Executive Summary
Overview: The new “Fair Pay and Safe Workplaces” Executive Order, which applies to new federal procurement contracts, will require those seeking government contracts to disclose their employment and labor law violations for the previous three years.
Employer Coverage: These requirements will apply to federal contracts and subcontracts (except for subcontracts for commercially off-the-shelf items), including those for goods, services, and construction, exceeding $500,000. For contracts and subcontracts that exceed $1 million, the Executive Order prohibits mandatory pre-dispute arbitration for disputes arising out of Title VII of the Civil Rights Act or for torts related to sexual assault or harassment.
Effective Date: The requirements of the Executive Order will be implemented in 2016 following issuance of implementing regulations by the Federal Acquisition Regulation (FAR) Council and guidance by the U.S. Department of Labor (DOL).
Action Required: Contact your Human Resource Business Partner as needed to discuss any potential compliance concerns.
The Details
The Executive Order requires prospective federal contractors to report employment and labor law violations (both initially in the bid and award process and post award every six months) and mandates that contracting agencies consider employment and labor law violations as a disqualifying factor when awarding a federal contract. In addition, the Executive Order mandates employer disclosure requirements to workers regarding classification as an employee or independent contractor and exempt or non-exempt status under the FLSA, and related compensation information.
These requirements will apply to federal contracts and subcontracts (except for subcontracts for commercially off-the-shelf items), including those for goods, services, and construction, exceeding $500,000. Finally, for contracts and subcontracts that exceed $1 million, the Executive Order prohibits mandatory pre-dispute arbitration for disputes arising out of Title VII of the Civil Rights Act or for torts related to sexual assault or harassment.
Independent Contractor Guidance Available
With respect to independent contractor status vs. employee determinations, the Office of Federal Contract Compliance Programs (OFCCP) has recently posted Frequently Asked Questions (FAQs) addressing how federal contractors should assess their employment relationships to distinguish “employees” from “independent contractors” or other non-employee workers. The FAQs describe what are commonly referred to as the “Darden” factors, derived from the 1992 Supreme Court decision in Nationwide Mutual Insurance Co. v. Darden, and provide examples illustrating their application in determining which workers are employees.
Get the FAQs.
Required Violation Disclosure
Pre-award, federal contractors and subcontractors (through the prime contractor) will have to advise agencies whether there has been any administrative merit determination, arbitral award or decision, or civil judgment rendered against them within the preceding three-year period for a violation of any of 12 listed federal labor and employment laws, two executive orders, or equivalent state laws.
These laws include, among others:
- Fair Labor Standards Act
- Occupational Safety and Health Act
- National Labor Relations Act
- Family and Medical Leave Act
- Davis-Bacon Act
- Service Contract Act
- Title VII of the Civil Rights Act
- Americans with Disabilities Act
- Age Discrimination in Employment Act
- Executive Order 11246 (equal employment opportunity)
- Vietnam Era Veterans’ Readjustment Assistance Act
- Section 503 of the Rehabilitation Act
- Executive Order 13658 (federal contractor minimum wage)
Post-award and during the performance of a contract, contractors will be required to update their violation information every six months and, for certain contracts, obtain the same violation information from their covered subcontractors. Contracting officers, in coordination with labor advisors, will determine whether remedial action is necessary based on these disclosures. Such actions may include compliance assistance and agreements to avoid additional violations. Contracting officers will also consider whether contract termination or referral for suspension or debarment is appropriate based on reported violations.
Worker Classification and Pay Information Disclosure
To help ensure that workers have the necessary information to verify the accuracy of their pay, contractors will have to provide workers each pay period with documentation detailing hours worked, overtime hours, pay, and additions or deductions from pay. The document provided to individuals exempt from the overtime compensation requirements of the Fair Labor Standards Act need not include a record of hours worked if the contractor informs the individuals of their overtime exempt status. Contractors also will be required to incorporate these requirements into certain subcontracts and to provide written notification to independent contractors of their status.
Pre-Dispute Arbitration Banned
For contracts and subcontracts exceeding $1 million (except for commercial items or commercially available off-the-shelf items), pre-dispute arbitration agreements are prohibited for claims arising under Title VII of the Civil Rights Act or torts related to or arising out of sexual assault or harassment. Contractors generally will be permitted to arbitrate these types of claims with voluntary, post-dispute agreements with employees or independent contractors.
Practical Impact
The FAR Council, DOL, and other key enforcement and contracting agencies will be holding informal “listening sessions” with stakeholders in connection with issuing rules and guidance implementing the Executive Order. Government contractors should consider participating in these sessions to voice their concerns with how the Executive Order will be implemented.
The Executive Order will not apply to contracts entered into before 2016 and many of the details need to be worked out in guidance and regulations. In the interim, to help ensure the ability to win and keep federal government contracts, clients should contact their HR Business Partner to discuss any potential compliance concerns with respect to the listed federal labor and employment laws above.