On August 25, 2016, the DoD, General Services Administration (GSA) and National Aeronautics and Space Administration (NASA) issued a final rule amending the Federal Acquisition Regulation (FAR) to implement Executive Order 13673, Fair Pay and Safe Workplaces, which is intended to increase efficiency and cost savings in federal contracting by improving contractor compliance with labor laws. Specifically, the rule requires that companies bidding on federal contracts or subcontracts of at least $500,000 disclose violations of labor laws, which will be taken into account by contracting officers in making their contract awards. After issuing the proposed rule in May 2015, the FAR Council and the Department of Labor (DOL) received over 12,500 comments. Although the final rule makes several changes to the proposed rule that will notably lessen the compliance burden on contractors, it still imposes substantial compliance obligations.

Specifically, companies seeking federal contracts must disclose any violations occurring within the past three years of 14 federal labor laws and Occupational Safety and Health Administration (OSHA)-approved state plans, under a phased-in approach. In addition to violations resulting in civil judgments and arbitral awards or decisions, companies must also disclose any “administrative merits determinations,” including notices or findings following an investigation by relevant enforcement agencies. The final rule also requires that contractors publicly disclose on the System for Award Management (SAM) certain specific information about labor law violations, including the law violated, the case identification number, the date of award or decision, and the name of the body that made the decision.

In addition, the final rule requires contractors to provide their workers “paycheck transparency,” notifying non-employees at the start of performance of their status as independent contractors and, with respect to employees, including certain information on the pay stubs they receive each pay period. On contracts worth more than $1 million, contractors also must agree not to impose mandatory arbitration on workers who file Title VII discrimination or sexual harassment claims. It is important to note that subcontractors must disclose labor law violations directly to the DOL rather than to their prime contractors. The rule will become effective on October 25, 2016. (81 Fed. Reg. 58,562, 8/25/16)