The Federal Acquisition Regulations Council (“FAR Council”) and the U.S. Department of Labor (“DOL”) have issued their Final Rule and Guidance implementing President Obama’s Executive Order 13673 – “Fair Pay and Safe Workplaces.” Together, the Rule, Guidance and commentary total over 800 pages, and is effective October 25, 2016.As a reminder, under some of its more onerous elements, E.O. 13673, which was issued on July 31, 2014, requires that companies bidding on federal contracts valued at over $500,000 have to indicate at the initial bid submission stage whether they have had any “administrative merits determinations, arbitral awards or decisions, or civil judgments”rendered against them during the preceding three-years for violations of specified federal labor and employment laws and/or their “equivalent state laws.” The information disclosed will then be used by contracting officers, in consultation with an agency’s “labor compliance advisor,” (“ALCA”) to determine whether the bidder has a satisfactory record of integrity and business ethics to obtain the federal contract. E.O. 13673 also requires that bidding contractors ensure that their subcontractors meet the same requirements, and that both successful primes and their subs update information semi-annually during the term of the contract.
Although effective October 25, under the new Rule, disclosure requirements contained in the E.O. will only apply to solicitations valued at $50 million or more until April 25, 2017; thereafter, the disclosure requirements will begin to be included in solicitations valued at $500,000 or more. Further, although the Proposed Rule contained a three-year look back for covered violations, the Final Rule only requires contractors to look back one year when the Rule first becomes effective. The look-back period will then increase gradually each year until October 2018 when it will reach the proposed three-year look-back period.
One significant change between the Proposed Rule and the Final Rule involves the reporting obligations of subcontractors. First, subcontractor reporting is not required to begin until October 25, 2017, a year after prime contractor reporting. Second, prime contractors will no longer be responsible for assessing the labor violations of their subcontractors as initially proposed. Rather, covered subcontractors must now report their labor violations directly to the appropriate ALCA, who will assess the disclosed violations and make a recommendation regarding the suitability of the subcontractor, which the subcontractor will then report back to the prime contractor.
As noted in prior posts, it is not too soon to begin preparing for compliance with E.O.13673. In particular, you could, in consultation with counsel, (1) review your records for reportable events; (2) check to ensure you have processes in place to handle compliance, reporting and corporate oversight for record-keeping; (3) confirm you have processes in place to ensure appropriate remedial actions are taken in the event potential violations of the specified laws occur, and that remedial actions are recorded for mitigation purposes; (4) implement procedures for monitoring subcontractor compliance; and (5) perhaps reconsider strategies for resolving the types of claims covered by E.O. 13673, since even entering into a voluntary settlement agreement or consent order, which may otherwise have made good business or financial sense before E.O. 13673, could have different and possibly adverse consequences going forward. In this regard, it is important to note that, to date, the DOL has still not released a comprehensive list of state laws that are covered by the E.O., but the final guidance just issued did clarify the scope of the administrative determinations that could be considered violations against a contractor. These include EEOC reasonable cause determinations, NLRB complaints, Wage and Hour unpaid wage determinations (WH-56), OSHA citations, and OFCCP show cause notices, to name a few troubling examples.
Debbi Cohen is Counsel to Benton Potter & Murdock, P.C.
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