Employers doing business with the federal government must now jump through additional hoops. In yet another example of the executive branch pursuing its agenda outside of the legislative process, President Obama signed Executive Order 13,673 (the “Executive Order”) mandating certain pre- and post-award disclosures and prohibiting employers from requiring employees to arbitrate discrimination or sexual harassment claims.[1]
Pre-Award Disclosure Obligations
The Executive Order requires employers that bid on government contracts with an estimated value exceeding $500,000 to disclose violations of a long list of labor laws ranging from the Americans with Disabilities Act to the National Labor Relations Act.[2] The Executive Order considers administrative merits determinations, arbitral awards or decisions, and civil judgments rendered against the contractor within the three-year period preceding the bid as violations that must be disclosed to the contracting agency. Similarly, the Executive Order requires employers bidding on contracts to disclose the labor law violations of any subcontractor receiving more than $500,000 of the potential contract for subcontracting services.
Employers may include steps taken to correct violations or to improve compliance in the disclosure. The contracting officer, in conjunction with the agency’s newly appointed Labor Compliance Advisor, will consider whether the violations disclosed constitute serious, willful, or pervasive violations such that the employer is deemed not to be a responsible contractor with a satisfactory record of integrity and business ethics.
Post-Award Disclosure Obligations
After the award of a government contract, employers must update the pre-award disclosures every six months. If a labor law violation occurs during the performance of the contract, the contracting officer, in consultation with the agency’s Labor Compliance Advisor, may, at its discretion, take action, including terminating the contract or requiring the employer to engage in appropriate remedial measures.
In addition, the Executive Order mandates that all government contracts subject to the requirements of the Executive Order include a paycheck transparency clause, requiring employers to provide employees with information detailing the hours worked, overtime hours, pay, and any additions or deductions from pay. The Executive Order further requires that employers include this paycheck transparency clause in any contract with a subcontractor subject to the Executive Order.
Restrictions on Arbitration for Discrimination or Sexual Harassment
Finally, the Executive Orders prohibits employers and subcontractors bidding on government contracts in excess of one million dollars from entering into agreements with employees that contain pre-dispute arbitration provisions mandating arbitration of claims arising under Title VII of the Civil Rights Act or any tort related to or arising out of sexual assault or harassment. Notably, the Executive Order does not apply to arbitration provisions contained in collective bargaining agreements or entered into prior to bidding as long as the agreement is not replaced during or after the bidding process and the contractor or subcontractor is not permitted to change the terms of the agreement.
How to Prepare
Although effective immediately, the White House does not plan to apply the Executive Order to new contracts until 2016. This gives the Department of Labor and the Federal Acquisition Regulatory Council time to issue regulations clarifying the disclosure process, standards and procedures for the responsibility determination, and appeal rights, if any. Until then, employers doing business with the federal government should review their arbitration provisions for compliance.
Notes:
[1] Exec. Order No. 13,673, 79 Fed. Reg. 45,309 (July 31, 2009), available at http://www.whitehouse.gov/the-press-office/2014/07/31/executive-order-fair-pay-and-safe-workplaces.
[2] The full list of labor laws includes the Fair Labor Standards Act; the Migrant and Seasonal Agricultural Worker Protection Act; the National Labor Relations Act; the Davis-Bacon Act; the Service Contract Act; Executive Order 11246 of September 24, 1965; 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 of February 12, 2014; or any equivalent State law.
