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Recent guidelines have been issued by the Department of Labor in connection with President Obama’s “Fair Pay and Safe Workplaces” Executive Order 13673.  Interested parties will have until July 27, 2015 to submit written comments to the Regulatory Secretariat for consideration before the proposals are finalized.

Based on the Executive Order and proposed regulations, the federal government could withhold federal contracts, terminate existing contracts, and expose federal contractors to suspensions and debarments based upon labor violations. The regulations create increased incentives for contractors to settle meritless claims rather than defend themselves and run the risk of an adverse judgment.

The guidelines provide that federal contractors will be required to report whether there have been any administrative merits determinations, civil judgments, or arbitral award decisions rendered against them during the preceding three-year period based on violations of any of the 14 federal labor laws, executive orders, or equivalent state laws.  (The DOL will provide a second proposed guidance document addressing which state laws are considered equivalent to the 14 federal labor laws and executive orders identified in the Executive Order.  That second proposed guidance document will be published in the Federal Register at an unspecified future date.)  Contracting officers and Labor Compliance Advisors will be responsible for assessing whether the violations reported by federal contractors are “serious, willful, or pervasive,” to aid in the determination of whether a contractor has a sufficient satisfactory record of integrity and business ethics to enable the federal government to continue its business relations with the contractor. The DOL’s proposal provides information regarding what constitutes a violation, definitions for various terms, and includes examples of how the various types of violations are measured by the DOL.

Additionally, the proposed guidance issued by the DOL requires federal contractors to require their subcontractors to report their own violations of the identified labor laws.  The federal contractors must then make their own evaluations about the integrity of the subcontractors.  Contractors must monitor the actions of their subcontractors to avoid being penalized with respect to receipt of federal contracts, which could impact overall business relations between federal contractors and subcontractors.  Both contractors and subcontractors will be required to provide their workers (employees and independent contractors) with information describing how workers’ pay was calculated for each pay period.

The Executive Order imposes new requirements on federal contractors in connection with various federal labor laws, which the federal government claims will improve the federal contracting process.  The stated goal of the Executive Order is to increase efficiency and cost savings regarding the work performed by contractors at the direction of the federal government. Additionally, the DOL claims the proposed guidance will provide a roadmap to contracting officers, Labor Compliance Advisors, and the contracting community, which will enable individuals and federal agencies to asses contractors’ history of labor law compliance in an effort to determine whether the contractors have a satisfactory record of integrity and business ethics.