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Posted on Monday, August 18, 2014

New Executive Order Will Require Contractors to Report Labor Law Violations

On July 31, 2014, President Obama signed the “Fair Pay and Safe Workplaces Executive Order.” The primary purpose of this Executive Order ‒ which is expected to be implemented beginning in 2016 ‒ is to encourage federal contractors receiving taxpayer dollars to maintain lawful working conditions for their employees. It imposes significant new requirements for federal contractors to ensure their compliance with fourteen federal statutes, executive orders, and equivalent state laws, including the FLSA, FMLA, ADA, Age Discrimination in Employment Act, Title VII of the Civil Rights Act, the Davis Bacon and Service Contract Acts, and recent Executive Order 13658 – “Establishing a Minimum Wage for Contractors.”The Executive Order requires contractors bidding on procurement contracts valued at $500,000 or more to disclose “whether there has been any administrative merits determination, arbitral award or decision, or civil judgment” issued against the contractor during the preceding three years for violations of the federal and state labor laws covered under the Executive Order. It also requires federal agencies to appoint a “Labor Compliance Advisor” to help contracting officers review contractors’ disclosures during the procurement process and contract performance, and requires contracting officers to consider this information in determining whether an offeror has a satisfactory record of compliance, integrity, and business ethics.

The Executive Order directs the FAR Council to propose to amend the FAR to identify considerations for determining whether serious, repeated, willful, or pervasive labor law violations demonstrate a lack of integrity or business ethics. It also directs the Secretary of Labor to develop guidance to assist agencies in determining whether adverse rulings were issued for serious, repeated, willful, or pervasive violations.

It is too soon to tell how the FAR Council, Department of Labor, and federal agencies will implement this Executive Order, and what the Order’s ultimate effect will be. Compliance with labor laws and maintenance of lawful working conditions should always be an important goal of all employers, including federal government contractors receiving taxpayer dollars. The Executive Order’s goals ‒ to protect employees and crack down on unethical and irresponsible contractors ‒ are admirable. However, the Executive Order introduces additional complexity to an already complicated process that, if not implemented correctly, could result in delays in the contracting process, place additional burdens on contracting officers, and potentially insert a subjective element into the process that opens the door to abuse by federal agency officials.

The White House has stated that contractors will be able to participate in “listening sessions” to provide input on how to ensure the policies and practices associated with the Executive Order will be fair and effective, and that the draft regulations and guidance will be subject to public comment before being finalized. Contractors should take advantage of these opportunities to make their concerns known to the government when the time comes.

Stephanie Wilson is an attorney at the Washington, DC business law firm, Berenzweig Leonard, LLP. She can be reached at SWilson@BerenzweigLaw.com

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