While chastising Congress as "doing nothing," the
executive and administrative branches of the federal government
were busy making new employment rules for federal contractors and
subcontractors.
This summer, President Barack Obama signed four executive orders
and one presidential directive, and the U.S. Labor Department's
Office of Federal Contract Compliance Programs (OFCCP) published
two sets of proposed rules and one set of interim rules affecting
contractors. With several items remaining on the OFCCP's
regulatory agenda that are slated to be issued in 2014, one almost
needs a scorecard to keep track. This article identifies those
items and summarizes the activity through August 8, 2014.
The summer rule-setting surge included new affirmative action and
nondiscrimination requirements for certain veterans and disabled
employees, protections for employees who discuss compensation, a
higher minimum wage, a requirement to disclose labor and employment
law violations, and a requirement that contractors annually report
summaries of compensation paid their employees by sex and race
categories. Items remaining on the regulatory agenda concern
retaliation and sex discrimination guidelines, and hiring goals for
construction contractors' female and minority employees.
Regulatory Process
When a law is passed by Congress, the federal agency responsible
for enforcement of the law is often charged with developing rules
and regulations for the interpretation and enforcement of the law.
Executive orders signed by a President may also direct the
appropriate administrative agency to develop regulations. Once an
agency develops a new rule, it issues a Notice of Proposed
Rulemaking (NPRM) presenting and discussing the proposed rule. The
NPRM is then published in the Federal Register and the public is
invited to submit comments within a specified time period. The
agency may decide to change the proposed rule as a result of
comments received, implement it without changes, delay its
implementation, or withdraw it.
Under the authority of Executive Order 11246, the OFCCP enforces
anti-discrimination and affirmative action laws that protect the
rights of applicants and employees of companies doing business with
the federal government.
Reporting Summary Data On Employee Compensation
Most recently, the OFCCP proposed a rule requiring federal
contractors and subcontractors, including construction contractors,
to annually report summary employee compensation data, broken down
by sex, and racial and ethnic group. This not the first time the
agency has addressed the subject: the OFCCP also solicited comments
in 2011.
Under the proposed rule, contractors will file Equal Pay Reports
showing the number of full- and part-time employees, hours worked,
and summary compensation data based on W-2 earnings by sex and
race, using the same race and ethnicity and job categories used in
the Employer Information Report (EEO-1). Reports will be filed
electronically between January 1 and March 31 of each year based on
data collected over the entire reporting (calendar) year. A
separate report will be required for each establishment, including
headquarters.
If implemented, the rule will apply to contractors that are
already required to file annual EEO-1 reports, have 100 or more
employees, and have contracts or subcontracts of at least $50,000.
The OFCCP is considering extending the rule's coverage to
institutes of higher education that are required to file Integrated
Postsecondary Education Data System reports with the Department of
Education; have 100 or more employees; and have a federal contract,
subcontract or purchase order of $50,000 or more.
The OFCCP describes the proposed rule as one component of a larger
strategy to address supposed pay gaps between men and women and
among various racial groups. It intends to use the summary
information to identify which contractors to audit for enforcement
purposes. It also intends to publish summary data by industry in an
effort to deter contractors from violating their existing
nondiscrimination requirements. Comments are due by November 6,
2014.
Nonretaliation For Disclosure Of Compensation Information
Another part of the strategy seeking pay equity, Executive Order
13665 prohibits federal contractors from discharging or in any
other manner discriminating against employees or applicants because
they "inquired about, discussed, or disclosed" their own
compensation information or the pay information of another employee
or applicant. Signed on April 8, 2014, it took effect immediately
and directed the agency to propose implementing regulations by the
end of September.
The laws of numerous states already make it unlawful for any
employer to prohibit employees from sharing compensation
information. The National Labor Relations Board (NLRB) also has
found such employer prohibitions unlawful.
Sexual Orientation And Gender Identity
Executive Order 13672 prohibits federal contractors and
subcontractors holding contracts of $10,000 or more from
discriminating against applicants or employees based on sexual
orientation or gender identity. It also adds both classifications
to existing affirmative action requirements. Signed by President
Obama on July 25, it directs the Secretary of Labor to propose
regulations within 90 days and will apply to contracts entered into
on or after January 1, 2015.
At the time the President signed the order, 18 states, the
District of Columbia, and over 200 cities and counties prohibited
employment discrimination on the basis of sexual orientation or
gender identity. In those locations that do not have such laws,
this Executive Order requires federal contractors and
subcontractors to go beyond the nondiscrimination requirements of
their state and local laws and Title VII of the Civil Rights Act of
1964.
