SBA Issues Final Rule on Definition of Employee for HUBZone Firms

The Small Business Administration issued a final rule modifying the definition of employee for purposes of determining whether a small business may participate in the Historically Underutilized Business Zone (HUBZone) contracting program. The rule (1) deletes full-time equivalency requirements (2) specifically allows HUBZone firms to count leased or temporary employees or employees obtained through a temporary agency, professional employee organization arrangement or union agreement to count as employees (3) explains that volunteers are not employees (4) defines volunteers as those persons receiving no compensation but (5) separately addresses a deferred compensation section for individuals who own all of part of the firm but receive no compensation for work performed. Under the HUBZone program a firm located in an area of economic distress is entitled to receive HUBZone set-aside contracts and receive a 10 percent price evaluation preference if 35 percent of the firm’s employees reside in that HUBZone area. Before the rule change only employees who were employed on a full time permanent basis (or full time equivalent) could be counted toward the 35 percent figure.

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