On July 31, President Obama issued an Executive Order requiring federal contractors to disclose past labor violations. The order applies to new contracts for goods and services, including construction, valued at more than $500,000.
Contractors subject to the new order must disclose any “administrative merits determination, arbitral award or decision, or civil judgment, as defined in guidance issued by the Department of Labor” arising from the violation of specified federal and state labor laws, including, but not limited to, the Fair Labor Standards Act, the National Labor Relations Act, the Occupational Safety and Health Act, Title VII of the Civil Rights Act of 1964, and all “equivalent state laws.” Any violation in the previous three years must be disclosed.
The order reflects the President’s explicit intent to “promote economy and efficiency in procurement by contracting with responsible sources who comply with labor laws.” The Department of Labor has estimated that there are approximately 24,000 businesses with federal contracts, employing about 28 million workers. Notably, a fact sheet issued by the White House at the time of the order observes,
In 2010, the Government Accountability Office issued a report finding that almost two-thirds of the 50 largest wage-and-hour violations and almost 40 percent of the 50 largest workplace health-and-safety penalties issued between FY 2005 and FY 2009 were at companies that went on to receive new government contracts.
Companies that make the required disclosures will be provided with “an opportunity to disclose any steps taken to correct the violations of or improve compliance” including any agreements entered into with an enforcement agency.
Pursuant to the order, agencies awarding contracts are then instructed to assess whether a company “is a responsible source that has a satisfactory record of integrity and business ethics.” Companies that are awarded contracts will be required to update their disclosures every six months during the performance of the contract.
The order also imposes requirements on contractors related to subcontracts. For any subcontract not for commercially available off-the-shelf items valued at over $500,000, the contractor must seek disclosures from its subcontractors of any labor law violations.
No Mandatory Arbitration
The order also prohibits contractors for contracts valued at over $1 million from requiring workers to sign pre-dispute arbitration agreements covering “claims arising under Title VII of the Civil Rights Act of 1964 and any tort related to or arising out of sexual assault or harassment.” The White House observed, at the time of the order was issued that this provision “builds on a policy already passed by Congress and successfully implemented at the Department of Defense, the largest federal contracting agency[.]”
The order also contains a provision requiring federal contractors to provide their employees with information, each pay period, with information on hours worked, overtime hours, pay, and any additions made to or deductions made from pay. Contractors must require these same disclosures on behalf of their subcontractors for any subcontract not for commercially available off-the-shelf items valued at over $500,000.
The order directs the Federal Acquisition Regulatory Council to issue implementing regulations for the new order. The White House has stated that it expects the Executive Order to be implemented in stages, on a prioritized basis, throughout 2016.