Government Contracts Monitor

FAR Council and DOL Publish Final Rule and Guidance on Fair Pay and Safe Workplaces

September 6, 2016

Two years after President Obama signed Executive Order (EO) 13673, “Fair Pay and Safe Workplaces”, the FAR Council has published the final rule implementing it. The Department of Labor (DOL) has also published the final version of its implementing guidance for the rule. Jackson Kelly initially wrote about the EO’s implementation last year when the DOL published its proposed guidance. The EO has been referred to by some as establishing a “Blacklist” because contractors reporting violations or negative information related to any of 14 specified statutes can be found ineligible for contract awards exceeding $500,000.00.

While the DOL guidance is effective as of August 25, 2016, the FAR Rule becomes applicable on October 25, 2016, and its requirements will be phased in over a two year period. On September 12, the DOL will begin a preassessment phase, during which contractors can voluntarily submit information for an audit by DOL aimed at determining the contractor’s compliance and eligibility for awards subject to the new requirements. Participation in such preassessments may be viewed as a mitigating factor, indicating compliance and transparency, in future acquisitions. The DOL preassessments will be available to contractors on an ongoing basis.

Beginning on October 25, 2016, prime contractors competing for federal contracts valued at or above $50 million must disclose any violations of 14 specified federal laws from the previous year. The subject laws are:

Fair Labor Standards Act
Occupational Safety and Health Act, and any state law equivalent
Migrant and Seasonal Agricultural Worker Protection Act
National Labor Relations Act
Family and Medical Leave Act
Davis-Bacon Act
Service Contract Act
Title VII of the Civil Rights Act
Americans with Disabilities Act
Age Discrimination in Employment Act
Executive Order 11246 (Affirmative Action and Equal Employment Opportunity)
Vietnam Era Veterans’ Readjustment Assistance Act
Section 503 of the Rehabilitation Act
Executive Order 13658 (Establishing federal contractor minimum wage)

Also starting this October 25, prime contractors with federal contract revenues exceeding $1 million will be prohibited from requiring employees to sign pre-dispute agreements submitting to binding arbitration for future sexual assault of civil rights claims as a condition of employment. Contractors will still be able, however, to obtain an employee’s consent to arbitration after a cause of action arises, unless prohibited by a collective bargaining agreement or other circumstance. The same rule applies to subcontractors with subcontracts valued in excess of $1,000,000, except for subcontracts for commercial items.

Beginning on January 1, 2017, federal contractors and subcontractors will be required to provide wage statements to all employees. If a significant portion of a contractor’s workforce does not speak English, the contractor must provide pay statements in the appropriate language. In addition, if a contractor or subcontractor has employees it considers independent contractors, it must provide them with a document indicating that status.

April 24, 2017 marks the beginning of the reporting requirements for federal contractors competing for smaller awards. On that date, federal contractors competing for prime contracts valued at $500,000.00 or more must report violations of the any of the specified fourteen laws for the year preceding award.

Then, beginning on October 25, 2017, subcontractors must report violations of any of these federal laws from the previous year if they seek an award of $500,000.00 or more. Subcontractors must make initial disclosures directly to DOL and not to their prime contractor. However, they must inform the prime contractor of the outcome of DOL’s assessment.

Finally, starting on October 25, 2018 (two years after the FAR rule first goes into effect), all prime and subcontractors must report violations of these laws for the previous three years when they compete for new awards. For state laws other than OSHA, further guidance will be forthcoming.

These new reporting requirements apply at the legal entity level. In other words, if the contractor is a separate legal entity, then even if it is both wholly owned by a parent entity and/or is the sole owner of a subsidiary entity, only the contracting entity’s own violations must be disclosed. The contracting entity is not required to disclose violations by its parent or its subsidiary as long as they are separate legal entities. But the contracting entity must disclose all violations by any of its own locations or divisions. The final rule also defines “civil judgments” for the purposes of reporting as excluding temporary restraining orders and offers of judgment made before trial in accordance with Rule 68 of the Federal Rules of Civil Procedure. Covered contracting entities must update their compliance disclosures twice each year during contract performance.

The final rule and guidance provide more detail concerning the process for assessment by contracting officers and agency Labor Compliance Advisors (ALCAs), whose role will be to review an offeror’s history of compliance with the EO’s reporting requirements and to determine whether the contractor has engaged in “serious, willful, repeated, and/or pervasive violations.” The final rule establishes a process for providing contractors notice and an opportunity to respond to agency recommendations before a final responsibility determination is made. Significantly, disclosure of potentially adverse information under the 14 reportable categories does not automatically result in a determination that the contractor is non-responsible, and contractors will have the opportunity to provide mitigating information in SAM which will be considered in the final responsibility determination. This information will not be made public unless the contractor consents. ALCAs must provide written analyses of contractors’ responsibility determinations to the appropriate contracting officer, who must then document the contract file with an explanation of how he or she considered the analysis in the offeror’s responsibility determination.

We will continue to monitor and report on developments in this area.