By Rod Smith, Pat Miller, Chuck Newcom and Matt Morrison

On August 25, 2016, the federal government published sweeping new rules requiring contractors bidding on federal contracts to submit detailed information about their labor and employment violations as part of the bidding process. The new rules implement Executive Order 13673, signed by President Obama in 2014. The goal of the Executive Order is to “improve contractor compliance with labor laws in order to increase economy and efficiency in federal contracting.” The rules will be phased in starting October 25, 2016, and will be fully effective two years later.

Called a “Black List” by some, the rules require contractors and sub-contractors bidding on a wide variety of federal contracts exceeding $500,000 to disclose their “Labor Law Decisions” for the last 3 years once the rule is fully phased-in. “Labor Law Decisions” include “administrative determinations,” such as a single OSHA citation, civil judgments in lawsuits, and arbitration awards issued under 14 federal labor laws or their state law equivalents, such as CalOSHA.

With the assistance of a newly created “Agency Labor Compliance Advisor” (ALCA), federal contracting agencies will evaluate and classify the bidder’s Labor Law Decisions, along with any mitigating factors supplied by the bidder − such as remedial actions taken to address the violations − to determine whether the prospective bidder has a satisfactory record of “integrity and business ethics.” The recommendations of the ALCA will be passed on to the contracting officer who will then make the final decision as to whether the bidder is qualified, qualified with certain conditions, or unqualified. “Conditions” can include a negotiated “Labor Compliance Agreement” or other remedial actions. If awarded the contract, contractors and their subcontractors will be required to disclose any new or updated Labor Law Decisions semi-annually.

Other provisions of the new rules require “pay check transparency” by requiring federal contractors to provide additional information on employee wage statements. The rules also prohibit contractors and their employees from entering into employment contracts with provisions for mandatory arbitration of civil rights claims.

The new rules leave many contractors, small and large, with significant new burdens, such as setting up a system to track and compile labor and employment law violations. Other concerns relate to the fact that the public can gain access to information provided through the government’s information systems. Significant questions remain as to how these rules will actually work in practice, including the number of contractors deemed unqualified or qualified with conditions.

This Update only scratches the surface. The new rules are extremely complex and lengthy. Federal contractors or those considering federal contract work should consult the Department of Labor’s “Guidance for Executive Order 13673, Fair Pay and Safe Workplaces,” also published on August 25, 2016, for a full explanation. As appropriate, the advice of a qualified federal contracts attorney should be obtained. Sherman & Howard will present a broader summary of the rules at its 7th Annual OSHA Seminar, September 23, 2016. Details and information on how to register are provided in this Update.

Rod Smith, Pat Miller, Chuck Newcom and Matt Morrison are part of Sherman & Howard’s Labor & Employment Law Department, practicing in the areas of occupational safety and health law. They routinely appear before the federal Occupational Safety and Health Review Commission, the federal Mine Safety and Health Review Commission, and state occupational safety and health boards.

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.

©2016 Sherman & Howard L.L.C.                                                                                    September 1, 2016