On August 25, 2016, the Department of Labor and the Federal Acquisition Regulatory Council issued the final rule implementing the Fair Pay and Safe Workplaces Executive Order (the “Order”). Initially signed by President Obama in July 2014, the Order will bar contractors that violate federal and state workplace protection laws from receiving federal contracts. Under the Order, contractors and subcontractors must disclose labor law violations that occurred within the last three years, information which will then be used in considering contract awards. Once a contract is awarded, contractors and subcontractors are required to provide updated information every six months, and the contracting officer will use the new information to determine whether to continue the contract or not.
The final rule will become effective on October 25, 2016, with certain provisions gradually phasing in over the next few years. Generally speaking, under the Order, contractors and subcontractors that bid on contracts with a value of $500,000 or more will be required to disclose labor violations relating to workplace safety, discrimination, labor organizing rights, minimum wage, and overtime hours, among others. Contracting officers, with the guidance of a Labor Compliance Advisor, will assess contractor’s violations to determine whether they rise to the level of a lack of integrity or business ethics. Depending on the circumstances, violations may result in penalties, including rejection of the bid, termination of existing contracts, referral to another agency, such as the Department of Labor or the Equal Employment Opportunity Commission for investigation, or referral for suspension and disbarment.
The Order also includes the Paycheck Transparency Clause, which requires contractors to provide accurate wage, hour, and other information relevant to workers’ paychecks. Contractors must also provide non-employees with written notice of their status as independent contractors. Finally, the Order prohibits contractors and subcontractors with bids exceeding $1 million from requiring workers to sign agreements to arbitrate Title VII claims or any tort related claim related to or arising out of sexual harassment or sexual assault.
Implementation will be carried out on a phased-in schedule based upon the size of a contract. As of October 25, 2016, disclosure and assessment of labor law compliance will be required for prime contractors with solicitations of $50 million or more. On April 25, 2017, the disclosure and assessment requirements will apply to contractors with a contract value of $500,000 and up. And by October 25, 2017, the requirements will also apply to subcontractors with a contract value of approximately $500,000.
The prohibition on mandatory arbitration for Title VII and sexual assault related claims will become effective October 25, 2016, however, the paycheck transparency requirements won’t be implemented until January 1, 2017.
The three-year look-back period for labor violations will also be implemented on a phased-in basis. Until October 25, 2017, contractors and subcontractors will only need to report labor violations that occurred within the preceding year. On October 25, 2017, the look-back period increases to two years, and then three years starting October 25, 2018.
Prior to offering a bid for a federal contract, contractors and subcontractors are advised to seek legal counsel to evaluate their current disclosure obligations and prepare for the Contracting Officer’s evaluation. Likewise, employers with federal contracts exceeding $1 million should review with an attorney any current arbitration agreements to ensure they are not in violation of the Order.
Overall, proponents of the Fair Pay and Safe Workplaces Executive Order hope that by rewarding businesses and individuals that comply with labor laws, there will be a significant improvement in workplace standards for the approximately 28 million employees and thousands of government contractors that the Order will affect.
This article is not intended to be nor should be construed as legal advice. As with any issue, business and individuals should seek the advice of counsel for their own particular needs.