The new paycheck transparency requirements under the “Fair Pay and Safe Workplaces” Executive Order (E.O. 13673) will be effective beginning January 1, 2017. The requirements will apply to all new federal procurement contracts and subcontracts of $500,000 or more. Covered contractors must fulfill four obligations, below, which will be triggered by inclusion of Federal Acquisition Regulation (FAR) clause 52.222-60 — Paycheck Transparency in covered solicitations and contracts.

These duties are not retroactive and do not apply to any existing contracts or subcontracts. (See our article, DOL and FAR Council Publish Final ‘Fair Pay and Safe Workplaces’ Rules for Government Contractors.)

Texas Injunction

In October 2016, a Texas federal district court enjoined two of the three main components of E.O. 13673: (1) the labor law violation reporting requirement; and (2) the prohibition of mandatory arbitration agreements covering Title VII claims. (For details, see our article, Texas Federal Court Blocks Enforcement of Key Portions of Fair Pay and Safe Workplaces Rules.)

The injunction has yet to be appealed and the future of the case, and the Executive Order under a Trump Administration, is uncertain.

The court did not enjoin the paycheck transparency requirements of the E.O.

Paycheck Transparency Requirements

Contractors must comply with the following:

1. Provide a “wage statement” “document” for each pay period to each worker performing services under a covered contract and subcontract who is covered by the Fair Labor Standards Act (FLSA), the Service Contract Act, or the Wage Rate Requirements for Construction (also known as the Davis-Bacon Act).

The document may be provided in electronic form if documents typically are provided to employees electronically, and if the worker can access the document through a device made available by the employer.

The statement must provide the worker with the following:

  • The total number of hours worked in the pay period;
  • The number of those hours that were overtime hours;
  • The rate of pay;
  • The gross pay; and
  • An itemized list of the specific amount of any additions made to or deductions taken from gross pay.

If the pay period is not weekly (e.g., bi-weekly), the statement also must break out the hours worked and overtime hours to correspond to the period for which overtime is calculated and paid (typically, weekly). Bottom line: employees must be able to see, without calculation, weekly hours and overtime hours worked and paid.

2. The statement for an FLSA-exempt employee need not include hours worked if the employee is notified in writing of his or her exempt status, either before the employee begins work on a covered contract or subcontract or in the first statement issued under the covered contract or subcontract.

3. The wage statement need not be provided to an independent contractor (IC) working under a covered contract or subcontract. However, contactors must provide each “individual” IC with notice that he or she is being treated as an IC.

Requirements for the IC notice include:

  • It must be a written document;
  • It must be provided at the time the IC relationship is established, but must be a standalone document — it cannot be included in any IC agreement;
  • It must be provided before the individual begins work on a covered contract;
  • It must be provided for each covered contract, even if the individual has been notified of his or her IC status under other covered contracts; and
  • If an employee converts to IC status during performance of a covered contract, the notice must be provided before the individual does any work under the contract as an IC.

4. Include (flow-down) FAR 52.222-60 from prime contracts to covered subcontracts.