FAIR PAY AND SAFE WORKPLACES EXECUTIVE ORDER

ALERT FOR FEDERAL GOVERNMENT CONTRACTORS

By:​ Kathy C. Potter, Esq.

With the issuance of the Fair Pay and Safe Workplaces Executive Order 13673, signed by President Obama on July 31, 2014, the cost of doing business with the federal government will continue to grow as the new requirements the Executive Order places on contractors and subcontractors go into effect. The Executive Order is designed to crack down on “federal contractors who put workers’ safety and hard-earned pay at risk” according to a White House Fact Sheet, which acknowledges that the vast majority of federal contractors play by the rules. The new obligations imposed by the Executive Order will (1) require contractors to disclose violations of certain labor and employment laws to contracting agencies; (2) require contractors to flow down the disclosure requirements to subcontractors; (3) require contractors to consider the subcontractor’s record and business ethics before making a subcontract award; (4) require contractors to provide certain painformation to employees to increase pay transparency; and (5) prohibit the use of pre-dispute arbitration clauses for certain employment-related disputes.

KEY PROVISIONS OF THE EXECUTIVE ORDER

1.​ Contractor Disclosure Requirements

Pursuant to the Executive Order, contractors seeking contracts for goods and services, including construction contracts, where the estimated value exceeds $500,000 will be required to disclose any administrative merits determination, arbitral award or decision, or civil judgment rendered against the contractor within the preceding three years for violations of the following laws (“labor laws”):

1. The Fair Labor Standards Act;

2. The Occupational Safety and Health Act of 1970;

3. The Migrant and Seasonal Agricultural Work Protection Act;

4. The National Labor Relations Act;

5. The Davis-Bacon Act;

6. The Service Contract Act;

7. Executive Order 11246 dated September 24, 1965 (Equal

Employment Opportunity);

8. Section 503 of the Rehabilitation Act of 1973;

9. The Vietnam Era Veterans’ Readjustment Assistance Act of 1974;

10. The Family and Medical Leave Act;

11. Title VII of the Civil Rights Act of 1964;

12. The Americans with Disabilities Act of 1990;

13. The Age Discrimination in Employment Act of 1967;

14. Executive Order 13658 dated February 12, 2014 (Establishing a

Minimum Wage for Contractors); and

15. Equivalent state laws, as defined in guidance to be issued by

the Department of Labor.

Contracting agencies must consider any disclosures from a prospective contractor in making responsibility determinations and must provide the contractor with the opportunity to disclose any steps taken to address the violation or improve compliance with the labor laws. Post award, contractors will be required to update their information every six months during contract performance on a website that is to be developed by the General Services Administration. If information regarding covered labor law violations is disclosed during contract performance, a contracting officer, in consultation with the agency’s Labor Compliance Advisor, a new position to be added to all agencies, shall consider whether action is necessary. Such action may include “agreements requiring appropriate remedial measures, compliance assistance, and resolving issues to avoid further violations, as well as remedies such as decisions not to exercise an option on a contract, contract termination, or referral to the agency suspending and debarring official.”

2.​ Flow-Down Requirements

Contractors will be required to “flow down” disclosure obligations to any subcontract for which the estimated value of the supplies and services acquired by the subcontract exceeds $500,000 and that is not for commercially available off-the-shelf items. For covered contracts, subcontractors will have to disclose to contractors the same information contractors are required to disclose to procuring agencies and update the information every six months.

The Executive Order requires contractors to consider the information submitted by the subcontractor in determining whether a subcontractor is a responsible source that has a satisfactory record of integrity and business ethics before awarding a subcontract, except for subcontracts that are awarded or become effective within five days of contract execution, in which case the information must be reviewed within thirty days of subcontract award.

If information required to be disclosed is brought to the attention of the contractor by its subcontractor or similar information is obtained through other sources, then the contractor shall consider whether action is necessary, including where appropriate, sending the information to the agency suspending and debarring official. The Executive Order requires that a contracting officer, Labor Compliance Advisor, and the Department of Labor be available for consultation with a contractor regarding appropriate steps it should consider.

3.​ Transparency

The Executive Order requires contractors to give their employees who are performing work under a contract for whom the contractor is required to maintain wage records under the Fair Labor Standards Act (“FLSA”), the Davis-Bacon Act, and the Service Contract Act information concerning their hours worked, overtime hours, pay, and any additions to or deductions made from their pay. If the contractor informs individuals exempt from FLSA overtime compensation requirements of their overtime exempt status, the employer need not include a record of hours worked for those employees. Where an individual performing work under a covered contract or subcontract is an independent contractor, the contractor must provide a document informing the individual of this status.

