DOL, FAR Council Finalize “Fair Pay and Safe Workplaces” Regulations, Forcing Government Contractors to Disclose Non-Final Labor Law Alleged Violations in the Contracting Process
On August 25, 2016, the Department of Labor (DOL) and the Federal Acquisition Regulatory Council (FAR Council) issued the Final Rule and Final Guidance implementing President Obama’s Fair Pay and Safe Workplaces Executive Order (E.O. 13673), signed on July 31, 2014. Under this new regime, those who seek to contract with the government (contracts over $500,000) must disclose alleged and final wage and labor law “violations,” including non-final agency allegations of labor law violations and agency determinations still subject to appeal, rendered against the contractor within the last three years. The government, through newly established agency labor compliance advisors (ALCAs), will then review each of those alleged and final “violations” and determine whether to award or extend the government contract. The Rule and Guidance will take effect in phases starting on October 25, 2016.
According to the Final Rule, E.O. 13673 was designed “to increase economy and efficiency in Federal procurement by providing, to Federal contracting officers, additional relevant information and guidance with which to consider that information.” The E.O. requires that prospective and existing contractors on covered contracts disclose federal and state agencies’ enforcement actions and decisions regarding “violations” of certain wage and labor laws, and then, federal contracting officers, in consultation with the new ALCAs would consider the enforcement agencies’ decisions (including any mitigating factors and remedial measures that the applying-contractor provides to the ALCA), as part of the contracting officer’s decision to award or extend a contract—i.e., the contracting officer’s “responsibility determination.” In particular, the E.O. directs the Secretary of Labor to define the categories of wage and labor law “violations” that applying-contractors must disclose: administrative merits determinations, civil judgments, and arbitral awards or decisions. The triggering agency enforcement actions must be for “violations” that are categorized by the enforcement agency as “serious,” “repeated,” “willful,” and/or “pervasive.” Among the wage and labor “violations” that are covered by the E.O. are “violations” of regulations issued under 14 specific labor laws, including the Occupational Safety and Health Act, and their state counterparts.
The proposed Rule and Guidance for implementation of the E.O. were issued last year for public comment. In the proposed Guidance, “administrative merits determination” included “notices or findings—whether final or subject to appeal or further review—issued by an enforcement agency following an investigation that indicates that the contractor or subcontractor violated any provision of the Labor Laws.” (Emphasis added.) Thus, using OSHA as an example, even OSHA’s issuance of a non-final citation would have to be reported to the contracting officer. In its explanation of the proposed Rule, DOL stated that applying-contractors would be granted the opportunity to provide documentation regarding “mitigating factors” concerning these non-final “agency determinations,” which the ALCA and contracting officer could consider in the responsibility determination.
GOVERNMENT REJECTS DUE PROCESS CONCERNS
Contractors raised several due process concerns with such a regime, almost all of which the DOL and FAR Council rejected. For example, Contractors were concerned that the E.O.’s requirement that contractors have to disclose a pending non-final enforcement action undermines due process because, among other things, the violation has not been finally determined and a contractor may be unable to fully explain itself during a responsibility determination if the basis of that agency action is being litigated, as it would potentially require disclosure of privileged information, evidence, litigation strategy and other sensitive information. Furthermore, a contractor could find itself being denied work even though the agency determination might be later overturned by a court.
In the Final Rule, the government rejected the due process concerns, stating, “this final rule, and particularly the DOL Guidance provide necessary steps for considering nonfinal information”—i.e., mitigating factors. According to the Final Guidance, “[i]f the Department limited its definition of administrative merits determination solely to findings of an ALJ, board, or commission, then thousands of uncontested enforcement agency determinations that Labor Laws have been violated would go undisclosed.” Furthermore, “a narrower definition of administrative merits determination would also exclude all those initial agency determinations that a contractor is actively contesting” and “would in many cases result in a particularly long delay between the prohibited conduct and the obligation to disclose.” Concluding: “The Department believes that contractors’ opportunity to provide all relevant information—including mitigating circumstances—and the Guidance’s explicit recognition that nonfinal administrative merits determinations should be given lesser weight resolve any due process concerns raised by the commenters.”
The following issues in the Final Rule and Final Guidance are notable changes from the proposed Rule and Guidance:
- Subcontractors must report violations directly to the government (not to their contractors, who then would have to report to the government). Subcontractor reporting of their “violations” begins on October 25, 2017,
- “[T]he requirement to represent and disclose applies to the legal entity whose name and address is entered on the bid/offer and that will be legally responsible for performance of the contract,” which does not include subsidiary or parent corporations. However, if a division of a corporation, which is not a separate legal entity, intends to bid on the contract, the corporation must be included in the disclosure.
- The Final Guidance sets out a clearer process by which "violations" should be assessed. (However, the language regarding the weight given to non-final versus final violations is the same.)
- There is now an explicit preassessment process whereby contractors may voluntarily agree to have their record of "violations" assessed by the government. According to the Guidance, preassessment will provide contractors with early information that their record of compliance is satisfactory—and, if that is not the case, with information about how to address any issues before bidding on a contract.