Contractors Must Comply with New Executive Order

Contractors who want to work with the federal government must report past labor law violations, according to a rule finalized and published on August 25, 2016. This rule, part of President Obama’s Fair Pay and Safe Workplaces Executive Order (which he issued in 2014), goes into effect on October 25.

The rule, in a nutshell, requires federal contractors to disclose even minor violations they or their subcontractors have had in the last three years when procuring contracts worth more than $500,000.

Contractors should keep in mind the following provisions of the rule:

Pre-Dispute Arbitration Agreements. Prohibitions against requiring employees to enter into pre-dispute agreements to arbitrate claims brought under Title VII of the Civil Rights Act of 1964 or tort claims arising from sexual assaults or harassment will take effect on October 25, 2016. The White House indicates that this prohibition will not apply “where valid contracts already exist and remain unmodified.”

Paycheck Transparency. Paycheck transparency provisions of the final rules will become effective on January 1, 2017.

One-Year Delay for Subcontractor Disclosures. For the one-year period beginning October 25, 2016, disclosures of labor law violations will be required only for prime contractors. Subcontractor disclosures will not be required until October 25, 2017.

Contract Thresholds. For the first six months after October 25, 2016, the requirement for prime contractors to disclose labor law violations will apply only on solicitations valued at $50 million or more. Starting on April 25, 2017, solicitations valued at or above $500,000 will be covered.

Three-Year Lookback Window. The three-year lookback period for disclosures will be phased in gradually. Initially, the period of time covered by the disclosure obligation will be limited to one year preceding the date on which a contractor submits a bid on a covered solicitation. Presumably, that window will increase from one to two years as of October 25, 2017, and then to the full three-year window as of October 25, 2018.

DOL to Handle Subcontractor Disclosures. Once subcontractor disclosures are required, the DOL will be responsible for determining whether and how labor law violations will affect subcontractor access to work on covered federal contracts. Subcontractors will make their disclosures directly to the DOL, rather than to prime contractors; and prime contractors will be able to rely on the DOL’s review.

Equivalent State Laws. The final rules do not contain any timeframe for rulemaking concerning labor law violations involving “equivalent” state laws. The White House indicates that this requirement will be “phased in at a later time” (with the exception for OSHA-approved state plans, which will take effect in accordance with the above schedule).

Early Assessment Opportunities. Starting September 12, 2016, the DOL will offer a pre-assessment” process, which will allow contractors to come forward to the DOL “to discuss their history of compliance with labor laws” and secure guidance on whether “additional compliance measures are necessary.”

Helpful Citizens. The White House fact sheet highlights the opportunity for the public to make reports to contracting agencies, a point that largely has escaped notice until now. According to the White House, Agency Labor Compliance Advisors “will also be available to members of the public who have information they feel that prospective contractors should have disclosed about their labor violations.”

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