Overview. On August 24, 2016, the final rule implementing the President’s 2015 Fair Play and Safe Workplaces Executive Order was released. Simultaneously, the Department of Labor (DOL) released guidance on key provisions of the final rule. This so-called “Blacklisting” rule ultimately requires contractors to disclose 3 years’ worth of labor law decisions (as defined in the Rule), when bidding for a federal contract. It also imposes certain paycheck transparency obligations on federal contractors. The various effective dates are set forth below. More information can be found on the Department of Labor’s website by clicking HERE.
Effective Dates.
October 25, 2016: The final rule takes effect. Mandatory disclosure and assessment of labor law compliance begins for all prime contractors under consideration for contracts with a total value greater than or equal to $50 million. The reporting disclosure period is initially limited to one (1) year and will gradually increase to three (3) years by October 25, 2018.
January 1, 2017: The Paycheck Transparency clause takes effect, requiring prime and sub-contractors to provide compliant wage statements, notice of exempt status, and notice of any independent contractor relationship to their covered workers.
April 25, 2017: The total contract value threshold for prime contracts requiring disclosure and assessment of labor law compliance is reduced to $500,000.
October 25, 2017: Mandatory assessment begins for all subcontractors under consideration for subcontracts with a total value greater than or equal to $500,000.
Details. The U.S. Department of Labor and the Federal Acquisition Regulatory (“FAR”) Council published the highly-anticipated final rule and guidance implementing President Obama’s “Fair Pay and Safe Workplaces” Executive Order (E.O. 13673), often called the “Blacklisting” or “Bad Actors” Executive Order. Signed by President Obama in July 2014, the Executive Order’s stated goal is to promote efficiency in government procurement by ensuring federal agencies contract only with “responsible” contractors who comply with federal and state workplace laws. The initially effective date of the regulations is October 25, 2016.
The Executive Order and regulations and guidance set forth procedures requiring federal agency contracting officers to consider an employer’s record of workplace law compliance when awarding contracts and subcontracts valued at more than $500,000. The relevant workplace laws on which employer compliance must be assessed remain unchanged in the final rules and include the following:
- Fair Labor Standards Act
- Occupational Safety and Health Act (and state law equivalents)
- Migrant and Seasonal Agricultural Worker Protection Act
- National Labor Relations Act
- Family and Medical Leave Act
- Davis-Bacon Act
- Service Contract Act
- Title VII of the Civil Rights Act
- Americans with Disabilities Act
- Age Discrimination in Employment Act
- Executive Order 11246 (affirmative action and equal employment opportunity)
- Vietnam Era Veterans’ Readjustment Assistance Act
- Section 503 of the Rehabilitation Act
- Executive Order 13658 (federal contractor minimum wage)
The state law equivalents of these laws, which contractors will also be required to report on, will be subject to a future rulemaking. The exception to this is OSHA state law equivalents, which are subject to the reporting requirements set forth in the final rules.
One notable distinction between the proposed and final guidance is the definition of “civil judgments,” which the DOL revised to clarify that temporary restraining orders and offers of judgment pursuant to Federal Rule of Civil Procedure 68 are excluded and, therefore, not reportable.
Effective Date and Timeframe of Reporting. The final regulations set out a phased-in reporting requirement with regular reporting beginning October 25, 2016 by contractors with workplace law violations received within the first year preceding the start of a contract bid (which will be phased in to a three-year look back period by October 25, 2018). Such contractors must make updated disclosures every six months thereafter for the duration of the contract. Notably, for bids on contracts valued at less than $50 million, contractors are not required to report violations as of the October 25, 2016 effective date under a six-month “no reporting” grace period ending on or about April 25, 2017.
Subcontractor Reporting Obligations. Two additional big changes from the proposed regulations involve the reporting obligations for subcontractors. First, subcontractor reporting will begin one year later, on October 25, 2017. Second, subcontractors must report their labor violations directly to DOL and then must report back to the prime contractor regarding the results of these disclosures.
Reporting Entity Clarification. The final rule addresses a critical issue that was unclear in the proposed rule and guidance: the identity of the reporting entity for the purpose of “whose” violations must be reported. Under the final rules, the legal entity required to report its violations is that listed on the bid/offer or contract and not that entity’s parent or other subsidiaries. A contracting entity that is a division of a corporation will be required to make disclosures regarding the corporation’s compliance record.
Assessment by Contracting Agency. Likely in response to public comments, the final regulations set out a detailed process for an assessment by contracting officers and designated “Labor Compliance Advisors” of the disclosures to determine whether the contractor has engaged in “serious, willful, repeated, and/or pervasive violations.” There also is now a process by which contractors can, and are encouraged (but not required), to go to DOL for pre-assessment of their violations before bidding on contracts.
Paycheck Transparency and Pre-Dispute Arbitration Agreements. Still intact are the other elements of the regulations and guidance involving paycheck transparency (hours worked, overtime hours (for non-exempt employees) by workweek and totaled for pay period, pay, deductions). The final rule also requires contractors to provide notice to workers that they consider to be independent contractors, and to provide written notice to inform workers if they are exempt from overtime pay. The final rules also preserve the prohibition on pre-dispute arbitration agreements to resolve Title VII of the Civil Rights Act and related tort claims for contracts of $1,000,000 or more. The effective date for paycheck transparency is January 1, 2017. The effective date for the arbitration prohibition provision is the same as the effective date for the final rule, October 25, 2016.
Public Availability of Disclosures. Despite concerns raised by federal contractors during the comment period, the final rule continues to require representations and disclosures regarding each labor law decision to be reported though the Federal Awardee Performance and Integrity Information System (FAPIIS) where it will be publicly available.
Call to Action. To the extent that you are a federal contractor and have not been tracking labor law violations (as defined in the final rule) so that they are readily accessible for disclosure, you should immediately begin to develop a system of tracking and reporting. While disclosures are not required until April 2017 for contracts of $500,000 above, this date will approach faster than you think. Readiness is for compliance. In addition, all contractors should be prepared to comply with the paycheck transparency requirements by January 1, 2017.
Produced in cooperation with Jackson Lewis, P.C.