In 2015, the Office of Federal Contract Compliance Programs (OFCCP) tackled what many believe was its most ambitious agenda since the agency’s inception. In 2016, we can expect more of the same—the Obama administration continuing to foist its most desired workplace policies on federal contractors whenever it doesn’t have the votes in Congress to pass laws that would apply more generally to U.S. employers. The following is a summary of some of the more significant OFCCP initiatives slated to take effect in 2016.
New Federal Minimum Wage
Effective January 1, 2016, some federal contractors and subcontractors must pay employees who perform work on or in connection with their federal contracts a minimum wage of at least $10.15 per hour ($5.85 per hour for tipped employees). This rate will be adjusted annually. Covered contractors are those that have current federal contracts for construction covered by the Davis-Bacon Act of 1931, contracts for services covered by the McNamara-O’Hara Service Contract Act (SCA), concession contracts (such as contracts to furnish food, souvenirs, newspapers, recreation equipment, etc.) on federal property, and contracts for services (like day care and dry cleaning) in federal buildings and on federal property. Covered contractors must include a reference to Executive Order 13658, “Establishing a Minimum Wage for Contractors,” in the equal opportunity clauses of their subcontracts. The U.S. Department of Labor’s Wage & Hour Division (WHD) will enforce the new law. We recommend that contractors identify which employees work on and in support of their federal contracts and ensure those employees are earning at least $10.15 per hour for all hours worked on or in support of the contractor’s federal contracts.
In addition, contractors must notify their covered employees of the minimum wage rate. This can be done by posting OFCCP’s notice, which may be found on the WHD’s website.
Finally, covered contractors should incorporate the following language in the equal opportunity clauses of their subcontracts:
If applicable to this contract, the requirements of Executive Order 13658/Establishing a Minimum Wage for Contractors and its implementing regulations at 29 C.F.R. Part 10 are incorporated herein by reference.
The Final Rule implementing President Obama’s April 2014 Executive Order 13665, “Government Contractors, Prohibitions Against Pay Secrecy Policies and Actions,” took effect on January 11, 2016, and applies to all federal contractors with federal contracts of greater than $10,000 entered into or modified on or after January 11, 2016. The Final Rule prohibits federal contractors from disciplining, firing, or otherwise discriminating against applicants and employees for discussing, disclosing, or inquiring about their own pay or that of a coworker.
There are two exceptions: The first permits employers to enforce a uniformly-applied rule that does not prohibit the discussion of compensation (for example, if an employee is tardy returning from break because he was discussing compensation, he can be disciplined for violating the attendance policy). The second exception applies to employees who have access to the compensation information of other employees by virtue of their job duties (e.g., human resources and benefits personnel, payroll administrators, and others) and disclose that compensation information to others.
The Final Rule also requires that a reference to the executive order be added to the equal opportunity clauses of covered subcontracts, and that contractors disseminate this new nondiscrimination provision via posting and by incorporating OFCCP-mandated language in contractors’ existing policy manuals and employee handbooks.
The required provision can be found on the OFCCP’s website. We recommend that covered contractors review their policies to ensure that they do not prohibit or discourage the discussion of wages, that they incorporate by reference the executive order in their covered subcontracts, and that they post and include the required pay transparency nondiscrimination provision in their existing policy manuals and employee handbooks.
Equal Pay Report
OFCCP has announced its plan to implement an “Equal Pay Report” by May of 2016. This will require federal contractors with 100 or more employees and federal contracts or subcontracts of $50,000 or more to electronically submit annual reports including composite W-2 wages, hours worked, and other pay-related data by race, gender, and EEO job classification to OFCCP. OFCCP will aggregate the data by industry and publish it on OFCCP’s website for use by contractors in assessing their compensation practices. OFCCP will also use the data to identify contractors for future audits whose wages appear to be out of line with other employers in their industries. In the interim, covered contractors should ensure their job titles are assigned to the correct EEO job classification (e.g., “professionals,” “technicians,” etc.) and consider conducting pay equity analyses under attorney-client privilege to identify potential problem areas.
Paid Sick Leave Regulations
In September of 2015, President Obama signed Executive Order 13706, “Establishing Paid Sick Leave for Federal Contractors,” which provides up to seven days of paid sick leave annually for federal contractors’ employees who work on federal contracts. OFCCP has announced its intent to publish a final rule by September 30, 2016, and it will take effect for certain contracts and subcontracts entered into on or after January 1, 2017.
