Prepared Expressly for OutSolve, LLC By Andrews Kurth Kenyon LLP
More than two years after President Obama signed the Fair Pay and Safe Workplaces Executive Order 13673, the U.S. Department of Labor (“DOL”) and Federal Acquisition Regulatory (“FAR”) Council issued the Final Rule (the “Rule”) and guidance on its implementation. The Rule was set to take effect on October 25, 2016, with a phased-in implementation schedule. However, on the eve of the Rule’s effective date, a federal district judge in Texas granted a nationwide preliminary injunction, halting the federal government’s enforcement of a requirement that federal contractors and subcontractors disclose violations of federal labor laws and their state equivalents. Notably, the injunction also prevents the federal government from prohibiting certain mandatory arbitration provisions in employee agreements. In reaching its decision, the court found, among other things, that the Rule’s disclosure requirement “forces contractors to disclose a list of court actions, arbitrations, and ‘administrative merits determinations,’ even where there has been no final adjudication of any violation,” in violation of the First Amendment rights of federal contractors and subcontractors and in conflict with existing federal labor laws. Assoc. Builders & Contractors of Se. Tex. v. Anne Rung, No. 1:16-CV-425 (E.D. Tex. Oct. 24, 2016) (order granting preliminary injunction). This rationale mirrored the concern of federal contractors and subcontractors.
Because the injunction is preliminary, however, the DOL has the opportunity to appeal the ruling or amend the Rule to directly address the court’s concerns. The DOL has not filed an appeal as of this date. We anticipate that the forthcoming Trump administration—supported by a Republican-majority Congress—could likely revoke the Rule in alignment with his campaign promises to loosen regulations for federal contractors.
Nonetheless, given such uncertainties, federal contractors and subcontractors should still assess whether their contracts subject them to the requirements of the Rule and educate themselves about any potential reporting obligations. Covered contractors and subcontractors should also review the wage statements they provide to employees with their paychecks to ensure compliance with the Rule’s less-publicized paycheck transparency requirement which was not impacted by the temporary injunction and is set to take effect on January 1, 2017.
Below is an overview of the portions of the Rule that are not affected by the injunction as well an outline of what federal contractors or subcontractors need to know should the injunction impacting the Rule’s disclosure provision be implemented in the future. Wage statements
Beginning on January 1, 2017, contractors and subcontractors with contracts or subcontracts valued at more than $500,000 must provide “all individuals performing work” for whom the contractor or subcontractor must maintain wage records—under the Fair Labor Standards Act, the Davis-Bacon Act, the Service Contract Act, or equivalent state laws—with a “document” each pay period containing (i) hours worked, (ii) overtime hours, (iii) rate of pay, (iv) gross pay, and any additions to, or deductions from, the gross pay. See Executive Order 13673, section 5(a). Notably, the Rule also requires that if a significant portion of the contractor’s workforce is not fluent in English, these statements must also be provided in alternative languages in which members of the workforce are fluent. Covered contractors and subcontractors must also provide independent contractors written notification of independent contractor status prior to having them work on each new federal contract or subcontract. General information
If the disclosure provision takes effect, federal contractors and subcontractors will be required to report details about certain labor law violations rendered against them in a three-year period. The Rule specifically identifies 14 federal labor laws and executive orders for which violations must be disclosed, including the Fair Labor Standards Act, The Occupational Safety and Health Act, the National Labor Relations Act, and the Family and Medical Leave Act. Federal contractors and subcontractors will also be required to disclose violations of “state law equivalents.” All disclosures under this Rule, should it be implemented, will be made public. Notably, these reporting requirements are limited to the contracting parties only and will not extend to corporate parents, subsidiaries, or affiliated companies. What must be disclosed?
The Rule specifically requires the disclosure of any “civil judgment, arbitral award or decision, or administrative merits determination.” Criminal convictions are not encompassed within those terms.
(1) Civil judgment encompasses any judgment or order entered by any federal or state court in which the court determined that the contractor or subcontractor violated any provision of the labor laws, or, alternatively, enjoined or restrained the contractor or subcontractor from violating any provision of such. The term includes a judgment or order that is not final or is subject to appeal. However, a private settlement where the lawsuit is dismissed by the court without any judgment being entered is not included in the definition.
(2) Arbitral award or decision includes any award or order by an arbitrator or arbitral panel in which it is determined that the contractor or subcontractor violated any provision of the labor laws, or, alternatively, enjoined or restrained the contractor or subcontractor from violating any provision of such. These awards and decisions must be disclosed even when the arbitral proceedings were private or confidential. This definition includes an award or order that is not final or is subject to judicial review, including being confirmed, modified, or vacated by a court.
(3) Administrative merits determinations include non-final and appealable decisions. The DOL enumerated an agency-by-agency list of notices, findings, and documents that will be considered to be administrative merits determinations, including the following:
• WH-56 “Summary of Unpaid Wages” forms issued by the Wage and Hour Division; • OSHA citations; • OFCCP show cause notices; • “A letter of determination that reasonable cause exists to believe that an unlawful employment practice has occurred or is occurring” issued by the EEOC and “a civil action filed on behalf of the EEOC”; • NLRB complaints; • “A complaint filed by or on behalf of an enforcement agency with a Federal or State court, an administrative judge, or an administrative law judge alleging that the contractor or subcontractor violated any provision of the Labor Laws”; and • Notices or findings of violations of the anti-retaliation provisions of the OSH Act, 29 U.S.C. 660(c) (“Section 11(c)”), and the FLSA, 29 U.S.C. 215(a)(3) (“Section 15(a)(3)”). Settlements are not administrative merits determinations, and therefore, contractors are not required to disclose them.
