Executive Order Targets Labor Law Violators

The White House has announced President Obama’s intent to sign an Executive Order that takes aim at government contractors that violate labor laws. According to an investigative report by the Senate Health, Education, Labor and Pensions committee, “in 2012 alone, taxpayers provided more than $80 billion in contracts to companies that had committed significant violations of our basic labor laws, which are designed to ensure workers are paid fairly and are safe on the job.” According to Department of Labor estimates, there are about 24,000 businesses with federal contracts, employing about 28 million workers. A July 31 White House fact sheet explains the soon-to-be issued Fair Pay and Safe Workplaces EO will require prospective contractors to disclose labor law violations and will give agencies more guidance on how to consider labor violations when awarding contracts. It will also place restrictions on certain mandatory arbitration agreements.

The Fair Pay and Safe Workplaces Executive Order will govern new procurement contracts valued at more than $500,000 and is expected to be implemented on new contracts in stages, on a prioritized basis, during 2016. The fact sheet provides further detail on the following key provisions of the anticipated EO:

  • Agencies will require prospective contractors to disclose labor law violations from the past three years before they can be awarded a contract.
  • Contracting officers will take into account only the most egregious violations, and each agency will designate a senior official as a Labor Compliance Advisor to provide consistent guidance on whether contractors’ actions rise to the level of a lack of integrity or business ethics.
  • Contractors with workplace violations are more likely to encounter performance problems, so the EO will also improve the efficiency of federal contracting and result in greater returns on tax dollars.
  • The EO is intended to protect the contractors that have clean records. The DOL estimates that the overwhelming majority of companies with federal contracts have had no workplace violations in the past three years.
  • The goal of the process created by the EO is to help more contractors come into compliance with workplace protections, not to deny contracts to contractors. Companies with labor law violations will be offered the opportunity to receive early guidance on whether those violations are potentially problematic and remedy any problems. Contracting officers will take these steps into account before awarding a contract.
  • The EO will prohibit companies with contracts of $1 million or more from requiring employees to enter into pre-dispute arbitration agreements for disputes arising out of Title VII or from torts related to sexual assault or harassment (except when valid contracts already exist).
  • The EO will require contractors to give their employees information concerning their hours worked, overtime hours, pay, and any additions to or deductions made from their pay, so workers can be sure they are receiving what they are owed.
  • The EO will direct the General Services Administration to develop a single website for contractors to meet their reporting requirements for this order and for other contractor reporting.

About George Gullo

George Gullo is an attorney editor in the Government Contracts group at Wolters Kluwer Legal & Regulatory U.S. George serves as the principal editor of Cost Accounting Standards Guide and supports all of the group’s print and electronic publications, as well as legal research tools, including the Government Contracts Reporter, Board of Contract Appeals Decisions, and the FAR and DFARS Matrix Smart Charts. With more than 25 years experience in the legal publishing industry, including more than 15 years in the government contracts area, George also has a background in legal and business transactions. He is a graduate of DePaul University College of Law and a licensed Illinois attorney.
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