On July 31, 2014, President Obama issued an Executive Order entitled Fair Pay and Safe Workplaces that will impose significant changes on Government contractors with regard to labor issues. Among other things, this Order would require contractors to disclose a variety of labor law violations.

The Order calls for reporting of findings that a company has violated one or more of certain laws or Executive Orders, including the Fair Labor Standards Act, the Occupational Safety and Health Act of 1970, and title VII of the Civil Rights Act of 1964, during the preceding three years. Reporting is required when the estimated value of the contract for goods or services, including construction, exceeds $500,000. The contractor also must disclose steps to correct the violations or improve compliance. This information must be updated every six months during contract performance. These requirements extend to subcontracts valued more than $500,000 for other than commercially available off-the-shelf (COTS) items.

When assessing whether a contractor is a responsible source with a satisfactory record of integrity and business ethics for purposes of making award decisions, the contracting officer must consider both the information regarding violations and the steps to correct violations or improve compliance. Agencies also must refer information to agency suspension and debarment officials, “as appropriate.”

These aspects of the Order are reminiscent of controversial prior efforts dating back more than a decade of seeking to “blacklist” contractors for violations of laws, such as labor laws, even when the violation did not occur in the performance of a government contract.

Further, the Order requires “paycheck transparency,” such that all individuals performing work under a contract covered by the Fair Labor Standards Act, the Davis Bacon Act, the Service Contract Act, or equivalent state laws are provided with documentation setting forth hours worked, pay, overtime pay, additions, and deductions. These requirements also extend to subcontracts valued more than $500,000 for other than COTS items.

Similar to a rule that applies to DoD contracts, the Order also provides that for any contracts and subcontracts valued over $1 million, the contractor must agree that “the decision to arbitrate claims arising under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment may only be made with the voluntary consent of employees or independent contractors after such disputes arise.” Contractors covered by this rule would not be able to require employees to agree in advance to submit such claims to arbitration. The Order allows for certain exceptions. First, the rule is not applicable to contracts and subcontracts for commercial items or commercially available off-the-shelf items. Second, there is an exception for employees covered by a collective bargaining agreement. And third, the rule does not apply to employees and independent contractors who entered into an arbitration agreement prior to when the contractor or subcontractor bid on a covered contract (though the “voluntary post-dispute consent” is required if the contractor or subcontractor is permitted to change the terms of the contract or it is renegotiated or replaced).

The Order takes effect immediately, but will require issuance of rules for certain matters, such as guidance for determination of whether “serious, repeated, willful, or pervasive violations” of the relevant labor laws “demonstrate a lack of integrity or business ethics” as well as other matters covered by the Order. By its terms, however, the Order is broad in scope. Many companies may be impacted by the new requirements.