• Proposed Fair Pay and Safe Workplaces Guidance and Rule
  • July 8, 2015
  • Law Firm: Shawe Rosenthal LLP - Baltimore Office
  • The Department of Labor has issued a Proposed Guidance in conjunction with the Federal Acquisition Regulatory (FAR) Council’s issuance of a Proposed Rule implementing President Obama’s “Fair Pay and Safe Workplaces” Executive Order.

    As we discussed in our September 2014 E-Update, the Order is intended 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 mandatory pre-dispute arbitration agreements as to claims for Title VII discrimination or torts arising out of assault or harassment.

    Disclosure of Labor Violations

    The disclosure obligations apply to contracts over $500,000, and subcontracts over $500,000 for items other than commercial off-the-shelf products. Contractors would be required to disclose any (a) administrative merits determinations, (b) arbitral awards or decisions, and (c) civil judgments incurred in the past three years and 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) or correlated State laws (the DOL states that the specific state laws will be identified in another forthcoming Guidance).

    The Guidance contains definitions and numerous examples of these three categories of violations. The definitions are quite broad. For example, “administrative merits determinations” means notices or findings issued by an agency following an investigation, and includes a reasonable cause finding by the EEOC, an OSHA citation, a show cause notice from the OFCCP, and a complaint filed by a NLRB regional director.

    With regard to all three types of violations, it is worth noting that the determinations do not need to be final in order to be reportable.

    The Guidance sets out a procedure for when and how information regarding the labor law violations will be reported. Initially, during the representation and certifications stage of the bidding process, a contractor responds to a “yes or no” question about whether it has 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. Contractors would also be required to obtain and assess such information from subcontractors. If a contract is awarded, the contractor must update the disclosures semi-annually. Notably, these disclosures are publicly available.

    The Guidance provides the process by which the violations are assessed. The reviewing contracting official is directed to consider the totality of the facts and circumstances, including any mitigating factors (such as remediation efforts, prevention efforts, and labor compliance agreements). Of particular concern are: pervasive violations; violations that meet two or more of the categories of serious, repeated or willful; violations reflected in final orders; and violations of particular gravity (which includes death, retaliation, impact on the working conditions of most workers at a worksite, and damages exceeding $100,000).

    Paycheck Transparency

    Under the proposed Guidance and rule, contractors must provide all workers, including employees and independent contractors, with certain information with each paycheck for that pay period: (1) total number of hours worked; (2) the number of overtime hours, broken down by workweek; (3) the gross pay; and (4) any deductions from or additions to the gross pay. The Guidance notes that compliance with “substantially similar” state notice requirements is acceptable, and will identify such “substantially similar” state requirements in the future.

    For exempt employees, the contractor must provide written notice regarding the employee’s exempt status. Contractors will also be required to provide notice to their independent contractors of their status, separate from any independent contractor agreement.

    Prohibition on Pre-Dispute Arbitration Agreements

    With regard to contracts exceeding $1,000,000, contractors are prohibited from requiring employees to enter into pre-dispute arbitration agreements regarding Title VII claims and tort claims arising from assault or harassment.

    Concerns for Employers

    These proposed documents are problematic for a number of reasons, including the following. The definitions of the violations covered is exceedingly broad, encompassing many determinations that are not final. The reported violations are available to the public. Some companies may feel pressured to enter into (non-reportable) settlements in order to avoid the reporting requirements for certain violations, even if the claims are without merit.

    Following a notice and comment period, the DOL and FAR will issue the final Guidance and regulations which may contain some revisions to the proposals described above. The comment period for the proposed documents closes on July 27, 2015. You may submit comments electronically by clicking on the “Submit a Formal Comment” button on the Federal Register webpage for the Guidance and for the rule.