DOL Issues Fair Pay and Safe Workplaces Final Regulations
On August 24, 2016, the DOL issued its final regulation implementing the Fair Pay and Safe Workplaces Executive Order (“EO”) signed by President Obama in July 2014. That Executive Order requires prospective federal contractors to disclose labor law violations during the early stages of the bid process.
The EO and corresponding regulations apply to procurement contracts for goods and services, including construction, where the estimated value exceeds $500,000. If your contracts or subcontracts are less than $500,000, these obligations will not apply to you.
Labor Law Violation Disclosures
In order to ensure that the federal government only does business with contractors with “a high level of integrity and business ethics,” the EO created disclosure requirements for contractors and subcontractors performing or bidding on covered contracts. Specifically, covered federal contractors must disclose any serious “Labor Law” violations committed within the last three years during the bid process. We outline the obligations during each phase of the bid process below.
With regard to the substance of the disclosure, the contractor must disclose any “violations” of laws such as the FLSA, OSHA, NLRA, Davis-Bacon Act, Service Contract Act, FMLA, relevant affirmative action laws, Title VII, the ADA, and the ADEA. The DOL indicated that it will decide at a later time whether any “state law equivalents” must be disclosed.
Notably, “violations” that must be reported include administrative merits determinations, arbitral awards or decisions, and civil judgments. The term “administrative merits determination” is defined to include: a WH-56 “Summary of Unpaid Wages” form from the Department of Labor’s Wage and Hour Division, a citation from the Occupational Safety and Health Administration (OSHA), a show cause notice from the Office of Federal Contract Compliance Programs (OFCCP), a determination of reasonable cause letter from the Equal Employment Opportunity Commission (EEOC), or a complaint issued by the National Labor Relations Board (NLRB). Such violations must be reported even if the contractor was not performing or bidding on a covered contract at the time the violations occurred or were issued.
The term “civil judgment” is defined as “any judgment or order entered by any Federal or State court in which the court determined that the contractor or subcontractor violated any provision of the Labor Laws, or enjoined or restrained the contractor or subcontractors from violating any provision of the Labor Laws.” Civil judgments include judgments or orders that are not final or are subject to appeal.
1. Initial Representation Reporting
When a contractor initially bids on a solicitation for a covered contract, the contractor must represent to the best of its knowledge and belief whether it has or has not had such violations, without providing further information.
2. Pre-Award Reporting
If the contractor reaches the stage in the process at which a responsibility determination is made, and that contractor responded affirmatively at the initial representation stage to a violation, the contracting officer would require additional information about that contractor’s “Labor Law” violation(s). For each administrative merits determination, civil judgment, or arbitral award or decision that must be reported, the contractor must provide:
• the Labor Law that was violated;
• the case number, inspection number, charge number, docket number, or other unique identification number;
• the date that the determination, judgment, award, or decision was rendered; and
• the name of the court, arbitrator(s), agency, board, or commission that rendered it.
Notably, this information is available to the public.
At this same time, the contractor may also provide such additional information as the contractor deems necessary to demonstrate its responsibility, such as mitigating circumstances, remedial measures (to include labor compliance agreements), and other steps taken to achieve compliance with the Labor Laws. Such mitigating circumstances or remedial measures are not subject to public disclosure, unless the contractor chooses to make them public.
3. Post-Award Reporting
Covered contractors would also be required to update the information reported to contracting agencies every six months during performance of the covered procurement contract.
4. Reporting by Subcontractors
In addition, the Final Rules deviate from the proposed rules in that subcontractors will not have to report Labor Law violations to the prime contractor (as was originally suggested). Rather, the subcontractor will make such disclosures directly to the DOL. The DOL will then review the information and respond. The subcontractor then makes a statement to the prime contractor regarding the DOL’s response to the subcontractor’s disclosure. The prime contractor then considers any response from the DOL in evaluating the integrity and business ethics of subcontractors. If the subcontractor is not in agreement with, or has concerns with, the DOL’s assessment, it is then required to disclose its Labor Law violations directly to the prime contractor.
