SIGNIFICANT LABOR AND EMPLOYMENT LAW REQUIREMENTS PERTAINING TO FEDERAL CONTRACTORS

Chapter Five SIGNIFICANT LABOR AND EMPLOYMENT LAW REQUIREMENTS PERTAINING TO FEDERAL CONTRACTORS Significant Labor and Employment Law Requirements

SIGNIFICANT LABOR AND EMPLOYMENT LAW REQUIREMENTS PERTAINING TO FEDERAL CONTRACTORS Table of Contents I. INTRODUCTION...121 II. FEDERAL STATUTES...121 A. Davis-Bacon Act (40 U.S.C. 3141, et seq.).... 121 B. Contracts for Materials, Supplies, Articles and Equipment Exceeding $10,000 (41 U.S.C. 6501, et seq.) (The Walsh-Healey Act)... 121 C. McNamara-O Hara Service Contract Act (41 U.S.C. 6701, et seq.)... 122 D. Contract Work Hours and Safety Standards Act (40 U.S.C. 3701, et seq.)... 123 E. Copeland Act (18 U.S.C. 874, 40 U.S.C. 3145)...123 F. Rehabilitation Act of 1973...124 III. EXECUTIVE ORDERS (EOs)....124 A. EO 12989 as amended by EO 13465 (E-Verify)...124 B. EO 11141 (Age Discrimination)... 124 C. EO 13494 (Economy in Government Contracting)... 125 D. EO 13495 (Nondisplacement of Qualified Workers under Service Contracts)... 125 E. EO 13502 (Use of Project Labor Agreements for Federal Construction)....126 F. EO 13496 (Notification of Employee Rights under Federal Labor Laws)... 127 G. Drug-Free Workplace Program Requirements for Federal Contractors (41 U.S.C. 8102, et seq.)...128 H. EO 13513 (Federal Leadership on Reducing Text Messaging while Driving)... 129 I. Fair Pay and Safe Workplaces EO....129 J. EO 13665 Further Prohibition on Pay Secrecy Policies....131 K. EO 13672 Further Amendments to EO 11478 and 11246...132 L. EO 13658....132 M. EO Requiring Paid Sick Leave for Employees of Government Contractors...134 IV. FEDERAL ACQUISITION REGULATIONS....135 119

SIGNIFICANT LABOR AND EMPLOYMENT LAW REQUIREMENTS PERTAINING TO FEDERAL CONTRACTORS Andrew S. Hament, ahament@fordharrison.com, Chapter Editor I. INTRODUCTION A number of labor and employment laws and regulations are applicable only to those employers that are contractors or subcontractors to the federal government. This material highlights some of the most significant of these laws and regulations. Some state and local governments impose additional requirements; a discussion of those requirements is beyond the scope of this material. Employers doing business with the federal government may be subject to the nondiscrimination and affirmative action requirements set forth under EO 11246, the Rehabilitation Act of 1973, 503, and the Vietnam Era Veterans Readjustment Assistance Act (VEVRAA), which prohibit discrimination and require affirmative action by federal contractors with regard to race, color, religion, sex, national origin, and status as a qualified individual with a disability or a protected veteran. These requirements are discussed in the Affirmative Action Chapter of the SourceBook. II. FEDERAL STATUTES A. Davis-Bacon Act (DBA) (40 U.S.C. 3141, et seq.). The DBA, which applies to all contracts for the construction or repair of federal public buildings and public works in excess of $2,000, requires prevailing wages and fringe benefits be paid to laborers and mechanics on covered contracts. Contractors and subcontractors engaged in the transportation of materials or supplies to or from the worksite are excluded from the Act s coverage. See Frank Bros. v. Wisconsin Dep t of Transportation, 409 F.3d 880 (7th Cir. 2005) (holding that truck drivers were not covered by DBA, but were covered by Wisconsin s Little Davis-Bacon law, finding that the DBA did not pre-empt state law). Covered contractors must maintain payrolls and basic records and submit certified weekly payrolls. Additionally, covered contractors must post a notice of employee rights under the DBA and comply with the Copeland Act, discussed below. Among other sanctions, violators may be subject to contract termination and debarment from future federal contracts for three years. Related Acts: In addition to the DBA itself, Congress has added Davis-Bacon prevailing wage provisions to approximately 60 laws related Acts under which federal agencies assist construction projects through grants, loans, loan guarantees, and insurance including but not limited to: Federal-Aid Highway Acts, the Housing and Community Development Act of 1974, and the Federal Water Pollution Control Act. Generally, the application of prevailing wage requirements to projects receiving federal assistance under any particular related Act depends on the provisions of that law. B. Contracts for Materials, Supplies, Articles and Equipment Exceeding $10,000 (41 U.S.C. 6501, et seq.) (The Walsh-Healey Act) 1. This provision governs contracts with the federal government for the manufacture or furnishing of materials, supplies, articles, or equipment in excess of $10,000. It requires covered contractors to pay employees who produce, assemble, handle, or 1 Previously 41 U.S.C. 35 through 41. 121