Minimum Wage
Executive Order 13658 raised the minimum wage that federal
contractors and subcontractors must pay employees to $10.10 per
hour on new federal contracts beginning January 1, 2015. Annually
thereafter, the rate will be indexed to inflation. Tipped workers
must receive at least $4.90 an hour beginning in 2015, with the
rate adjusted for inflation annually. Federal, state, and local
prevailing-wage laws setting a higher minimum wage will take
precedence over these rates.
The Secretary of Labor published a proposed rule on June 17
setting standards and procedures for its implementation and
enforcement of the order. The proposed rule prohibits retaliation
and waiver of claims, sets the time for payment of wages,
establishes recordkeeping requirements and explains that the order
does not create a private right of action.
The proposed rule applies to procurement contracts for
construction covered by the Davis Bacon Act, service contracts
covered by the Service Contract Act, concessions contracts, and
contracts in connection with federal property or lands and related
to offering services. It interprets the term "contract"
broadly to include contract-like instruments entered into verbally
or in writing and any subcontract of any tier. The comment period
closed July 28.
Disclosing Past Violations When Seeking Award
Executive Order 13673 requires employers seeking new federal
contracts to disclose "whether there has been any
administrative merits determination, arbitral award or decision, or
civil judgment" rendered against it within the preceding
three-year period for labor and employment law violations.
Violations that a prospective contractor must disclose include
violations of 14 federal laws enforced by agencies including the
U.S. Labor Department (DOL), the NLRB, the Equal Employment
Opportunity Commission, and equivalent state laws. The prospective
contractor must also disclose the steps it has taken to correct
violations, disclose "any agreements" with enforcement
agencies, represent that it will require its covered subcontractors
to make similar disclosures and represent that it will incorporate
that obligation into its subcontracts.
New "labor compliance advisors" will consider the
information provided by a prospective contractor and determine if
it "is a responsible source that has a satisfactory record of
integrity and business ethics." Standards and guidance are to
be developed by the Federal Acquisition Regulations Council and the
DOL in a timely fashion.
This order applies to procurement contracts for goods and
services, including construction, where the estimated value of the
supplies acquired and services required exceeds $500,000. When the
contract is worth $1 million or more, the order also prohibits
contractors from using agreements that require employees to
arbitrate Title VII or tort claims related to sexual assault or
harassment.
Paycheck Transparency
That same Executive Order also provides for paycheck transparency, requiring contractors and subcontractors to provide each individual performing work under the contract, for each pay period, a document showing the individual's hours worked, overtime hours (or a statement that the individual is exempt from overtime pay requirements), pay, and any additions to or deductions from pay. Individuals treated as independent contractors must be provided a document informing the individual of their independent contractor status.
Affirmative Action And Nondiscrimination Clauses
Last fall, the OFCCP published final rules updating covered
contractors' (including construction contractors')
affirmative action and nondiscrimination obligations toward
individuals with disabilities and certain protected categories of
veterans under Section 503 of the Rehabilitation Act and the
Vietnam Era Veterans' Readjustment Assistance Act (VEVRAA),
respectively.
On July 25, the Department of Defense, General Services
Administration and National Aeronautics and Space Administration
issued an interim rule amending the contract clauses in the Federal
Acquisition Regulations to reflect these changes, effective
immediately. The modified clauses incorporate the new requirements
on mandatory job listings, data collection, recordkeeping, and
establishment of hiring benchmarks.
Conclusion
The goals reflected in these actions are laudable but impose
increased monetary and practical costs on contractors. The security
of compensation information is also a concern: an August 2012
National Academy of Sciences report questioned the ability of the
OFCCP and other federal agencies to handle employer pay data in a
secure manner.
The new executive orders and rules may lead some contractors to
question whether federal contract work is worth the effort, cost
and risk involved. But the rules are not final yet. How well the
goals are achieved and at what risk and cost will depend largely on
the rules for implementation.
And if implemented, the proposed rules may be challenged in court.
Because the penalties for noncompliance can include loss of the
contract and debarment, the rules may be challenged as
unconstitutional takings of property without due process. Section
208 of Executive Order 11246 may provide another basis for a
challenge because it states that "[n]o order for debarment of
any contractor from further government contracts ... shall be made
without affording the contractor an opportunity for a
hearing." Additionally, if Republicans gain control of the
White House in 2016, the executive orders could potentially be
rescinded.
In the meantime, federal contractors should assume that rules in
some form will be implemented and start auditing their pay and
recordkeeping practices, reviewing their policies, and devising
methods of tracking and reporting violations of discrimination
laws.
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