On August 24, 2016, the U.S. Department of Labor (DOL) and the Federal Acquisition Regulatory Council (FAR) issued a Final Guidance and a Final Rule, respectively, implementing the Fair Pay and Safe Workplaces Executive Order. The Final Rule can be found at https://www.federalregister.gov/articles/2016/08/25/2016-19676/federal-acquisition-regulation-fair-pay-and-safe-workplaces; and the Final Guidance can be found at https://www.federalregister.gov/articles/2016/08/25/2016-19678/guidance-for-executive-order-13673-fair-pay-and-safe-workplaces.

Executive Order

The Fair Pay and Safe Workplaces Executive Order, dated July 31, 2014, purportedly attempts to ensure federal contractors’ compliance with laws that protect their employees’ safety, wages and civil rights. The Executive Order requires federal contractors on covered contracts to disclose labor law violations and gives agencies guidance on how to consider labor violations when awarding federal contracts. The Executive Order also ensures that contractors' employees and independent contractors are given certain information regarding the pay they are owed, their employment status and limits the use of predispute arbitration clauses in employment agreements on such federal contracts.

Highlights of Final Regulations

The Final Rule and Final Guidance (collectively, Final Regulations) apply to federal contractors and subcontractors bidding on any federal contract or subcontract worth more than $500,000 — with the exception of contracts for commercial off-the-shelf items. Highlights of the Final Regulations are:

Disclosure Requirements. Covered contractors and subcontractors must report whether they received any "administrative merits determinations, civil judgments or arbitral awards or decisions" in the preceding three years (but initially only going back to October 25, 2015), concerning any of the following 14 labor and employment laws:

  • Fair Labor Standards Act;
  • Occupational Safety and Health Act (OSHA) (and state law equivalents);
  • Migrant and Seasonal Agricultural Worker Protection Act;
  • National Labor Relations Act;
  • Family and Medical Leave Act;
  • Davis-Bacon Act;
  • Service Contract Act;
  • Title VII of the Civil Rights Act;
  • Americans with Disabilities Act; Age Discrimination in Employment Act;
  • Executive Order 11246 (affirmative action and equal employment opportunity); Vietnam Era Veterans’ Readjustment Assistance Act;
  • Section 503 of the Rehabilitation Act; and
  • Executive Order 13658 (federal contractor minimum wage).
  • The legal entity that must report its violations is the one submitting the bid/offer or contract. Thus, violations by parent, subsidiaries and other affiliated companies need not be reported; however, violations by a different division of the same legal entity must be reported.

Due Process. Covered contractors and subcontractors will receive notice of, and have the opportunity to respond to, agency recommendations prior to a final responsibility determination.

Public Availability of Disclosures. Covered contractors and subcontractors must publicly disclose specified information regarding reportable violations - the law violated, the case identification number, the date of the decision and the name of the entity that made the decision.

Paycheck Transparency. Effective January 1, 2017, covered contractors and subcontractors must: provide wage statements to covered employees concerning their hours worked, overtime hours, pay and any additions to or deductions made from their pay; provide independent contractors a document informing them of their independent contractor status; and provide written notice to inform workers if they are exempt from overtime pay.

Predispute Arbitration Agreements. Covered contractors and subcontractors with contracts for goods and services worth more than $1 million cannot require employees to enter into any predispute arbitration agreement covering Title VII discrimination claims or sexual harassment claims. However, this prohibition does not apply to employees covered by a collective bargaining agreement, or employees or independent contractors who entered into a valid agreement to arbitrate prior to the date the contractor or subcontractor bids on the covered contract (except if the contractor is permitted to change the terms of the agreement or when the agreement is renegotiated or replaced, in which case the bar would apply at that time).

Pre-Assessment. Covered contractors are encouraged, though not required, to go to the DOL for a pre-assessment of their violations before bidding contracts.

Effective Dates of Reporting Requirements

There is a phased implementation schedule.

Prime Contractors. Beginning October 25, 2016, prime contractors must report/disclose workplace law violations received within the first year preceding the start of a contract bid (which will be phased into a three-year look back period by October 25, 2018). However, in the case of contractors bidding on solicitations for contracts under $50 million, disclosure is not required until April 25, 2017. In addition, prime contractors must make updated disclosures every six months thereafter for the duration of the contract.

Subcontractors. Subcontractor reporting/disclosure requirements begin on October 25, 2017 – one year after prime contractors’ reporting obligations. Subcontractors must report their labor violations directly to the DOL and then must report back to the prime contractor the DOL’s response to its disclosure.

State Laws

The Final Regulations focus on federal laws. However, the state law equivalents of most of these laws will be subject to a future rulemaking. The exception to this is OSHA state law equivalents, which are subject to the reporting requirements set forth in the Final Regulations.

Practical Guidance

First, to prepare for the implementation of the Final Regulations, federal contractors should ensure they are familiar with the types of violations or decisions that must be reported under the regulations and create or modify procedures to collect and track the information in a way that can be readily retrieved

Second, federal contractors should consider whether it makes sense for them to take advantage of the new pre-assessment options, especially to establish an initial base line.

Third, federal contractors should take steps to insure that any standard procedures that require employees to sign pre-dispute arbitration agreements are terminated.