Summary: The U.S. Department of Labor and the Federal Acquisition Regulatory Council have published the final guidance and regulations implementing the Fair Pay and Safe Workplaces Executive Order (E.O. 13673). The Executive Order sets forth procedures requiring federal agency contracting officers to consider an employer’s record of workplace law compliance when awarding contracts and subcontracts valued at more than $500,000. Consistent with this goal, prospective and existing contractors on covered contracts are not only required to disclose administrative determinations, arbitral awards, and civil judgments resulting from violations of any one of 14 enumerated labor laws and their state law equivalents, but they are also required to comply with the Executive Order’s Paycheck Transparency requirements.
Effective: For the first year that the regulations are effective (beginning October 25, 2016), only prime contractors must make disclosures. Subcontractors will not be required to start making disclosures until October 25, 2017. The rule’s paycheck transparency requirements will become effective January 1, 2017.
Coverage: Government contractors with contacts of $500,000 or more.
Action Required: Affected government contractors should familiarize themselves with the requirements of the Executive Order and contact their Human Resources Business partner with any questions.
The U.S. Department of Labor and the Federal Acquisition Regulatory (“FAR”) Council published the final guidance and regulations implementing the Fair Pay and Safe Workplaces Executive Order (E.O. 13673). The Executive Order’s stated goal is to promote efficiency in government procurement by ensuring federal agencies contract only with “responsible” contractors who comply with federal and state workplace laws.
To be eligible for government contracts valued at $500,000 or more, employers are required to report on both their records of “compliance with labor laws,” and eventually, on the records of their subcontractors. They must also ensure that specific elements are incorporated into employee wage statements and comply with certain paycheck notifications for employees and independent contractors. For contracts in excess of $1,000,000, contractors are further prohibited from requiring mandatory arbitration of employment law claims.
Contractor Disclosure Requirements
The Executive Order sets forth procedures requiring federal agency contracting officers to consider an employer’s record of workplace law compliance when awarding contracts and subcontracts valued at more than $500,000. Prospective and existing contractors bidding on covered contracts will be required to disclose and attest to whether they have had violations of any of fourteen (14) covered federal labor laws that resulted in any administrative merits determinations, arbitral awards or decisions, and civil judgments. Some of the relevant workplace laws on which employer compliance will be assessed include the Fair Labor Standards Act (FLSA), Occupational Safety and Health Act (OSHA), National Labor Relations Act (NLRA), Family and Medical Leave Act (FMLA), Title VII, and others. Eventually, contractors will also be required to report on the compliance records of their subcontractors.
Paycheck Transparency
One of the most critical pieces of the Executive Order is the Paycheck Transparency provision. Pursuant to this provision, contractors are required to provide: (1) wage statements to individuals working for them; (2) overtime exemption notices to employees exempt from the overtime requirements of the FLSA for whom the contractor does not want to include hours-worked information; and (3) documentation to workers treated as independent contractors, notifying them of their status as independent contractors.
Wage Statement Requirements: The Executive Order requires that contractors include the following information on wage statements: (1) hours worked; (2) overtime hours by workweek; (3) rate of pay; (4) gross pay; and (5) itemization of each addition to or deduction from the gross pay. Although both gross pay and the rate of pay must be included on the wage statement, the rule does not require that contractors specify the overtime rate. The rationale for this is that employees should be able to ascertain the overtime rate they should have earned based on the report showing hours worked and rate of pay.
Another requirement is that the required wage statement information be broken down by week, even where contractors’ payrolls may be bi-weekly or semi-monthly. This is because if hours and rates of pay were lumped together for periods longer than a week, employees would not be able to tell whether they were entitled to overtime. For instance, an employee could have worked 45 hours in week 1 of the pay period and 35 hours in week 2, and his or her wage statement would still reflect 80 hours worked for that 2 week period, even though the employee actually was entitled to 5 hours of pay at the overtime premium rate.
As long as a contractor complies with the wage statement requirements of any of certain, defined Substantially Similar Wage States, the contractor will be in compliance with the rule. Currently, the following states are considered Substantially Similar Wage States: (1) Alaska; (2) California; (3) Connecticut; (4) District of Columbia; (5) Hawaii; (6) New York; and (7) Oregon.
Beginning January 1, 2017, the wage statement requirement clause will be inserted in solicitations if the estimated value exceeds $500,000, and in resultant contracts.
FLSA Exempt-Status Notification: Wage statements provided to FLSA-exempt employees are not required to delineate hours worked if the contractor has provided the exempt employees with a written notice stating that they are exempt from the overtime requirements of the FLSA. Oral notice is not sufficient. As far as how often this notice must be provided, it is sufficient to provide notice to workers one time before the worker performs any work under a covered contract, or in the worker’s first wage statement under the contract. If during performance of the contract, the contractor determines that the worker’s status has changed from nonexempt to exempt, it must provide notice to the worker prior to providing a wage statement to the worker without hours worked information or in the first wage statement after the change. The notice can be a standalone document or be included in the offer letter, employment contract, position description, or wage statement provided to the worker.
Independent Contractor Notification: If a contractor treats an individual performing work under a covered contract as an independent contractor, the contractor must provide the individual written notice of his/her independent contractor status. Contracting agencies, in turn, must require that contractors incorporate this same requirement into covered subcontracts. The notice must be provided separately from any independent contractor agreement entered into between the contractor and the individual.
Translation Requirements Applicable to All Three Documents
All required documents must be provided in English and the language(s) in which significant portions of the workforce is fluent. Where a significant portion of the workforce is not fluent in English, the contractor should provide notices to workers in each language in which the significant portion of the workforce is fluent. The agencies do not specify a numeric threshold for what should be considered a “significant portion” of a contractor’s workforce.
Electronic Provision of Documents
Contractors may provide all three documents electronically if they regularly provide documents electronically and if the worker can access the document through a computer, device, system, or network provided or made available by the contractor. A contractor is not required to obtain workers’ consent to provide notices electronically.
As always, please feel free to contact your Human Resources Business Partner if you have any questions.