On August 24, 2016, the U.S. Department of Labor (DOL) and the Federal Acquisition Regulatory (FAR) Counsel issued a final rule to implement President Obama’s Executive Order 13673, entitled “Fair Pay and Safe Workplaces,” first announced by the President over two years ago on July 31, 2014.

According to the Federal Acquisition Institute, the purpose of E.O. 13673 is “to help [federal] contractors come into compliance with labor laws – not to exclude contractors.” The final rule implementing the order requires both current and prospective federal contractors and subcontractors to disclose labor law violations and establishes how federal agencies (primarily contracting officers working with agency labor compliance advisors) should take infractions and violations of labor laws into account when awarding or extending federal contracts.

The “Fair Pay and Safe Workplaces” order affects an estimated nearly 30 million employees in the U.S. workforce and tens of thousands of federal government contractors. According to the final rule and accompanying guidance provided by the DOL, current and prospective contractors seeking contracts valued at more than $500,000 will be required to disclose to the contracting agency any violation of one or more enumerated federal and state labor laws of which they have been found guilty or otherwise responsible for the three years preceding the submission of the contract bid.  Once a contract has been awarded, the contractor must renew its disclosures every six months. The federal and state labor laws of which contactors must disclose violations include wage and hour, safety and health, collective bargaining , family and medical leave and civil rights laws.  Contractors must also disclose such information as it pertains to their primary subcontractors.

Since Executive Order 13673 is intended to encourage reporting and accountability among federal contractors and not to eliminate or reduce the number of federal contracts, the DOL contemplates that only the most egregious violators – namely contractors who fail or refuse to come into compliance with labor laws – will be refused new or extended federal contracts. Indeed, the executive order provides that each contracting agency will designate a senior official as a Labor Compliance Advisor who will advise the contractor (or prospective contractor) whether any violations rise to the level of a lack of integrity or business ethics and, if appropriate, will provide guidance on corrective actions the contractor can take to avoid losing a current or prospective contract.

Two other aspects of Executive Order 13673 are worth noting. First, the order mandates that federal contractors not require their employees to enter into pre-dispute arbitration agreements for disputes involving allegations of sexual assault or harassment.  Simply put, the order requires that employees be given their “day in court” for any claims involving sexual harassment or assault.  Importantly, the “no arbitration” restriction does not apply to other types of worker claims, including workplace safety or wage and hour claims.

Second, the Order requires that federal contractors provide employees with accurate information every pay period about the number of basic and overtime hours worked, amount of pay, and any additions to or deductions from the calculate pay, so that employees may see precisely how their pay was calculated.

Federal contractors have always been subject to an added layer of scrutiny because of their interface with the federal government, but Executive Order 13673 takes this scrutiny to a new and unprecedented level. While the DOL has attempted to streamline the disclosure and assessment processes under the new final rule – including by promising to design a single website so that contractors can “report once in one place” in order to meet their disclosure requirements no matter how many separate federal contracts they have or are seeking – the full implementation of the new reporting requirements  are sure to cause some bumps and bruises along the way as both federal agencies and their contractors become accustomed to the more rigorous process.

 

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