ship goods under contracts exceeding $10,000 the federal minimum wage 2 for all hours worked and time and one half their regular rate of pay for all hours worked over 40 in a workweek. The Act also requires that covered work be performed in safe, sanitary conditions without hazard to health and safety. Note that meeting the Act s safety requirements does not relieve employers obligations to comply with stricter federal, state or local safety and health standards. The Act also prohibits the employment of workers younger than age 16 and prohibits the use of incarcerated individuals except for prisoners participating in a work-release program. Employers must post a notice of employee rights under the Act. 1. Certain Employees Excluded. The Act does not apply to executive, administrative, and professional employees or to outside salespersons exempt from the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA). Nor does it apply to certain office and custodial workers. 2. Types of Contracts Excluded. The Act does not apply to contracts for the following: Purchases of materials, supplies, articles, or equipment as may usually be bought in the open market ; Purchases of perishables; Purchases of agricultural products from the original producers; Contracts made by the Secretary of Agriculture for the purchase of agricultural commodities or products; Contracts for public utility services and certain transportation and communication services; Supplies manufactured or furnished outside the U.S. (including Puerto Rico) or the Virgin Islands; and Contracts administratively exempted by the Secretary of Labor in special circumstances because of the public interest or to avoid serious impairment of government business. 3. Sanctions. Among other sanctions, violators may be subject to contract termination and debarment from future federal contracts for three years. C. McNamara-O Hara Service Contract Act (SCA) (41 U.S.C. 6701, et seq.) 3 The SCA applies to government contracts in excess of $2,500, the principal purpose of which is to furnish services through the use of service employees. It requires covered employers to pay prevailing area wage and fringe benefits or the rates (including prospective increases) contained in a predecessor contractor s collective bargaining agreement. The term service employees does not include individuals employed in bona fide executive, administrative, or professional capacity, as those terms are defined in part 541 of title 29, Code of Federal Regulations. The Act also requires contractors and subcontractors performing services on covered contracts of $2,500 or less to pay the federal minimum wage. Additionally, the Act requires covered contractors and subcontractors to ensure that employees performing services on covered contracts not work in buildings or areas that are unsanitary or hazardous or dangerous to the health or safety of the service employees. Employers must post a notice of employee rights under the SCA. 1. Certain Contracts Excluded. This provision does not apply to certain types of contractual services including: 2 Executive Order 13658, signed by President Obama on February 12, 2014, raising the minimum wage to $10.10 for workers on federal construction and service contracts, does not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government, i.e., those subject to the Walsh-Healey Public Contracts Act. Executive Order 13658 is discussed in more detail below. 3 Previously 41 U.S.C. 351, et seq. 122

Contracts for construction, alteration, and/or repair of public buildings or public works, including painting and decorating (those are covered by the DBA); Work required in accordance with the provisions of Part 65 (the Walsh-Healey Act); Contracts for transporting freight or personnel by vessel, airplane, bus, truck, express, railway line or oil or gas pipeline where published tariff rates are in effect; Contracts for furnishing services by radio, telephone, telegraph, or cable companies subject to the Communications Act of 1934; Contracts for public utility services; Employment contracts providing for direct services to a federal agency by an individual or individuals; Contracts for operating postal contract stations for the U.S. Postal Service; Services performed outside the U.S. (except in territories administered by the U.S., as defined in the Act); and Contracts administratively exempted by the Secretary of Labor in special circumstances because of the public interest or to avoid serious impairment of government business. 41 U.S.C. 6707(b). 2. Sanctions. Among other sanctions, violators may be subject to contract termination and debarment from future federal contracts for three years. D. Contract Work Hours and Safety Standards Act (CWHSSA) (40 U.S.C. 3701, et seq.). CWHSSA applies to federal service contracts and federal and federally assisted construction contracts over $100,000. The Act requires covered contractors and subcontractors to pay laborers and mechanics employed in the performance of the contracts one and one-half times their basic rate of pay for all hours worked over 40 in a workweek. It also prohibits unsanitary, hazardous, or dangerous working conditions on federal and federally financed and assisted construction projects. 1. Certain Contracts Exempt from the Act. Certain contracts are exempt from CWHSSA, including: Transportation by land, air, or water; Transmission of intelligence; Purchase of supplies, materials, or articles ordinarily available in the open market ; Work required to be done according to provisions of the Walsh-Healey Public Contracts Act; and Contracts administratively exempted by the Secretary of Labor in special circumstances because of the public interest or to avoid serious impairment of government business. 2. Enforcement. The DOL s Wage and Hour division enforces the compensation requirements of the Act, while the DOL s Occupational Safety and Health Administration (OSHA) enforces the safety and health requirements. 3. Sanctions. Among other sanctions, violators may be subject to contract termination and debarment from future federal contracts for three years. E. Copeland Act (18 U.S.C. 874, 40 U.S.C. 3145). The Copeland Act applies to all federal construction contracts for public buildings or public works or federally assisted construction contracts (financed in whole or in part by federal loans or grants) over $2,000. The Act precludes a covered contractor or subcontractor from inducing an employee to give up any part of the compensation to which he or she is entitled under his or her contract of employment. It also requires contractors and subcontractors to submit a weekly statement of the wages paid to each employee performing 123

