The Obama Administration’s Proposed “Labor Violation” Reporting Duties Present Challenges for Federal Contractors

President Obama’s July 2014 Fair Pay and Safe Workplaces Executive Order 13673 mandates that federal contracting agencies collect information concerning a potential prime contractor’s 3-year violation history with respect to 14  federal  labor, employment, wage payment, and safety laws (and the “equivalent” state laws). The executive order instructs government procurement officials to weigh each contractor’s “violations” of these laws for purposes of assessing whether the company should be permitted to bid on new federal contracts over $500,000 or continue working on existing federal projects.

The U.S. Department of Labor (DOL) recently issued proposed guidance (80 Fed. Reg. 30574) designed to implement the executive order and the Federal Acquisition Regulatory Council (FAR Council) simultaneously issued its own proposed implementing regulations (80 Fed. Reg. 30548), which would amend existing federal procurement regulations known as the Federal Acquisition Regulations (FAR) to implement this new contractor blacklisting program.

While the proposed DOL guidance and FAR Council’s implementing regulations leave critical questions unanswered concerning which equivalent state laws trigger a three-year reporting duty, they contain a number of substantive provisions including:

• mandatory pre-award and post-award reporting of contractor and subcontractor “labor violations”;
• initial certification of a contractor’s three-year “labor violations” history and public disclosure of  each “violation” on a contractor violator database;
• a broad definition of labor violation that sweeps in mere “administrative merits determinations,” “civil judgments,” and “arbitral awards or decisions” before they have been appealed;
• controversial and untested culpability standards, e.g., “serious,” “repeated,” “willful,” and “pervasive,” for government contract officials to apply  in evaluating the  severity of reported labor violations;
• subjective guidance for evaluating a contractor’s labor “responsibility” and weighing possible mitigating factors to overcome reported labor “violations”;
• onerous labor violation monitoring duties imposed on prime contractors with respect to their subcontractors and a possible phase-in of subcontractor labor violation reporting
• proposed paycheck information requirements, including notice at the outset of a project to exempt employees and independent contractors of their employment status; and
• proposed ban on contractors’ use of employment arbitration to resolve Title VII and sexual assault or sexual harassment claims.

A detailed discussion of these and other provisions is included in our white paper, “Contractor Blacklisting: Sweeping ‘Labor Violation’ Reporting Duties in the Proposed ‘Fair Pay and Safe Workplaces’ Guidance and Procurement Rules.” Public comment on both the guidance and the FAR Council notice are due by July 27, 2015. Federal contractors, subcontractors and interested parties should consider submitting comments in July addressing the ramifications of these unprecedented contractor labor “responsibility” rules.