Federal Contractors Get Slammed Again Regarding New Disclosure Provision

in Opinion

By Terry Potter, Partner – Husch Blackwell, LLP

It seems that every time we turn around there is another Executive Order placing additional burdens on federal contractors.  This time it is the Fair Play and Safe Workplace Executive Order which President Obama signed on July 31.  Under this new Executive Order, before prospective contractors can obtain a contract with the federal government, they must disclose labor law violations from the past three years encompassing fourteen different federal statutes and equivalent state laws.

The contracting officers must take into account these violations in the issuance of such contracts.  However, the standards for such review have yet to be established.  Indeed, each agency will have to designate a
senior official as a “labor compliance advisor” to provide guidance on whether the contractor’s actions rise to the level of a “lack of integrity or business ethics.”  These are rather broadly stated standards which ultimately will likely result in a great deal of inconsistency and abuse.

What is especially concerning in this situation is that the Executive Order states that companies with workplace violations are more likely to encounter performance problems, and so the Executive Order is being issued
to improve the efficiency of federal contracting resulting in a greater return on federal tax dollars.  Well, if performance is really the issue then that should be the topic of discussion, not setting up a whole new level of bureaucracy.  In my experience, I have never known a contracting officer who was not well aware of any ongoing investigations regarding potential labor law violations with their contractors.  Quite frankly, they do a very effective job of being the watchdog over those situations.

Moreover, hidden away in the middle of this Executive Order is a very odd inclusion which specifies that companies with federal contracts of $1 million or more may not require their employees to enter into pre-dispute
arbitration agreements arising out of Title VII or from torts related to sexual assault or harassment.  The recent decisions by the Supreme Court clearly indicate support for the arbitration process over burdening the courts with additional matters that are best handled on a private basis through an arbitration procedure in the workplace.  That would be an efficient use of federal tax dollars.  So if your purpose is to save tax dollars, this provision runs totally counter to that goal.

The final key provision of the Executive Order provides that employees shall receive information about their paychecks (hours worked, overtime and deductions) which normally is specified under state law in any event, so this inclusion is of very limited value, especially for federal contractors who have to provide certified payrolls on a regular basis.

The various agencies will have to spend a lot of time and effort on this Executive Order as it places substantial burdens on them in investigating a myriad of potential violations that could potentially effect the contracting company’s ability to obtain a contract to ensure that due process and fair play take place with respect to each of the contractors.  As these standards develop we will keep you informed, but it is obviously going to be a long, slow process.