It’s not quite what the Ides of March was to Julius Caesar, but government contractors do have plenty to worry about come October 25. That’s the day phased implementation of Executive Order 13673, “Fair Pay and Safe Workplaces,” begins. Effective that day, offerors on contracts exceeding $50 million will have to represent, to the best of their knowledge and belief, whether — since October 25, 2015 — there were findings that they violated any of 14 federal statutes and executive orders listed in the order and the implementing regulations. Those laws address wage and hour, safety and health, collective bargaining, family and medical leave, and civil rights protections. Contracting officers will be required to consider those disclosures in determining whether an offeror is a responsible source that has a satisfactory record of integrity and business ethics.
First, because the U.S. Department of Labor has ruled that disclosures must include even allegations that the contractor violated the Service Contract Act, Davis-Bacon Act, Fair Labor Standards, Occupational Safety & Health Act and other labor laws. Whether that will result in “fair pay” or “safe workplaces” remains to be seen, but it doesn’t sound fair to contractors. In fact, the rules have been challenged in court, but for now, they are the law.
A related reason to worry is that the laws listed in the executive order are so complicated that thousands of well-meaning, honest employers, including government contractors, may violate them in some way with some frequency. Now, those mistakes may be a consideration in whether those companies get contracts.
Third, a failure to disclose, where disclosure is required, may be regarded as a false statement.
So, what should contractors do?
There are some steps contractors can, and should, take to mitigate the impact of these new requirements.
- In order to make proper disclosures, contractors should identify any “administrative merits determinations,” “arbitral awards or decisions,” or “civil judgments” against them on or after October 25, 2015 that involved the listed laws. (The terms in the preceding sentence have detailed definitions in the rules.) As bad as disclosure could be, inaccurate disclosures could be worse.
- Contractors should review the steps they have taken to correct the violations of, and improve compliance with, the listed laws. Such corrective measures could be considered by contracting officers as mitigating factors. In particular, contractors should discover any systemic problems that led to the award/decision/judgment and correct them. Paying the damages awarded is not enough because that does not demonstrate a commitment to not violate the law in the future.
- Consider obtaining a “pre-assessment” from DOL. There are pros and cons to this, of course.
- Strongly consider performing, or having performed, labor law compliance audits. Such audits could be performed in-house but are best performed by outside consultants such as lawyers or human resources professionals. The audits review the employer’s labor policies and practices to identify past violations or vulnerabilities that could lead to future violations. Such audits may consider, for example:
– whether personnel who are being treated as independent contractors meet the legal tests for that classification;
– whether workers being treated as exempt from the FLSA, SCA and DBA are correctly classified;
– whether working time and overtime are being calculated and compensated properly;
– whether FMLA leave is being properly administered; and
– whether documentation of terminations and other employment actions is sufficient to survive scrutiny under laws such as Title VII, the ADA and the ADEA, among others.
Experienced compliance auditors also can help contractors correct past wrongs with a minimum of unwanted attention.
- If they have past labor law violations, train or re-train their personnel, especially managers. It is insufficient to have an employee handbook that prohibits off-the-clock work, for example. Managers must be trained to honor the rules and employees’ rights.
- Examine any pending labor litigation and administrative investigations or proceedings and consider which cases to settle. Of course, many considerations impact whether a company settles a lawsuit of any kind. The executive order introduces a new consideration, however, since it requires disclosure of every “administrative merits determination, arbitral award or decision, or civil judgment.” It does not appear to require disclosure of all settlements, though some may have to be disclosed depending on the specific terminology and paperwork used in the settlement. Thus, a contractor that settles claims may be able to shorten the list of disclosures it will be required to make.
Most importantly, contractors should make sure they understand what is required under these new rules.