This past month, the Department of Labor (DOL) issued its Final Rule and Guidance on the Fair Pay and Safe Workplaces Executive Order 13673 (Executive Order) which subject existing and prospective government contractors to a broad new set of record-keeping, reporting and compliance requirements. The Final Rule and DOL Guidance will impact many federal contractors and some contractors may need to start complying as soon as October 25, 2016, with phased-in disclosure requirements, and paycheck transparency requirements go into effect on January 1, 2017. Running afoul of these new regulations can expose the contractors to disqualification, suspension, or debarment which is why you many know this as the “Blacklisting” law or rule.
Remember that the intent of the Executive Order is to ensure that parties who contract with the federal government comply with the laws that protect workers’ safety, wages and civil liberties. The Executive Order requires prospective and existing contractors to disclose violations of 14 federal labor laws (and state equivalents), and requires them to provide certain information each pay period to enable workers to verify the accuracy of their pay, and prohibits certain contractors from using predispute arbitration agreements to address sexual assault and civil rights claims.
Required Violation Disclosure
The following is a list of these 14 federal laws:
- The Fair Labor Standards Act (FLSA);
- The Occupational Safety and Health Act of 1970 (OSH Act);
- The Migrant and Seasonal Agricultural Worker Protection Act (MSPA);
- The National Labor Relations Act (NLRA);
- The Davis-Bacon Act (DBA);
- The Service Contract Act (SCA);
- Executive Order 11246 (Equal Employment Opportunity);
- Section 503 of the Rehabilitation Act of 1973;
- The Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA);
- The Family and Medical Leave Act (FMLA);
- Title VII of the Civil Rights Act of 1964 (Title VII);
- The Americans with Disabilities Act of 1990 (ADA);
- The Age Discrimination in Employment Act of 1967 (ADEA); and
- Executive Order 13658 (Establishing a Minimum Wage for Contractors).
With the exception of OSHA-approved state plans included in the Final Rule and the DOL Guidance, the DOL has yet to identify or define “equivalent State laws.” However, it is reasonable to anticipate that California’s Labor Code, which governs the state’s wage and hour practices, will be listed under “equivalent State laws.”
The disclosure requirements apply to the legal entity bidding for the particular solicitation. If the contractor bidding on the solicitation is related to another legal entity (whether parent, subsidiary, or sister), the contractor need only disclose labor law violations for itself. However, the DOL Final Guidance imposes a duty on the bidding contractor to consider the contractor’s affiliates’ integrity issues, to the extent those integrity issues are known by the contractor, and disclose them as necessary. Contractors with parent, subsidiary or sister relationships will likely need to engage the assistance of legal counsel to ensure they follow the disclosure requirements carefully.
What Is a Reportable Violation?
The Final Rule defines “violation” as (i) administrative merits determinations; (ii) awards or decisions from an arbitration; or (iii) civil judgments. The Final Rule and DOL Final Guidance broadly interpret the definition of “violation” which means a contractor must report all issues except those matters that were reversed or vacated.
Administrative Merits Determination
An administrative merits determination is defined as any notice or finding (final, or subject to appeal or further review) issued after a full investigation by the relevant enforcement agency that indicates the contractor violated any provision of the 14 labor laws identified above. Currently, only those administrative merits determinations issued by state or federal enforcement agencies such as the DOL, the Occupational Safety and Health Review Commission, the National Labor Relations Board (NLRB), the Equal Employment Opportunity Commission (EEOC), as well as any state agency designated to administer an OSHA-approved state plan, must be disclosed. Once the DOL determines and identifies the equivalent state laws that will also require disclosure, then the administrative merits determinations made by state agencies such as the Department of Fair Employment and Housing (DFEH) and the Division of Labor Standards Enforcement (DLSE) may need to be disclosed.
Under the Final Rule, contractors must report many types of administrative actions that are not final, even where no hearing has been held and no ultimate agency determination has been issued or reviewed by the courts. The Final Rule states that when contractors and subcontractors report administrative merits determinations, they may also submit any additional information that they believe may be helpful in assessing the violations at issue, such as the fact that the determination has been challenged. Contractors and subcontractors will also have an opportunity to provide information regarding any mitigating factors.
DOL’s Wage and Hour Division:
- A WH-56 “Summary of Unpaid Wages” form;
- A letter indicating that an investigation disclosed a violation of ANY provision of the FLSA, or a violation of the FMLA, SCA, DBA, or Executive Order 13658;
- A WH-103 “Employment of Minors Contrary to The Fair Labor Standards Act” notice;
- A letter, notice, or other document assessing civil monetary penalties;
- A letter that recites violations concerning the payment of special minimum wages to workers with disabilities under section 14(c) of the FLSA or revokes a certificate that authorized the payment of special minimum wages;
- A WH-561 “Citation and Notification of Penalty” for violations under the OSHA’s field sanitation or temporary labor camp standards; or
- An order of reference filed with an administrative law judge.
Occupational Safety and Health Administration (OSHA) or any state agency designated to administer an OSHA-approved state plan: a citation; an imminent danger notice; a notice of failure to abate; or any state equivalent.
