Affirmative Action AlertAugust 30, 2016
Will these mandates really result in "fairer pay and safer workplaces," or will they just increase administrative burdens for contractors?
Despite a litany of reasons to delay implementation of the Fair Pay and Safe Workplaces Executive Order, the Federal Acquisition Regulatory Council and the U.S. Department of Labor have, respectively, issued their Final Rule and Final Guidance. The regulations and guidance were published notwithstanding
- Congressional attempts to exempt the Department of Defense through limiting language in the 2017 National Defense Authorization Act (which is still pending),
- Concerns that contractors will be effectively debarred without due process,
- Arguments that the President exceeded his executive authority because the changes will not improve the “economy and efficiency” of federal contracting as asserted and as required by the federal Procurement Act,
- Extraordinary new burdens placed on contractors and subcontractors in tracking and reporting violations of labor laws, and
- Claims of additional and unnecessary layers of bureaucracy added to an already complicated procurement system.
The Final Rule and Final Guidance are lengthy and complex, but here is a summary of the salient points.
Are Your Workplaces Fairer & Safer Yet? Preparing for Mandatory Disclosures of Labor Law Violations
Presenter: Cara Yates Crotty
The FAR Council and the Department of Labor issued a Final Rule and Final Guidance implementing the Fair Pay and Safe Workplaces Executive Order on August 25, 2016. Join us as we discuss the detailed new obligations for federal contractors, such as
When you register, you can submit in advance any questions you have about this topic. Cara will try to answer all advance questions during the webinar.
Wednesday, September 21, 2016
Not available at this time? Register anyway and after the webinar we will send you a link to the recording.
For additional information, please contact Kian Wint at firstname.lastname@example.org.
The Fair Pay & Safe Workplaces Executive Order addressed three main issues:
- Reporting labor law violations
- Paycheck transparency
- Complaint and dispute transparency
Reporting Labor Law violations
Both contractors and subcontractors are required to provide information regarding "Labor Law violations." The government intends to use this information to determine whether the contractors and subcontractors have a satisfactory record of integrity and business ethics such that they are eligible to do business with the government. The Rule and Guidance set forth general procedures for reporting violations. As noted below, some of these mandates are phased in over the next several years. (See “Phased-In Compliance” section for details.)
When a contractor bids on a solicitation for $500,000 or more, it must disclose whether it has any administrative merits determinations, arbitral awards or decisions, or civil judgments against it that involve certain labor laws “Labor Law violations.” These are called Labor Law violations. Violations must be reported only if they occurred between October 25, 2015 (one year prior to the effective date of the Rule), and the date of submission of the bid, or in the three years before submission of the bid, whichever time period is shorter.
14 Labor Law Violations That Must be Reported
Administrative merits determinations = Any of the following notices or findings, whether final or subject to further review, issued by an enforcement agency following an investigation that indicates that the contractor violated any provision of the Labor Laws:
DOL Wage & Hour Division
OSHA or state agency designated to administer OSHA-approved state plan
This is an exhaustive list of administrative merits determinations.
Arbitral awards and decisions = any award or order by an arbitrator or arbitral panel in which it is determined that the contractor violated a Labor Law or in which the contractor is enjoined or restrained from violating any Labor Law. This includes private and confidential proceedings as well as awards or decisions that are subject to further review.
Civil judgments = any judgment or order by a federal or state court in which it is determined that the contractor violated a Labor Law or in which the contractor is enjoined or restrained from violating any Labor Law. This includes judgments or orders that are not final or that are subject to appeal.
