On July 31, 2014, President Obama issued another new labor and employment Executive Order entitled the "Fair Pay and Safe Workplaces Executive Order". This new rule is being imposed on government contractors ostensibly intended to force contractors to disclose workplace violations of labor laws and settle labor disputes by paying back wages. Contractors should carefully review their policies and procedures to ensure compliance with the new rule.
The new labor rule includes the following:
1. Pre-Award Disclosure of Violations. Any contractor preparing a bid or proposal in excess of $500,000 will be required to disclose an administrative merits determination, arbitral award or decision, or civil judgment against the bidder or offeror during the prior three (3) years involving the 14 primary labor laws, such as wage and hour, safety and health, family and medical leave, and civil rights, and equivalent state laws. Subcontractors on subcontracts with a value exceeding $500,000 (except for commercial-off-the-shelf ("COTS") items) must likewise disclose any violations. These disclosures are now a responsibility determination to be considered and evaluated by the Contracting Officer when evaluating proposals because any violations may result in disqualification of a bidder or offeror for an award of a contract. Independent contractors, i.e., individuals who are sole proprietors, must be informed of their status by the prime contractor.
2. Post Award Actions. During contract performance, contractors must update the disclosed information every six (6) months. These disclosures may result in government action ranging from assistance with compliance to contract termination, or suspension or debarment.
3. Labor Compliance Advisor. A senior official must be designated by federal agencies as a "Labor Compliance Advisor" to facilitate contractor compliance with labor laws and responding to violations.
4. Paycheck Information. Pay stubs will be required to show hours worked, overtime hours, hourly rates, and deductions from pay, for lawful reasons.
5. Arbitration of Disputes. Contractors with contracts valued over $1 million or more (except for COTS items and collective bargaining agreements) are now prohibited from requiring employees to enter into pre-dispute arbitration agreements for disputes and claims arising out of civil rights violations or torts related to sexual harassment or sexual assault. Such an arbitration agreement may only be executed bilaterally after such a dispute arises. This issue is applicable also to subcontractors holding subcontracts exceeding $1 million.
6. GSA Website. The GSA is directed to develop a single website for contractors to meet their reporting requirements, regardless of the number of contracts held, for this Executive Order and other contractor reporting.
7. Effective Dates. The new rule will probably not be effective until 2016, and only on new contracts and on new solicitations issued after the FAR Council issues new implementing regulations.
Any violations of the labor laws could result in appropriate remedial assistance, compliance assistance, or harsh penalties such as not exercising an option, termination of the contract, or referral of the matter to a suspending and debarring official.
In addition, Rep. Keith Ellison, D-Minn., has introduced amendments to appropriations bills to debar federal contractors with violations of the Fair Labor Standards Act ("FLSA") during the five (5) years that resulted in penalties of as little as $5,000.
Contrary to White House claims that these new rules will "promote efficient contracting" and "protect responsible contractors"; these rules will add a heavy burden of labor law compliance to an already existing burden. Small and mid-tier business concerns will incur the highest cost to implement compliance and suffer the harshest penalties for non-compliance. At the same time, all federal government contractors, large and small, would be wise to ensure that they are in strict compliance with the top 14 labor and employment laws by engaging in an audit or review of your policies, procedures, and actual practices.
Contracts Unlimited, Inc. | 1114 Fairfax Pike, Suite 12 | White Post, Virginia 22663-1882
Phone: (877) 327-3812 | Fax: (877) 327-3814
Copyright © 2004-2014, Contracts Unlimited, Inc. All Rights Reserved.