On May 28, 2015, the President’s administration published proposed amendments to the Federal Acquisition Regulation, and related Department of Labor guidance to implement the July 31, 2014 “Fair Pay and Safe Workplaces” Executive Order 13673.  The Order and these proposed changes would subject government contractors to a broad new set of record-keeping, reporting and compliance requirements. Failure to fulfill these obligations and exhibit compliance with all applicable federal and state labor laws would expose the contractor to the prospects of disqualification, suspension, or debarment.

Under this proposed regulatory scheme, offerors on contracts or subcontracts estimated to exceed $500,000 must disclose “any administrative merits determination, arbitral award or decision, or civil judgment” against the contractor under the following fourteen enumerated federal statutes and Executive Orders (labor law violations), for the three years preceding the contract bid:

  • the Fair Labor Standards Act (FLSA);
  • the Occupational Safety and Health Act of 1970 (OSHA);
  • the Migrant and Seasonal Agricultural Worker Protection Act (MSPA);
  • the National Labor Relations Act (NLRA);
  • the Davis-Bacon Act;
  • the Service Contract Act;
  • Executive Order 11246 (Equal Employment Opportunity);
  • the Rehabilitation Act of 1973;
  • the Vietnam Era Veterans’ Readjustment Assistance Act of 1972 and the Vietnam EraVeterans’ Readjustment Assistance Act of 1974;
  • 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);
  • Executive Order 13658 (Minimum Wage for Contractors); and
  • any and all “equivalent State laws”.

This information will then be considered when making responsibility determinations during the contract award process. More specifically, the proposed regulations also define new categories of labor law violations —i.e., “serious,” “repeated,” “willful,” and “pervasive” violations. These violations may be considered evidence of “a lack of integrity or business ethics” sufficient to disqualify a contractor from consideration for a contract. Covered contractors and subcontractors would also be required to update all this information every six months during the term of a contract.  Finally, contractors must obtain all this information from any subcontractor and attest to all subcontractors’ fitness under these new standards. The regulations would create a new position — Labor Compliance Advisor — to assist contract officers in the process of evaluating responsibility and in procuring labor compliance agreements from contractors trying to ensure their consideration for contracts.

Finally, the proposed regulations would also require inclusion of contract language under which the contractor declines to obtain or enforce pre-dispute arbitration agreements for Title VII, sexual assault or harassment claims; and, would require covered contractors and subcontractors to provide certain employees with additional wage and hour information every pay period.

The proposed regulations and guidance, in conjunction with the Executive Order, would completely transform the risks and costs of doing business with the federal government. The vast majority of contractors – who abide by the law – will nonetheless be subjected to a vast new array of record-keeping and reporting obligations, as well as increased legal fees to maintain their competitive positions.  As much of this cost will be passed on to the customer – the government – and added to the increased financial burden of the new bureaucracy these regulations would create, it is hard to see how one reasonably expects this scheme to accomplish its primary purported objective – to “promote efficient federal contracting”.

Moreover, the standards set by the proposed regulations are grossly unfair to contractors as they are designed to base contract awards, disqualification and suspension entirely on administrative allegations – before those allegations are fairly and fully adjudicated.  The proposed regulations require reporting of any “administrative merits determination” regarding these laws —  including: WH-56 “Summary of Unpaid Wages” forms from the Wage and Hour Division; OSHA citations; OFCCP “show cause” notices; EEOC “reasonable cause” letters; and NLRB complaints. These are not final determinations on the merits. These all are preliminary findings, against which employers have the right to defend themselves, including the rights to challenge evidence at a hearing and confront witnesses under oath. Yet the proposed regulations would allow contractors to be disqualified from contracts based on these.

Finally, the Executive Order and proposed regulations reflect an unconstitutional breach of Separation of Powers. It is for Congress, not the Executive branch, to amend the federal labor laws to define new categories of violations; to create enforcement mechanisms for these federal labor laws; and to determine the appropriate penalties for violations. Consistent with that constitutional authority, Congress has already addressed all these issues, and included them in the appropriate federal statutes.

Because of all of these serious problems with the Order and proposed guidance, litigation challenging the final rules is a certainty. But contractors – or employers who might want to do business with the government in the future – must prepare now. In addition to practical steps to ensure labor law compliance and efficient record-keeping, contractors should consider submitting comments in response to the proposed regulations. Interested parties are invited to submit comments, on or before July 27, 2015.

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