Government Contracts Monitor

Short Take: New Year, New Regulations—What Contractors Need to Know About Paycheck Transparency

December 20, 2016

Although there is still some uncertainty as to which of President Obama’s many Executive Orders will be implemented once the Trump administration is in place, there are a few regulations that will take effect before the inauguration, and for which contractors therefore need to prepare. One such requirement, regarding paycheck transparency for government contract employees, is set to take effect January 1.

Although the government was enjoined from enforcing many mandates of Executive Order 13673 (Fair Pay and Safe Workplaces), the federal court that issued the injunction did not restrict implementation of the Order’s instructions regarding paycheck transparency, found in Section 5 of the Order, and the implementing FAR regulations.

The Order, which applies to contracts valued at over $500,000.00 and resulting from solicitations issued after January 1, 2017, requires agencies to include a provision stating that employers are required to maintain wage records under the Fair Labor Standards Act (FLSA), including the requirements set forth in the Davis-Bacon Act and the Service Contract Act, where those apply. Contractors are required to document, and provide wage statements to each employee showing, the employee’s hours worked, overtime hours, pay and any additions to or deductions from their pay. These requirements are implemented in FAR 22.2005, 22.2007(d), and the clause at FAR 52.222-60, and further reflected in several other FAR clauses. The requirements also apply to any subcontract valued at over $500,000.00. For employees who are exempt from overtime, the pay statement does not need to include a record of hours worked.

Many contractors may be surprised to find that they already comply with Section 5’s requirements. Specifically, the Order states that the requirements will be deemed fulfilled if a contractor already complies with “State or local requirements that the Secretary of Labor has determined are substantially similar” to those enumerated in the Order. DOL has determined that, for the purposes of this section, Alaska, California, Connecticut, the District of Columbia, Hawaii, New York and Oregon have paycheck transparency requirements that are substantially similar to E.O. 13673’s requirement. Therefore, if a contractor is in compliance with the paycheck transparency requirements of one or more of these states or DC, it is deemed in compliance with the new requirement.

The Order also requires the contractor or subcontractor to notify individuals of their status as independent contractors, as opposed to employees, where applicable. As for the remainder of EO 13673’s requirements, it is unclear when, or if, they will be implemented.