On July 31, 2014, President Obama signed the "Fair Pay and Safe Workplaces" Executive Order, which imposes new requirements on federal contractors to disclose labor violations and also prohibits certain government contractors from requiring workers to sign pre-dispute arbitration agreements covering employment claims. The Executive Order applies to those businesses that seek to obtain from the federal government "procurement contracts for goods and services, including construction," that are valued at more than $500,000. The U.S. Department of Labor estimates that there are roughly 24,000 businesses with federal contracts, employing about 28 million workers.

New reporting required for contractors.

The Executive Order, which became effective immediately, provides that applicants seeking government contracts must disclose any "administrative merits determination, arbitral award or decision, or civil judgment," arising from the violation of certain federal and state labor laws, rendered against the applicant during the previous three years. At least 15 such laws are specified, including the Fair Labor Standards Act, Title VII of the Civil Rights Act, and all "equivalent state laws" to be defined in guidance issued by the U.S. Department of Labor. Agencies awarding government contracts are then instructed to consider, based on the disclosures, whether the applicant "is a responsible source that has a satisfactory record of integrity and business ethics." Those applicants that are awarded contracts will then be required to update their disclosures every six months during the period of performance of the contract. The Executive Order also imposes requirements on federal contractors to ensure that certain subcontractors make similar disclosures and updates.

Pre-dispute arbitration agreements curbed for contracts over $1 million.

Additionally, for those contracts "where the estimated value of the supplies acquired and services required exceeds $1 million," federal contractors are barred from requiring employees or independent contractors to enter into pre-dispute arbitration agreements applicable to "claims arising under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment." This same requirement, which does not apply to employees covered by a union collective-bargaining agreement, must also be incorporated into subcontracts where the estimated value of the supplies acquired and services required exceeds $1 million.

Public input is being sought. Implementation in 2016.

The Federal Acquisition Regulatory (FAR) Council will be responsible for implementing specific regulations as necessary to carry out the Executive Order. According to the White House, the federal contracting community and other interested parties will be invited to participate in "listening sessions" regarding the implementation of the regulations, and input from these sessions will be considered as the regulations are drafted. The Executive Order will be implemented on new contracts in stages, on a prioritized basis, throughout 2016.

This is a dramatic change in federal contracting requirements. Employers should monitor developments relating to the Executive Order, including the development and implementation of the FAR Council's regulations.