President Barack Obama’s “Fair Pay and Safe Workplaces” Executive Order, which applies to new federal procurement contracts, will require those seeking government contracts to disclose their employment and labor law violations for the previous three years. 

This sweeping Executive Order, signed July 31, 2014, implements previous “blacklisting” principles and sets the stage for common violations of federal and state labor and employment laws to result in ineligibility to hold federal contracts. 

The new Executive Order is the latest in a series of Executive Orders by the Obama Administration aimed at federal contractors (see our articles, President Obama Signs Executive Order Raising Minimum Wage for Federal Contractorsand Executive Order Extends Workplace Anti-Discrimination Protections to LGBT Workers of Federal Contractors) and comes on the heels of legislative activity seeking to bar contractors with certain Fair Labor Standards Act violations from holding government contracts (House Passes Appropriations Bill Barring Contractors with Some FLSA Violations from Government Contracts). 

The requirements of the Executive Order will be implemented in 2016 following issuance of implementing regulations by the Federal Acquisition Regulation (FAR) Council and guidance by the U.S. Department of Labor (DOL).

The Executive Order requires prospective federal contractors to report employment and labor law violations (both initially in the bid and award process and post award every six months) and mandates that contracting agencies consider employment and labor law violations as a disqualifying factor when awarding a federal contract. In addition, the Executive Order mandates employer disclosure requirements to workers regarding classification as an employee or independent contractor, exempt or non-exempt status under the FLSA, and related compensation information. These requirements will apply to federal contracts and subcontracts (except for subcontracts for commercially off-the-shelf items), including those for goods, services, and construction, exceeding $500,000. Finally, for contracts and subcontracts that exceed $1 million, the Executive Order prohibits mandatory pre-dispute arbitration for disputes arising out of Title VII of the Civil Rights Act or for torts related to sexual assault or harassment.

Required Violation Disclosure

Pre-award, federal contractors and subcontractors (through the prime contractor) will have to advise agencies whether there has been any administrative merit determination, arbitral award or decision, or civil judgment rendered against them within the preceding three-year period for a violation of any of 12 listed federal labor and employment laws, two executive orders, or equivalent state laws. 

These laws include, among others:

• Fair Labor Standards Act

• Occupational Safety and Health 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 (equal employment opportunity)

• Vietnam Era Veterans’ Readjustment Assistance Act

• Section 503 of the Rehabilitation Act

• Executive Order 13658 (federal contractor minimum wage)

Post-award and during the performance of a contract, contractors will be required to update their violation information every six months and, for certain contracts, obtain the same violation information from their covered subcontractors. Contracting officers, in coordination with labor advisors, will determine whether remedial action is necessary based on these disclosures. Such actions may include compliance assistance and agreements to avoid additional violations. Contracting officers also will consider whether contract termination or referral for suspension or debarment is appropriate based on reported violations.

Worker Classification and Pay Information Disclosure 

Generally, contractors will have to provide workers with documentation detailing hours worked, overtime hours, pay, and additions or deductions from pay. Further, contractors will be required to provide exempt workers with documentation detailing that status. Contractors also will be required to incorporate these requirements into certain subcontracts and to provide written notification to independent contractors of their status. 

Pre-Dispute Arbitration Banned

For contracts and subcontracts exceeding $1 million (except for commercial items or commercially available off-the-shelf items), pre-dispute arbitration agreements are prohibited for claims arising under Title VII of the Civil Rights Act or torts related to or arising out of sexual assault or harassment. Contractors generally will be permitted to arbitrate these types of claims with voluntary, post-dispute agreements with employees or independent contractors. 

Action Items

The FAR Council, DOL, and other key enforcement and contracting agencies will be holding informal “listening sessions” with stakeholders in connection with issuing rules and guidance implementing the Executive Order. Government contractors should consider participating in these sessions to voice their concerns with how the Executive Order will be implemented. 

With the disclosure requirements looming, contractors also should review their violation records and access their current compliance programs to determine whether more robust programs are needed to help ensure the ability to win and keep federal government contracts.