For Compliance

» Proposed rule has a three year look back, so beginning to inventory pending matters that could lead to reportable violations

» Evaluate any impacts of decentralized management on information gathering

» Consider changes to subcontracts and process for monitoring subcontractor compliance

» Evaluate employment agreements and procedures relating to paychecks

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OFCCP Sex Discrimination Regulations

» Propose major substantive changes to Sex Discrimination Guidelines˗ Addressing behaviors and practices not previously

expressly regulated

˗ Identifies specific discriminatory practices

» Requirements for federal government contractors, subcontractors and federally assisted construction contractors and subs

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OFCCP Sex Discrimination Regulations (cont’d)

» Generally seeks to align guidelines with case law and policy as evolved over last 40 years

˗ Codifies prohibition against discrimination based on gender identity or transgender status

˗ Prohibits sexual stereotyping

˗ Prohibits sex-based compensation discrimination

˗ Prohibits discrimination on basis of pregnancy and childbirth• Adds health insurance and leave requirements

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OFCCP Sex Discrimination Regulations: Implementation

» January 30, 2015 Proposed Rulemaking˗ Comment period ended March 31, 2015

» Administration by OFCCP will provide new enforcement mechanisms ˗ Aggrieved employees can file administrative charge

under Title VII or with the OFCCP

˗ OFCCP has ability to seek remedies such as debarment that are not otherwise available

˗ Additional compliance area for OFCCP audits

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OFCCP Sex Discrimination Regulations: Preparation For Compliance

» Review current sex discrimination practices and policies to make sure they address both overt and inherent discrimination based on sex

» Consider management and employee training programs that provide examples of prohibited conduct similar to those addressed in the proposed regulations

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Minimum Wage For Contractor Personnel

» December 15, 2014: FAR Council issued interim rule implementing minimum wage for certain contractor personnel˗ Companion to DOL final rule published as required by

February 2014 Executive Order

» $10.10 per hour for contracts awarded after January 1, 2015

» Annual adjustments to be announced by DOL for 2016 and beyond

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Minimum Wage For Contractor Personnel (cont’d)

» Applies to covered workers under covered contracts, including SCA and DBA

» Applies to workers covered by the FLSA who work in support of SCA- and DBA-covered contracts for at least 20% of their time

˗ Calculated on a workweek basis

˗ Working “in connection with” but not directly on

» Only applies to hourly non-exempt employees

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Minimum Wage For Contractor Personnel (cont’d)

» Employees subject to lower CBA provisions, must still be paid minimum wage

» Minimum wage cannot be met by furnishing fringe benefit equivalents

» Primes responsible for compliance by their immediate subs (more limited than DOL final rule)

» Suspension and debarment potential remedies for violations

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Ending Trafficking In Persons

» Implements Executive Order 13627 entitled “Strengthening Protections Against Trafficking in Persons in Federal Contracts” and Title XVII of the 2013 NDAA “Ending Trafficking in Government Contracting”

» Amends the Combating Trafficking in Persons clause (FAR 52.222-50), adds certification clause (FAR 52.222-56) and applicable FAR Part 22 sections

» FAR Case 2013-001 - Final Rule effective March 2, 2015

» DFARS Case 2013-D007 – Further Implementation of Trafficking in Persons Policy – Final Rule effective January 29, 2015

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Ending Trafficking In Persons: Requirements

» All Contractors and Subcontractors must: ˗ Establish policies and procedures to ensure employees,

subcontractors and agents do not engage in or support trafficking activities

˗ Immediately disclose to the CO and agency IG “credible information” of violations of prohibited activities• Information must be sufficient to identify the nature and extent of

offense and individuals responsible

• Provide timely and complete responses to auditors and investigators

• Cooperate fully in providing reasonable access to facilities and staff

˗ Protect all employees suspected of being victims or witnesses

˗ Provide suitable remedies including termination

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Ending Trafficking In Persons: Prohibitions

