Employers with federal contracts or subcontracts have seen quite a few changes in 2015, and the Office of Federal Contracts Compliance Programs (OFCCP) has been very active in its enforcement of regulations, both the new as well as the old. President Obama’s continued use of Executive Orders in addition to changes made by the OFCCP have resulted in numerous changes that federal contractors and subcontractors have had to implement in regard to their obligations as contractors (or subcontractors). As 2015 comes to end and 2016 quickly approaches, this is a good time for federal contractors and subcontractors to ensure that they are complying with the OFCCP’s regulations. Below, we review the changes that went into effect in 2015 and the additional changes that are coming in 2016 (and beyond).
The significant changes that went into effect in 2015 are as follows:
- $10.10 minimum wage (Executive Order 13658): Beginning January 1, 2015, workers were required to be paid $10.10 per hour while performing work in connection with covered federal contracts and subcontracts. This requirement applies to covered federal contracts and subcontracts that are solicited (including replacement or renewal of expiring contracts) on or after January 1, 2015. Tipped employees working in connection with covered federal contracts must receive at least $4.90 per hour. Contracts and subcontracts subject to this requirement generally include the following: (1) procurement contracts for construction covered by the Davis-Bacon Act (DBA); (2) service contracts covered by the Service Contract Act (SCA); (3) concessions contracts; and (4) contracts in connection with federal property or lands and related to offering services for federal employees, their dependents or the general public. The definition of “contract” also includes a “contract-like instrument.” The monetary thresholds for prime contracts are as follows: (1) prime DBA contracts that exceed $2,000; (2) prime SCA contracts that exceed $2,500; and (3) prime procurement contracts where the workers’ wages are governed by the FLSA that exceed $3,000. There is no monetary threshold for subcontracts awarded under such prime contracts.
- Sexual orientation and gender identity discrimination (Executive Order 13672): Effective April 8, 2015, sexual orientation and gender identity were added to the list of protected groups under Executive Order 11246. Employees and job applicants may not be discriminated against by employers who are federal contractors on the basis of their sexual orientation or gender identity. In addition, federal contractors were required to update their “Equal Opportunity” clause included in federal contracts and subcontracts, the EEO language used in job postings and their “EEO is the Law” poster. The rule applies to contracts of $10,000 or more per year and entered into or modified on or after the rule’s effective date of April 8, 2015. Significantly, the new regulations do not require voluntary self-identification of sexual orientation or gender entity. They also do not include any additional obligations for contractors with respect to their affirmative action plans.
- VETS-4212 report: The VETS-4212 report replaced the VETS-100A and VETS-100 reports. Federal contractors are no longer required to report on individual categories of veterans and instead must report only the total number of “protected veterans.” The OFCCP has advised that contractors are no longer required to invite individuals to self-identify by individual categories in the post-offer self- identification. Rather, contractors are required only to invite those offered a job to indicate whether they are “protected veterans” under any of the VEVRAA categories.
- New, lower veterans’ hiring benchmark: OFCCP lowered the hiring benchmark for protected veterans from 7.2% to 7.0% for 2015 for federal contractors and subcontractors who opt to use this benchmark for their affirmative action plan. The hiring benchmark is subject to change annually, so the OFCCP could make another adjustment in 2016.
- Compliance with 2014’s revised VEVRAA and Section 503 regulations: Although the revisions to VEVRAA and Section 503 regulations became effective in March 2014, they are worth mentioning. Because more than a year has passed, the OFCCP expects that all contractors have now incorporated the requirements of the revised regulations into their affirmative action plans.
Additional changes are scheduled to go into effect in 2016 and into 2017:
- $10.15 minimum wage: Effective January 1, 2016, the minimum hourly wage for workers who perform work in connection with covered federal contracts and subcontracts increases $0.05 per hour, from the $10.10 required in 2015 to $10.15 for 2016. The new minimum wage for tipped employees working in connection with covered federal contracts and subcontracts also increases, from $4.90 to $5.85 per hour.
