United States: Fair Pay And Safe Workplaces Executive Order Targets Federal Contractors

Last Updated: August 12 2014
Article by William E. Doyle

The new Executive Order requires reporting of labor law violations, which may jeopardize federal contracts, and requires contractors to agree that certain claims would not be arbitrated without the voluntary postdispute consent of employees or independent contractors.

On July 31, the White House issued a new Executive Order that leverages federal contract power to enforce labor and employment laws.1 The order will add considerable uncertainty to the contract award process, authorize a host of federal officials to negotiate remedial programs with contractors under threat of contract termination, and impose administrative burdens on contractors that report their own and their subcontractors' labor law violations. The Executive Order also takes aim at predispute arbitration agreements covering claims arising under Title VII or any tort related to or arising out of sexual assault or harassment and requires that federal contractors agree that the decision to arbitrate such claims may only be made with the voluntary consent of the employee or independent contractor after the dispute arises. However, this requirement would not apply to preexisting arbitration agreements unless the employer has discretion to modify the agreement.

The controversial order will likely invite litigation by trade associations as to whether there is statutory authorization for the new requirements and whether the order conflicts with federal law. For example, the requirement that federal contractors agree that Title VII claims will not be arbitrated without the voluntary postdispute consent of employees or independent contractors conflicts with the Federal Arbitration Act (FAA), which reflects a "national policy favoring arbitration," and section 118 of the Civil Rights Act of 1991, which expressly provides that "the use of alternative means of dispute resolution, including . . . arbitration, is encouraged to resolve disputes" under Title VII. The U.S. Supreme Court has long recognized that Title VII claims are arbitrable and recently held in CompuCredit Corp. v. Greenwood that the FAA requires that arbitration agreements be enforced according to their terms, "even when the claims . . . are federal statutory claims, unless the FAA's mandate has been overridden by a contrary congressional command."2

The new Executive Order will be implemented through amendments to the Federal Acquisition Regulations issued by the Federal Acquisition Regulatory (FAR) Council (consisting of the Administrator for Federal Procurement Policy, the Secretary of Defense, the Administrator of National Aeronautics and Space, and the Administrator of General Services). Employers will have an opportunity to submit public comments in response to any proposed regulations implementing the Executive Order. Given the many troublesome provisions discussed below, employers that have or may seek federal contracts will likely take advantage of this opportunity.

Which contracts does the Executive Order apply to?

The new reporting obligations will apply to federal procurement contracts of $500,000 or more and to subcontracts at the same threshold, unless the subcontract is for "commercially available off-the-shelf items"—a term defined in the Federal Acquisition Regulations.3 The requirement that contractors agree that Title VII claims and tort claims related to or arising out of sexual assault or harassment would not be arbitrated without the voluntary postdispute consent of employees or independent contractors applies to federal contracts and subcontracts of $1 million or more, unless the acquisition is for "commercial items"4 or "commercially available off-the-shelf items."

When will the new requirements take effect?

The new requirements will apply to solicitations for contracts issued after the final rule implementing the Executive Order is published. According to a fact sheet provided by the White House, the final rule may be expected in 2016.5

What does the Executive Order require of employers?

Reporting

Employers seeking federal contracts will be required to report certain labor law violations that occurred within the prior three years when bidding on contracts. Importantly, awardees of federal contracts will also have additional ongoing reporting and compliance obligations that require the employer to submit reports of labor law violations every six months during the performance of the contract. If the contract is awarded, the employer must submit additional reports of labor law violations every six months during the performance of the contract. The reportable violations include "administrative merits determinations," "arbitral awards or decisions," and "civil judgments" (as these terms will be defined in guidance to be issued by the Department of Labor [DOL]) involving claims or enforcement actions under the following employment laws:

  • Fair Labor Standards Act
  • Occupational Safety and Health Act of 1970
  • Migrant and Seasonal Agricultural Worker Protection Act
  • National Labor Relations Act
  • Davis-Bacon Act
  • Service Contract Act
  • Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity)
  • Section 503 of the Rehabilitation Act of 1973
  • Vietnam Era Veterans' Readjustment Assistance Act of 1974
  • Family and Medical Leave Act
  • Title VII of the Civil Rights Act of 1964
  • Americans with Disabilities Act of 1990
  • Age Discrimination in Employment Act of 1967
  • The President's February 12, 2014 federal contractor minimum wage Executive Order (No. 13658)
  • Equivalent state laws, as defined in guidance issued by the DOL

The Executive Order indicates that the reports will be made through a new government website that will be established.

