Big Brother is Watching: Contractors Required to Report Labor Law Violations

By Brooke Colaizzi, Glenn Schlabs, and Rod Smith

Reminder to all clients who are federal contractors: the federal government will now consider a prospective contractor’s past labor law compliance in determining whether or not the contractor has the requisite “satisfactory record of integrity and business ethics” to be awarded large government contracts.

Executive Order 13673, entitled “Fair Pay and Safe Workplaces,” took effect on July 31, 2014. The Department of Labor issued proposed guidance on May 28, 2015, outlining its interpretation of E.O. 13673’s requirements. The comment period closed on July 27, 2015, and the final regulations should be published in the next few months.

The Order applies to all contracts for goods and services, including construction, that exceed $500,000. Contractors are required not only to report their own labor law violations but also those of any subcontractors, unless the subcontractor’s obligation includes only commercially available off-the-shelf items.

Contractors are required to report “administrative merit determinations, civil judgments, and arbitral awards or decisions” related to fourteen federal labor laws or executive orders, if those decisions were rendered during the three years preceding the contractor’s bid or proposal. The fourteen laws are:

  1. Fair Labor Standards Act (“FLSA”);
  2. Occupational Safety and Health act of 1970 (“OSH Act”);
  3. Migrant and Seasonal Agricultural Worker Procection Act (“MSPA”);
  4. National Labor Relations Act (“NLRA”);
  5. Davis-Bacon Act (“DBA”);
  6. Service Contract Act (“SCA”);
  7. E.O. 11246;
  8. Section 503 of the Rehabilitation Act of 1973;
  9. Vietnam Era Veterans’ Readjustment Assistance Acts of 1972 and 1974 (“VEVRAA”);
  10. Family and Medical Leave Act (“FMLA”);
  11. Title VII of the Civil Rights Act of 1964 (“Title VII”);
  12. Americans with Disabilities Act of 1990 (“ADA”);
  13. Age Discrimination in Employment Act (“ADEA”); and
  14. E.O. 13658 (minimum wage for federal contractors).

E.O. 13673 also requires contractors to report violations of similar state laws. The Department of Labor anticipates issuing a second proposed guidance addressing the specific state laws covered.

Reporting takes place in three steps: First, at the bid stage, a contractor must represent only whether it has or has not had covered violations. Second, at the responsibility determination stage, the contracting officer will require information about the labor law(s) violated; the case or unique identifying numbers; the dates of determinations; the names of the courts, arbitrators, agencies, boards, or commissions issuing the determinations; and any corrective steps or mitigating information. Finally, contractors awarded contractors must update their reports semi-annually during performance of the contract.

Determinations that contractors must now report include:

  1. The following Department of Labor Wage and Hour Division determinations:
    • WH-56 Summary of Unpaid Wages forms;
    • Letters indicating violations of section six or seven of the FLSA or a violation of the FMLA, SCA, DBA, or E.O. 13658;
    • WH-103 “Employment of Minors Contrary to the Fair Labor Standards Act” notices;
    • Letters, notices, or other documents assessing civil monetary penalties;
    • Letters reciting violations concerning the payment of special minimum wages to workers with disabilities under section 14(c) of the FLSA or revoking a certificate that authorized the payment of a special minimum wage;
    • WH-561 “Citation and Notification of Penalty” for violations under the OSH Act’s field sanitation or temporary labor camp standards;
    • Orders of reference filed with an administrative law judge.
  2. The following OSHA (or state agency if administering OSHA-approved state plans) determinations:
    • Citations;
    • Imminent danger notices;
    • Notices of failure to abate; or
    • Any state equivalent.
    • Show-cause notices for failure to comply with E.O.
  3. 11246, Section 503 of the Rehabilitation Act, or VEVRAA from the Office of Federal Contract Compliance Programs;
  4. Reasonable cause determinations from the Equal Employment Opportunity Commission (“EEOC”) and civil actions filed on behalf of the EEOC (but not Charges of Discrimination by themselves);
  5. Complaints issued by any Regional Director of the National Labor Relations Board;
  6. Complaints filed by or on behalf of an enforcement agency with a federal or state court, and administrative judge, or an administrative law judge alleging labor law violations;
  7. Any orders or findings from any administrative judge, administrative law judge, the Department of Labor Administrative Review Board, the Occupational Safety and Health Review Commission or state equivalent, or the National Labor Relations Board that the contractor violated labor laws;
  8. Any judgments or orders entered by a federal or state court determining that the contractor violated labor laws or enjoining or restraining the contractor from violating labor laws; and
  9. Any awards or orders by an arbitrator or arbitral panel determining that the contractor violated labor laws or restraining the contractor from violating labor laws.

Contractors must report determinations even if those determinations are not final and/or subject to appeal. Also, contractors must report arbitration awards even if they were private or confidential.

E.O. 13673 emphasizes a focus on “serious, repeated, willful, or pervasive” violations of labor laws, and the DOL guidance provides substantial explanation of what those terms mean, as well as explanation of relevant mitigating factors, the most important of which is remediation.

E.O. 13673 also addresses arbitration provisions for contracts exceeding $1 million. Contractors are permitted to arbitrate claims arising under Title VII or any tort related to or arising out of sexual assault or sexual harassment only if the involved employee or independent contractor voluntarily consents after the dispute arises.

What This Means: The head of the Occupational Health and Safety Administration has referred to the new executive order as a “leverage tool” to force employer compliance with labor laws. E.O. 13673 is not limited to final determinations of wrongdoing. Contractors now face the risk of losing potential contracts, or at very least having to vigorously defend their employment practices, as a result of EEOC reasonable cause determinations and similar non-final, appealable or debatable accusations. Because a non-final determination is not, in most cases, likely to lead to immediate remedial measures, contractors are at a disadvantage in providing mitigating information to contracting officers. Contractors also will have to carefully consider strategy when facing EEOC Charges of Discrimination, union organizing drives (which often lead to unfair labor practice charges), arbitrations, threatened lawsuits, and the like and consider seeking early resolution to avoid a reportable determination.

Other Notes: E.O. 13673 also contains a “paycheck transparency” provision, which requires contractors to provide all workers for who it is required to retain wage records under the FLSA, DBA, SCA, or equivalent state laws with a document each pay period containing hours worked, overtime hours, pay, and any additions to or deductions from pay. Contracts using independent contractors must provide them with a document informing them of their independent contractor status.


Sherman & Howard L.L.C. has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation and does not create an attorney-client relationship between any reader and the Firm.

©2015 Sherman & Howard L.L.C.                                                                                August 19, 2015