Federal contractors must be straining their necks to see if they have an actual target on their backs. Last week, President Obama signed an executive order that requires federal contractors to disclose labor and employment law violations dating back three years. This latest Order follows a number of other executive directives from President Obama this year that target the labor and employment practices of government contractors, including a hike in the minimum wage, an expansion of overtime eligibility, and a ban on discrimination on the basis of sexual orientation or gender identity. The Order also requires government contractors to give their employees information concerning their hours worked, overtime hours, pay, and any additions to or deductions made from their pay. The stopgap measures come in a year where Congressional gridlock has thwarted many of the President’s more wide-reaching labor law initiatives.
The sweeping measure requires federal contractors bidding on contracts that exceed $500,000 to disclose any violations of a number of federal labor and employment laws, including violations of the Fair Labor Standards Act, the Family and Medical Leave Act, the National Labor Relations Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, and the Age Discrimination in Employment Act, as well as any “equivalent state laws,” as defined in Department of Labor guidance. It also prohibits companies with contracts over $1 million requiring employees to arbitrate claims of discrimination, harassment or assault unless covered by a union’s collective bargaining agreement.
The Order instructs federal agencies to consider past violations when awarding federal contracts, which means that applicants with past violations may be denied federal contracts on that basis alone. The Order is expected to go into effect in 2016 for new contracts, and the Department of Labor has been tasked with drafting regulations to implement the Order.
Taken together with the President’s other executive orders, though, it is clear that regardless of the specific requirements, federal contractors should anticipate major increases in compliance costs in the coming years. Federal contractors will be required not only to ensure their own compliance with labor and employment law, but also their subcontractors, and must file notices every six months with the government verifying subcontractor compliance. And, given the three-year look-back, contractors should take immediate steps to review compliance with federal and state labor and employment laws.