In order to provide a complete picture of a contractor’s or subcontractor’s compliance history, the disclosure requirement makes no distinction between violations committed during performance of a federal contract and those that are not. See Executive Order 13673, sections 2(a)(i), 2(a)(iv)(A). Thus, contractors and subcontractors must disclose any decision issued for a violation of the labor laws, even if the violation were not committed in the performance of work on a federal contract or subcontract.
For each arbitral award or decision, federal contractors and subcontractors must disclose the following basic information: (1) the labor law that was violated; (2) the case number; (3) the date of the award or decision; and (4) the name of the arbitrator. See FAR 22.2004-2(b)(1)(i). For each civil judgment, administrative merits determination or decision, the contractor or subcontractor must disclose substantially similar information: (1) the labor law that was violated; (2) the case number, inspection number, charge number, docket number, or other unique identification number; (3) the date of the determination, judgment, award, or decision; and (4) the name of the court, arbitrator(s), agency, board, or commission that rendered it. See 80 FR 30574, 30581.
How to calculate the disclosure period
The three-year disclosure period is calculated from the date of the applicable judgment, award, decision, or determination, as opposed to when the underlying conduct occurred.
Duty to update disclosures
If a new labor law decision is rendered or a contractor or subcontractor otherwise learns that its disclosure representation is no longer accurate, it must promptly update the contracting officer. See FAR 52.222-57(e). For example, if a contractor made an initial representation that it had no decisions to disclose, and since the time of the offer the contractor obtains a labor law decision to disclose, the contractor must notify the contracting officer. The same is true if a contractor made an initial representation that it has a labor law decision to disclose, and since the time of the offer that labor law decision has been vacated by the enforcement agency or a court, the contractor must notify the contracting officer.
How will violations be weighed and assessed?
An agency labor compliance advisor (“ALCA”) is a senior agency official who ensures each agency’s implementation of the Rule and Executive Order 13673. See FAR 22.2002. ALCAs work with contracting officers during the procurement stage to provide a holistic analysis and recommendation regarding disclosed labor law violations, as well as any mitigating factors and remedial measures. See FAR 22.2004-1(c), 22.2004-2(b), and 22.2004-3(b). In particular, the ACLA will review all of the contractor’s or subcontractor’s violations to determine if such are serious, repeated, willful, and/or pervasive. Then, the ALCA weighs any serious, repeated, willful, and/or pervasive violations in light of the totality of the circumstances, including the severity of the violation(s), the size of the contractor, and any mitigating factors that are present. The fact that a contractor or subcontractor is challenging or appealing an adverse administrative merits determination or decision will be considered. Moreover, labor law violations that have not resulted in final determinations, judgments, awards, or decisions will be given less weight. Lastly, the ALCA provides a written analysis and advice to the contracting officer regarding the contractor’s record of labor law compliance, and whether a labor law compliance agreement or other action is warranted. The contracting officer makes a final determination of whether a contractor is, or is not, a responsible source.
Although the preliminary injunction temporarily stays the federal government’s enforcement of the disclosure requirement, many anticipated that the DOL would appeal that decision. However, unlike the injunction related to the DOL’s new overtime rule, which the DOL announced on December 1, 2016 it would appeal, no such announcement has been made regarding this Rule. Therefore, it remains unclear whether the injunction will remain in place through President-Elect Trump’s inauguration. Accordingly, federal contractors and subcontractors should continue to monitor the developments of this matter closely. And, in the meantime, covered contractors and subcontractors should review the wage statements they provide to employees to ensure compliance with the paycheck transparency requirement which will be implemented on January 1, 2017
The Rule sought to prohibit mandatory arbitration provisions related to Title VII claims and sexual assault/harassment claims, unless the complaining employee agrees to arbitration after the claim arises. The prohibition pertained only to goods and services contracts worth more than $1 million, but also required that contractors incorporate this requirement into qualifying subcontracts worth more than $1 million.
The full text of the court’s October 24, 2016, Memorandum and Order Granting Preliminary Injunction is available at https://www.dol.gov/asp/fairpayandsafeworkplaces/20161026CourtOrder.pdf.
The Rule also identifies the Age Discrimination in Employment Act, the Davis-Bacon Act, Section 503 of the Rehabilitation Act, Title VII of the Civil Rights Act, the Migrant and Seasonal Agricultural Worker Protection Act, the Service Contract Act, the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, the Americans with Disabilities Act, Executive Order 112456 (Equal Employment Opportunity), and Executive Order 13658 (Establishing a Minimum Wage for Contractors).
- The contracting officer, in consultation with an agency labor compliance advisor, makes the ultimate decision to award or extend a federal contract.
This article was prepared expressly for OutSolve, LLC by Jason Regas and Britney J.P. Prince, associates at Andrews Kurth Kenyon. Copyright © 2016. Andrews Kurth Kenyon. This communication has been prepared by Andrews Kurth Kenyon 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.