News & Insights

The Assault on Federal Contractors: When will it end?
August 20, 2014
by Robert Conte


South Bend / Mishawaka, IN – The Obama Administration continues its assault on employers with its aggressive pursuit to expand employee protections. Here is a reminder of areas currently being affected and the agencies charged with the responsibility for implementing the “plan”, including the latest Executive Order.

The National Labor Relations Board continues its pursuit of employers with its never ending attack on employer policies and rules in an effort to expand employee protection under the National Labor Relations Act, thereby increasing labor’s opportunities for union organizing. The Equal Employment Opportunity Commission has jumped into the mix by laying its claim on common provisions generally found in separation and settlement agreements, finding many of them unlawful. The U.S. Department of Labor, under specific direction from the Obama Administration, has been charged with revising the overtime exemptions under the Fair Labor Standard Act, in an effort to expand the Act’s coverage. This assault on employers is a clear indication that the executive branch (the President) is determined to expand and protect employees through the non-legislative process, thereby deliberately bypassing Congress. The most recent victims of this plan are federal contractors.

The President recently issued his newly penned non-legislative action, the Fair Pay and Safe Workplace Executive Order. This Executive Order follows two prior ones in which Obama set out requirements for contractors to pay their employees a minimum wage of at least $10.10 per hour and prohibited contractors from discriminating on the basis of sexual orientation or gender identity. In the latest Executive Order, the federal contractor is further burdened with several significant new and onerous obligations, namely:

1.  It mandates disclosure to the government of a prospective contractor’s labor law violations during the three years preceding the contract, including violations by subcontractors, with updates every six months during performance of the contract.

This will require contractors to disclose their labor law “violations” while at the same time authorizing the enforcement agencies to deny federal contracts if a contractor’s (or subcontractor’s) violation listing suggests “a lack of integrity or business ethics.”

2.  It requires that contractors provide employees with documentation “concerning that individual’s hours worked, overtime hours, pay, and any additions made to or deductions made from pay”, a/k/a pay stubs.

3.  In contracts over $1 million, it prohibits employers from requiring employees to enter into pre-dispute arbitration agreements for Title VII claims or for state law claims related to sexual assault or harassment.

By the terms of the recent Executive Order (combined with the previous orders), it is clear that the Executive Order is “to be implemented on new contracts in stages, on a prioritized basis during 2016.” For a contractor looking for a federal contract in 2016, they should be aware, they are already into the three-year disclosure period. Therefore, the time for interested federal contractors to start tracking any labor law violations or judgments is now. For those contractors with reportable violations, remedial measures should already be underway in an effort to demonstrate a “satisfactory record of integrity and business ethics.”

From the contractor’s perspective, the impact of the above reporting and compliance requirements may be so onerous that some federal contractors may give up their contracting work entirely. Small and medium-sized businesses may simply choose to go in another direction rather than do work with the federal government. Under these burdensome requirements, the new level of responding and the significant additional costs it will create for compliance may result in more federal contractors electing the less costly alternative to just walk away.

DISCLAIMER: The material provided in this article is presented for informational purposes only and should not be acted upon without advice and counsel from an experienced attorney familiar with the facts of your specific situation.