On July 31, 2014, President Obama signed the Fair Pay and Safe Workplaces Executive Order, which will require bidders for covered federal contracts to disclose their violations of federal and state labor and employment laws and will bar egregious violators of labor and employment laws from receiving federal contracts. The new Executive Order will also prohibit certain large federal contractors from requiring employees to enter into predispute arbitration agreements covering certain employment-related claims, require federal contractors to disclose certain information to employees regarding their pay, and create a “one stop” contractor reporting website. The new Executive Order is expected to go into effect in 2016 after federal agency regulations implementing the Executive Order are published and finalized. 

Key Provisions of the Executive Order 

The Fair Pay and Safe Workplaces Executive Order will require bidders for federal procurement contracts valued at more than $500,000 to disclose labor and employment law violations under 14 federal laws and equivalent state laws over the past three years. The violations that must be disclosed to the contracting agency include those under employment discrimination laws, wage and hour laws, affirmative action laws, workplace safety and health laws, family and medical leave laws, and the National Labor Relations Act. Only violations found by an administrative merits determination, arbitral award or decision, or civil judgment must be reported. In addition, contractors with covered federal contracts will be required to obtain corresponding information about labor and employment law violations from certain subcontractors and to provide updates on labor and employment law violations to the contracting agency every six months. Contracting officers at federal agencies will take the information about violations into account in determining whether to award a contract, terminate a contract, or impose remedial provisions in a contract. The new Executive Order calls for the adoption of standards for identifying egregious violators, who will generally be disqualified from obtaining federal contracts. 

The new Executive Order also prohibits contractors with federal contracts valued at more than $1 million from entering into predispute arbitration agreements with employees covering claims under Title VII of the Civil Rights Act (the federal law that prohibits employment discrimination based on race, color, sex, religion, or national origin) or tort claims related to sexual assault or harassment. Arbitration provisions in collective bargaining contracts and valid arbitration agreements that are already in effect when the employer bids on a covered federal contract may continue to be enforced with respect to those claims, however. Subcontractors with a subcontract valued in excess of $1 million will also be subject to the restrictions on predispute arbitration agreements. These restrictions will not apply, however, to contracts and subcontracts for the acquisition of commercial items or commercially available off-the-shelf items. 

The new Executive Order will require contractors and subcontractors with a federal contract or subcontract valued at more than $500,000 to provide employees with information in writing concerning the total number of hours they work, the number of overtime hours, the amount of their pay, and any additions to or deductions from their pay. (Information about working hours and overtime hours need not be provided to exempt employees.) In addition, covered contractors and subcontractors that treat workers as independent contractors must provide those workers with a document informing them of that status. 

Federal contractors holding contracts with multiple agencies have frequently complained about the duplicative reporting obligations they must satisfy under their various contracts. In response to those complaints, the new Executive Order directs the development of a single federal website on which federal contractors can satisfy all of their reporting requirements, including the new requirements for reporting labor and employment law violations, at one time. 

Practical Implications 

The Fair Pay and Safe Workplaces Executive Order’s requirement for reporting labor and employment law violations is based on the premise that companies with a history of such violations are more likely to have labor problems that would affect the performance of a federal contract and on the premise that law-abiding companies should not have to compete for federal contracts with prospective contractors that can submit lower bids because of their noncompliance with labor and employment laws. As a practical matter, this requirement may encourage employers to settle employment-related claims so that they can report that they have not been found in violation of a labor or employment law when they bid on a federal contract. The Executive Order will also cause certain federal contractors either to revise drastically the employment-related arbitration agreements they have been using, thereby seriously impairing the utility of those agreements, or to eliminate the use of such agreements altogether. A better understanding of the full impact of this Executive Order will come with the publication of the regulations implementing it. No deadline has been set for the publication of those regulations, however.