If a prospective contractor discloses that it has one or more Labor Law violations and the contracting officer proceeds to a responsibility determination about that contractor, the contractor will be required to disclose the following information regarding each of its Labor Law violations:
- Labor Law that was violated
- Case or other identifying number associated with the violation
- Date decision was issued or rendered
- Name of court, arbitrator, agency, board, or commission that rendered decision
Contractors should disclose mitigating factors that they believe will demonstrate that they are responsible employers. The Guidance lists the following examples of mitigating factors and remedial measures:
- Steps taken to correct the violation
- Negotiation or execution of a settlement agreement or “labor compliance agreement”
- Other steps to achieve compliance with the Labor Laws
- Appeal or challenge of adverse finding
Labor compliance agreement = an agreement (outside of any pending agency investigation or enforcement matter) between a contractor or subcontractor and an enforcement agency to address appropriate remedial measures, compliance assistance, steps to resolve issues to increase compliance, or other related matters.
Although the initial information provided by contractors will be publicly available, the mitigating factors will not be made public unless the contractor consents. However, whenever a contractor enters into a labor compliance agreement, such event will become part of the public record.
Analysis of Labor Law Violations
Contracting officers must consider the analysis and advice of Agency Labor Compliance Advisors designated by each agency to evaluate contractors’ Labor Law violations. The ALCAs must adhere to a three-step process in assessing contractors’ Labor Law violations:
(1) Classifying – ALCAs review all violations and determine whether any are serious, repeated, willful, or pervasive.
(2) Weighing – ALCAs analyze any serious, repeated, willful, or pervasive Labor Law violations in light of the “totality of the circumstances,” including any mitigating factors.
(3) Advising – ALCAs provide written advice to contracting officers regarding contractors’ compliance and whether a labor compliance agreement or other action is needed.
This is an exhaustive list of “serious” violations.
The Guidance includes a lengthy exhaustive list of substantially similar violations for each Labor Law.
After classifying the Labor Law violations, the ALCA must weigh the violations and mitigating factors presented by the contractor. The DOL states that remediation (or steps to prevent recurrence) is the most important mitigating factor. Other mitigating factors included in the Guidance are as follows:
- Having only a single violation
- Few violations in relation to the size of the contractor
- Implementation of a safety and health management program
- Collectively-bargained grievance procedure
- Recent legal or regulatory change that precipitated the violation
- Defense of good faith
- Long period of compliance following violations
The ALCA must also assess factors that weigh against a finding of satisfactory compliance, such as the following:
- Pervasive violations
- Violations that meet more than one of the classifications (serious, repeated, and willful)
- Violations of particular gravity
- Violations for which injunctive relief is granted
- Violations that are reflected in final orders
The ALCA must conduct “a holistic review that considers the totality of the circumstances and considers all of the relevant factors.” After performing this analysis, the ALCA must provide the contracting officer with a recommendation regarding the contractor’s record of integrity and business ethics. The recommendation must be one of the following:
- A finding of satisfactory record of integrity and business ethics
- A finding of satisfactory record of integrity and business ethics, but the contractor must commit, after award, to negotiating a labor compliance agreement or other remedial action
- A finding of satisfactory record of integrity and business ethics if the contractor commits, prior to award, to negotiating a labor compliance agreement or other remedial action
- A finding of satisfactory record of integrity and business ethics only if the contractor enters, prior to award, to negotiating a labor compliance agreement or other remedial action
- No finding of a satisfactory record of integrity and business ethics and that the agency suspending and debarring official should be notified.
The ALCA must provide a written analysis to the contracting officer supporting the recommendation. The contracting officer must then consider the analysis and advice of the ALCA in determining a contractor’s responsibility. If the ALCA’s recommendation is not received in a timely manner, the contracting officer may proceed in making an assessment without that advice.
Post-Award Reporting and Assessments
After receiving a contract award, contractors are required to update their Labor Law violations every six months. ALCAs will follow the same classifying, weighing, and advising process for post-award assessments. Based on any new information, the contracting officer may take no action or may exercise an appropriate contract remedy.
Subcontracting Reporting and Assessments
Subcontracts valued at $500,000 or more, except those for commercially available off-the-shelf items, are also covered by the regulations. Prime contractors must consider the Labor Law violations of prospective subcontractors when making responsibility determinations. The reporting procedures for prospective subcontractors are the same as for contractors: an initial disclosure regarding whether any Labor Law violations exist and more detailed disclosure regarding the violations.
