Skip to content

Diagnosis: Another Executive Order Causes Government Contractors Nightmares and Loss of Appetite

If your business is a federal government contractor or subcontractor, do not read this before bedtime or mealtime. The U.S. Department of Labor has published the much-anticipated final rule implementing the Fair Pay and Safe Workplaces Executive Order, which will go into effect on October 25, 2016. Any businesses entering into new government contracts after that date may have to contend with new compliance burdens on certain covered contractors and subcontractors:

New Duty to Report Adverse Findings and Determinations Related to Labor Matters. Covered contractors will now need to disclose labor violations during the preceding three-year period (including violations under the FLSA, OSHA, and various other labor and employment laws), and the federal contracting agency will consider the contractor’s track record as part of the procurement process. The only good news here is that the rule only requires employers to report adverse findings, determinations, or judgments issued by agencies or courts. Thus, there is no obligation to report a charge filed by an individual or union with the EEOC or NLRB will not be reportable or a matter that is settled while pending before the agency. On the other hand, if the agency makes an “administrative merits determination” adverse to the company, that matter will potentially be reportable;

New Duty to Provide Pay Information to Employees and Specifically Notify Independent Contractors that they are not employees. Covered contractors will need to provide workers with information regarding their pay, hours, overtime, and any deductions to their pay, as well as notify independent contractors of their independent-contractor status and employees exempt from overtime pay of their exempt status; and

Prohibition Against Mandatory Arbitration Agreements. Covered contractors will be prohibited from imposing mandatory arbitration of discrimination claims under Title VII and tort claims relating to sexual harassment, unless the worker voluntarily agrees to arbitrate a claim after the dispute arises; note that this does not prohibit the application of such arbitration programs for claims under other laws, such as the FLSA.

The rule is ambiguous in numerous respects and many contractors are concerned about how it will apply in practice. In the meantime, as the requirements come into effect, contractors will need to review their compliance practices and ensure that staff is brought up to speed and properly trained. Proper record keeping will also be important. In addition, contractors will need to consider their litigation strategy with this rule in mind. All of this and more will need to be considered in the time leading up to implementation of the rule.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.