Office of Federal Contract Compliance Programs (OFCCP)
Administrative merits determinations under by OFCCP includes a show cause notice for failure to comply with the requirements of Executive Order 11246, Section 503 of the Rehabilitation Act, the Vietnam Era Veterans’ Readjustment Assistance Act of 1972, or the Vietnam Era Veterans’ Readjustment Assistance Act of 1974.
Equal Employment Opportunity Commission (EEOC)
A letter of determination that reasonable cause exists to believe that an unlawful employment practice (including retaliation) has occurred or is occurring will constitute an administrative merits determinations.
National Labor Relations Board (NLRB)
Despite concerns raised during the comment period regarding the contents, a complaint issued by any Regional Director will qualify as an administrative merits determination.
Judicial Action by an Agency
Administrative merits determinations will also include:
- Any complaint filed by or on behalf of an enforcement agency with a federal or state court, an administrative judge, or an administrative law judge alleging that the contractor or subcontractor violated any provision of the labor laws; or
- Ay order or finding from any administrative judge, administrative law judge, the DOL’s Administrative Review Board, the Occupational Safety and Health Review Commission or state equivalent, or the National Labor Relations Board, that the contractor or subcontractor violated any provision of the labor laws.
Awards Or Decisions From An Arbitration
An arbitral award or decision is defined as any award or order by an arbitrator or arbitral panel where the contractor or subcontractor was found to have violated labor laws. This includes an award or order that is not final or is subject to being confirmed, modified, or vacated by a court, and also covers arbitral proceedings that were private or confidential.
Civil determination means any judgment or order – including appealable judgments – entered by any federal or state court, in which the court determined that the contractor or subcontractor violated any provision of the labor laws, or enjoined or restrained the contractor or subcontractor from violating any provision of the labor laws. The definition covers private suits resolved by jury trial, bench trial, or the granting of summary judgment, as well as preliminary injunctions for labor law violations, consent judgments, and default judgments. A private settlement where the lawsuit is dismissed by the court without any judgment being entered is not a civil judgment. The Final Rule and DOL Guidance also clarify that civil judgments do not include temporary restraining orders and offers of judgment pursuant to Federal Rule of Civil Procedure 68.
Successive Labor Law Decisions Arising From the Same Underlying Violation
Contractors also have a duty to disclose the most recent, successive decision that arises from the same underlying violation whenever a contractor appeals or challenges a decision subject to disclosure.
Business Integrity and Ethics Standards
Contracting officers will consider violation information provided by a contractor to determine whether the contractor is a “responsible source” with a satisfactory record of “integrity and business ethics” in determining whether the company is eligible to perform federal contracts. A contractor has a satisfactory record of labor law compliance where it has no labor law violations within the 3-year disclosure period or has no violations that meet the definitions of serious, repeated, willful, and/or pervasive. The Guidance allows for a review of the totality of the circumstances to determine whether the existence of the violations is outweighed by mitigating factors or other relevant information.
During the performance of a contract, contractors will be required to update their violation information every six months and, for certain contracts, obtain the same violation information from their covered subcontracts and consider whether action is necessary.
Prohibition on Arbitration
Pre-dispute arbitration agreements are prohibited for key claims under contracts exceeding $1 million. Under certain contracts, contractors will only be permitted to arbitrate claims arising under Title VII of the Civil Rights Act of 1964, or torts related to or arising out of sexual assault or harassment, based on voluntary, post-dispute agreements with employees or independent contractors.
Pay Information Disclosure
The Final Rule requires that the wage statement contain: 1) hours worked, 2) overtime hours, 3) rate of pay, 4) gross pay, and 5) an itemization of each addition to and deduction from gross pay. If a significant portion of the contractor’s workforce is not fluent in English, the wage statement must also be provided in the language(s) other than English in which that portion or those portions of the workforce are fluent. The wage statement provided to workers who are exempt from overtime pay under the FLSA need not include a record of hours worked if the contractor informs the individuals of their exempt status.
The DOL has determined that the following states and localities have substantially similar wage statement requirements to that imposed by the Executive Order: Alaska, California, Connecticut, District of Columbia, Hawaii, New York, and Oregon. The wage statement requirements of these states and the District of Columbia are substantially similar to the Executive Order because they require employers to provide wage statements that include at least the worker’s overtime hours or overtime earnings, total hours, gross pay, and any additions or deductions from gross pay. According to the DOL, contractors and subcontractors can satisfy the Executive Order’s wage statement requirement by providing a worker in one of these states or the District of Columbia with a wage statement that complies with the requirements of that state or locality. Since state laws change, the DOL will update their list of states with “Substantially Similar Wage Payment States.”
In conclusion….Good luck! Considering the many labor laws, it is reasonable for contractors to review their violation records and assess their current compliance programs to determine whether these programs should be improved so as ensure your ability to win and keep federal government contracts.
Before contacting legal counsel, government contractors should consider browsing through the DOL’s website dedicated to the Executive Order 13673: Fair Pay and Safe Workplaces to help identify or narrow some of your concerns.
The DOL’s website contains information on the following subjects: Contractor Disclosures, Subcontractor Disclosures, Paycheck Transparency and Mandatory Arbitration. The DOL also provides a Preassessment form.