The DOL will assess the subcontractor’s violations and provide advice regarding its compliance with Labor Laws. The subcontractor must provide that advice to the prime contractor, who will use that information in determining whether to award the subcontract. Subcontractors are likewise required to update their Labor Law violations on a six-month basis.
The DOL has graciously agreed to assist contractors and subcontractors in assessing their Labor Law violations prior to bidding on a contract.
The following is quoted from the DOL website:
- Week of September 12, 2016: Preassessment begins, through which current or prospective contractors may come to the DOL for a voluntary assessment of their labor compliance history, in anticipation of bids on future contracts but independent of any specific acquisition.
- October 25, 2016: The final rule takes effect. Mandatory disclosure and assessment of labor law compliance begins for all prime contractors under consideration for contracts with a total value greater than or equal to $50 million. The reporting disclosure period is initially limited to one (1) year and will gradually increase to three (3) years by October 25, 2018.
- January 1, 2017: The Paycheck Transparency clause takes effect, requiring contractors to provide wage statements and notice of any independent contractor relationship to their covered workers.
- April 25, 2017: The total contract value threshold for prime contracts requiring disclosure and assessment of labor law compliance is reduced to $500,000.
- October 25, 2017: Mandatory assessment begins for all subcontractors under consideration for subcontracts with a total value greater than or equal to $500,000.
Impact on Contractors
The result of these public disclosures is significant and multi-faceted. Significantly, information that is generally private and confidential (and which many companies go to great lengths to keep private and confidential) will become readily available to the government, advocacy groups, plaintiffs' lawyers, competitors, and current and prospective employees.
In addition, evaluating the potential effect of a Labor Law violation must now be a standard component of every complaint, charge, lawsuit or other legal or administrative action. Should the contractor attempt to resolve the matter early to avoid a violation that must be reported? Will the potential for having to report the issue later increase the settlement value of the matter for the contractor? How much pressure will an enforcement agency or plaintiffs' lawyers place on this risk for the contractor during settlement negotiations?
The administrative costs and burdens of the reporting process must also be taken into account. Contractors must determine who will track the Labor Law violations, what must be reported, what the mitigating factors are, what must be updated, and when violations can be removed. Who is going to determine whether subcontractors are responsible?
As apparent from the Congressional debate and likely legal challenges to the Order and regulations, the business community is not fond of these new mandates. Whether any challenge will ultimately be successful will not be known for some time, and contractors must prepare for compliance now.
Contractors are required to provide a “wage statement document,” or pay stub, every pay period to each individual performing work under the contract. This wage statement for non-exempt employees must include the following information:
- Total number of hours worked
- Number of overtime hours
- Rate of pay
- Gross pay
- Itemization of any additions made to or deductions from gross pay
- If not provided weekly, total hours and number of overtime hours must be broken down to the period for which overtime is calculated
The statement for exempt employees does not need to include the number of hours worked if the contractor informs the individual in writing of the exempt status. Also, if the contractor engages an independent contractor to perform work under the contract, the contractor must provide a written document to the individual advising of that status.
Complaint and dispute transparency
For contracts that are valued at $1 million or more, the Executive Order prohibits pre-dispute arbitration agreements of claims arising under Title VII, or any tort related to sexual assault or harassment. This prohibition does not apply to
- Employees covered by a collective bargaining agreement
- Employees who entered into a valid arbitration agreement prior to the bid on a covered contract, except that this does not apply
- If the contractor is permitted to change the terms of the agreement
- When the contract is renegotiated or replaced
This is just a “brief” summary of the Rule and Guidance. Please review the agencies’ documents carefully with your counsel to determine with particularity what Labor Law violations must be reported and the potential impact of such disclosure. Our Affirmative Action/OFCCP Compliance Practice Group is able to assist with this analysis if you need guidance. Also, as noted above, please join our webinar at 1 p.m. Eastern on Wednesday, September 21, where we will delve into these issues in even more detail!
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