OFCCP Issues Proposed Guidance and Rule Implementing Fair Pay and Safe Workplaces Executive Order
On July 31, 2014, President Obama signed the Fair Pay and Safe Workplaces Executive Order (“Order”), which would require certain prospective federal contractors to disclose labor law violations and would give agencies more guidance on how to consider labor violations when awarding federal contracts. You can access the newsletter article on that topic here.
On May 27, 2015, the Department of Labor issued proposed guidance to assist contracting agencies and the contracting community in applying the Order’s requirements, including evaluating the severity of labor violations. The Federal Acquisition Regulatory Council (FAR Council) also issued proposed regulations integrating the Order’s requirements. Both the FAR Council’s proposed regulations and the Labor Department’s proposed guidance are subject to a 60-day public comment period.
The following summarizes some of the primary points in the proposed guidance and regulations.
The proposed rules apply to procurement contracts for goods and services, including construction, where the estimated value exceeds $500,000. If your contracts 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 Order created disclosure requirements for contractors and subcontractors performing or bidding on covered contracts. Specifically, covered federal contractors would have to 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 would have to 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.
1. Initial Representation Reporting
When the 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 would have to 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.
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.
3. Post-Award Reporting
Covered contractors would also be required to update the information reported to contracting agencies semi-annually during performance of the covered procurement contract.
4. Reporting by Subcontractors
In addition, under the proposed rules, prime contractors must essentially police their subcontractors by collecting, reviewing, and reporting similar information from their subcontractors “of any tier where the estimated value of the supplies acquired or services required exceeds $500,000,” and the subcontract is not for commercially available off-the-shelf items. Not only would contractors have to revise their subcontracting/purchasing agreements to require data on any labor law violations against the subcontractor within the preceding three-year period, but they would also have to implement a way to evaluate such information to determine whether the subcontractor is “a responsible source that has a satisfactory record of integrity and business ethics.”
5. Method of Reporting
In order to “minimize additional compliance burdens” and “increase economy and efficiency in federal contracting,” the Order provides that a single website will serve as the portal for all reporting requirements under the new rule.
6. 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 Information
The Executive Order also contained two paycheck transparency requirements, which are expounded upon in the proposed rules. First, contractors would 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 must 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 proposed rules state that federal contractors seeking contracts in excess of $1 million would be prohibited from requiring employees to enter into mandatory arbitration agreements to resolve Title VII complaints, sexual discrimination, harassment, or assault disputes.
Both the DOL guidance and the proposed rules provide for a 60-day comment period that expires on July 27, 2015. Contractors subject to these new potential obligations should review them in detail, and submit comments related to any requirements that may be unduly burdensome. In the meantime, covered contractors should consider taking steps now to begin complying with these obligations, including updating agreements with subcontractors to begin seeking Labor Law violation information, and reviewing payroll systems to ensure compliance with the pay transparency requirements. While it is possible that the proposed documents could be revised in light of comments, preparing for any possible additional administrative burden in advance is highly recommended.