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President Issues Order Requiring Contractors to Disclose Labor Law Violations When Competing for Federal Contracts

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This afternoon, President Obama signed yet another executive order impacting federal contractors. In short, the order will require prospective federal contractors to disclose all labor law violations, including federal and equivalent state laws addressing wage and hour, safety, collective bargaining, family and medical leave, and civil rights protections, from the past three years before they can receive a contract. Contracting officials will be heavily advised to not contract with employers with “repeat violations.”

This order will seriously impact HR professionals whose primary responsibility is to ensure compliance with the confusing array of provisions and regulations under the Fair Labor Standards Act and other labor law statutes. Under these circumstances, even the best employers can sometimes run into compliance challenges. This executive order will impact employers of all sizes, governing new federal procurement contracts valued at more than $500,000. While not effective immediately, provisions of this order are expected to be implemented on new Federal contracts in 2016.

Furthermore, the executive order directs employers with larger federal contracts – at least $1 million – “not to require their employees to enter into predispute arbitration agreements for disputes arising out of Title VII of the Civil Rights Act or from torts related to sexual assault or harassment (except when valid contracts already exist).” 

The order has significant implications for HR professionals, in particular, with a new requirement that contractors provide employees with information about hours worked, overtime hours, pay, and any additions to or deductions made from their pay, which is yet to be defined. While the thrust of the Administration’s actions appears to be focused on “repeat” violators, even an employer with a single violation (depending on the severity) could be barred from receiving future federal contracts.  After an initial review, the order is vaguely written stating that government officials will provide guidance to contract officials on whether contractors’ actions rise to the level of a lack of integrity or business ethics. 

Employers will be required to check a box on a contract submittal attesting that they don’t have a history of labor law violations.  The Administration also notes that employers with labor law violations will have an opportunity to receive assistance and guidance on whether the labor violations are problematic and will have the opportunity to remedy any problems.  

The Administration indicated that they will hold listening sessions with stakeholders about how the order will be implemented. Draft regulations and guidance will be published for public comment before being finalized. In an effort to make sure the final regulations and guidance work in way that balances the need of both employer and employee, SHRM will remain actively involved as the implementation of this order progresses and will provide feedback to SHRM members and Obama Administration officials about how guidance should be crafted, taking into account the realities of workplace operations and compliance.

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