As with the new contractor minimum wage requirement, contracts covered by this executive order include federal contracts for construction governed by the Davis-Bacon Act, service contracts governed by the SCA, and contracts for concessions and for services on federal property. Employees may use their paid sick leave for their own physical or mental illness, to care for a family member, or if they are the victim of domestic abuse, sexual assault, or stalking. Employees are to receive one hour of paid sick leave for every 30 hours worked, and unused leave will roll over from year to year.
Updated Sex Discrimination Rule
On January 28, 2015, OFCCP announced a Notice of Proposed Rulemaking updating the rules that govern how federal contractors and subcontractors prohibit sex discrimination. The proposal would rescind outdated guidance from 1970 while attempting to align contractors’ requirements with current law and legal interpretations and better address the realities of the contemporary workplace. OFCCP’s proposed rule deals with a variety of barriers to equal opportunity and fair pay, including pay (and benefits) discrimination, sexual harassment, hostile work environments, a lack of workplace accommodations for pregnant women and those with other medical conditions, as well as gender identity and gender stereotyping in family caretaking responsibilities. In October of 2015, OFCCP sent its draft final regulations to the Office of Management and Budget for review and approval, and has promised the final rule by May of 2016.
Fair Pay and Safe Workplaces (“Blacklisting”) Regulations
The final regulations implementing President Obama’s July 2014 Executive Order 13673, “Fair Pay and Safe Workplaces,” are expected in 2016. The so-called “blacklisting” executive order requires bidders on federal contracts of at least $500,000 to disclose their labor law violations from the past three years under 14 federal labor laws, including the Fair Labor Standards Act, the Family and Medical Leave Act, the National Labor Relations Act, the Occupational Safety and Health Act of 1970, and Title VII of the Civil Rights Act of 1964. Contracting agencies will then consider a bidder’s history of violations when awarding federal contracts.
The executive order also requires contractors to provide certain information each pay period to their employees so they can verify the accuracy of their paychecks. Moreover, it prohibits contractors with federal contracts of $1 million or more from requiring their employees to enter mandatory pre-dispute arbitration agreements for Title VII civil rights and harassment claims. Both the “blacklisting” effort and the arbitration prohibitions have met with great opposition from the contractor community, and we expect they will be the subject of litigation. In the interim, contractors should carefully monitor their compliance with federal labor laws and vigorously defend against any findings of labor law violations.
Contractor Poster Requirements
Most federal contractors will now have three poster requirements: (1) the “Equal Employment Opportunity is the Law” poster; (2) the “EEO is the Law” poster supplement (both of which can be found on OFCCP’s website in English, Spanish, and Chinese ); and the “Pay Transparency Nondiscrimination Provision” poster for contractors covered by Executive Order 13665.
OFCCP Class Member Locator Website
In September of 2015, OFCCP launched its Class Member Locator website designed to identify class members who may have been affected by alleged illegal workplace discrimination and could be eligible for monetary relief and/or consideration for a job in connection with a settlement. The website includes an alphabetical list of contractors’ names and locations, the relevant time period of the alleged violations, and the affected job titles and affected group of applicants/employees. The website also includes OFCCP’s summary of the case along with a redacted version of each contractor’s conciliation agreement with OFCCP.
The website is problematic because the redacted conciliation agreements contain information about monetary settlements and remedies and other sensitive company information, which is now readily available to plaintiffs’ attorneys and unions. Contractors should consult with legal counsel before entering into any conciliation agreement with OFCCP.
Increased Contract Thresholds for Coverage
The Federal Acquisition Regulatory Council recently adjusted the dollar threshold amounts for coverage by the Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA). Now, federal contractors must hold aggregated federal contracts of at least $15,000 in order to be subject to Rehabilitation Act requirements. Likewise, contractors must have a single contract of at least $150,000 in order to be subject to VEVRAA and its now much more burdensome affirmative action requirements. (OFCCP recently published an infographic on the jurisdictional thresholds of the federal affirmative action laws.) Contractors should continually monitor the dollar values of their current federal contracts and subcontracts to determine whether they are subject to any or all of the federal affirmative action laws.