President Obama’s “Year of Action” has a significant focus on federal contractors, and there have been a number of pertinent developments in recent weeks of which both current and prospective contractors should take note.

1. LGBT Workers Protected Under Executive Order 11246

On July 21, 2014, President Obama issued a new Executive Order extending the anti-discrimination requirements and other provisions of Executive Order 11246 (11246) to lesbian, gay, bisexual and transgender applicants and employees. It also amends an existing order governing federal agencies to add sexual identity protections for federal employees.

11246 is administered by the United States Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) and currently prohibits federal contractors with contracts exceeding $10,000 from discriminating in employment decisions on the basis of race, color, religion, sex, or national origin. It also requires covered contractors to take affirmative action to ensure that equal opportunity is provided in all aspects of employment.

The new Order adds sexual orientation and gender identity to the list of protected classifications under 11246. The OFCCP will be implementing these new provisions, and the Department of Labor has 90 days from the date of the order, or until October 19, 2014, to prepare regulations on these amended provisions, which will apply to contracts entered into after the new regulations become effective.

A copy of the new Order is available through the White House website here.

2. Fair Pay and Safe Workplaces Order

On July 31, 2014, President Obama signed the Fair Pay and Safe Workplaces Executive Order, a broad-sweeping order that adds new requirements for covered contractors and subcontractors and entities seeking covered contracts, and limits the use of pre-dispute arbitration agreements for certain claims. The Order is expected to be implemented on new contracts in stages, on a prioritized basis, during 2016. A copy of this Order is available through the White House website here. Key provisions are summarized below.

  • Disclosure of Labor Law Violations Prospective federal contractors seeking a procurement contract for goods and services valued at more than $500,000 will be required to disclose whether there were administrative, judicial or arbitral findings against that contractor with respect to federal labor and employment laws or their state law equivalents within the preceding three years. The Order lists 14 federal statutes about which contractors must make such disclosure, including, among others, the Fair Labor Standards Act, Occupational Safety and Health Act, National Labor Relations Act, Family and Medical Leave Act, equal employment opportunity laws such as Title VII, and numerous affirmative action laws and other laws and orders applying to entities doing work with the federal government.In most cases, contractors must also require subcontractors seeking work valued in excess of $500,000 to provide similar disclosures and updates so that the contractor can use this information to determine whether the subcontractor should be awarded the contract. Contractors and subcontractors will be required to update these disclosures every 6 months, and will be given opportunity to disclose corrective action taken.Significantly, where violations are disclosed, the contracting agencies will have authority to offer compliance assistance or impose remedial measures, to decline to exercise an option in a contract or terminate a contract, or, to make a referral to the agency’s suspension or debarment officials. The Order appears to focus on identifying “serious, repeated, willful or pervasive” violators demonstrating a “lack of integrity or business ethics” however, and notes that in most cases, a single violation of the law would not necessarily give rise to a determination of lack of responsibility on the part of the contractor that would preclude an award.The Department of Labor and Federal Acquisition Regulatory (FAR) Council will issue guidelines and rules implementing the various components of the Order.
  • Paycheck Transparency To the extent they are not already doing so, covered contractors and subcontractors will also be required to provide employees who work on the covered contract with information each pay period concerning hours worked, overtime hours, pay, and any additions made to or deductions made from their pay. Information regarding hours worked need not be provided to employees exempt from the Fair Labor Standards’ Act overtime requirements so long as the contractor informs such individuals of their exempt status. Contractors also must inform independent contractors working on covered contracts of their status as an independent contractor, as opposed to an employee.
  • Dispute Resolution For federal supply or service contracts or subcontracts exceeding $1 million (except for contracts or subcontracts for commercially available items), contractors may only enter into agreements with employees to arbitrate claims arising under Title VII, or torts related to sexual assault or harassment, 1) with the voluntary consent of the employee or independent contractor, and 2) after such disputes arise. This requirement does not apply to employees covered under a collective bargaining agreement. There are also exceptions for certain kinds of arbitration agreements entered into prior to the time the contractor bid on a covered contract.The Executive Order went into effect immediately and shall apply to solicitations for contracts after final rules are issued by the FAR Council.

3. Proposed Rule Requiring Equal Pay Data Reporting

On August 8, 2014, the Department of Labor, acting through the OFCCP, published a proposed rule that would require covered federal contractors and subcontractors to submit an annual Equal Pay Report during the first calendar quarter of each year on employee compensation from the prior year. Under the proposed rule, the annual reporting requirement would apply to companies that file EEO-1 reports, have more than 100 employees, and hold federal contracts or subcontracts worth $50,000 or more for at least 30 days. Covered contractors and subcontractors would be required to submit a modified version of the EEO-1 report containing three pieces of information related to employee compensation:

  • The total number of workers within specified EEO-1 job categories by race, ethnicity, and sex;
  • The total W-2 wages defined by the total individual W-2 for all workers in the job category by race, ethnicity, and sex; and
  • The total hours worked, defined as the number of hours worked by all employees in the job category by race, ethnicity, and sex.

The OFCCP proposes to use the data collected in the Equal Pay Reports to direct its enforcement resources toward federal contractors whose summary data suggests potential pay violations.

The proposed rulemaking is open for public comment until November 6, 2014. The Department of Labor’s announcement regarding the proposed rule is available here.

For additional information regarding these Executive Orders or proposed rule, please contact any member of Schiff Hardin’s Labor and Employment Group.