4.​ Anti-Arbitration Provision

The Executive Order precludes contractors having contracts exceeding $1 million, other than those contracts or subcontracts for commercial items or commercially available off-the-shelf items, from using pre-dispute arbitration agreements for claims arising under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment except where there is voluntary consent of employees or independent contractors after such disputes arise. This preclusion does not apply to contracts for the acquisition of commercial items or commercially available off-the-shelf items. The anti-arbitration provision does not apply to arbitration agreements in place prior to the contractor bidding on a contract covered by the Executive Order, unless the terms of the existing agreement can be changed by the employer or the agreement is renegotiated or replaced. The provision also does not apply to employees covered by a collective bargaining agreement. The prohibition of pre-dispute arbitration agreements must be flowed down to subcontractors where the estimated value of the supplies and/or services to be acquired exceeds $1 million and the subcontract is not for the acquisition of commercial items or commercially available off-the-shelf items.

5.​ Effective Date

The Executive Order will apply to all solicitations for contracts as set forth in any final rule issued by the FAR Council after considering all public comments, as appropriate. It is expected that implementation on new contracts will be done in stages throughout 2016, according to a White House Fact Sheet.

NEXT STEPS TO TAKE FOR CONTRACTORS

Pending publication of the implementing regulations, contractors can take several steps in preparation for these new disclosure requirements. Contractors would be advised to review their policies and procedures to ensure compliance with labor laws and provide any additional compliance training where needed. In addition, contractors that have arbitration agreements with their employees or are considering using arbitration agreements should evaluate them now to determine if they qualify for the exclusions discussed above.

Benton Potter & Murdock, P.C., will continue to monitor developments and will provide an updated alert when the proposed regulations are published or other developments occur. If you have any questions about the Executive Order and what it could mean for your business, please contact Kathy Potter, a partner with Benton Potter & Murdock, P.C., at kcp@bpmlawyers.com.

This Alert is provided by Benton Potter and Murdock, P.C., for informational purposes only, and should in no way be relied upon or construed as legal advice. Receipt of this Alert does not create an attorney-client relationship. Recipients of this Alert should not act or refrain from acting on the basis of any information included in this Alert without first consulting with legal counsel. This Alert may be considered Attorney Advertising in some jurisdictions. ©2014 Benton Potter & Murdock, P.C.

Important News for Employers: The EEOC and FTC Issue New Background Check Guidance

By Kimberly S. Greenspan, Esq.

On March 10, 2014, the U.S. Equal Employment Opportunity Commission (EEOC) and the U.S. Federal Trade Commission (FTC) partnered to issue, for the first time, joint informal guidance on employment background checks. Two documents came out of the agencies’ collaboration: "Background Checks: What Employers Need to Know" and "Background Checks: What Job Applicants and Employees Should Know."

The unique intersection of anti-discrimination laws and the Fair Credit Reporting Act (FCRA) have resulted in these publications which define the rights and responsibilities governing employers, employees and job applicants when employers use background checks in making personnel decisions.

The EEOC enforces federal anti-discrimination laws, and emphasizes that any time an employer uses an applicant’s or employee’s background information to make an employment decision, the employer must comply with those laws. The FTC enforces the Fair Credit Reporting Act (FCRA), which protects the privacy and accuracy of the information in credit reports, and therefore regulates how background checks are conducted and used. If an employer runs a background check through a company in the business of compiling background information, the employer must comply with the FCRA.

Below are some of the main points that an employer should consider as a result of this guidance:

​Fair Credit Reporting Act

The FCRA requires employers who get background information (i.e., a credit or criminal background report) from a company in the business of gathering background information, to follow specific procedures:

1. Employers must provide written notice to the applicant or employee that it might use the information to make decisions about that person’s employment. This notice must be in a stand-alone format, and cannot be included in an employment application.

2. If an employer asks a company to provide an investigative report, employers must tell the applicant or employee of his or her right to a description of the nature and scope of the investigation.

3. Employers need written permission from job applicants and employees before conducting background checks. This information can be part of the notification document referred to above. If the employer plans on conducting background checks throughout the person’s employment, that employer should make this information clear and conspicuous in the notification document.

4. The employer must certify to the company from which it is getting the report that it notified the applicant or employee, got that person’s permission to conduct the background check, and complied with all FCRA requirements. The employer must also certify that it will neither unlawfully discriminate, nor misuse the information in violation of federal or state equal opportunity laws or regulations.

Once the background information is gathered, the FCRA imposes additional requirements on the employer before that information can be used to take an adverse action. An employer must give the applicant or employee a notice that includes a copy of the consumer report it relied on to make the decision, and a summary of his or her rights under the FCRA. Providing the individual with advance notice allows the applicant or employee the chance to review the report and explain any negative information.

After the adverse employment action is taken, the employer must tell the applicant or employee that he or she was rejected because of the information in the report; the name, address, and phone number of the company that sold the report; and that the company selling the report did not make the hiring decision, and cannot give specific reasons for the decision. This information may be provided orally, in writing, or electronically. Furthermore, the applicant or employee has a right to dispute the accuracy or completeness of the report and to obtain an additional free report from the reporting company within 60 days.

