New Executive Order Further Burdens Federal Contractors - American Society of Employers - Anonym

New Executive Order Further Burdens Federal Contractors

On July 31, President Obama signed a new Executive Order (EO) on Fair Pay and Safe Workplaces that will affect federal contractors and potential federal contractors for construction and supply and services contracts over $500,000. The White House touts the EO as a means to use only those contractors who are “clean,” meaning they have not committed violations of any of a variety of laws over the past three years. But it will place HR departments in a very difficult situation within the organization.  

What is the reason for the EO? It is likely a reaction to the results of an investigation by the Democratic Senate Health, Education, Labor and Pensions (HELP) Committee investigation, which found widespread labor violations by government contractors that went unnoticed in the contracting process.  According to a White House fact sheet, “tens of thousands” of American workers are deliberately under-compensated and/or illegally discriminated against by their government contracting employers. Therefore, the President is “cracking down” on those employers that “break the law.”

The Executive Order directs the General Services Administration to develop a single website for contractors to meet their reporting requirements—for this order and for other contractor reporting.  This aspect of reporting is apparently a response to federal contractors’ complaints about multiple reporting sites. 

The EO requires contractors to report any “administrative merits determination,” “arbritral award or decision,” or civil judgment by the Department of Labor rendered against them in the prior three years for any of the 14 federal laws shown in the chart below (and any state equivalent law):



Fair Labor Standards Act

Occupational Safety and Health Act of


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


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


Executive Order 13658 of February 12, 2014

(Establishing a Minimum Wage for Contractors)




Many of these laws already are difficult for HR practitioners. The FLSA, where Exempt and Non-exempt designation in practice sometimes seems more art than science, is just one example.

What further makes this provision difficult for HR is that settlements are routinely made for violations without any admission of violation. Therefore, for example, what should a contractor report if it had previously signed a conciliation agreement (CA) on technical violations, where the CA wording indicated no admission of violation? If the contractor chooses not to report it, but the contracting officer then locates the initial violation in the files, the contractor could be denied the contract all because of the way the language of the CA is interpreted.

Now consider that the contractor is supposed to be invited to disclose any steps taken to correct violations or improve compliance before the contractor awards the contract. Suppose the contractor does that, but has signed an agreement with no admission of violation. This is incongruous to say the least; worse, it could still lead to additional liability to the contractor.

The EO does establish that the contracting officer will be able to consult with an agency’s Labor Compliance Advisor (a newly created position) and/or Department of Labor, with new guidelines to determine the “seriousness” of violations to be issued by the DOL.  Moreover, a contractor will have the same requirements of a subcontractor and will have to determine if the subcontractor is a responsible source that has a satisfactory record of integrity and business ethics. 

Once a contract has been awarded, the violation information must be updated every six months by both the contractor and any subcontractor.

The EO does not stop there. For certain contracts, the contractor must provide certain workers with documentation detailing hours worked, overtime hours, pay, and additions or deductions from pay. Where appropriate, it must provide exempt workers with documentation detailing that status. This step implements controversial misclassification disclosure and recordkeeping requirements that previously had been listed among the new regulations that DOL would propose. Contractors will also be required to incorporate this requirement into certain subcontracts and to provide written notification to independent contractors of their status.

The government stated it will be holding listening sessions to hear how this EO should be implemented.

Finally, the EO essentially abrogates any arbitration agreements that employees may have signed prior to the award of any contract over a $1 million. Once the contract is awarded, an employer that tries to “force” employees to sign arbitration agreements could potentially be violating a variety of laws and lose any federal contract they may have. And it might nullify collective bargaining agreements’ provisions on this point.

The question now for many contractors or subcontractors is whether being a federal contractor or subcontractor is worthwhile. A series ofExecutive Orders and Presidential Memorandums have greatly increased the costs of doing business with the government.  In turn, if a number of contractors and subcontractors drop out, the cost of doing business by the government or larger contractors may become prohibitive.

It is expected that the EO will be implemented in stages during 2014.

Source:, Jackson Lewis 7/31/14, Fortney Scott 7/31/14, SHRM 7/31/14  Seyfarth Shaw 8/1/14, DCI 7/31/14


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