United States: President Obama Signs Executive Order Mandating Government Contractor And Subcontractor Disclosure Of Labor Law Violations

On July 31, 2014, President Barack Obama signed The Fair Pay and Safe Workplaces Executive Order. The executive order is unprecedented in scope, requiring covered federal contractors periodically to disclose various labor law violations to the government pre- and post-contract award and to collect similar information from subcontractors. The executive order also (a) adopts guidelines for how reported violations should be considered by agencies in making contract awards, (b) adds new paycheck "transparency" requirements, and (c) attempts to limit the use of mandatory arbitration for certain employment disputes.

Labor Law Violation Reporting

Pre-Award Disclosure

The executive order first requires contractors bidding for federal procurement contracts for goods and services (including construction contracts) valued at more than $500,000 per contract to disclose to the contracting agency whether there has been "any administrative merits determination, arbitral award or decision, or civil judgment" rendered against the bidding contractor within the past three years for violations of the following (collectively, "a labor law violation"):

  1. The Fair Labor Standards Act
  2. The Occupational Safety and Health Act of 1970
  3. The Migrant and Seasonal Agricultural Worker Protection Act
  4. The National Labor Relations Act
  5. The Davis-Bacon Act
  6. The Service Contract Act
  7. Executive Order 11246
  8. Section 503 of the Rehabilitation Act of 1973
  9. The Vietnam Era Veterans' Readjustment Assistance Act of 1974
  10. The Family and Medical Leave Act
  11. Title VII of the Civil Rights Act
  12. The Americans with Disabilities Act
  13. The Age Discrimination in Employment Act
  14. Executive Order 13658 (establishing a minimum wage for contractors)
  15. "Equivalent state laws"

Under the executive order, a contractor's disclosure must then be reviewed by an agency's contracting officer to determine whether a bidding contractor is "a responsible source that has a satisfactory record of integrity and business ethics."

Post-Award Disclosure

In addition to pre-award disclosure, during the performance of a covered contract, federal contractors must update their pre-award labor law violation disclosures to the contracting agency every six months.

Further, for federal subcontracts valued at more than $500,000 each and that "are not for commercially available off-the-shelf items," prime contractors must:

  • require each applicable subcontractor to disclose labor law violations to it as part of a subcontract award, with updates every six months;
  • "before awarding a subcontract" (or within 30 days of subcontract award for subcontracts effective within 5 days of execution) "consider the information submitted by the subcontractor...in determining whether a subcontractor is a responsible source that has a satisfactory record of integrity and business ethics"; and
  • incorporate language regarding the subcontractor disclosure obligation in applicable subcontracts.

Contractor reporting disclosures, once effective, will be made via a website to be developed by the federal administrator of general services.

Violation Consideration by Contracting Agencies

Under the executive order, each agency will be required to designate a senior official to act as "a labor compliance advisor," who will be responsible for working with contracting officers to determine whether a bidder or current contractor is "a responsible source." Labor compliance advisors also are tasked with, among other things:

  • consulting with "relevant enforcement agencies" (e.g., the Department of Labor, Equal Employment Opportunity Commission, Office of Federal Contract Compliance Programs) regarding "appropriate actions to be taken in response to violations identified";
  • advising the contracting officer "whether agreements are in place or other otherwise needed to address appropriate remedial measures, compliance assistance, steps to resolve issues to avoid further violations, or other related matters"; and
  • helping agency officials determine the "appropriate response" to address disclosed violations, with particular emphasis on "serious, repeated, willful, or pervasive violations."

"Appropriate responses" can include "agreements requiring remedial measures, decision to not award a contract or exercise an option on a contract, contract termination, or referral to the agency suspending or debarring official."

Notably, in addition to agency pressure that will be brought to bear on contractors deemed out of compliance, the Department of Labor (DOL) will be required to inform contracting agencies of its investigations of federal contractors and subcontractors so that agencies can "help the contractor determine the best means to address any issues, including compliance assistance and resolving issues to avoid or prevent violations."

It is unlikely that such "help" will include contracting agency support of employers who disagree with enforcement agencies about whether a labor law violation has, in fact, occurred or the appropriate remedy for an alleged violation.

Factors for Agency Consideration

The executive order instructs the Federal Acquisition Regulatory (FAR) Council, in consultation with various entities, to promulgate amendments to the Federal Acquisition Regulation "to identify considerations for determining whether serious, repeated, willful, or pervasive violations" are deemed to "demonstrate a lack of integrity or business ethics." Per the executive order, the proposed regulations must:

  • provide that in most cases a single violation of law "may not necessarily give rise to a determination of lack of responsibility," depending on the nature of the offense;
  • "ensure appropriate consideration is given to any remedial measures or mitigating factors, including any agreements by contractors or other corrective action taken to address violations"; and
  • ensure that contracting officers and labor compliance advisors "send information, as appropriate, to the agency suspending and debarring official, in accordance with agency procedures."

