With little assistance from Congress in enacting workplace reforms, President Obama has more frequently been resorting to executive orders to push pro-employee legislation. Last month, he signed one of his most expansive employment orders to date.
On July 31, President Obama signed the Fair Pay and Safe Workplaces Executive Order. The Executive Order has three main parts that affect federal contractors and subcontractors: (i) mandatory disclosure of labor violations, (ii) paycheck transparency, and (iii) prohibition on mandatory arbitration agreements.
Disclosure of Labor Law Violations: Under the new order, entities bidding on certain federal contracts are required to disclose whether there have been any “administrative merits determination, arbitral award or decision, or civil judgment” rendered against the entity within the previous 3-year period for violations of specifically enumerated labor and employment laws. The covered laws include 14 federal statues and executive orders, as well as equivalent state laws, including the FLSA, OSHA, the NLRA, the Davis-Bacon Act, Executive Order 11246, the FMLA, Title VII, the ADA, and the ADEA. Notably, the Executive Order does not require disclosure of pending claims or voluntarily settled matters. The disclosure provisions apply only to entities bidding on new federal contracts where the estimated value of the supplies acquired and services required exceeds $500,000, as well as certain subcontractors.
In addition to the pre-award disclosure obligation, covered contractors and subcontractors must provide updated disclosures about labor violations every 6 months for the duration of the contract. If a labor violation has occurred, the executive order authorizes the government to take certain remedial action, including termination of the contract.
Payroll Transparency: The Executive Order also requires that a contractor provide FLSA-covered employees performing work under the contract with a document each pay period verifying the accuracy of their paychecks. The document must include information on the individual’s hours worked, overtime hours, pay, and additions to or deductions made from pay. Exempt employees and independent contractors must be provided with a document informing them of their status.
Prohibition on Pre-Dispute Mandatory Arbitration: Finally, and perhaps most notably, the Executive Order requires that entities with federal contracts in excess of $1 million are prohibited from requiring their employees or independent contractors to agree in advance to arbitrate claims under Title VII or “any tort related to or arising out of sexual assault or harassment.” Under the Executive Order, only voluntary post-dispute consents to arbitrate are valid as to such claims. The Executive Order does, however, provide an exception, for employees covered by a collective bargaining agreement and for employees or independent contractors who entered into a valid arbitration agreementprior to the contractor or subcontractor bidding on a contract covered by the Executive Order—unless the contract is renegotiated or replaced.
According to a Fact Sheet issued by the White House, the Executive Order will be implemented on new contracts in stages on a prioritized basis beginning in 2016. Various federal agencies, including the Department of Labor, have been directed to propose regulations to carry out the Executive Order.