The 8(a) program regulations require the disadvantaged individual upon whom 8(a) program eligibility is based to manage the firm on a full-time basis, during normal working hours of firms in the same or similar line of business. When 8(a) program applicants learn about 8(a) program’s “full time devotion” requirement, many ask: “can I work a second job?”
Maybe. As seen in a recent decision of the SBA Office of Hearings and Appeals, an 8(a) program applicant may be able to engage in outside employment–even a second full-time job–so long as the applicant can demonstrate that the outside employment will not interfere with the applicant’s ability to manage the 8(a) firm full-time during normal working hours.
SBA OHA’s decision in BDS Protective Services, LLC, SBA No. BDP-433 (2012) involved the 8(a) program application of BDS Protective Services, a security services firm. Jeffrey Jackson, BDS’s sole owner and President, founded the firm in 2002.
In addition to owning and running BDS, Mr. Jackson was a full-time employee of the U.S. Government Printing Office. Mr. Jackson worked the “third shift” at the GPO, from 11:30 p.m. to 8:00 a.m. weekdays. Mr. Jackson had been a GPO employee since 1988.
In 2010, BDS applied for 8(a) program certification. In the application, Mr. Jackson admitted working full-time for the GPO, but stated that he also worked full-time for BDS. Mr. Jackson admitted that he did not work a traditional “nine to five” schedule for BDS. Rather, Mr. Jackson stated that he worked eight hours per day Saturday and Sunday, and the remaining 24 hours during the Monday-Friday workweek, by working from 9:00 a.m. to 2:00 p.m. those days.
The SBA denied BDS’s 8(a) program application, finding that Mr. Jackson did not meet the “full time devotion” requirement because of his outside employment at the GPO. The SBA stated Mr. Jackson’s schedule was “not practical” and that working a “full business day” after coming off his third shift at BDS would “detract” from his ability to manage BDS full-time.
SBA OHA disagreed with the SBA’s determination, and held that the SBA had acted arbitrarily, capriciously and improperly by denying BDS’s 8(a) program application.
“Full-time employment outside an applicant firm does not necessarily preclude a disadvantaged individual from also managing an applicant firm full-time,” SBA OHA wrote. Rather, “[t]he issue is whether the dual obligations conflict to the extent that SBA may reasonably conclude that one precludes the other.”
In this case, Mr. Jackson’s “third shift” schedule, between 11:00 p.m. and 8:00 a.m., did not preclude Mr. Jackson from being available to manage BDS during normal business hours. Although the SBA questioned whether Mr. Jackson could successfully work such long hours, evidence in the record showed that Mr. Jackson had successfully maintained a similar schedule for 13 years. In addition, BDS had shown substantial gross revenues over the three years preceding its application, “supporting his claim of full-time devotion.” SBA OHA held that by ignoring Mr. Jackson’s employment history and BDS’s financial record, the SBA “failed to consider important aspects of this case.”
Finally, SBA OHA took issue with the SBA’s conclusion that Mr. Jackson must necessarily work a “full business day” each weekday following his shift at the GPO. SBA OHA noted that the SBA “assumed that Mr. Jackson must work eight hours per day, between 9:00 a.m. and 5:00 p.m., Monday through Friday, to manage [BDS] on a full-time basis.” However, “the regulations do not require this schedule.”
Rather, the term “normal working hours” is “necessarily flexible,” depending on the industry involved. In the case of a security company like BDS, SBA OHA held that there was no reason to believe that Mr. Jackson could not successfully run the company by working eight-hour days on the weekends and five-hour days on the weekdays, as he claimed to do.
The BDS Protective Services case is welcome news for prospective 8(a) program applicants. In recent years, the SBA has sometimes taken a hard line on outside employment. In BDS Protective Services, SBA OHA reminded the SBA that outside employment–even a full-time second job–is not necessarily a bar to 8(a) program admission, and that “normal working hours” in an industry are not always a traditional 9:00 a.m. to 5:00 p.m. schedule.
Nevertheless, 8(a) applicants should be careful not to read too much into the BDS Protective Services case. Keep in mind that Mr. Jackson’s outside employment occurred completely outside of normal working hours, freeing him up for five hours per day of weekday work during that 9:00 a.m. to 5:00 p.m. window. Mr. Jackson was able to successfully make the case that his “third shift” work did not interfere with his ability to run BDS. The same might not have been true if he had worked, for example, the 8:00 a.m. to 4:00 p.m. shift at the GPO.
The lesson from BDS Protective Services is that an 8(a) program applicant may hold outside employment–but the application must be able to demonstrate that the outside employment does not interfere with his or her ability to manage the company.