Skip to content

Government Contracts: Be Careful What You Wish For

In what may be the last gasp of the Obama-era Department of Labor (DOL), the DOL filed suit against Google to force the company to divulge certain compensation data for EEO compliance purposes. The DOL’s complaint goes nuclear and seeks to cancel all of Google’s existing federal contracts and bar Google and its officers from receiving any such contracts in the future. Google has refused the DOL’s requests over the past year, and claims they are overbroad and seek information that is confidential. This is an important case to watch but, in the meantime, the dispute highlights important issues employers should be aware of when entering into government contracts and subcontracts.

The DOL claims it is entitled to the compensation information through the equal employment opportunity obligations under Executive Order 11246 (as amended); section 503 of the Rehabilitation Act; and section 4212 of the Vietnam Era Veterans’ Readjustment Assistance Act. All three provisions provide for compliance evaluations by the DOL, which can include desk audits, on-site reviews, and detailed analysis of records relating to a company’s affirmative action, hiring and employment practices. Further, the executive order provides that government contractors and subcontractors with at least 50 employees and a $50,000 federal contract or subcontract must file an annual EEO compliance report, which is an obligation at issue in the Google litigation. Penalties for failure to comply with any of the above can be severe: the DOL can cancel current contracts, debar the contractor from receiving future contracts, recommend the filing of Title VII proceedings by the Department of Justice or EEOC, and recommend the filing of criminal charges if the contractor submits any false information.

There are several lessons to be learned. First, employers should be aware that, when entering into government contracts or subcontracts, they are giving away more than services rendered, and are subjecting themselves to a potentially intrusive set of compliance obligations. Second, contractors should familiarize themselves with the above obligations to ensure compliance. Third, employers that decide to push back against a DOL request, even with legitimate confidentiality concerns, should be on notice that the agency (at least under the current administration) may be willing to play hardball. Granted, the incoming Trump administration’s promises to scale back executive orders and regulations may alter the enforcement landscape. Nonetheless, although government contracts may appear to be a boon, employers should take care in weighing whether they are worth the strings attached.

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.