- Pay transparency (Executive Order 13665): Effective January 11, 2016, covered federal contractors and subcontractors are prohibited from terminating or discriminating against job applicants or employees for discussing their pay or the pay of their co- workers. Contractors must also include the Pay Transparency Policy statement (prescribed by OFCCP) in employee handbooks and must disseminate the statement to applicants and employees. The “EEO is the Law” poster also will be updated, and employers will be required to post the updated poster. This regulation applies to contracts or subcontracts over $10,000 entered into or modified on or after January 11, 2016. Notably, neither contractors nor their employees are required to disclose information related to pay. Rather, it prohibits adverse actions against those who discuss or inquire about pay.
- Paid sick leave (Executive Order 13706): Effective January 1, 2017, employees working on covered federal contracts and subcontracts must receive a minimum of one hour of paid sick leave for every 30 hours worked, up to 56 hours per year. Unused sick leave will roll over from year to year and must be reinstated for any employee who quits or is separated and then rehired within 12 months. The leave may be used not only for the employee’s own physical or mental illness or preventative care, but also may be used to care for a “family member,” which is defined to include people with relationships that are the “equivalent” of family relationships. The Secretary of Labor will be implementing regulations further clarifying paid sick leave requirements by September 30, 2016. However, covered employers should start preparing to update leave policies and impacts for budgets now. The categories of federal contractors and subcontractors that are covered by the paid sick leave requirements are the same as those that apply to the federal contractor minimum wage, as discussed in detail above.
- Disclosure of employment and labor law violations (“Fair Pay and Safe Workplaces Executive Order,” Executive Order 13673): This Executive Order applies to procurement federal contracts that exceed $500,000. Before a new contract may be awarded to a contractor, and every six months thereafter, the contractor must disclose to the contracting agency all employment and labor law violations occurring in the past three years against the company. Contractors are required to disclose violations of 14 federal labor laws and their state counterparts, including federal and state wage and hour laws, safety and health, collective bargaining, family and medical leave, and civil rights protections. “Violations” broadly include “administrative merits determinations,” “arbitral awards or decisions” and “civil judgments.” The violations could be used by a contracting agency to determine whether to award a contract to the company and can also be taken into account by the contracting agency to determine whether to take other actions, including whether to terminate a contract or whether suspension or debarment of the contractor is appropriate. Under the proposed guidance, contractors also must collect similar information on their subcontractors, prior to awarding a new subcontract and every six months thereafter, where the value of the subcontract exceeds $500,000.
This Executive Order also requires federal procurement contractors and subcontractors with contracts in excess of $500,000 to include paycheck notifications for employees working on any such contracts, including hours worked, overtime hours, pay and any additions to or subtractions from pay. Finally, for goods and service contracts in excess of $1,000,000, contractors and subcontractors are prohibited from imposing mandatory arbitration of employment law claims that arise under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment. A decision to arbitrate may, however, be made with the voluntary consent of the employee or independent contractor after the dispute arises.
These requirements are expected to be implemented in 2016, when the final rule is published. The rule, however, imposes significant compliance obligations on federal contractors and is causing some contractors to consider their internal processes and their ability to comply with these requirements.
Coming soon? There are additional proposals that are not yet final but are on the horizon:
- Sex discrimination regulations: New regulations have been proposed by the OFCCP to update the OFCCP’s sex discrimination guidelines but have not yet been approved. The current guidelines cover nondiscrimination and affirmative action requirements related to sex under Executive Order 11246. The guidelines, however, have been in effect since the 1970s and, therefore, do not reflect established law or the demographic shifts of the workplace. Accordingly, the new guidelines are expected to largely mirror developments in and obligations already imposed by Title VII of the Civil Rights Act. The guidelines are expected to address pay discrimination, sexual harassment, workplace accommodations for pregnancy, sex stereotyping, gender identity and family caregiving discrimination. The OFCCP projects that this will go to final form in December 2015. Although that may still be possible, as we approach the end of the year, it is more likely to be published in 2016.
- Equal Pay Report: In August 2014, the OFCCP proposed new regulations requiring contractors with more than 100 employees to submit this report annually. Covered federal contractors would be required to submit summary compensation data, including W-2 wages and total hours worked for all workers in each EEO-1 job category by race/ethnicity and sex. It is not clear when, or even if, a final rule will be published. The OFCCP originally projected that the proposal would go to final rule in August 2015, and then delayed the date to November 15. The date has now been pushed back again to May 2016. Some who follow the OFCCP’s activities have suggested that the Equal Pay Report may never get any further.