As previously reported in everythingpeople.™ This Week!, on July 31, 2015 President Obama signed an Executive Order (EO) on Fair Pay and Safe Workplaces that affected federal contractors and subcontractors and potential federal contractors that have construction and supply and services contracts over $500,000. The White House touted the EO as a means to use only those contractors who are “clean,” meaning they have not committed violations over the past three years.  The final regulations and guidance were published (900 plus pages) last week. 

The Executive Order regulations still require employers, when bidding on federal contracts, to attest to whether they have had violations of the covered labor laws resulting in any “administrative merits determinations, civil judgments, or arbitral awards or decisions” issued within the preceding three years. It had been left to the DOL to define the scope of such reportable violations or “labor law decisions.”  Yet the proposed and final regulations are not just looking at violations, but also at allegations.  As such, federal contractors are between a rock and hard place when determining how to proceed when the government comes knocking on the door conducting investigations. 

For example, among agency findings triggering disclosure are a WH-56 "Summary of Unpaid Wages" form from the DOL’s Wage and Hour Division; a citation from the Occupational Safety and Health Administration (OSHA) or state agency; a show cause notice from the Office of Federal Contract Compliance Programs (OFCCP); a reasonable cause finding from the Equal Employment Opportunity Commission (EEOC); and complaint issued by a Regional Director at the National Labor Relations Board (NLRB). 

The Department of Labor will have Labor Compliance Advisors (ALCAs), a new position created by the EO, to review all disclosures and violations to make a recommendation to the contracting agency.  A “labor compliance agreement” may be required by the ALCA if he finds that a contractor has an unsatisfactory record of Labor Law compliance.  The ACLA could also prevent a contractor from using a subcontractor who may be considered a “bad actor,” which could result in a disruption of the provisions and goods and services.

Most of the proposed regulations were left intact. Highlights of the final rule include:

·       Contractors who bid on new contracts over $50 million are covered under these regulations starting October 25, 2016.

·       Contracts from $500,000 or higher, but less than $50 Million, will be covered starting April 25, 2017.

·       The initial look back period will be 1 year, but will be expanded to 3 years look back starting October 25, 2018.

·       Contractors are not responsible for subcontractor reporting, and subcontractor reporting must begin by October 25, 2017.

·       Once subcontractor disclosures are required, the DOL will be responsible for determining whether and how labor law violations will affect subcontractor access to work on covered federal contracts.

·       Subcontractors will make their disclosures directly to the DOL, rather than to prime contractors; and prime contractors will be able to rely on the DOL’s review.

·       Subcontractors are required to report to prime contractors on any findings if they are under any investigation under the covered laws.

·       There will be “due process” for contractors to receive notice of and respond to recommendations prior to final responsibility determination.

·       Contractors with contracts for more than $1 million are prohibited from entering into agreements with employees for mandatory arbitration of certain civil rights claims.

·       There is still a requirement that representations and disclosures regarding each labor law decision are to be reported through the Federal Awardee Performance and Integrity Information System (FAPIIS), which will be publically viewable.

·       There were virtually no changes to willful or pervasive actions that could cause a contractor to be labeled a bad actor.

The DOL is also initiating a preassessement program for contractors to assess their level of compliance.  Although not associated with any bid, the preassessment will be considered in future contract bids as a mitigating factor when submitted by the contractor.

Another concern for contractors is that there is a prohibition on the use of arbitration agreements with employees unless the employee and contractor agree to use arbitration after the employee has a claim (effectively negating many pre-employment or company-wide arbitration agreements and plans).

In addition, starting January 1, 2017, contractors and subcontractors are required to provide wage statements to covered workers, giving them information concerning their hours worked, overtime hours, pay, and any additions to or deductions made from their pay. Further, any independent contractor must be provided a document informing them of their independent contractor status. Moreover, contractors and subcontractors must also provide written notice to inform workers if they are exempt from overtime pay.  

This is just the tip of the iceberg on these regulations.  Currently, Congress is working on a law to exempt defense contractors from these requirements.  They are also working on a spending bill for the Department of Labor that specifically denies funding for ACLAs.  How these regulations and guidance play out in the long-term is unknown, but much is clear: good intentions have created a bureaucratic nightmare for employers working on federal contracts and subcontracts.  Who wants to be a federal contractor or subcontractor anymore?

Sources: DOL, Littler 8/24/16, Jackson Lewis 8/24/16, Duane Morris 8/25/16