5. What Does the Contracting Agency Do With the Report?
Contracting agencies must determine whether the reported Labor Law violations were issued for “serious, repeated, willful, or pervasive violations.” The guidance provides a detailed list of what constitutes a “serious, repeated, willful, or pervasive violation.” Generally, however, each contractor’s disclosed violations will be assessed on a case-by-case basis in light of the totality of the circumstances, including the severity of the violation or violations, the size of the contractor, and any mitigating factors. The extent to which a contractor has remediated violations of Labor Laws, including agreements entered into by contractors with enforcement agencies, will be given particular weight. In other words, the mere reporting of violations will not automatically lead to disqualification from the bid process.
Paycheck Transparency Obligations
The Executive Order also contained several paycheck transparency requirements, which are expanded upon in the Final Rules. First, contractors will be required to provide all employees performing work under the contract, in each pay period, with information related to their wages, hours worked, overtime, and any additions/deductions made to pay. If the contractor or subcontractor regularly provides documents to its workers by electronic means, the wage statement may be provided electronically if the worker can access it through a computer, device, system, or network provided or made available by the contractor or subcontractor. If an employee is exempt, the contractor need not provide the record of hours worked if it informs the exempt employee of their exempt status in writing.
In addition, contractors who use independent contractors to perform work on the federal contract must provide them with written notice of their independent contractor status before they perform work on the contract. The document should be separate from any contract entered into between the contractor or subcontractor and the independent contractor. Notably, contractors and subcontractors must provide the notice to an independent contractor each time that he or she is engaged to perform work under a covered contract. The notice provided must be specific to a particular covered contract regardless of whether the worker performs the same type of work on another covered contract.
Pre-Dispute Arbitration Agreements
Additionally, the Final Rules state that federal contractors seeking contracts in excess of $1 million are prohibited from requiring employees to enter into mandatory arbitration agreements to resolve Title VII complaints, sexual discrimination, harassment, or assault disputes.
Independent of a specific bid, any current or prospective government contractor may voluntarily contact the DOL to request an assessment of their record of labor law compliance. This is similar to the concept of getting “pre-approved” for a loan. Under the preassessment process, the DOL will assess whether the contractor has a satisfactory record of labor law compliance.
If a contractor that has been assessed by the DOL later submits a bid, and the contracting officer initiates a responsibility determination of the contractor, the contracting officer and the Agency Labor Compliance Advisor (“ALCA”) may use the DOL’s assessment that the contractor has a satisfactory record of labor law compliance unless additional labor law violations have been disclosed.
The preassessment process may remove some uncertainty in the bid process related to whether any Labor Law violations could ultimately affect a contract award. It also may help expedite the bidding process, including if preassessment is required of subcontractors before a formal bid is made to the federal government.
In perhaps the most significant deviation from the proposed rules, the Final Rules provide a phased-in approach to making the labor disclosures.
September 12, 2016: Preassessment begins.
October 25, 2016: The final rule takes effect. Mandatory disclosure and assessment of labor law compliance begins for all prime contractors under consideration for contracts with a total value greater than or equal to $50 million. The reporting disclosure period is initially limited to one (1) year and will gradually increase to three (3) years by October 25, 2018.
January 1, 2017: The Paycheck Transparency clause takes effect, requiring contractors to provide wage statements and notice of any independent contractor relationship to their covered workers.
April 25, 2017: The total contract value threshold for prime contracts requiring disclosure and assessment of labor law compliance is reduced to $500,000.
October 25, 2017: Mandatory assessment begins for all subcontractors under consideration for subcontracts with a total value greater than or equal to $500,000.
Contractors subject to these new obligations should review them in detail, and prepare for compliance before they begin bidding on a covered federal contract or subcontract. This may include updating agreements with subcontractors to begin seeking Labor Law violation information, requiring pre-assessment, and reviewing payroll systems to ensure compliance with the paycheck transparency requirements.
For more information, you can purchase the archived webinar addressing this and other recent Federal Contractor/Affirmative Action developments here.