Benefits Insights, Winter 2017
Federal contractors should be aware that several aspects of the Fair Pay and Safe Workplaces Executive Order and its Final Rule were shut down this fall when a federal district court in Texas issued a preliminary injunction. The court, which issued the injunction shortly after the rule took effect, was most concerned with the aspect that requires disclosure of alleged violations of labor law that have not yet been finally determined.
Full implementation of the rule was to begin on October 25, 2016, with the mandatory disclosure and assessment of labor law compliance for all prime contractors under consideration for contracts with a total value of $50 million or more. Plus, for contractors with contracts for goods or services of $1 million or more, the rule would prohibit pre-dispute arbitration agreements with employees to resolve claims arising under Title VII of the Civil Rights Act, or related tort claims.
The rule was intended to improve federal contractor compliance with workplace protection requirements by providing contracting agencies with information to assist in determining contractor awards. The changes were meant to ensure that the competitive process is fair and that taxpayer dollars are used only for contractors that meet their responsibilities to their employees.
However, the rule drew immediate opposition from three national and local trade associations (the Associated Builders and Contractors, National Association of Security Companies, and the Associated Builders and Contractors of Southeast Texas). In response to their formal complaint, the Texas court found the rule to be overly broad concerning the reporting of prior violations and issued an emergency motion for a temporary restraining order and preliminary injunction.
As a result of the court action, contractors bidding on covered prime contracts worth at least $50 million will not be required to begin reporting and disclosing labor law violations. Also, there is currently a ban on mandatory pre-dispute arbitration agreements covering Title VII or sexual assault/harassment claims for contractors and subcontractors with covered contracts of more than $1 million.
One aspect of the rule not affected by the injunction pertains to the Paycheck Transparency clause, which still takes effect on January 1, 2017. Contractors will be required to provide wage statements and notice of any independent contractor relationship to their covered workers.
The government is expected to appeal this decision to the Fifth Circuit Court, seeking expedited briefings and a possible hold on the injunction. Therefore, contractors should review their policies, procedures, and data reporting to ensure compliance.