Federal Anti-Discrimination Laws

Federal anti-discrimination laws make it illegal for an employer to use any background information that it receives to discriminate against an employee or applicant for employment. Therefore, it is illegal to discriminate against a person on the basis of race, color, national origin, sex, religion, age (40 or older), disability, or genetic information, including family medical history, when requesting or using background information for employment, irrespective of the information’s source.

The guidance advises employers against basing employment decisions on background problems that may be more common among individuals in a particular protected group. Should a background check policy disproportionately impact members of particular protected group, employers should ensure that the policy is job-related and consistent with business necessity. Employers are well-served to seek the same background information from all individuals, rather than only checking the background of a particular subset of employees or applicants.

Generally, an employer should not try to get an applicant’s or an employee’s genetic information, which includes family history, and if that information is obtained, it should not be used to make an employment decision. Medical questions cannot be asked before a conditional job offer has been made, and once a person has started to the job, the employer cannot ask medical questions unless there is objective evidence that the employee is unable to do the job or poses a safety risk due to a medical condition. To be compliant with the Americans with Disabilities Act, employers may need to make exceptions for disability-related problems that surface during a background check.

Records

Generally, employers must preserve personnel or employment records for one year after the records were made, or after a personnel action was taken, whichever comes later. The Department of Labor extends this requirement to two years for federal contractors that have at least 150 employees and a government contract of at least $150,000. Once an applicant or employee files a charge of discrimination, the employer must maintain the records until the conclusion of the case.

Conclusion

Despite the requirements or suggestions enumerated above, employers should not be dissuaded from using background checks. It is not illegal for an employer to ask a job applicant about his or her background or to require a background check, provided the employer does not unlawfully discriminate. Finally, employers should review their state and local laws regarding background reports or information, as there may be additional regulations beyond that required by federal law.

Benton Potter & Murdock's Boyd K. Rutherford Runs for Maryland Lt. Governor!

Benton Potter & Murdock, P.C., is proud to report that Boyd Rutherford, of Counsel with the firm, is running for the Republican nomination for Lieutenant Governor for the State of Maryland. Larry Hogan, Jr., announced Boyd as his running mate when he announced his own candidacy for Maryland Governor. Boyd and Hogan previously worked together as cabinet Secretaries in the Administration of Governor Robert L. Ehrlich, where Boyd served as the Secretary of the Department of General Services.

Prior to serving in the Ehrlich Administration, Boyd served as the Associate Administrator for the U.S. General Services Administration, where he directed both the Office of Small Business Utilization and the Office of Performance Improvement. After his Maryland service, Boyd returned to the Federal government as the Assistant Secretary for Administration in the U.S. Department of Agriculture. In that role, he served as the Department’s Chief Acquisition Officer, Chief Human Capital Office, the Senior Energy and Environmental Official, as well as the Department’s Freedom of Information Act Officer.

Boyd’s inclusion on the Gubernatorial ticket has been termed “a solid pick” (Professor Todd Eberly, St. Mary’s College ) and as “enhancing the ticket” (Maryland Reporter).

For more information, please contact John Murdock at jm@bpmlawyers.com

The IDIQ "Contract" -- It is not a Contract until a Task or Delivery Order makes it One

By Janine S. Benton, Esq.

A U.S. Government agency uses indefinite-delivery, indefinite quantity ("IDIQ")* contracts to purchase supplies and/or services when it does not know the precise quantities of goods, or times/amounts of services at the time of IDIQ award. Under the IDIQ, the agency does not promise to purchase all of its needed supplies and/or services from the awardee. Instead, the agency only agrees to, generally, purchase a minimum amount that is identified in the IDIQ document. This amount may be small, but it must be more than "de minimis. "**

Most importantly, contractors must recognize that an IDIQ is not considered a contract until a task order or delivery order has been placed against it. In fact, an IDIQ is often called a "hunting license" that gives contractors only the right to hunt and trap task or delivery orders. Contractors also should be aware that an IDIQ may not be fully funded so that it may be the case that no task or delivery orders are ever placed against it. Accordingly, IDIQ contractors should recognize that their ability to obtain remedies through submission of claims under the Contract Dispute Act may be very limited unless those claims relate to task or delivery orders.

This limitation also extends to bid protests. While GAO has jurisdiction over bid protests concerning the initial IDIQ procurement, under 41 USC 4106(f), its jurisdiction over IDIQ task or delivery order competitions is limited to situations where: (1) the protest challenges the scope, period, or maximum value of the underlying contract; or (2) the task or delivery order is valued at more than $10 million.

*IDIQ contracting is governed by Subpart 16.5 of the Federal Acquisition Regulation ("FAR").

** "De minimis," as used in regard to IDIQ contracts, means a small amount, but not so small as to be inconsequential.

Ms. Benton is a partner with Benton Potter & Murdock, P.C. She may be reached via jb(at)bpmlawyers.com.