By: Thomas S. Tripodianos Published: September 2014

Executive Order "Fair Pay and Safe Workplaces"

President Obama has signed an Executive Order called "Fair Pay and Safe Workplaces," requiring covered federal contractors and subcontractors to publicly report labor violations, to forgo the use of mandatory arbitration agreements, and to ensure paycheck transparency.  The Executive Order takes effect immediately, although it directs the Federal Acquisition Regulatory (FAR) Council to propose regulations for public comment to carry out the Order. In addition, the White House announced that it expects the Executive Order to be implemented on new contracts in stages, on a prioritized basis, during 2016.

Labor Law Violations. For procurement contracts for goods and services, including construction contracts, where the estimated value exceeds $500,000, the Executive Order requires reporting of labor and employment law violations that occurred in the past three years. A violation is considered an administrative merits determination, arbitral award or decision, or civil judgment. The laws covered span 14 federal laws and equivalent state laws, including the Fair Labor Standards Act (FLSA), Occupational Safety and Health Act, National Labor Relations Act, Family and Medical Leave Act, Title VII of the Civil Rights Act (Title VII), Americans with Disabilities Act, Age Discrimination in Employment Act, and Executive Order 11246, among others.

Under the Executive Order, each contracting agency is to designate a senior official who will serve as the agency's Labor Compliance Advisor. In consultation with the agency's Labor Compliance Advisor, contracting officers shall consider the information provided in determining whether the contractor is a responsible source that has a satisfactory record of integrity and business ethics, after reviewing the guidelines set forth by the Department of Labor and consistent with any final rules issued by the Federal Acquisition Regulatory (FAR) Council

During the performance of the contract, each agency must require contractors to update the information provided every six months and to obtain updated information from subcontractors. If violations occur during the contract performance, the agency may require an agreement for appropriate remedial measures and may take additional measures, such as opting not to exercise an option on the contract, terminating the contract, or referring the contractor for suspension or debarment.

Mandatory Arbitration Agreements. The Executive Order restricts contractors’ ability to use mandatory arbitration agreements for certain types of claims. For covered contractors or subcontractors, the Executive Order provides that the decision to arbitrate claims arising under Title VII or any tort related to or arising out of sexual assault or harassment only may be made with the voluntary consent of the employee or independent contractor after the dispute arises. Covered contracts are those where the estimated value of the supplies acquired and services required exceeds $1 million, excluding contracts and subcontracts for the acquisition of commercial items or commercially available off-the-shelf items.

This provision does not apply to employees covered by any type of collective bargaining agreement. 

Paycheck Transparency. The Executive Order further requires that, in each pay period, contractors provide all individuals performing work under the contract for whom they are required to maintain wage records under the Fair Labor Standards, the Davis-Bacon Act, the Service Contract Act or equivalent State laws, with a document with information concerning that individual's hours worked, overtime hours, pay, and any additions made to or deductions made from pay.  Agencies shall also require that contractors incorporate this same requirement into covered subcontracts.  The document provided to individuals exempt from the overtime compensation requirements of the Fair Labor Standards Act need not include a record of hours worked if the contractor informs the individuals of their overtime exempt status.  These requirements shall be deemed to be fulfilled if the contractor is complying with State or local requirements that the Secretary of Labor has determined are substantially similar to those required by this subsection.

If the contractor is treating an individual performing work under a contract or subcontract as an independent contractor, and not an employee, the contractor must provide a document informing the individual of this status.

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