The Department of Labor (DOL) and the Federal Acquisition Regulatory Council (FAR Council) issued the final rules and guidance implementing the Fair Pay and Safe Workplaces Executive Order, which will take effect on October 25, 2016. The rule consists of a two-year phase-in period, during which time current and prospective federal contractors and subcontractors with covered contracts will be required to disclose certain labor law decisions and violations. Federal agencies will consider and assess contractors’ workplace compliance histories when determining whether to award contracts and subcontracts.
As part of the phase-in process, on October 25, 2016, only prime contractors will be required to make disclosures of labor law decisions and violations. Subcontractors will not be required to make disclosures until October 25, 2017. Prime contractors must initially make disclosures for contracts valued at $50 million or more. This amount will be reduced to contracts valued at $500,000 or more on April 25, 2017. Initially, the period for which labor violations must be disclosed will be one year preceding the date of the contract bid–gradually increasing to three preceding years by October 25, 2018.
Specifically, contractors will be required to disclose whether or not they have violated the covered labor laws, resulting in administrative merits determinations, civil judgments or arbitral awards or decisions within the reporting period, when bidding on federal procurement contracts. The covered laws include:
- Fair Labor Standards Act
- Occupational Safety and Health Act
- Migrant and Seasonal Agricultural Worker Protection Act
- National Labor Relations Act
- Davis-Bacon Act
- Service Contract Act
- Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity)
- Section 503 of the Rehabilitation Act
- Vietnam Era Veterans’ Readjustment Assistance Act
- Family Medical Leave Act
- Title VII of the Civil Rights Act of 1964
- Americans with Disabilities Act
- Age Discrimination in Employment Act
- Executive Order 13658 of February 12, 2014 (Establishing a Minimum Wage for Contractors)
- Or equivalent state laws, as defined in guidance issued by the DOL
Contractors will make disclosures through the General Services Administration (GSA) System for Award Management (SAM). The SAM is a federal government website that facilitates the federal acquisition process. Information disclosed in the SAM is publicly available, and the disclosures will also be made publicly available on the Federal Awardee Performance and Integrity Information System (FAPIIS), a database that tracks contractor misconduct and performance and which the government utilizes when evaluating prospective contractors competing for federal contracts.
When submitting a bid for a government contract in the SAM, contractors will be required to respond to the following:
- For solicitations issued between October 25, 2016 and April 24, 2017:
The Offeror [ ] does [ ] does not anticipate submitting an offer with an estimated contract value of greater than $50 million.
- For solicitations issued after April 24, 2017:
The Offeror [ ] does [ ] does not anticipate submitting an offer with an estimated contract value of greater than $500,000.
If the offeror selects “does,” the offeror must respond to the following:
- [ ] There has been no administrative merits determination, arbitral award or decision, or civil judgment for any labor law violation(s) rendered against the offeror for labor law violations during the period beginning on October 25, 2015 to the date of the offer, or for three years preceding the date of the offer, whichever period is shorter;
- [ ] There has been an administrative merits determination, arbitral award or decision, or civil judgment for any labor law violation(s) rendered against the offeror for labor law violations for during the period beginning on October 25, 2015 to the date of the offer, or for three years preceding the date of the offer, whichever period is shorter.
A contractor will need to disclose additional information about its labor violations if the contracting officer initiates a responsibility determination regarding the prospective contractor, or if the contractor has already submitted such information for another bid and nothing has changed since then. The additional information that might be required includes:
- The labor law violated;
- The case number, inspection number, charge number, docket number, or other unique identification number;
- The date rendered; and
- The name of the court, arbitrator(s), agency, board, or commission rendering the determination or decision.
In addition, the contractor will also have the opportunity to provide additional information to demonstrate its responsibility–such as mitigating circumstances, remedial measures and other steps taken to achieve compliance with the relevant labor law or laws. The contracting officer will ultimately determine whether a prospective contractor’s labor violations demonstrate a satisfactory record of integrity and business ethics, or if additional action is needed. Such action may include a labor compliance agreement with the relevant enforcement agency or agencies, denial of the award, or referral to the agency’s suspending and debarring official.
The DOL’s guidance suggests that only a small percentage of contractors will actually be required to make disclosures. However, contractors should be cognizant that when the rule is fully implemented, approximately 14,000 contractors will receive prime contracts covered by the order. While the DOL estimates that only 10% of these contractors will be required to make disclosures, this is still a significant number of covered contracts. And, in any event, every contractor will be required to have a compliance program to track possible violations and make an initial disclosure in regard to prior violations when bidding on a contract. This poses a great burden on all contractors.
Prior to the effective date, the DOL has implemented a “Preassessment period,” which is an opportunity for contractors to voluntarily contact the DOL and request an assessment of its labor law compliance history. This period is ongoing, and will continue even after the rule is effective. The DOL characterizes the Preassessment process as a proactive and mitigating measure for contractors with labor law compliance history concerns to develop a labor compliance agreement before there is a specific acquisition. Essentially, an interested contractor would complete the Preassessment Request Intake Form, at which time a member of the DOL would follow up with an additional labor law violation history form to be completed.
Contractors should thoughtfully consider and seek guidance as to whether or not their compliance history warrants participation in the Preassessment period, as there may be risks and potentially minimal benefits. The DOL provides that “if a contractor that has been assessed by the Department of Labor subsequently submits a bid, and the contracting officer initiates a responsibility determination of the contractor, the contracting officer and the Agency Labor Compliance Advisor (ALCA) may use the Department’s assessment that the contractor has a satisfactory record of labor law compliance unless additional labor law violations have been disclosed.” However, the additional time available for review during Preassessment could potentially lead to a more in-depth analysis and higher level of scrutiny.
In addition to the disclosure requirements, the final rule imposes further requirements and restrictions on certain contractors and subcontractors. On October 25, 2016, companies with federal contracts and/or subcontracts valued at $1 million or more will also be prohibited from requiring its workers to enter into pre-dispute arbitration agreements for disputes arising out of Title VII of the Civil Rights Act, or from torts related to sexual assault or harassment. There are however two exceptions. First, this provision does not apply to employees covered by a collective bargaining agreement between the contractor and a labor organization. Second, it does not apply to employees or independent contractors who consented to arbitration prior to the contractor or subcontractor bid on a government contract covered by the Executive Order, unless the existing arbitration agreement permits the employer to change the terms of the arbitration agreement, or if the contract is renegotiated or replaced.
As of January 1, 2017, certain paycheck transparency requirements will become effective, as well. The final rule requires contractors and subcontractors to provide wage statements to covered workers, giving them information concerning their hours worked, overtime hours, pay and any additions or deductions made from their pay. Contractors and subcontractors must also provide written notice informing workers if they are exempt from overtime pay, and provide workers treated as independent contractors a document informing them of their independent contractor status.
Contractors should carefully review their labor compliance history in anticipation of future required disclosures. Further, given the increasing look-back period for disclosing violations, contractors should implement a strong compliance program as soon as possible, and all entities that are contemplating entering into contracts with the government should also carefully consider these compliance obligations.