The executive order also requires the secretary of labor to develop guidance to assist agencies in implementing any final rule issued by the FAR Council. Such guidance must, "where available, incorporate existing statutory standards for assessing whether a violation is serious, repeated or willful." Where no such statutory standard exists, the executive order requires that DOL guidance take into account the following:

  1. For determining whether a violation is serious, consider "the number of employees affected, the degree of risk posed or actual harm done by the violation to the health, safety, or well-being of a worker, the amount of damages incurred or fines or penalties assessed with regard to the violation, and other considerations as the Secretary finds appropriate."
  2. For determining whether a violation is repeated, consider "whether the entity has had one or more additional violations of the same or a substantially similar requirement in the past 3 years."
  3. For determining whether a violation is willful, consider "whether the entity knew of, showed reckless disregard for, or acted with plain indifference to the matter of whether its conduct was prohibited."
  4. For determining whether a violation is pervasive, consider "the number of violations of a requirement or the aggregate number of violations of requirements in relation to the size of the entity."

"Paycheck Transparency"

In addition to labor law violation disclosure, the executive order requires "paycheck transparency" for all employees and independent contractors performing work under a contract for whom the employer is required to maintain wages under the Davis-Bacon Act, the Service Contract Act or "equivalent State law."

Specifically, federal contractors and subcontractors covered by the executive order must provide such workers a document "in each pay period" that contains information concerning the individual's "hours worked, overtime hours, pay, and any additions made to or deductions made from pay." However, exempt employees need not be given a record of hours worked if the contractor or subcontractor informs such workers of their overtime exempt status. Contractors and subcontractors also must provide any worker who is treated "as an independent contractor, and not an employee" with a written document regarding the worker's status.

Limits on Mandatory Arbitration

The executive order also requires that, for each contract with an estimated value in excess of $1 million (except for contracts for commercially available off-the-shelf items), contractors and subcontractors must agree that "the decision to arbitrate claims arising under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment may only be made with the voluntary consent of employees or independent contractors after such disputes arise."

This requirement is a direct attempt to ban the use of pre-claim mandatory arbitration agreements used by many employers. However, per the executive order, the limits on mandatory arbitration do not apply to employees employed pursuant to collective bargaining agreements. The limits on mandatory arbitration also do not apply to an employee or independent contractor "who entered into a valid contract to arbitrate prior to the contractor or subcontractor bidding on a contract covered by this order," unless the contractor is permitted to change the terms of the mandatory arbitration agreement or the agreement is later renegotiated or replaced.

Contractor Take-Aways

The accompanying White House fact sheet to the executive order notes that the Obama Administration expects the order "to be implemented on new contracts in stages, on a prioritized basis, during 2016," giving the FAR Council and secretary of labor time to promulgate regulations and guidance. In the meantime, whether certain parts of the executive order are "good law" likely will be the subject of heavy litigation. Examples include the following:

  • The executive order's ban on mandatory arbitration appears to conflict with prior federal court precedent, upholding the enforceability of mandatory arbitration clauses used by federal contractors and subcontractors under the Federal Arbitration Act (FAA).
  • The role of agency "labor compliance advisors" in actively pressuring contractors "to resolve issues to avoid further violations" in order to get or keep a contract appears to violate due process protections provided to employers under current statutes. This is especially true given the White's House's trumpeting of the executive order as a mechanism "to encourage companies to settle existing disputes."

Whether violations reported under the executive order will be deemed public information subject to disclosure under the Freedom of Information Act (e.g., to the media, unions, plaintiffs' attorneys) is also an open question.

Nevertheless, final regulatory details aside, federal contractors and subcontractors will want to start working now toward putting steps in place to address the new reporting and other obligations. In doing so, employers face several challenges.

  1. Contractors will need a compile an accurate list of adverse labor decisions that may be subject to reporting.
  2. Contractors should be ready to defend any decision to report some labor law "violations" but not others, consistent with regulations to be issued later.
  3. Because the executive order applies to certain labor law violations stretching back for three years, contractors should take steps to implement a labor dispute tracking system in coordination with human resources, legal, compliance and other company personnel and outside counsel.
  4. Contractors should be ready to challenge any agency findings that they are not "responsible sources", which can render otherwise acceptable contract bids ineligible for award (and jeopardize ongoing contracts).
  5. If contractors have experienced particularly serious or numerous negative, alleged labor law violation outcomes in the last three years, they should prepare for the possibility of having to defend against potential suspension or debarment proceedings.

Copies of the executive order and White House fact sheet are available online.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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