DOL, FAR Council Issue ‘Blacklisting’ Proposed Guidance, Rule

By Allen Smith May 28, 2015
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Federal contractors should now have more clarity about the types of violations that may jeopardize their winning new contracts or maintaining current ones—if they can digest the mammoth proposed guidance issued by the U.S. Department of Labor (DOL) and proposed rule issued by the Federal Acquisition Regulatory (FAR) Council May 27, 2015.

The guidance and proposed rule were issued to implement Executive Order 13673, the Fair Pay and Safe Workplaces order, which was signed by President Barack Obama on July 31, 2014. The executive order intended to bar companies with frequent labor law violations from receiving federal contracts; hence the reference to it as the “blacklisting” executive order.

Consistent with the executive order, changes are being implemented through proposed regulations by the FAR Council, as informed by proposed guidance from the DOL.

Particular attention is being paid in the proposed guidance and rule to violations that are serious, repeated, willful or pervasive. But federal agencies’ labor compliance advisors will examine a wide variety of violations of laws addressing wage and hour, safety and health, collective bargaining, family and medical leave, and civil rights protections.

The proposed guidance and rule will put pressure on federal contractors to settle more claims and could result in a snowball effect of copycat litigation once plaintiffs see that federal contractors are more willing to cave in on litigation, predicted John Meyers, an attorney with Barnes & Thornburg in Atlanta and Washington, D.C.

Contractors had wondered how expansively the term “administrative merits determinations”—labor law violations as found by administrative agencies—would be defined, Linda Jackson, an attorney with Littler in Washington, D.C., told SHRM Online. Under the proposed definition, a company’s contracting rights might be affected without full due process, she noted. The DOL has asked federal contractors to come forward with mitigating information, which raises the question of whether “companies will have to litigate issues in more than one forum to preserve their rights,” she said.

Administrative Merits Determinations

Federal agencies will examine administrative merits determinations, which are defined exhaustively by the proposed guidance as the following for different agencies.

For the Wage and Hour Division:

  • A WH-56 “summary of unpaid wages” form.
  • A letter indicating that an investigation disclosed a violation of Section 6 or 7 of the Fair Labor Standards Act (FLSA) or a violation of the Family and Medical Leave Act, the Service Contract Act, the Davis-Bacon Act, or Executive Order 13658, which established a minimum wage for federal contractors.
  • A WH-103 “employment of minors contrary to the Fair Labor Standards Act” notice.
  • A letter, notice or other document assessing civil monetary penalties.
  • A letter that recites violations concerning the payment of special minimum wages to workers with disabilities under Section 14(c) of the FLSA or that revokes a certificate that authorized the payment of special minimum wages.
  • A WH-561 “citation and notification of penalty” for violations under the Occupational Safety nd Health (OSH) Act’s field sanitation or temporary labor camp standards.
  • An order of reference filed with an administrative law judge.

For the Occupational Safety and Health Administration (OSHA) or any state agency designated to administer an OSHA-approved state plan:

  • A citation.
  • An imminent danger notice.
  • A notice of failure to abate.
  • Any state equivalent.

For the Office of Federal Contract Compliance Programs:

  • A show cause notice for failure to comply with the requirements of Executive Order 11246 (requiring equal employment opportunity and affirmative action), Section 503 of the Rehabilitation Act, the Vietnam Era Veterans’ Readjustment Assistance Act of 1972, or the Vietnam Era Veterans’ Readjustment Assistance Act of 1974.

For the Equal Employment Opportunity Commission:

  • A letter of determination that reasonable cause exists to believe that an unlawful employment practice has occurred or is occurring.
  • A civil action filed on behalf of the commission.

For the National Labor Relations Board:

  • A complaint issued by any regional director.

More generally, administrative merits determinations include a complaint filed by or on behalf of an enforcement agency with a federal or state court alleging that the contractor or subcontractor violated any provision of labor laws. Or the determinations could be any order or finding from any administrative law judge, the DOL’s Administrative Review Board, the Occupational Safety and Health Review Commission or state equivalent, or the National Labor Relations Board that the contractor or subcontractor violated any provision of labor laws.

Disclosure Obligations

Contractors and subcontractors would have disclosure obligations when they are performing or bidding on covered contracts, the proposed guidance notes.

They would have to report not only administrative merits determinations, but also civil judgments and arbitral awards or decisions that have been rendered against them within the previous three years for a violation of labor laws.

The proposed guidance ensures that workers who may have been sexually assaulted or had their civil rights violated get their day in court, putting an end to mandatory pre-dispute arbitration agreements covering these claims at large federal contractors.

The three-year period precedes the date of the contract bid or proposal. So, determinations, judgments, awards and decisions during that three-year period must be reported even if the underlying conduct occurred more than three years prior to the date of the report.

If the C-suite is involved in wrongdoing, that will be scrutinized particularly closely, the Labor Department said. It also acknowledged that the larger a company is, the more likely it is to have an increased number of violations.

Decisions have to be reported during the three-year period even if the company is not performing or bidding on a covered contract at the time.

Existing contractors would be required semiannually to update the information on their labor law violations.

Jackson said that federal contractors may want to start auditing their labor law practices to see if there are any particular issues where they can introduce mitigating factors, such as training, so that contractors are “confident they will be where they ought to be” once there is final guidance and a final rule.

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.

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