On July 31, 2014, President Obama signed the Fair Pay and Safe Workplaces Executive Order (“EO”). This new EO comes just weeks after he signed an executive order making it illegal for federal contractors to discriminate on the basis of sexual orientation or gender and is part of the Administration’s concerted effort to increase oversight and regulation of federal contractors.
The EO requires federal contractors to disclose recent labor violations and bars certain contractors from forcing employees to sign arbitration agreements regarding civil rights disputes. Although most contractors already do so, the EO further requires contractors give their employees accurate information regarding how many hours they’ve worked, their overtime pay and other relevant paycheck details.
According to the White House fact sheet, the EO applies to federal contracts valued over $500,000. It requires companies to disclose to the government, when competing for new contracts, all of its state and federal labor law violations from the prior three years. Covered violations include wage and hour violations under the Fair Labor Standards Act, discrimination under Title VII of the Civil Rights Act of 1964, unfair labor practices that violation the National Labor Relations Act, and leave violations under the Family and Medical Leave Act. Prime contractors will also need to provide the government with this information for all of their subcontractors with any subcontract valued over $500,000, with the exception of subcontractors providing commercially available off-the-shelf (COTS) items or services. The EO requires that both the prime contractor and subcontractor reports be updated every six months.
In addition to the new labor law violation reporting requirements, the EO expands on the so-called “Franken Amendment.” That amendment, included in the Defense Appropriations Act of 2010, prohibited Department of Defense (“DoD”) agencies from awarding contracts valued in excess of $1 million unless the contractor agreed not to enter into or enforce mandatory pre-dispute arbitration agreements which would require employees, as a condition of employment, to resolve claims under Title VII of the Civil Rights Act and other various tort claims, through arbitration. Examples of the Title VII and torts claims covered by the Franken Amendment include claims based on sexual harassment, hostile work environments and disparate impact because of sex, as well as claims of sexual assault, assault and battery, intentional infliction of emotional distress, false imprisonment or negligent hiring, supervision or retention. The Franken Amendment prohibitions also applied to subcontracts in excess of $1 million; they do not apply to prime contracts or subcontracts for commercial items/services or to COTS items/services.
The EO expands the Franken Amendment to apply to all federal agencies, not just the DoD. It prohibits contractors with federal contracts of $1 million or more from requiring their employees to enter into pre-dispute arbitration agreements for disputes arising out of Title VII of the Civil Rights Act, or from torts related to sexual assault or harassment (except when valid contracts already exist).
Federal contractors will be invited to take part in “listening sessions” with the Department of Labor and other relevant agencies before the regulations are drafted. For now, if you are a federal subcontractor who supplies COTS items or services, it appears the restrictions in this EO will not apply to you. For everyone else, you may want to attend a “listening session” to get a sense of how the EO will be implemented via the Federal Acquisition Regulation. The new rules are expected to be implemented in stages, on all new contracts throughout 2016, so there is still time to prepare.
The Administration believes that these new regulations will increase efficiency — that remains to be seen.