» Regulatory Prohibitions ˗ Engaging in severe forms of trafficking in persons

˗ Procuring commercial sex acts

˗ Using forced labor

˗ Destroying, confiscating or otherwise denying an employee access to his/her identity or immigration documents

˗ Using misleading or fraudulent practices during recruitment of employees or offering of employment

˗ Using recruiters that do not comply with local labor laws of the country in which the recruiting takes place

˗ Charging employees recruitment fees

˗ Failing to provide return transportation or pay for the cost of return transportation upon the end of employment for an employee who is not a national and was brought into another country for the purpose of working on a U.S. government contract or subcontract

˗ Providing or arranging housing that fails to meet host country housing and safety standards

˗ Failing to provide an employment contract (if required by law or contract) within a requisite time period containing specific information and in a language the employee understands

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Ending Trafficking In Persons: Remedies

» Government Remedies ˗ Enter the Violation in FAPIIS

˗ Remedies included in FAR 52.222-50• Removal of employees from contract

• Requiring termination of a subcontract

• Suspension of contract payments

• Loss of award fee

• Decline to exercise options

• Termination for default

• Suspension or debarment

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Ending Trafficking In Persons: Compliance Plan

» Compliance Plan required for contracts for non-COTS supplies acquired OCONUS or services to be performed OCONUS if the estimated value of the contract exceeds $500,000

» Compliance plan must be posted at worksite or on website

» Mitigating factor when determining remedies for violations

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Ending Trafficking In Persons: Compliance Plan (cont’d)

» Compliance Program Minimum Requirements included in FAR 52.222-50(h):

˗ An awareness program to inform employees of the government’s policy prohibiting trafficking-related activities

˗ A process for reporting prohibited activity without fear of retaliation• including access to Global Human Trafficking Hotline 1-844-888-FREE or

help@befree.org

˗ A recruitment and wage plan that only allows use of recruiting companies that train their employees, prohibit charging recruitment fees to the employee, and ensure that wages meet host country legal requirements

˗ A housing plan that ensures that housing meets host country housing and safety standards

˗ Procedures to monitor and detect violations by agents and subcontractors at any tier and to terminate agents, subcontracts, or subcontractors’ employees upon detection

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Ending Trafficking In Persons: Certification

» New FAR Clause 52.222-56 – Certification Regarding Trafficking in Persons Compliance Plan˗ Applicable for non-COTS supplies acquired and services

performed OCONUS AND estimated value exceeds $500,000

˗ Certifying that: • Implemented a compliance plan to prevent prohibited activities

and to monitor, detect and terminate subcontractors engaging in prohibited activities

• Conducted due diligence that neither the offeror nor any proposed agents, subcontractors, or subcontractors’ agents engaged in prohibited activities, or if violations found, appropriate remedial and referral actions have been taken

» Pre-Award Certification

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Ending Trafficking In Persons: Certification (cont’d)

» Apparent successful offeror must provide Compliance Plan Certification prior to contract award˗ Certifications required from subcontractors if

subcontracts meet threshold requirements above

˗ Annual certifications required after award

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Ending Trafficking In Persons: DFARS Requirements

» Contractors must display the “DoD Combating Trafficking in Persons and Whistleblower Protection” hotline posters for non-commercial item contracts and subcontracts above $5 million

» FAR 252.222-7007 – Adds new representation in all solicitations above the simplified threshold (including FAR Part 12 commercial item buys)- Offerors will not engage in trafficking

- Implemented hiring policies to address trafficking

- Notified employees and subs of their obligations

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Ending Trafficking In Persons: DFARS Requirements (cont’d)

» FAR 252.225-7040 – Modifies clause to add list of employee rights when supporting Armed Forces OCONUS- Keep identity and immigration documents

- Housing standards

- Take lunch and work break

- Terminate employment at any time

- Raise grievances without reprisal

- Receive host country minimum wage

- Notification of rights prior to signing employment contract

- Receive wages on time

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Recent Developments Regarding Internal InvestigationsAnd Whistleblower Protections

