By Sean Milani-Nia
On July 31, 2014, President Obama signed the Fair Pay and Safe Workplaces Executive Order (Order), which imposes new requirements and prohibitions on federal contractors. While the Order is effective immediately, the requirements will not apply to contractors until the final rule implementing the Order is published (likely in 2016). In the meantime, contractors should bolster their compliance efforts to ensure they will be found responsible for future proposals.
Pre award: Under the Order, offerors on procurement contracts, where the estimated value exceeds $500,000, will be required to disclose certain labor law violations occurring during the prior three years. The Order enumerates 14 applicable federal labor laws and includes their state law equivalents as well.
Upon disclosing such violations, federal contractors will be permitted to explain their efforts to correct the violations and increase compliance efforts.
Contracting officers, in consultation with the agency’s designated Labor Compliance Advisor, must consider violations as well as contractors’ remedial efforts in determining whether contractors have a satisfactory record of integrity and business ethics sufficient to be considered responsible offerors.
Only serious, repeated, willful, or pervasive violations of the labor laws enumerated in the Order will demonstrate lack of integrity and business ethics. In most cases a single violation should not give rise to a non-responsibility determination.
Post award: In addition to disclosing labor law violations prior to award, federal contractors will be required to update their disclosures every 6 months. If a new violation is disclosed, the contracting officer, in consultation with the agency’s Labor Compliance Advisor, may: (1) require an agreement outlining appropriate remedial measures; (2) provide compliance assistance; (3) decide not to exercise an option on the contract; (4) terminate the contract; or (5) refer the contractor to a suspending and debarring official.
Federal contractors should also be aware that they will be responsible for flowing down similar requirements to their subcontractors. For subcontracts where the estimated value exceeds $500,000 (excluding commercially off-the-shelf items), contractors will need to require subcontractors to disclose any violations of the enumerated labor laws within the preceding three years and to update those disclosures every six months.
The Order prohibits contractors with federal contracts in excess of $1 million from entering into pre-dispute arbitration agreements with employees relating to Title VII or sexual assault or harassment torts. Contractors will be required to flow down similar requirements in subcontracts greater than $1 million. This provision, however, will not apply where employees or independent contractors entered into a valid agreement to arbitrate prior to the contractor or subcontractor bidding on a contract that is covered by the Order.
The Fair Play and Safe Workplaces Executive Order sets forth yet further requirements with which federal contractors will need to comply. Contractors should focus on increasing their compliance efforts now to ensure that the disclosure of any labor law violations in the future are minimal and not grounds for a nonresponsibility determination.