“Fair Pay and Safe Workplaces” Guidance Explains Broad Labor Reporting Requirements for Federal Contractors

Today, the U.S. Department of Labor (DOL) published proposed guidance addressing the controversial Fair Pay and Safe Workplaces Executive Order 13673, which President Obama signed on July 31, 2014 (80 Fed. Reg. 30574 (May 28, 2015)). The Federal Acquisition Regulatory (FAR) Council also issued proposed regulations integrating the executive order’s requirements and the provisions of the Labor Department’s guidance into existing procurement regulations (80 Fed. Reg. 30548 (May 28, 2015)).

Section 2 (a)(iii) of the executive order requires contracting agencies to take into account violations of 14 federal statutes and executive orders, as well as equivalent state laws, when determining if a federal contractor is a “responsible source that has a satisfactory record of integrity and business ethics.”  The contracting officer, in consultation with newly created Labor Compliance Advisors in each agency, must make a responsibility determination when considering contract awards. The contracting officer can also take this information into account when considering other actions, such as a decision not to exercise an option on a contract, to terminate a contract, or to refer matters to an agency suspending or debarring official. In making contractor responsibility determinations, agency contracting officers may also consider “similar information” from “other sources” in addition to the contractor’s own self-reporting, which politicizes the government contracting process by inviting labor unions, plaintiffs’ lawyers, and business competitors to provide information to leverage their positions in organizing and bargaining and in settlement of litigation.

Contractor and Subcontractor Disclosure Required for $500,000 Contracts

The executive order provides that for procurement contracts for goods and services, including construction, where the estimated value of the supplies acquired and services required exceeds $500,000, agency solicitations must require that the contractor represent, to the best of its knowledge and belief, whether there has been any administrative merits determination, civil judgment, or arbitral award or decision  rendered against it within the preceding 3-year period for violations of any of the 14 identified federal laws or executive orders or any equivalent state laws.

Highlights of the DOL guidance include:

Contractors are required to report violations of these laws during the bidding process and then provide updates every six months.

The DOL guidance discusses what constitutes an “administrative merits determination,” “civil judgment,” and “arbitral award or decision” as those terms are used in the executive order. In particular, it identifies seven categories of documents, findings, and notices of the U.S. Equal Employment Opportunity Commission (EEOC), National Labor Relations Board (NLRB), Office of Federal Contract Compliance Programs (OFCCP), and Wage and Hour Division that must be reported under the executive order. This is an exhaustive list and the guidance clarifies that contractors are required to report non-final administrative merits determinations, civil judgments, and arbitral awards or decisions that they are challenging, can still challenge, or are otherwise subject to appeal or further review. Examples of reportable violations include citations from Occupational Safety and Health Administration (OSHA); a reasonable cause determination from the EEOC or a civil action filed on behalf of the EEOC; a show cause notice from the OFCCP for failure to comply with any of the statutes or executive orders enforced by the agency; and a complaint issued by a Regional Director of the NLRB. The guidance also discusses how appeals of such decisions must be reported as well as what information must be disclosed.  

Contractors must report these violations rendered during the three-year period preceding the contract bid or proposal, even if the underlying conduct occurred more than three years prior to the date of the report and even if they were not performing or bidding on a covered contract at the time.

Contractors are required to collect similar information on their subcontractors of any tier where the estimated value of the supplies acquired and services required in the subcontract exceeds $500,000 and the subcontract is not for commercially available off-the-shelf items. Contractors must make an initial determination as to whether these subcontractors are responsible contractors and continue to monitor their status throughout the project.

Federal Labor Laws Specified in the Order

The 14 federal labor laws and executive orders identified in the Executive Order 13673 are:

• the Fair Labor Standards Act;
• the Occupational Safety and Health Act of 1970;
• the Migrant and Seasonal Agricultural Worker Protection Act;
• the National Labor Relations Act;
• the Americans with Disabilities Act of 1990;
• the Family and Medical Leave Act;
• Title VII of the Civil Rights Act of 1964;
• the Age Discrimination in Employment Act of 1967;
• the Davis-Bacon Act;
• the McNamara-O’Hara Service Contract Act;
• Section 503 of the Rehabilitation Act of 1973;
• Vietnam Era Veterans’ Readjustment Assistance Act of 1972 and the Veterans’ Readjustment Assistance Act of 1974;
• Executive Order 11246 (Equal Employment Opportunity); and
• Executive Order 13658 (Establishing a Minimum Wage for Contractors).

State Law Equivalents Still to Come

In its guidance, the DOL stated that it will publish in the Federal Register at a future date a second proposed guidance addressing which state laws are equivalent to the 14 federal labor laws and executive orders identified in the executive order. DOL’s guidance, however, clarifies that even at this juncture it considers “OSHA-approved State Plans”—of which there are more than 20—as “equivalent State laws.” This means, for example, that at least some state health and safety citations would count as reportable and potentially disqualifying “violations.”

Paycheck Information Requirements Include Notice to Exempt Employees and Independent Contractors

The DOL’s guidance contains a section that addresses the paycheck transparency provisions of the executive order. Each pay period, covered federal contractors and subcontractors must provide all individuals performing work under the contract a wage statement containing the employee’s hours worked, overtime hours, pay, and any additions or deductions made in pay. It also discusses various state law requirements for wage statements and compliance with this requirement of the executive order.

For those employees not covered by the overtime provisions of the Fair Labor Standards Act (FLSA), the guidance proposes to clarify that contractors are not required to include a record of hours worked but must provide written notice to the worker stating that the worker is exempt from the FLSA’s overtime compensation requirements. The guidance allows contractors to provide workers with electronic versions of these documents.

In addition, the guidance proposes a requirement that contractors provide workers who they treat as independent contractors a document informing the individual of their independent contractor status before they perform any work under the contract. The guidance clarifies that oral notice would not be adequate.

Restrictions on Use of Employment Arbitration in Title VII and Sexual Assault or Harassment Claims

The executive order prohibits pre-dispute arbitration agreements applicable to claims arising under Title VII or any tort related to sexual assault or sexual harassment where the value of the contract exceeds $1 million. Any agreement to arbitrate such a claim must be voluntarily made only after the dispute arises. There is an exception for collective bargaining agreements. The DOL guidance does not address this aspect of the executive order.

Additional Information and Contents of Guidance

This proposed guidance contains a section that defines the terms “serious,” “repeated,” “willful,” and “pervasive” and contains additional information for assisting agencies in weighing such violations. It includes four appendices that identify types of violations under each statute that would qualify as “serious,” “repeated,” “willful,” and “pervasive” and another appendix that instructs agencies on how to assess these violations.

A more detailed analysis of the Labor Department’s proposed guidance and the FAR Council’s proposed regulations is forthcoming.

60-Day Comment Period

Both the DOL guidance and FAR Council notice of proposed rule provide for a 60-day comment period that expires on July 27, 2015. It is important that federal contractors and/or subcontractors submit comments to these proposals. Even employers that are not federal contractors or subcontractors should consider filing comments, particularly on the anti- arbitration and paycheck transparency provisions. The current administration and some members of Congress seek to eliminate the use of any pre-dispute arbitration agreements and require employers to provide greater pay and work information to their employees. In fact, the DOL’s Wage and Hour Division continues to maintain its “right-to-know” regulatory agenda item as a long-term action item. Once the DOL finalizes this guidance, it will use the paycheck transparency provision as justification for moving forward on its right-to-know regulatory proposal. Instructions on filing comments are provided in the introductory summary.