New law will impact contract bidding process
While individuals of both political parties almost universally agree on the principles of fair pay and safe workplaces, many federal contractors and subcontractors in both red and blue states are increasingly concerned about the anticipated costs and burdens imposed by EO 13673 -- questioning whether they will continue doing business with the federal government. The rule proposed by the Federal Acquisition Regulatory (“FAR”) Council in conjunction with guidance from the U.S. Department of Labor (“DOL”) saddles federal contractors and subcontractors with obligations that may be greater than those suggested by EO 13673’s title, “Fair Pay and Safe Workplaces.”
“Blacklisting” Procedures of EO 13673
President Obama issued EO 13673 on July 31, 2014 concluding that “[c]ontractors that consistently adhere to labor laws are more likely to have workplace practices that enhance productivity and increase the likelihood of timely, predictable and satisfactory delivery of goods and services to the federal government.” Consequently, the administration ordered that to continue doing business with the federal government, federal contractors and subcontractors will be required, among other things, to disclose, as part of their bids, “whether there has been any administrative merits determination, arbitral award or decision, or civil judgment, as defined in guidance issued by the [DOL], rendered against the offeror within the preceding 3-year period for violations of any of the following labor laws and Executive Orders (labor laws):”
• The Fair Labor Standards Act; • The Occupational Safety and Health Act of 1970; • The Migrant and Seasonal Agricultural Worker Protection Act; • The National Labor Relations Act; • The Davis-Bacon Act; • The Service Contract Act; • Executive Order 11246 -- Equal Employment Opportunity; • Section 503 of the Rehabilitation Act of 1973; • The Vietnam Era Veterans’ Readjustment Assistance Act of 1974; • The Family and Medical Leave Act; • Title VII of the Civil Rights Act of 1964; • The Americans with Disabilities Act of 1990; • The Age Discrimination in Employment Act of 1967; • Executive Order 13658 -- Establishing a Minimum Wage for Contractors; or • Equivalent state laws, as defined in guidance issued by the DOL.
The Department of Labor was tasked with providing guidance regarding these new obligations. “Administrative merits determination” is defined in the proposed rule as “certain notices or findings of labor law violations issued by an enforcement agency following an investigation” which further states that these “may be final or be subject to appeal or further review.” Critics argue that requiring contractors to disclose this information, and have the government evaluate the merits of such a claim in considering a bid before any alleged violation has been reviewed by the courts or becomes final, deprives contractors of their due process rights.
Moreover, this will give greater leverage to the Office of Federal Contract Compliance Programs (“OFCCP”) during audits because it could lead to an expansion of the scope and costs associated with an audit conducted by the agency. For example, contractors and the OFCCP often work together to enter into a conciliation agreement to avoid having the issues raised during the audit being referred to the DOL Office of the Solicitor through administrative enforcement proceedings. Although the proposed rule failed to include conciliation agreements as part of the exhaustive list of actions that constitutes an administrative merits determination, contractors could be made to feel more pressure to enter into a conciliation agreement -- or otherwise risk the agency issuing a show cause notice that could impact future bids. Additional Impact of EO 13673
As part of the “Blacklisting” procedures, federal contractors and subcontractors are also required to provide updated disclosures of their violations every six months. EO 13673 further requires all employers with federal contracts for goods and services (including construction) worth more than $500,000 to provide wage statements containing detailed pay information (including hours worked, overtime hours, pay, and any additions made to or deductions made from pay) and to require to incorporate this requirement into qualifying subcontracts worth more than $500,000.
Note: the proposed rule also impacts arbitration agreements between contractors, with contracts for goods and services worth more than $1,000,000, and their employees and independent contractors, mandating that any agreements (with narrow exceptions) by individuals to arbitrate claims arising under Title VII, or any tort related to, or arising out of, sexual assault or harassment, can only be enforced if voluntary consent is obtained from the individuals after such disputes arise. Subcontractors are similarly affected as the proposed rule requires federal contractors to include this provision in subcontracts that also exceed the $1,000,000 threshold.
Final Rule With the final rule anticipated to be published this quarter, federal contractors and subcontractors should already be planning ahead to ensure they are prepared to comply with these new requirements, which could take effect as early as next month.
This article was prepared expressly for OutSolve, LLC by Jason Regas, Associate at Andrews Kurth. Copyright © 2016. Andrews Kurth. This communication has been prepared by Andrews Kurth for informational purposes and does not constitute legal advice. A past performance or prior result is no guarantee of a similar future result in another case or matter. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Attorney Advertising.