ALERT FOR FEDERAL GOVERNMENT CONTRACTORS
By: Kathy C. Potter, Esq.
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.
