Government contracts business capture and compliance folks, meet the human resources department. HR, please meet the govcon business development and compliance units. As long as you want to become or remain federal contractors or subcontractors, you are going to be spending lots of time working together from now on.

As anticipated and discussed in a recent post on the Duane Morris Government Contracts and Litigation Blog, on August 25, 2016, the Federal Acquisition Regulatory Council (“FAR Council”) and the U.S. Department of Labor published a Final Rule (81 Fed. Reg. 58562) and Final Guidance (81 Fed. Reg. 58654) implementing Executive Order 13673, Fair Pay and Safe Workplaces. The 203 pages of Final Rules and Guidance, which become effective on October 25, 2016, fundamentally alter the way federal contractors and subcontractors will need to handle and resolve employment and labor claims and compliance issues involving their entire workforce. The Final Rules and Guidance could also result in otherwise-capable companies being “blacklisted” and effectively barred from federal contracts and subcontracts based on labor or employment law violations related or unrelated to prior or current federal contract performance.

The Final Rules and Final Guidance flesh out the mandates of Executive Order 13673, Fair Pay and Safe Workplaces (the “Order”) and are organized into three separate, but equally impactful, components: (1) Disclosure Requirements and Responsibility Determinations; (2) Paycheck Transparency; and (3) Arbitration of Title VII Claims and Tort Claims Related to Sexual Assault or Harassment.

Disclosure Requirements and Responsibility Determinations

The centerpiece of the new regulatory scheme is the new disclosure and responsibility determination requirement. 48 C.F.R. (or “FAR”) Part 22.20, and §§ 52.222-57, 52.222-58 and 52.222-59. The Final Rule is being phased in over time as follows:

  • October 25, 2016 – Prime contractors on all federal contract solicitations issued on or after October 25, 2016, and valued in excess of $50 million;
  • April 24, 2017 – Prime contractors on all federal contract solicitations issued on or after April 24, 2017, and valued in excess of $500,000; and
  • October 25, 2017 – Subcontractors at any tier with subcontracts valued in excess of $500,000 (but not for Commercial-Off-The-Shelf items).

Covered contractors and subcontractors will be required to certify, as part of the RFP process, whether they had any reportable “labor law decisions” arising under 14 different federal labor and employment statutes or Executive Orders in the prior three years. If they did, Contracting Officers will require contractors to provide, as part of their FAR 9.104 responsibility determinations, detailed information about each “labor law decision” and any mitigating or remedial factors. Subcontractors will provide information about each “labor law decision” directly to the U.S. Department of Labor. Most of that information, if not all (at the contractor’s choosing), will be publicly accessible. 

What constitutes a “labor law decision” and how Contracting Officers and their associated Agency Labor Compliance Advisors or the U.S. Department of Labor will use the information disclosed by contractors to make responsibility determinations is complicated and allows for a great deal of government discretion. Simply stated, if a contractor or subcontractor has too many “labor law decisions” to report or they are too severe, pervasive, repeated or willful, the company could be deemed not “responsible” and denied a federal contract or subcontract. In other words, an OSHA citation, a Service Contract Act violation and/or an adverse single-plaintiff employment discrimination case could effectively bar your company from competing for a government contract or subcontract. That’s a lot to take in and oversimplifies 203 pages of regulations and guidance. For further details, please see “Fair Pay and Safe Workplaces Final Rules and Guidance Will Lead to Big Changes in How Federal Contractors Handle Employment and Labor Claims,” which addresses this topic in greater depth.

Paycheck Transparency

The second major section of the Final Rule and Guidance concerns “Paycheck Transparency.” See FAR 22.2005, 52.222-60. The new Paycheck Transparency provisions:

  • become effective on January 1, 2017;
  • apply to contractors and subcontractors covered by the Fair Labor Standards Act, the Service Contract Act or the Davis-Bacon Act;
  • apply to all federal contracts valued at more than $500,000;
  • apply to all subcontracts valued at more than $500,000 other than for COTS items; and
  • apply to all employees and independent contractors.

The new Paycheck Transparency rule requires covered contractors and subcontractors to provide specific wage and hour details as part of worker paychecks or in worker pay stubs. Covered contractors and subcontractors will also be required to provide formal written notices to all independent contractors advising the workers of their independent contractor status. For additional information and insights into the new rule, please see “Fair Pay and Safe Workplaces Final Rules and Guidance Will Lead to Big Changes in How Federal Contractors Handle Employment and Labor Claims,” which addresses this topic in greater detail.

Arbitration of Title VII Claims and Tort Claims Related to Sexual Assault or Harassment

The last major section of the new regulations concerns “Arbitration of Contractor Employees Claims.” See FAR 22.2006, 52.222-61. The new arbitration provisions:

  • become effective October 25, 2016;
  • apply to all contracts and subcontracts valued at more than $1,000,000 (excluding COTS items); and
  • do not apply to employees covered by a collective bargaining agreement.

In the new FAR clause, employees get to choose whether to bring Title VII claims or sexual assault or harassment claims in arbitration or in court, but only after the worker has a claim. This FAR clause has the potential to effectively void company-wide arbitration plans for covered contractors, subcontractors and workers. For further details, please see “Fair Pay and Safe Workplaces Final Rules and Guidance Will Lead to Big Changes in How Federal Contractors Handle Employment and Labor Claims,” which addresses this topic in greater depth.