• DOL Issues Fair Pay and Safe Workplaces (i.e. "Blacklisting") Final Rule Applicable to Government Contractors
  • September 16, 2016
  • Law Firm: Shawe Rosenthal LLP - Baltimore Office
  • The Federal Acquisition Regulatory Council and the Department of Labor have issued the Final Rule and Guidance implementing Executive Order 13673, “Fair Pay and Safe Workplaces,” aka the “Blacklisting” Rule.              

    As we previously discussed in our September 2014 E-Update, President Obama issued EO 13673 in order to bar companies with labor law violations from obtaining government contracts. The Order also contains paycheck transparency provisions, requiring employers to provide detailed information about an employee’s pay with each paycheck. In addition, the Order prohibits employers from implementing mandatory pre-dispute arbitration agreements as to claims for Title VII discrimination or torts arising out of sexual assault or harassment.

    A proposed rule and guidance were issued in May 2015, which we addressed in our June 2015 E-Update. The public submitted comments on the proposed documents, and the federal agencies have now revised the proposed rule and guidance and made them final.

    Disclosure of Labor Law Violations

    The disclosure obligations apply to new contracts and subcontracts for goods and services, including construction, that exceed $500,000 over the life of the contract (subcontracts for commercial off the shelf items are not covered).

    Contractors would be required to disclose any labor law violations during the past three years relating to any of the 14 specified labor laws (including the federal anti-discrimination laws, federal contracting laws, the Fair Labor Standards Act, the Family and Medical Leave Act, and the Occupational Safety and Health Act). While the EO also included correlated State laws, the DOL states that only OSHA-approved state plans are subject to disclosure at this point; other state laws will be subject to a separate rulemaking. Violations consist of the following:

    (a) administrative merits determinations (meaning notices or findings issued by an agency following an investigation. The DOL has provided an exhaustive list of such determinations, which includes EEOC reasonable cause findings, OSHA citations, or NLRB Regional Director complaints. These determinations need not be final to be reportable.),

    (b) arbitral awards or decisions, and

    (c) civil judgments

    The Guidance sets out a procedure for when and how information regarding the labor law violations will be reported. Initially, during the bid submissions stage, a contractor simply states whether it has or does not have any such violations. If the contractor makes it to the responsibility determination stage, it will be required to provide specific information about the violation and any mitigation efforts. Notably, the information about the violation will be publicly available, and the contractor may choose to make mitigation information public as well. The public will also have the opportunity to report information about violations as well. If a contract is awarded, the contractor must update its disclosures semi-annually.

    In the proposed Guidance, contractors would have been required to obtain and assess such information from subcontractors. The final Guidance, however, provides that subcontractor disclosures will be made to the DOL, and contractors will be able to rely on the DOL’s review of a subcontractor’s record to determine if the subcontractor is a “responsible source of integrity and business ethics.”

    The Guidance provides the process by which the violations are assessed. The reviewing contracting official will consult with a senior agency official who has been designated an Agency Labor Compliance Advisor (ALCA). The ALCA engages in a three-step assessment process: it reviews the contractor’s violations to determine whether any are serious, repeated, willful or pervasive (as defined in the Guidance, which also provides examples); it weighs any such violations in light of the totality of the circumstances, including any mitigating factors; and it provides advice to the contracting official regarding the contractor’s record of compliance and whether further action, such as a labor compliance agreement or even referral to suspension and debarment, is warranted.

    The Final Rule provides a phase-in period for these disclosure obligations:
    • October 25, 2016: Disclosure requirements apply to contract solicitations with a value of $50 million or more.
    • April 25, 2017: Disclosure requirements apply to prime contract solicitations with a value of $500,000 or more.
    • October 25, 2017: Disclosure requirements apply to subcontracts with a value of $500,000 or more.
    For any of the disclosures, no violations occurring prior to October 25, 2015 will need to be disclosed.

    In addition, the DOL has set up a preassessment program, by which a contractor, independent of any contract solicitation, may voluntarily request an assessment of their compliance record using the criteria set forth in the Guidance and Rule. In this way, if there are any concerns, contractors may address them ahead of any contract bid. Moreover, unless there have been additional violations in the meantime, contractors can rely on the preassessment determination in an actual bid. Additionally, the request for preassessment would also be considered a mitigating measure in future assessments. Additional information about the preassessment program, which will begin the week of September 12, 2016.

    Paycheck Transparency

    Starting January 1, 2017, contractors must provide all workers, including employees and independent contractors, with a wage statement containing certain information with each paycheck for that pay period:

    (a) total number of hours worked;

    (b) the number of overtime hours, broken down by workweek;

    (c) the rate of pay by basis (whether hourly, daily, weekly, per piece, or other basis);

    (d) the gross pay; and

    (e) any deductions from or additions to the gross pay.

    The wage statement may be provided electronically if the contractor regularly provides workers with documents by electronic means. If a significant portion of the workforce is not fluent in English, the wage statement must also be provided in the language in which they are fluent.

    The Guidance notes that compliance with “substantially similar” state notice requirements is acceptable, and has identified the following states as having such “substantially similar” requirements: Alaska, California, Connecticut, the District of Columbia, Hawaii, New York and Oregon. This list will be updated on the DOL’s website.

    For exempt employees, the contractor need not provide the hours worked but must provide written notice to the employee regarding his exempt status. Contractors will also be required to provide written notice to their independent contractors of their status each time before they begin work on a particular contract, separate from any independent contractor agreement.

    The DOL has created a webpage to summarize these paycheck transparency requirements.

    Prohibition on Mandatory Pre-Dispute Arbitration Agreements

    Effective October 25, 2016, contractors entering into or renewing contracts exceeding $1,000,000 are prohibited from requiring employees to enter into pre-dispute arbitration agreements that cover Title VII claims and tort claims arising from sexual assault or harassment. This provision exempts employees:
    • covered by a collective bargaining agreement or
    • employees/independent contractors who have an already-existing arbitration agreement, as long as the terms of the agreement cannot be changed. Any new or revised agreement would need to comply with the prohibition.

    The DOL has created a webpage to summarize these arbitration requirements.