» Expanding whistleblower protection is a substantial priority for the enforcement and oversight community

» Several IGs have identified whistleblower protections as a priority in their work plans

» Whistleblower protection issues are increasingly prevalent in enforcement proceedings

» Changes impact:˗ Personnel Policies, including employment agreements and

policies

˗ Employee termination and discipline actions

˗ Internal investigations

˗ Subcontracts

˗ Other third party agreements

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Recent Enforcement And Oversight Examples

» In the Matter of KBR, Inc., SEC-File No. 3-16466, April 1, 2015˗ The SEC fined KBR $130,000 after finding that KBR’s standard

confidentiality language used in its internal investigations could impede whistleblowers from making reports to the government. KBR was also required to send notices and revise policies with respect to all employees from 2011 forward (likely more costly than the fine). Notably, the SEC acted solely on the basis of the language in the company policy and despite acknowledging that A) there was no evidence that any whistleblower was impeded; and B) there was no evidence that KBR had actually enforced the confidentiality provisions.

» Federal IGs are actively surveying the policies of many companies for similar provisions˗ See e.g. State OIG Report re: 30 largest contractors: https://

oig.state.gov/system/files/esp-15-03.pdf

» Publicly traded companies, and federal contractors and grantees are especially susceptible in this area

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Statutory And Regulatory Whistleblower Protection Expansion

» Federal law prohibits government personnel from retaliating against a whistleblower who reports fraud, waste, or abuse to the OIG

» The NDAA of 2013 extended these protections to government contractors, subcontractors, and grantees

» A protected whistleblower is one who discloses:˗ A violation of law, rule, or regulation

˗ Gross mismanagement

˗ Gross waste of funds

˗ An abuse of authority

˗ A substantial and specific danger to public health or safety

» New DFARS Clause 252.203-7998 (Mar 2015) implements 2015 Budget Reconciliation Act prohibition on employee confidentiality agreements˗ Note: the clause applies to subcontractors as well

» The Whistleblower Protection Act of 2012 requires an ombudsman in each OIG to educate employees about their rights if retaliated against

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Non-Competition Agreements

» Enforceable if:˗ Narrowly drawn to protect employer’s legitimate business interest

˗ Not unduly burdensome on employee’s ability to earn a living

˗ Not against public policy

» Temporal Scope˗ Don’t forget to include it!

˗ Typically see 6 months – 3 years

˗ Does the sliding scale theory work?

» Geographic Scope˗ Don’t forget to include it!

˗ Typically see within XX miles of office or in territories serviced by employee

˗ Broader restrictions permitted if had access to confidential information and/or was officer

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Non-Competition Agreement Restrictions

» Customer Non-Solicitation˗ In place of or in addition to geographic restriction

˗ Restriction must relate to the business the former employer had with the customer

˗ Prospective customers

» Restricted Activities˗ Be careful about:

• in any capacity

• in any way

• indirect

• influence

• other vague words

˗ Be careful about defining your business

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Issues With Non-Competition Agreements

» Considered disfavored restraints on trade

» Employer bears the burden of proof

» Whether enforceable is a question of law

» More deference to non-compete agreements in the context of a sale of a business

» Treated as a contract signed by the party to be charged

» Consideration required˗ Upon commencement of employment

˗ Continued employment when clearly expressed

» Employee handbook issues˗ Need separate agreement

» Will the courts rewrite your non-compete to make them enforceable?

» Severability – enforcing separate provisions of the agreement

» Can non-competes be assigned?

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Non-Competition Agreements: Litigation

» Deciding to litigate over non-compete agreements˗ Business effect – sending a message

˗ Injunction and/or damages

˗ Pursuing claims against the new employer as well as the employee(s) who departed

» Avoid being the defendant in a non-compete agreement lawsuit

» Vet applicants and ask repeatedly about existing obligations˗ Include as a question on the application form

» How to respond to a cease and desist letter

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Does The Procurement Integrity Act Cover Bid And Proposal Information Provided To A Competitor By A Former Employee?

