Final rule for federal contracting calls for compliance, transparency

The Obama Administration is issuing final guidance  for the Fair Pay and Safe Workplaces executive order, which supporters say will help level the playing field for law-abiding contractors and hold violators to higher standards.

The final regulations go into effect Oct. 25 and require companies to disclose violations for 14 labor law protections that occurred in the past three years.

The violations requiring disclosure are those considered serious, repeated, willful and pervasive.

The reporting and compliance processes will be simple for businesses who play by the rules, said  Labor Secretary Thomas Perez, during an Aug. 22 call with reporters.

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“The vast majority of businesses will only need to check a box affirming that they don’t have any labor violations from the reporting period,” Perez said. “The rule is not intended to be a gotcha game. It’s not about maximizing the number of contracts that are denied. It’s about promoting compliance, fixing potential problems in advance, and thereby preventing bigger problems later.”

David Berteau, president and CEO of the Professional Services Council, said while everyone agrees it’s important not to contract with labor law violators, there’s nothing that shows the Labor Department needs more tools than it currently has to do that job.

“Our problem with the executive order is it takes the Labor Department’s responsibilities for determining compliance with labor laws and burdens the contracting officer with that enforcement responsibility,” Berteau said in an interview with Federal News Radio. “At best, it’s a sheer duplication of the responsibility of the Labor Department. And at worst, it’s a huge burden of collecting information. And that burden would rest on the contractors, on the thousands or tens of thousands of subcontractors and on the contracting officers.”

The House and Senate armed services committees have both passed amendments to the 2017 National Defense Authorization Act, asking that the Defense Department be exempt from the executive order.

The regulations come more than two years after President Barack Obama signed the order, and are scheduled to be phased in through October 2018 — proof, officials say, that the administration considered the contracting community as it prepared final guidance.

“Contractors told us they needed more time to adjust,” Perez said, “so we phased in the requirements over time.”

Under the staggered implementation:

  • Only prime contractors must make disclosures beginning October 2016. Subcontractors must make disclosures starting Oct. 25, 2017.
  • Disclosure requirements are included only in solicitations for $50 million or more. Solicitations worth $500,000 or more will require disclosures beginning April 25, 2017.
  • Paycheck transparency requirements become effective Jan. 1, 2017.

A privilege, not entitlement

Rep. Bobby Scott (D-Va.), ranking member of the Committee on Education and the Workforce, said during the media call that the point of the order is not to take contracts away from contractors, but help them follow the law.

“The executive order does not deal with minor or technical violations,” Scott said. “Even contractors with a history of serious violations will be given a chance to fix the problems before being sanctioned under this order.”

One way to fix those problems is through a “pre-assessment process” hosted by the Labor Department.

Beginning the week of Sept. 12, contractors can meet with the Labor Department to talk about their compliance history and the department will be able to advise the contractors on whether or not “additional compliance measures are necessary.”

According to numbers provided by Labor and the Federal Acquisition Regulatory Council, “less than 10 percent of covered contractors and subcontractors will have labor violations involving enforcement-agency action that requires disclosure.”

And of that percentage, only contractors in the running for a contract will have to disclose their labor law violations.

The guidance also compares violations with mitigating factors, “including good faith efforts to remedy past violations, internal processes for expeditiously and fairly addressing reports of violations, and/or plans to proactively prevent future violations.”

“The idea is to make sure that we’re strengthening and protecting the workforce before problems occur,” said Cecilia Muñoz, director of the White House Domestic Policy Council. “But having said that, the worst actors will be held accountable if they have repeatedly violated the rights of their workers, showed willful disregard for the law and are unwilling to even begin to fix their problems.”

“This rule affirms the notion that contracting with the federal government is a privilege, not an entitlement,” Perez said. “Government procurement activities should not be promoting a race to the bottom.”

The final rule also sets out paycheck transparency requirements. Contractors must provide workers with information on their hours worked, overtime hours and pay. Under the guidance contractors must tell workers if they are exempt from overtime.

The Labor Department earlier this month settled a $7 million overtime grievance with more than 100 of its employees, who worked overtime for years but never received compensation.