covered work during the preceding payroll period. In addition to other sanctions, willful falsification of the statement of compliance with the Act may be cause for contract termination or debarment. F. Rehabilitation Act of 1973. 1. Affirmative Action Requirement. Section 503 of the Rehabilitation Act, 29 U.S.C. 793, provides that contracts with the federal government for the procurement of personal property and nonpersonal services in excess of $10,000 (including construction) entered into by federal government departments and agencies must include specific equal opportunity clauses. One of these clauses requires that contractors take affirmative action to employ and advance in employment qualified disabled individuals. This law is also enforced by the Office of Federal Contract Compliance Programs (OFCCP) and disabled individuals may file complaints with that agency. For more information regarding affirmative action obligations of federal contractors, including new regulations implementing 503, please see the Affirmative Action Chapter of the SourceBook. 2. Anti-discrimination Provision. Section 504, 29 U.S.C. 794, of the Rehabilitation Act provides that no otherwise qualified individual with a disability shall, solely by reason of his or her disability, be excluded from participation in, be denied the benefits of, or subjected to discrimination under any program or activity receiving federal financial assistance or under any program or activity conducted by executive agencies or by the U.S. Postal Service. Section 504 is enforced by private suit in court. It should be noted that it requires nondiscrimination in programs or activities receiving federal financial assistance, as distinguished from the affirmative action required of contractors subject to 503. It is analogous to Title VI, which prohibits race, sex, and national origin discrimination in programs or activities receiving federal financial assistance. See 42 U.S.C. 2000(d). The procedures by which a contractor employs disabled individuals (and disabled veterans) have been made consistent with the ADA s limitation on pre-employment medical inquiries. 41 C.F.R. 60-741.42. For more information on 504, please see the Affirmative Action Chapter of the SourceBook. III. EXECUTIVE ORDERS A. Executive Order (EO) 12989 as Amended by Executive Order 13465 (E-Verify). This EO requires all federal contractors to use an electronic employment eligibility verification system designated by the Secretary of Homeland Security to verify the employment eligibility of their employees. The government has amended the Federal Acquisition Regulation (FAR) to implement this EO by requiring federal contractors and subcontractors to use the United States Citizenship and Immigration Services (USCIS) E-Verify system to verify their employees eligibility to work in the U.S. The rule requires federal contractors to insert language in their federal contracts agreeing to use E-Verify to confirm the employment eligibility of all persons hired during a contract term, and to confirm the employment eligibility of federal contractors current employees who perform contract services for the federal government within the U.S. The E-Verify requirement applies to contracts for $100,000 or more, with a performance term of more than 120 days and subcontracts for $3,000 or more for services or construction. Prime federal contracts and subcontracts for commercially available off the shelf items (COTS) are exempt. The E-Verify requirement applies to qualifying contracts awarded after September 8, 2009. In addition to use of the E-Verify system and compliance with its regulations, employers still must comply with the I-9 employment verification requirements. For more information regarding the E-Verify requirements and I-9 employment verification requirements, please see the Business Immigration Chapter of the SourceBook. B. EO 11141 (Age Discrimination). This EO prohibits federal government contractors and subcontractors from discriminating against people on the basis of their age, unless age is a bona fide occupational qualification, retirement plan, or statutory requirement. 124

C. EO 13494 (Economy in Government Contracting). This EO prohibits contractors from using taxpayer funds obtained from federal contracts to persuade employees to either organize or avoid organizing. Such unallowable costs must be excluded from any billing, claim, proposal, or disbursement applicable to any such federal government contract. Examples of costs unallowable under EO 13494 include the costs of the following activities, when they are undertaken to persuade employees to exercise or not to exercise, or concern the manner of exercising, rights to organize and bargain collectively: Preparing and distributing materials; Hiring or consulting legal counsel or consultants; Holding meetings (including paying the salaries of the attendees at meetings held for this purpose); and Planning or conducting activities by managers, supervisors, or union representatives during work hours. Costs incurred in maintaining satisfactory relations between the contractor and its employees, including costs of labor-management committees, employee publications (other than those undertaken to persuade employees to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively), and other related activities are allowable. D. EO 13495 (Nondisplacement of Qualified Workers under Service Contracts). This EO gives nonsupervisory and nonmanagerial employees who lose their jobs when a service contract is awarded to another entity a right of first refusal for employment with the new contractor. The EO applies to contracts or subcontracts for services covered by the SCA that exceed the simplified acquisition threshold as defined in 41 U.S.C. 134 4. 1. Exclusions. The EO does not apply to: Contracts or subcontracts awarded pursuant to the Javits-Wagner-O Day Act, 41 U.S.C. 8501-06 5 ; Guard, elevator operator, messenger, or custodial services provided to the federal government under contracts or subcontracts with sheltered workshops employing the severely handicapped as described in 505 of the Treasury, Postal Services and General Government Appropriations Act, 1995, Public Law 103-329; Agreements for vending facilities entered into pursuant to the preference regulations issued under the Randolph-Sheppard Act, 20 U.S.C. 107; or Employees who were hired to work under a federal service contract and one or more nonfederal service contracts as part of a single job, provided that the employees were not deployed in a manner that was designed to avoid the purposes of EO 13495. 2. Successor Contractor Requirements. The successor contractor and its subcontractors must offer employees (other than managerial and supervisory employees6) employed under the predecessor contract, whose employment will be terminated as a result of award of the successor contract or the expiration of the predecessor contract, a right of first refusal of employment under the successor contract in positions for which the employees are qualified. The successor contract must be for performance of the same or similar services at the same location as the predecessor contract. The contractor and subcontractors retain the right to determine the number of employees necessary for efficient performance of the successor contract. They may elect to employ fewer employees than the predecessor contractor employed in connection with 4 Previously 41 U.S.C. 403. 5 Previously 41 U.S.C. 46-48c. 6 The implementing regulations clarify that managerial employee and supervisory employees mean persons engaged in the performance of services under the contract who are employed in a bona fide executive, administrative or professional capacity, as those terms are defined in 29 CFR part 541. 125

performance of the work. To fill the positions, the contractor and its subcontractors must make an express offer of employment to qualified employees of the predecessor. The offer must state the time within which the predecessor s employee must accept the offer, and the employee must be given at least 10 days to accept the offer. The contractor cannot offer employment under the successor contract to any other person before it has offered employment to all the qualified employees of the predecessor. Exceptions to the Successor Contractor Requirements. The contractor or subcontractor may employ under the successor contract any of its current employees who has worked for the contractor or subcontractor for at least three months immediately preceding the commencement of the successor contract and who would otherwise face lay-off or discharge. The contractor and subcontractors are not required to offer a right of first refusal to any employees of the predecessor contractor who are not service employees within the meaning of the SCA. The contractor and subcontractors are not required to offer a right of first refusal to any employee(s) of the predecessor contractor whom the contractor or any of its subcontractors reasonably believes, based on the particular employee s past performance, has failed to perform suitably on the job. 3. Predecessor Contractor Requirements. At least 10 days before completion of a contract, the predecessor contractor must provide the department s contracting officer with a certified list of the names of all service employees working under the predecessor contract and its subcontracts during the last month of contract performance. The list must also contain anniversary dates of employment of each service employee under the contract and its predecessor contracts either with the current or predecessor contractors or their subcontractors. The contracting officer will provide this list to the successor contractor. The list will also be provided to employees or their representatives upon request. 4. Sanctions. The Secretary of Labor is responsible for investigating and obtaining compliance with the EO. The Secretary can issue final orders prescribing appropriate sanctions and remedies, including, but not limited to, orders requiring employment and payment of wages lost. Sanctions for willful violations of the EO s requirements can lead to the contractor or subcontractor, and its responsible officers, and any firm in which the contractor or subcontractor has a substantial interest, being ineligible to be awarded any contract of the U.S. for a period of up to three years. A hearing is required before the debarment of any contractor or subcontractor or the inclusion of a contractor or subcontractor on a published list of noncomplying contractors. EO 13495 creates no rights under the Contract Disputes Act. Any disputes regarding compliance with the EO, to the extent permitted by law, will be disposed of only as provided by the Secretary pursuant regulations issued under the EO. To the extent practicable, such regulations shall favor the resolution of disputes by efficient and informal alternative dispute resolution methods. 5. President George W. Bush Executive Orders Revoked. This EO also revokes EO 13204 (February 17, 2001), which revoked a 1994 EO that, similar to EO 13495, required successor contractors to offer a right of first refusal of employment to employees of the prior contractor. E. EO 13502 (Use of Project Labor Agreements for Federal Construction). This EO provides that when awarding or obligating funds pursuant to a large-scale construction project, federal agencies may consider, on a project-by-project basis, requiring that every contractor or subcontractor on the project agree, for that project, to negotiate or become a party to a project labor agreement with one or more appropriate labor organizations. The EO does not require an executive agency to use a project labor agreement on any construction project. This EO revokes prior EOs issued by President George W. Bush that prohibited the requirement of project labor agreements. This EO does not preclude the use of a project labor agreement in circumstances not covered by the order, including leasehold arrangements and projects receiving federal financial assistance. Additionally, the EO does not require contractors or subcontractors to enter into a project labor agreement with any particular labor organization. 126

1. Contracts Covered. This EO applies to contracts for construction, rehabilitation, alteration, conversion, extension, repair, or improvement of buildings, highways, or other real property for $25 million or more. 2. Requirements. If a project labor agreement is required, it must: Bind all contractors and subcontractors on the construction project through the inclusion of appropriate specifications in all relevant solicitation provisions and contract documents; Allow all contractors and subcontractors to compete for contracts and subcontracts without regard to whether they are otherwise parties to collective bargaining agreements; Contain guarantees against strikes, lockouts, and similar job disruptions; Set forth effective, prompt, and mutually binding procedures for resolving labor disputes arising during the project labor agreement; Provide other mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health; and Fully conform to all statutes, regulations, and EOs. F. EO 13496 (Notification of Employee Rights under Federal Labor Laws). This EO revokes EO 13201 of February 17, 2001, which required the posting of a notice (Beck Poster). (A Beck Poster generally notifies employees that they cannot be required to join a union and explains that employees who are not union members can object to the use of their payments to the union for certain purposes, among other things.) In its place, EO 13496 requires the posting of a notice informing employees of their rights under federal labor laws, including the National Labor Relations Act (NLRA). All government contracting departments and agencies must include the posting requirement in every government contract, other than collective bargaining agreements and purchases under the simplified acquisition threshold as defined in the Office of Federal Procurement Policy Act, 41 U.S.C. 403. Failure to post the required notice can lead to contract cancellation or termination. On May 20, 2010 the DOL issued a final regulation implementing EO 13496. In National Ass n of Manufacturers v. Perez (D.D.C. May 7, 2015), the court upheld the final rule, holding that it does not violate employers First Amendment rights, was properly adopted, and is not preempted by the NLRA. Employers that generally post electronic notices will be required to use specific language on their web site that will contain a link to the full text of the notice. The DOL will print the required notice poster and provide it to federal contractors through the federal contracting agency. Alternatively, contactors will be able to obtain it from the Office of Labor-Management Standards (OLMS) at: http://www.dol.gov/olms/regs/compliance/eo13496.htm. Contractors will need to follow the specific document requirements below when printing their own copy of the notice. The size, color, or content of the poster provided by the DOL cannot be altered; thus, the poster must be printed on 11 x 17 inch paper (or in the 11 x 8.5 inch two-page format). This may make it more difficult (although not impossible) for federal contractors to simply buy an all-in-one poster that consolidates all the federally mandated labor and employment notices (since this is usually done by shrinking the posters to fit the lay-out). In addition, if a significant portion of the contractor s workforce is not proficient in English, the employer must post the notice in the language of such employees. Finally, if an employer generally posts electronic notices as explained above and a significant portion of its workforce does not speak English, the employer must provide a web site link to a copy of the notice in the language the employees speak. The final regulation also sets out the four paragraphs that the EO requires to be included in all nonexempt government contracts and subcontracts (the employee notice clause ). Unlike the proposed regulation, the final regulation does not require that the employee notice clause be quoted verbatim; instead it can be included in the contract by citation to 29 CFR Part 471, Appendix A to Subpart A. 127

The Director of the OFCCP may conduct compliance evaluations to determine whether a contractor holding a covered contract is in compliance with the requirements of EO 13496. The evaluation may be limited to compliance with EO 13496 or may be included in a compliance evaluation conducted under other laws, EOs, and/or regulations enforced by the DOL. Hence, going forward, OFCCP audits likely will include this component. An employee of a covered contractor may file a complaint alleging that the contractor has failed to post the employee notice as required and/or has failed to include the employee notice clause in subcontracts or purchase orders. Complaints may be filed with the OLMS or the OFCCP. In investigating complaints, the Director of the OFCCP will evaluate the allegations of the complaint and develop a case record. The record will include findings regarding the contractor s compliance with the requirements of EO 13496 and if applicable, a description of conciliation efforts made, corrective action taken, and/or enforcement recommended. The bases for a finding of a violation may include, but are not limited to: the results of a compliance evaluation; the results of a complaint investigation; a contractor s refusal to allow a compliance evaluation or complaint investigation to be conducted; and a contractor s refusal to cooperate with the compliance evaluation or complaint investigation, including failure to provide information sought during those procedures. If a violation is found, the contractor must correct the violation and must commit, in writing, not to repeat the violation before the contractor may be found to be in compliance. If a violation cannot be resolved through conciliation efforts, the OFCCP Director will refer the matter to the Director of OLMS who may refer the matter to the Solicitor of Labor for institution of administrative enforcement proceedings. In enforcing EO 13496, the Director of OLMS may direct a contracting agency to cancel, terminate or suspend any contract for failure of the contractor to comply with its contractual provisions. Contracts may be canceled, terminated, or suspended absolutely, or continuance of contracts may be conditioned upon compliance. Additionally, an order of debarment may be issued. G. Drug-Free Workplace Program Requirements for Federal Contractors (41 U.S.C. 8102, et seq.) 7. To be eligible for the award of a federal contract for the procurement of property or services at a value greater than the simplified acquisition threshold ($100,000) (other than a contract for the procurement of commercial items) an entity must agree to provide a drug-free workplace. See 41 U.S.C. 8102. This law requires contractors to publish and provide to all employees a statement notifying employees that the manufacture, distribution, possession or use, etc., of a controlled substance is prohibited in the workplace and specifying the actions that will be taken against employees for violation of this prohibition. Id. This statement must also notify employees that as a condition of employment on the contract, the employee must abide by the terms of the statement and notify the employer of any criminal drug statute conviction for a violation occurring in the workplace no later than five days after the conviction. Additionally, the contractor must establish a drug-free awareness program to inform employees about the dangers of drug abuse, the employer s drug-free workplace policy, available drug counseling, rehabilitation, and employee assistance programs, and the penalties that may be imposed on employees for drug abuse violations. The law further requires the contractor to notify the contracting agency within 10 days after receiving notice from an employee of a conviction of a criminal drug statute (as discussed above). Additionally, within 30 days after receiving notice from an employee of the conviction of a criminal drug statute, the employer must take an appropriate sanction against the employee (up to and including termination) or require the employee to satisfactorily participate in an approved drug abuse assistance or rehabilitation program. See 41 U.S.C. 8104. The contractor also must make a good faith effort to continue to maintain a drug-free workplace through implementation of these requirements. 7 Formerly 41 USCA 701, et seq. 128

The contractor may be subject to suspension of payment, termination of the contract, or suspension or debarment from the federal procurement process if it fails to comply with these requirements or if the number of the contractor s employees who have been convicted of violations of criminal drug statutes for violations occurring in the workplace indicates that the contractor has failed to make a good faith effort to provide a drug-free workplace. 41 U.S.C. 8102. Drug-free workplace requirements for federal grant recipients are located at 41 U.S.C. 8103. While the requirements discussed above do not apply to private employers, such employers may be subject to state drug-testing laws or programs. Additionally, some municipalities and cities regulate drug testing. Employers should check the applicable state law and any municipal ordinances or administrative regulations. H. EO 13513 (Federal Leadership on Reducing Text Messaging while Driving). This EO was issued to demonstrate federal leadership in improving safety on the nation s roads and highways, and to enhance the efficiency of federal contracting. The implementing regulations encourage federal contractors and subcontractors to adopt and enforce policies that ban text messaging while driving company-owned or -rented vehicles or government-owned vehicles; or privately-owned vehicles when on official government business or when performing any work for or on behalf of the government. They also encourage federal contractors to establish or re-evaluate programs prohibiting text messaging while driving and provide education, awareness and other outreach programs to inform employees about the safety risks of text messaging while driving. I. Fair Pay and Safe Workplaces EO. On July 31, 2014, President Obama signed the Fair Pay and Safe Workplaces EO, requiring federal contractors and subcontractors bidding on contracts over $500,000 to disclose any violations that they have incurred under 14 different federal workplace laws (and their state-law equivalents) in the last three years. The EO also prohibits contractors and subcontractors with contracts exceeding $1 million from requiring employees to arbitrate their Title VII or sexual assault or harassment claims. Additionally, it requires contractors to provide employees with paycheck details regarding hours worked, overtime hours, and additions or deductions to their pay. On May 28, 2015, the DOL issued proposed guidance on the EO, and the Federal Acquisition Regulatory Council (FAR Council) published a Notice of Proposed Rulemaking implementing the provisions of the EO. The EO is expected to be implemented in phases through 2016, and is another milestone in the President s Year of Action according to the White House s Fact Sheet. 1. Required Disclosures of Labor Violations (Compliance with Labor Laws). The most significant requirement of the EO is its attempt to hold corporations accountable by requiring federal contract bidders to state whether any administrative merits determination, arbitral award or decision, or civil judgment has been rendered against them in the preceding three years for any of the following 14 federal laws or their state-law equivalents: Fair Labor Standards Act; Occupational Safety and Health Act of 1970; Migrant and Seasonal Agricultural Worker Protection Act; National Labor Relations Act; Davis-Bacon Act; Service Contract Act; Executive Order 11246 (equal employment opportunity); Section 503 of the Rehabilitation Act of 1973; Vietnam Era Veterans Readjustment Assistance Act of 1974; Family and Medical Leave Act; 129

Title VII of the Civil Rights Act of 1964; Americans with Disabilities Act of 1990; Age Discrimination in Employment Act of 1967; and Executive Order 13658 of February 12, 2014 (new minimum wage). The disclosure requirement is triggered for any new contract for goods or services, including construction, valued at more than $500,000. The bidder making a disclosure of violations will have an opportunity to disclose what steps it has taken to correct the violations. The contracting officer will be required to consult with its agency s labor compliance advisor, a new position created by the EO, to determine whether a bidder is responsible, that is, has a satisfactory record of integrity and business ethics. According to the White House Fact Sheet on this EO, while the EO ensure[s] that the worst actors, who repeatedly violate the laws don t get contracts, the overall goal of the EO is not to deny contracts but to help more contractors come into compliance with workplace protections. To that end, a bidder may seek early guidance on whether [its] violations are potentially problematic and remedy problems before an award is made. The reporting requirements also flow down to subcontracts for supplies or services exceeding $500,000 that are not for COTS. The contracting officer will require the contractor to state that it will require subcontractors to make similar disclosures and that the contractor will make a responsibility determination as to the subcontractor. The contracting officer will be made available for consultation with a contractor to determine the propriety of including the subcontractor. During performance of the contract, both contractors and subcontractors must provide updates every six months. If a new violation is disclosed, the contracting officer may take responsive action, ranging from the provision of compliance assistance to termination of the federal contract. 2. Voluntary Arbitration of Title VII Claims (Complaint and Dispute Transparency). Although most of the EO focuses on the disclosure requirement, the prohibition on mandatory arbitration of certain discrimination and harassment claims could have a significant impact on contractors and subcontractors. Specifically, the EO requires that for all contracts exceeding $1 million, the decision to arbitrate Title VII or sexual harassment or sexual assault tort claims may only be made with the voluntary consent of the employee or independent contractor after such a dispute arises. As with the rest of the EO, this requirement also applies to subcontracts (with the same $1 million threshold requirement). It will not apply to parties covered by collective bargaining agreements or other valid arbitration contracts entered into before the contractor or subcontractor bid on the covered federal contract, unless the contractor or subcontractor is permitted to change the terms of the contract with the employee or independent contractor, or when the contract is renegotiated or replaced. It also will not apply to contracts or subcontracts for the acquisition of commercial items or COTS. 3. Required Hours Worked and Pay Disclosures (Paycheck Transparency). The EO also includes a provision relating to paycheck transparency, requiring contractors to provide details relating to hours and pay, which most contractors already provide. This provision requires employers to provide their employees with information relating to the individual s hours worked, overtime hours, pay, and additions or deductions made to that pay. Employers must also provide formal notice to an individual if that individual is classified by the employer as an independent contractor. This aspect of the EO flows down to subcontractors as well. 4. Proposed Regulations and Guidance. As noted above, the DOL has issued proposed guidance on the EO, and the FAR Council has issued proposed regulations integrating the order s requirements, and the provisions of the DOL s guidance into the existing procurement rules. Parts of the regulations and guidance will be phased in to give contractors more time to understand the requirements. Highlights of the guidance include: 130

Discussing what constitutes an administrative merits determination, civil judgment, and arbitral decision or award for purposes of the EO. Identifying seven categories of specific agency documents that constitute administrative merits determinations that must be reported. Clarifying that contractors are required to report non-final administrative merits determinations, civil judgments, and arbitral awards or decisions that they are challenging, can still challenge, or are otherwise subject to appeal or further review. Permitting contractors and subcontractors to submit additional information that may be helpful in assessing the violations and stating that contractors will have an opportunity to provide information regarding mitigating factors. Defines the terms serious, willful, repeated, or pervasive, for purposes of the EO. Requiring contractors to determine whether a subcontractor is a responsible source by conducting the same analysis of labor law violations as that conducted by the contracting officer on the prime contractor. This requirement applies to subcontractors who are awarded subcontracts worth over $500,000, but does not apply to subcontracts for commercially available off-the-shelf items. Providing more detail on the paycheck transparency and prohibition of arbitration provisions of the EO. J. EO 13665 Prohibition on Pay Secrecy Policies. On April 8, 2014, President Obama signed Executive Order 13665, which prohibits federal contractors from maintaining pay secrecy policies. This executive order amended section 202 of Executive Order 11246, which requires federal agencies to include an equal opportunity (EO) clause in all government contracts. The EO clause within the regulations has been amended to add language prohibiting federal contractors from: discharging or discriminating in any way against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. This provision shall not apply to instances in which an employee who has access to the compensation information of other employees or applicants as a part of such employee s essential job functions discloses the compensation of such other employees or applicants to individuals who do not otherwise have access to such information, unless such disclosure is in response to a formal complaint or charge, in furtherance of an investigation, proceeding, hearing, or action, including an investigation conducted by the employer, or is consistent with the contractor s legal duty to furnish information. In addition to revising the EO clause to include the language provided in the Executive Order, the final rule: provides definitions of certain key terms used in the clause, such as compensation, compensation information, and essential job function; sets out two employer defenses to claims of violation of the pay transparency requirement a general defense and essential job function defense ; requires contractors to disseminate a nondiscrimination provision to employees and applicants using their existing employee manuals or handbooks, and either electronically or by posting the prescribed provision in conspicuous places available to employees and job applicants. The provisions of the EO and final rule apply to covered federal contracts and federally assisted construction contracts entered into or modified on or after January 11, 2016. Covered federal contracts are those required to comply with EO 11246 that is, any business or organization that (1) holds a single federal contract, subcontract, or federally assisted construction contract in excess of 131

