August 4, 2014

Executive Order Brings New Reporting Requirements and Debarment Procedures for Federal Contractors

Last Thursday, President Obama issued an Executive Order aimed at “cracking down on federal contractors [and their subcontractors] who break the law.” The Fair Pay and Safe Workplaces Executive Order (EO) requires prospective federal contractors to disclose any labor law violations they or their subcontractors have had within the last three years in order to be considered for new federal contracts valued at more than $500,000. The disclosures, which the EO requires contractors and subcontracts to update every six months, must include any “administrative merit determination[s], arbitral award[s] or decision[s] or civil judgment[s]” that indicate contractors or subcontractors have violated federal and state laws dealing with wage and hour, safety and health, collective bargaining, family and medical leave, and civil right protections. The EO directs federal agency contracting officers to consider violations in awarding contracts and offer guidance to contractors on remedying the violations.

Many in the federal contractor community have voiced serious concerns with this EO, as it puts agency procurement officers into the position of labor law enforcers. The EO would also provide federal and state enforcement agencies and plaintiffs lawyers with leverage to force settlements in cases where the law or the facts may be in dispute, and put contractors in a difficult position of policing and disclosing violations by their subcontractors. Many in the contracting community have also argued that, given the complexity of federal and state labor and employment laws and the fact that parties often have legitimate disagreements about the interpretations of these laws, it is nearly impossible for federal contractors to have a flawless compliance record.

The EO also requires contractors to provide employees in each pay period with information on the hours they worked, overtime hours, pay and any deductions that were made so that the employee can verify the accuracy of their paychecks. Finally, the EO forbids any federal contractor with a contract of $1 million or more from requiring its employees to enter into mandatory arbitration agreements for disputes dealing with sexual assault or harassment claims.

According to the fact sheet released by the White House, the EO will likely be implemented on new contracts in stages, on a prioritized basis, during 2016. The federal contracting community and other interested parties will be invited to participate in listening sessions with the Office of Management and Budget (OMB), the Department of Labor (DOL) and senior White House officials to share views on how to ensure that implementing policies and practices is both fair and effective. DOL and other enforcement agencies along with the FAR Council will consider this input as they draft regulations and guidance, which will be published for public comment before being finalized.

CUPA-HR will continue to analyze the impact of this EO for higher ed HR. Stay tuned for additional information on the EO, implementing regulations and opportunities to provide comments to the administration.