Contracting agencies will use the reports to determine whether an apparent successful offeror in a federal procurement is "responsible" and thus eligible to receive the award. This is particularly troubling because any implementing regulation will likely leave a significant, subjective component to a contracting officer's determination of what constitutes "serious, willful, repeated or pervasive violations" that could affect the responsibility determination, and contractors may only challenge responsibility determinations in limited circumstances. Further, the Executive Order requires that, in the post-award context, contracting officers consider reported information regarding violations of labor laws and whether action against the contractor is necessary. Such action may include forced remedial agreements, nonexercise of contract options, contract termination, and referral of the contractor to the agency suspending and debarring official.

Settlements do not need to be reported, which may pressure employers to settle labor law violations to avoid risking a reportable event that could threaten their federal contracts or subcontracts.

Subcontractor Monitoring

Prime contractors will be required to obtain similar reports of labor violations from covered subcontractors at the time of the subcontract award and at six-month intervals during the performance of the subcontract. Before awarding a covered subcontract, the prime contractor, based on these reports, must determine whether the proposed subcontractor is a "responsible source that has a satisfactory record of integrity and business ethics" and is therefore eligible for award. The Executive Order also requires that, based on reports indicating serious, willful, repeated, or pervasive violations, agency contracting officers, when appropriate, must refer a subcontractor with violations to the agency suspending and debarring official. The prime contractor must evaluate the reports and determine whether to take remedial actions against the subcontractor based on the nature and severity of the violations.

Arbitration Agreements

To be eligible for an award of a covered contract or subcontract, entities submitting a proposal or bid on a covered federal contract or subcontract will be required to agree that claims arising under Title VII or any tort related to or arising out of sexual assault or harassment by their employees or independent contractors will not be arbitrated without the voluntary postdispute consent of employees or independent contractors. It remains to be seen whether the implementing regulations will provide for this requirement to apply to all Title VII claims or only those "related to or arising out of sexual assault or harassment," but we note that the regulations implementing a similar provision with similar language in the Franken Amendment adopted the more expansive reading. This provision does not invalidate preexisting arbitration agreements unless the employer has discretion to modify the agreement, but it will apply to any renegotiated or replacement agreement. It also does not apply to employees covered by a collective bargaining agreement. The requirement apparently applies whether or not the employee or independent contractor is personally involved in the performance of a government contract. Employers may want to consider the pros and cons of amending arbitration agreements to eliminate any right to unilaterally modify them before implementing regulations are issued.

Pay Notices

Covered contractors and subcontractors will be required to provide pay notices to nonexempt employees. In each pay period, the written notice must list the hours worked, overtime hours, pay, and any credits to or deductions from pay. The employer must also inform individuals of their exempt or independent contractor status.

How will these requirements be enforced?

The Executive Order requires each government agency to name a Labor Compliance Advisor (LCA), who will be responsible for a wide range of oversight responsibilities. In particular, the LCAs will consult with the contracting officers as to whether an employer's report should preclude the award of an initial contract. With regard to violations reported during the performance of a contract, the LCAs will coordinate discussions among contracting officers, enforcement agency staff, and contractors to negotiate remedial programs as a condition of maintaining the contract.

The order suggests that a complaint alleging labor law violations could be submitted to an LCA or contracting agency (or perhaps the DOL) and that the LCA and contracting agency would consider appropriate remedial action, presumably after conducting an investigation or perhaps referral to an enforcement agency for investigation. The DOL is directed to inform contracting agencies of pending investigations of contractors "so that the agency can help the contractor to determine the best means to address any issues, including . . . resolving issues to avoid or prevent violations."

The Executive Order further charges the DOL with issuing standards for evaluating the significance of reported labor violations, such as the number and severity of the violations, whether there were repeated violations, and whether the violation was willful.

What should employers do now?

Employers should conduct a privileged risk assessment to evaluate the potential effect of the Executive Order on their employment practices and federal contracts. Employers should also evaluate existing and contemplated arbitration agreements to determine the potential impact of the new order. As noted, there may be actions that employers can take before a final rule is issued to avoid some negative aspects of the order. The risk assessment may also provide information that employers can use to inform comments to the FAR Council on the proposed implementing regulations.

Footnotes

1 View the order here.

2 132 S. Ct. 665, 669 (2012) (emphasis added) (internal quotations and citations omitted).

3 A commercially available off-the-shelf item "[m]eans any item of supply (including construction material) that is (i) [a] commercial item [see note 4 below]; (ii) [s]old in substantial quantities in the commercial marketplace; and (ii) [o]ffered to the Government, under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace," excluding bulk cargo. 48 C.F.R. § 2.101.

4 A commercial item is defined as "[a]ny item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes, and (i) [h]as been sold, leased, or licensed to the general public; or (ii) [h]as been offered for sale, lease, or license to the general public," including items with certain modifications and certain services. 48 C.F.R. § 2.101.

5 View the fact sheet here.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions