Proposed FAR Rules Impose Significant New Burdens for Government Contractors

August 5, 2015

On May 28, 2015, the Obama administration published proposed amendments to the Federal Acquisition Regulation (FAR) and related Department of Labor (DOL) guidance to implement the July 31, 2014, “Fair Pay and Safe Workplaces” Executive Order 13673.

The executive order and these proposed changes, if finally adopted and implemented, would subject government contractors and subcontractors to a broad new set of record-keeping, reporting and compliance requirements. Failure to fulfill these obligations and exhibit compliance with all applicable federal and state labor laws would expose the contractor to the prospects of disqualification, suspension or debarment.

Fair Pay and Safe Workplaces E.O. Background

As we previously reported, on July 31, 2014, President Barack Obama signed The Fair Pay and Safe Workplaces Executive Order. Unprecedented in scope, the executive order would require covered federal contractors periodically to disclose various labor law violations to the government pre- and post-contract award and to collect similar information from subcontractors. The executive order also:

  • adopts guidelines for how reported violations should be considered by agencies in making contract awards;
  • adds new paycheck “transparency” requirements; and
  • attempts to limit the use of mandatory arbitration for certain employment disputes.

May 28, 2015, Proposed FAR Rule

Under the proposed new FAR rules, contractors will be required to track and report a wide range of information related to employee labor disputes. The new rules also will significantly change contractors’ obligations to their employees.

Pre-Award Reporting

For contracts valued at more than $500,000, prime contractors will be required to report any government or court determination within the past three years involving an extensive list of state and federal labor laws, including the Fair Labor Standards Act, Title VII of the Civil Rights Act of 1964, Americans with Disabilities Act, Family and Medical Leave Act, Occupational Safety and Health Act, National Labor Relations Act, Davis-Bacon Act, Service Contract Act, as well as any vaguely defined “state equivalent” laws and the new executive order that raises the minimum wage for federal contractors.

The reporting requirement stems from letters and notices issued from government agencies alleging labor violations. As currently outlined in the proposed rule, contractors will be required to report the allegations in proposals even if a contractor challenges the agency findings, and even though a court or government body may later find the allegations unsubstantiated and/or overturn the initial government determination.

Further, the term “violations” is defined broadly and includes many things that are not final adjudicated decisions, such as (1) National Labor Relations Board (NLRB) complaints, (2) Equal Employment Opportunity Commission (EEOC) reasonable cause letters, (3) DOL Wage and Hour “Summary of Unpaid Wages” letters, and (4) Occupational Safety and Health Act (OSHA) citations.

Post-Award Reporting and Other Obligations

Prime contractors also will be required to collect and consider the same labor information from their subcontractors for certain non-COTS contracts. The DOL has requested public comment in determining whether subcontractors should provide their labor report information directly to primes, or whether the subcontractors instead should be allowed to report to a central government collection site (similar to current executive compensation reporting practices).

Additionally, the proposed FAR rule provides the following:

  • Contractors will be required to provide their employees with written documentation of pay information including hours worked, overtime hours, pay and deductions. This requirement will apply to contracts valued at more than $500,000, and to employees working on those contracts and covered under FLSA, the Service Contract Act, and/or the Davis Bacon Act.
  • For contracts valued at more than $1 million, contractors must agree to waive any requirement that employees arbitrate certain labor disputes (specifically those arising out of Title VII or any tort related to or arising out of sexual assault or harassment) – even if the employee signs an employment contract that includes an arbitration clause.

Additional Resources

For copies of the proposed FAR Council rule and other resources, please see:

  • Proposed amendments to the Federal Acquisition Regulation (FAR)
  • DOL guidance to implement the Fair Pay and Safe Workplaces Executive Order
  • Fair Pay and Safe Workplaces Executive Order 13673

Also, please find additional analysis on the new rules provided by the McGuireWoods Labor Blog.

The DOL and FAR Council have requested public comments on these new rules by August 11, 2015.

While some details may change, most of the new rules likely will remain unchanged unless significantly altered via court challenge. A such, contractors should begin to prepare for the additional record-keeping, reporting and human resources requirements that soon will become part of most federal prime contracts.

For further information, please contact the author, your McGuireWoods contact, or a member of the firm’s government contracts team, affirmative action team, or labor and employment group .