» The Procurement Integrity Act (PIA) does address disclosing and obtaining “contractor bid or proposal information”

» Given the short timelines for reporting PIA violations (14 days), you should strongly consider reporting such activity; HOWEVER

» The “Savings Provisions” of the PIA state that if the information is supplied by the contractor, there is not a PIA violation

» The language of the PIA also covers only information that is marked as contractor bid and proposal information

» The Court of Federal Claims and GAO have both stated that the PIA is not intended to resolve disputes between private parties

» Bottom line: consider such events in the context of the PIA, but manage your expectations

Questions?

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Thank You!

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Practice Education Bar Admission

Robert K. Tompkins

» Robert K. Tompkins

» Partner

» (202) 469-5111» Robert.Tompkins@hklaw.com

» Washington D.C.

Bob Tompkins is a partner in Holland & Knight's Washington, D.C., office and co-chair of the firm’s National Government Contracts Group. Mr. Tompkins provides strategic advice and counsel to government contractors, their management and investors. He is experienced in government contract protests and disputes, government investigations and related proceedings, mergers and acquisitions, matters related to the U.S. Small Business Administration (SBA) government contracting programs and providing general counseling to clients.

• Government Contracts

• False Claims Act Defense

• Indian Law• Congressional

Investigations• Regulatory and

Federal Litigation

• Washington and Lee University (J.D.)

• Washington and Lee University (B.A.)

• Virginia• District of Columbia• Maryland

43

Practice Education Bar Admission

Howard S. Trickey

» Howard S. Trickey

» Partner

» (907) 263-6365» Howard.Trickey@hklaw.com

» Anchorage, AK

Howard S. Trickey is a partner in Holland & Knight's Anchorage office. Mr. Trickey represents businesses, individuals, school districts and municipalities in complex commercial and business disputes, professional malpractice claims, employment and labor disputes, as well as constitutional and public law claims. He has been involved in a number of precedent-setting cases that have influenced public policy, and regularly represents clients in appeals before the Alaska Supreme Court and the Ninth Circuit Court of Appeals.  

Mr. Trickey frequently writes and speaks on topics related to labor and employment law, school law and business torts. He has served as a board member of the Council of School Attorneys and the Anchorage Center for Children, a service provider to abused children and families in crisis.

For more than 10 years, Mr. Trickey has been listed in The Best Lawyers in America for commercial litigation, employment law and labor law. He has also served on the Alaska Bar Association Ethics Committee.

• Litigation and Dispute Resolution

• Education• Labor, Employment

and Benefits• Appellate

• The Catholic University of America, J.D.

• University of Wisconsin-Madison, B.A.

• Alaska• District of Columbia

44

Practice Education Bar Admission

Sarah M. Curtis

» Sarah M. Curtis

» Senior Associate

» (907) 263.6386

» Sarah.Curtis@hklaw.com

» Anchorage, Alaska

Sarah Curtis is an associate in Holland & Knight's Anchorage office. Ms. Curtis focuses her practice on Alaska Native and Native American-owned businesses. She regularly counsels clients on a wide range of matters including: transactional; corporate business and governance; shareholder relations; employment; government contracting; and tax.

Ms. Curtis assists clients in navigating the intricacies of the Alaska Native Claims Settlement Act (ANCSA) and the U.S. Small Business Administration’s 8(a) Business Development Program. Additionally, Ms. Curtis has argued before the Alaska Supreme Court and has participated in representations for a broad client base, from small pro bono matters to $12 billion litigation cases.

Ms. Curtis has also served as general counsel and sole in-house legal advisor for the village of Wainwright's Alaska Native Corporation – a $200 million family of 15 companies engaged in both government contracting and commercial transactions.

• Government Contracts• Compliance Services• Corporate Services• Corporate Governance• Indian Law• Mergers and

Acquisitions

• University of Washington School of Law, LL.M., Taxation

• Roger Williams University School of Law, J.D.

• University of Alaska – Anchorage, B.A.

• Alaska