$10,000; (2) has federal contracts or subcontracts for indefinite quantities which are reasonably likely to exceed $10,000 in any year; or (3) holds government bills of lading, serves as a depository of federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount. K. EO 13672 Further Amendments to EO 11478 and 11246. On July 21, 2014, President Obama signed EO 13672 prohibiting federal contractors from discriminating against employees based on gender identity and sexual orientation. Specifically, the EO amends EO 11246 to add gender identity and sexual orientation to the protected categories listed in that EO. The EO further amends EO 11478, which requires the federal government to provide equal opportunity in federal employment for all persons, to prohibit discrimination in employment because of race, color, religion, sex, national origin, handicap, or age, and to promote equal employment opportunity through a continuing affirmative program in each executive department and agency. EO 11478 was amended by EO 13087 to add sexual orientation to the list of protected categories. The White House Fact Sheet on the EO states that it does not allow for any exemption beyond the one added by EO 13279, issued by President George W. Bush, which permits religiously affiliated contractors to favor individuals of a particular religion when making employment decisions, by specifying that EO 11246, shall not apply to a Government contractor or subcontractor that is a religious corporation, association, educational institution, or society, with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities. Such contractors and subcontractors are not exempted or excused from complying with the other requirements contained in this Order. Additionally, under the First Amendment, religious entities are permitted to make employment decisions about their ministers as they see fit. EO 11246 prohibits federal contractors and federally-assisted construction contractors and subcontractors, who do over $10,000 in government business in one year, from discriminating in employment decisions on the basis of race, color, religion, sex, or national origin. The EO also requires covered government contractors to take affirmative action to ensure that equal opportunity is provided in all aspects of their employment. The amendments to EO 11246 only apply to federal contractors and subcontractors who have covered federal contracts entered into on or after the effective date of the rules promulgated by the Secretary of Labor implementing the EO, which is April 8, 2015. The Final Rule implements EO 13672 by replacing the words sex, or national origin with the words sex, sexual orientation, gender identity, or national origin throughout the EO 11246 implementing regulations. Thus, under EO 11246, the following categories are protected from discrimination in the workplace: race, color, religion, sex, sexual orientation, gender identity and national origin. For contracts entered into or modified on or after April 8, 2015, contractors must include gender identity and sexual orientation as prohibited bases of discrimination in the Equal Opportunity Clause. The Final Rule does not impact existing contracts unless those contracts are modified on or after April 8. Additionally, contractors should ensure that applicants and employees are treated without regard to the sexual orientation and gender identity and should update the equal opportunity language used in job applications and solicitations. The only affirmative action obligations impacted by the Final Rule are those contained in 41 CFR Part 60-1. The Rule does not require contractors to set placement goals on the basis of sexual orientation or gender identity, nor does the rule require contractors to collect and analyze data on these bases. L. EO 13658. On February 12, 2014, President Obama signed EO 13658 raising the minimum wage for employees who work on procurement contracts for services or construction to $10.10 per hour effective January 1, 2015. On January 1, 2016, and annually thereafter, covered employers will be required to pay their employees an increased amount to be determined by the Secretary of Labor that is tied into the Consumer Price Index. The rate for 2016 is $10.15 per hour. Additionally, the minimum cash wage that generally must be paid to tipped employees of covered federal contractors will increase to $5.85 per hour effective January 1, 2016. The EO applies only to new 132

contracts or contract-like instruments where the solicitation for such contracts has been issued on or after January 1, 2015. The EO provides that federal agencies must include language in their new contracts requiring the payment of a minimum wage. In turn, covered contractors and subcontractors must incorporate this language into their contracts and subcontracts. The EO applies if the contract or subcontract is a procurement contract for services or construction, is a contract for services covered by the SCA and the wages of workers under such contract are governed by the FLSA, the SCA, or the DBA. The EO imposes recordkeeping obligations. Covered contractors and subcontractors must maintain pay records for three years that include the name, address, and social security number of each individual; the individual s pay rate; the number of daily and weekly hours worked; and any deductions made. Any worker, contractor, labor organization, trade organization, contracting agency, or other person or entity that believes the EO has been violated may file a complaint with the Wage and Hour Division of the U.S. DOL. Remedies include orders that back wages be paid, suits for underpayment of wages, and debarment of the contractor or subcontractor from federal contracts or subcontracts for a period of up to three years. The regulations contain an anti-retaliation provision that prohibits an employer from discharging or in any other manner retaliating against any worker because the worker filed a complaint or was involved in any proceeding under or related to the EO. Appropriate relief includes employment, reinstatement, promotion, and the payment of back wages. 1. DOL Final Rule. On October 1, 2014, the U.S. DOL published final regulations implementing the EO which are available at: http://www.dol.gov/whd/flsa/eo13658/. Below are highlights of the final rule. a. What contracts are covered? Four major categories of contracts are covered: procurement contracts for construction covered by the DBA; service contracts covered by the SCA; concessions contracts, including any concessions contract excluded from the SCA by the DOL s regulations at 29 CFR 4.133(b); and contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public. The wages of workers under such contracts must be governed by the DBA, the SCA, or the FLSA. Below are answers to basic questions pertaining to the EO. 2. What is the threshold for coverage under EO 13658? The EO applies only to prime contracts covered by the DBA that exceed $2,000 and prime contracts covered by the SCA that exceed $2,500. For procurement contracts where workers wages are governed by the FLSA, the EO applies only to contracts that exceed $3,000. Importantly, there are no value thresholds for subcontracts awarded under such prime contracts. 3. What is a new contract? The EO applies only to new contracts with the federal government. A new contract is a contract resulting from a solicitation issued on or after January 1, 2015, or a contract that is awarded outside the solicitation process on or after January 1, 2015. The term includes both new contracts and replacements for expiring contracts. It may also include amendments or modifications to existing contracts. 4. Which groups of employees are covered by EO 13658? Workers whose wages under covered contracts are governed by the FLSA, the SCA, or the DBA are entitled to the EO minimum wage. Generally these include employees who are entitled to the minimum wage under the FLSA; service employees who are entitled to prevailing wages under the SCA; and laborers and mechanics who are entitled to prevailing wages under the DBA. 133