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More Executive Orders, Rulemakings Issued Targeting Federal Contracting Community

Posted in: Legislative Updates

On July 31, the Obama Administration issued another executive order (EO) targeted at the federal contracting community. The Fair Pay and Safe Workplaces Executive Order creates a “look-back” requirement for contractors to disclose violations of a number of state and federal safety or wage-related laws and regulations over the past three years when bidding for a federal contract over $500,000.  Even after a federal contract is awarded, a contractor will still be required to self-report on labor law violations and, if applicable, the violations of its covered subcontractors to the federal contracting agency every six months. Contractors that disclose violations will have an opportunity to document any actions they have taken to correct the violations and improve compliance. However, a recorded violation can still put a contractor in jeopardy of contract termination, suspension, or even disbarment from future opportunities to do business with the federal government depending on the agency’s assessment of their disclosures.
 
In addition to the requirements related to the disclosure of violations of the listed labor laws, the executive order also mandates that contractors and subcontractors provide employees with detailed information about their paychecks and limits the circumstances under which certain claims may be arbitrated. Covered contractors and subcontractors will be required to provide each of their Fair Labor Standards Act (FLSA)-governed employees, each pay period, with a written document identifying the employee’s hours worked, overtime hours, pay rate, and any additions to or deductions from their wages. 
 
The EO echoes recent measures adopted to four appropriations bills by the House of Representatives that would prevent contractors with FLSA violations from being awarded any federal contracts funded by these bills, effectively creating a government “blacklist” of companies that would not be permitted to compete for federal work. IEC vehemently opposed these amendments. The Senate has yet to act on these appropriations bills and decide whether to keep the onerous contracting language.
 
IEC is concerned that the EO will place unprecedented burdens on contractors – particularly small businesses – that already grapple with a nexus of complex compliance requirements in order to do business with the government. The Federal Acquisition Regulatory (FAR) Council will be required to draft regulations and guidance in order to implement the Executive Order and make those available for public comment.
 
At the same time, the Office of Federal Contracting Compliance (OFCCP) is moving forward with a Notice of Proposed Rulemaking (NPRM) precipitated by another April 2014 Executive Order regarding the creation of an “Equal Pay Report” and development of an agency tool for federal contractor compensation data collection. Contractors with 100 or more employees and a contract or subcontract over $50,000 would be required to disclose to the Department of Labor data on their total number of workers by race, ethnicity, and sex; the total W-2 earnings for each employee according to these categories; and the total hours worked for all workers in each category. The agency would use the data collected to develop an “industry standard” for compensation in order to weed out potential pay discrimination. This proposal, too, stands to impose compliance burden on contractors -- many companies’ employee databases do not retain W-2 earnings information in the same place as race, ethnicity, gender, EEO category, or hours worked.  IEC is also concerned that the proposal would not successfully target bad actors but instead create an incentive for contractors to raise compensation rates to meet or exceed the industry standard in order to avoid being targeted by the OFCCP.   
 
Comments are due on the OFCCP proposal by November 6.
 
These recent actions come on the heels of an EO issued earlier in the year initiating regulatory action to increase the minimum wage for federal contractors to $10.10, strengthening anti-discrimination language, and prohibiting retaliation against employees for discussing their compensation rates. IEC will continue to assess the impact of the Fair Pay and Safe Workplaces EO and OFCCP rulemaking on our membership and develop an appropriate course of action in response.
 
For more information, contact Alexis Moch, IEC National Vice President of Government Affairs, at amoch@ieci.org or (703) 650-0054.