New Executive Order Requires Federal Contractors to Disclose Labor Law Violations, Give Workers Pay Information, and Limit Arbitration
On July 31, President Obama issued the latest, and most far-reaching, executive order in a series of presidential directives imposing new mandates on federal contractors. The Fair Pay and Safe Workplaces Executive Order (“EO”) purports to help federal agencies “identify and work with contractors with track records of compliance” with labor laws in order to “reduce execution delays and avoid distractions and complications that arise from contracting with contractors with track records of noncompliance.” It imposes several new obligations on federal contractors and contracting agencies, increasing the burdens and risks for covered contractors. It does not cover federally assisted contracts.
Most significantly, the EO establishes a new system for contractor disclosure, and agency consideration, of labor law violations from the past three years before a prospective contractor may be awarded a federal contract with a value over $500,000 starting in 2016. Contracting agencies must require prospective prime contractors to disclose any administrative merits determination, arbitral award or decision, or civil judgment rendered against the company for violations of any of 14 federal statutes and executive orders, as well as “equivalent” state laws. Post-award, contractors must update the disclosures every six months. Contracting agencies must consider the disclosures in determining whether the contractor is a “responsible source” and whether further action is needed. Further action could include additional remedial measures, compliance assistance, declining to exercise an option on a contract, contract termination, suspension, or debarment. The EO requires contractors to impose similar requirements on subcontractors with a subcontract worth over $500,000.
The EO also directs contracting agencies to require contractors subject to the above disclosure mandates to provide workers with certain documentation of their hours and pay each pay period. The provision covers all individuals who work under a covered contract and for whom the company must maintain wage records under the Fair Labor Standards Act (“FLSA”), Davis-Bacon Act, Service Contract, or “equivalent” state laws. The document must include information about the individual’s hours worked, overtime hours, pay, and any additions made to or deductions made from pay. If the individual is exempt from overtime pay under the FLSA and if the employer has informed the individual of his or her exempt status, then the document need not include a record of hours worked. If the individual is treated as an independent contractor rather than an employee, then the company must provide a document informing him or her of that status. Again, similar requirements apply to subcontracts.
Furthermore, the EO includes a restriction on employer-mandated arbitration. More specifically, it directs contracting agencies to require contractors with a federal contract worth over $1 million to agree that the decision to arbitrate any claims brought by an employee or independent contractor alleging a violation of Title VII of the Civil Rights Act of 1964 or alleging a tort related to sexual assault or harassment may only be made with the individual’s voluntary consent given after the dispute arises. The EO again includes flow-down requirements for subcontracts.
In addition, the EO directs the General Services Administration to develop a single website for contractors to meet all of their reporting requirements (those arising under the present EO and otherwise). According to a White House Fact Sheet on the EO, “The desire to ‘report once in one place’ is a key theme in the feedback received from current and potential contractors. This step is one in a series of actions to make the federal marketplace more attractive to the best contractors, more accessible to small businesses and other new entrants, and more affordable to taxpayers.”
The EO directs the Federal Acquisition Regulatory (“FAR”) Council to issue implementing regulations and the Department of Labor to issue guidance. No time frame is specified. The EO takes effect immediately but applies only to solicitations for contracts specified in the FAR Council’s regulations. AGC is closely monitoring developments and exploring ways to prevent any negative impact on AGC members.
For more information, contact Denise Gold at (703) 837-5326 or firstname.lastname@example.org, or Jimmy Christianson at 703-837-5325 or email@example.com.
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