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The FAR Council and the Department of Labor have published the final versions of their respective final rule and DOL guidance implementing the President’s July 2014 Executive Order entitled “Fair Pay and Safe Workplaces”—EO 13673.

Detractors frequently refer to EO 13673 as the “Blacklisting” or “Bad Actors” Executive Order. The order and the new regulations purport to promote efficiency in government procurement by ensuring that federal agencies contract only with “responsible” contractors that comply with federal and state workplace protection laws.

This objective is already a well-established requirement of the government’s procurement rules. The regulations impose additional administrative burdens on current and future contractors, adding an element of uncertainty to future contract award decisions, but only achieving marginal improvements in workplace law compliance.

A new Final Rule addressing sex discrimination in employment by federal contractors and subcontractors will go into effect on August 15, 2016. The new Final Rule was published by DOL’s Office of Federal Contract Compliance Programs. It implements Executive Order 11246, which has been essentially unchanged since it was first issued in 1970. OFCCP’s new rules and guidelines include several significant changes from the 1970 version, but the changes are primarily intended to update DOL requirements so that they conform to well-established federal caselaw and other more recently enacted federal requirements.

Who is affected?

OFCCP’s new Final Rule on sex discrimination applies to any business or organization that (1) holds a single Federal contract, subcontract, or federally assisted construction contract in excess of $10,000; (2) has Federal contracts or subcontracts that, combined, total in excess of $10,000 in any 12-month period; or (3) holds Government bills of lading, serves as a depository of Federal funds, or is an issuing and paying agency for U.S. savings bonds and notes in any amount.

What does the Final Rule address?

As they have for many years, DOL’s regulations require contractors to ensure nondiscrimination in employment on the basis of sex and to take affirmative action to ensure that they treat applicants and employees without regard to their sex. The new Final Rule is much more specific.

We have previously written about the Department of Labor’s effort to expand the scope of its regulatory and enforcement jurisdiction over government contractors against the wishes of Congress and even fellow federal agencies. The United States Court of Appeals for the District of Columbia struck down an attempt by the DOL to significantly expand the Davis-Bacon Act to apply to the construction of a Public-Private Partnership project. The Davis-Bacon Act requires that contractors on federal and DC government construction projects pay prevailing wages and fringe benefits to the workers on such projects. DOL sought to apply the Act to CityCenterDC, which is a mixed-use development on the site of the DC Convention Center. This project includes 60 retail stores, various private offices, approximately 700 residential units, and a 370-room luxury hotel. 

President Obama signed an Executive Order raising the minimum wage for employees of federal contractors on February 12, 2014. Our earlier entry on the issue discusses how a higher minimum wage will affect current contractors. It looks like more waiting will be required before the true impact will be known.

The Executive Order calls for the Secretary of Labor and the FAR Council to draft regulations and contract provisions implementing the new minimum wage and to publish them later this year. But the Executive Order also includes some useful guidance.

Here are the key takeaways—

Jurisdictional issues arising from disputes about wages and benefits required by federal minimum wage statutes like the Davis-Bacon Act and the Service Contract Act can be tricky. In some cases, the Department of Labor has exclusive power to resolve such disputes. In others, the dispute must be resolved by the contracting officer, with appeal rights available under the Contract Disputes Act. The ASBCA’s recent decision in Caddell Constr. Co., ASBCA No. 57831 (May 21, 2012) [pdf] helps determine which cases fall on either side of this line.

The case arose from an Air Force contract to build a new commissary and related site work at Fort Campbell, Kentucky. The solicitation included two wage determinations—one for highway construction with low wage rates and another for building construction with much higher wage rates. Prior to bid, the agency told bidders to use the lower highway construction wage determination. During performance, the contracting officer required the contractor to pay wages according to the higher wage determination for building construction.

The contractor submitted a claim in accordance with the Contract Disputes Act. At the Board, the government moved to dismiss the appeal, arguing that such labor disputes are reserved to the Department of Labor. The Board denied the motion, holding that the Board has jurisdiction to hear disputes over wage issues “where there was an alleged mistake (mutual or unilateral) as to the applicability of the Davis-Bacon Act to appellant’s employees.” The Board concluded that it had jurisdiction to hear the contractor’s claim to recover additional wages paid to employees as a result of faulty wage rate information provided to bidders before submission of bids.

But why is this important?

The FAR Council has proposed a new FAR Subpart 22.12 addressing Executive Order 13495 and the Department of Labor’s final rule [pdf] on nondisplacement of qualified workers. The proposed amendments restate the substance of the Executive Order and the DOL rule, omitting only the procedures for investigation and enforcement that do not pertain directly to contract administration. A new mandatory contract clause will incorporate the nondisplacement policy into all contracts and subcontracts at any tier to furnish services in the United States that succeed contracts for the same or similar work in the same location (unless an exemption or waiver applies).

The new FAR language does not address the apparent conflict between the policy requirement for nondisplacement of qualified workers and the requirement to accept the terms of an existing collective bargaining agreement under the NLRB’s “perfectly clear” doctrine. The “perfectly clear” doctrine states that a successor employer is bound by the terms of a collective bargaining agreement when it is “perfectly clear” that the successor will retain all employees in the bargaining unit without changes to the terms and conditions of employment. This differs from a normal successor employer, which is required to bargain with the union but not to comply with the existing collective bargaining agreement. 

The National Defense Authorization Act for Fiscal Year 2012 [pdf] puts an end to OFCCP’s effort to impose subcontractor status on retail pharmacies and health care providers serving TRICARE beneficiaries. The controversy had been brewing for some time. As we discussed in an earlier client alert, the October 2010 decision in OFCCP v. Florida Hospital, …

The Department of Labor has announced its final rule [pdf] implementing Executive Order 13495 [pdf], which addresses nondisplacement of qualified workers under federal service contracts. Under the DOL rule, federal contractors and subcontractors on service contracts over the $150,000 simplified acquisition threshold will be required to offer employment to non-managerial employees whose employment would otherwise end at the close of the predecessor contract.

Activity by the Office of Federal Contract Compliance Programs points directly toward a new focus on discrimination in employee compensation. A settlement with AstraZeneca involving pay disparities averaging only $1,700 requires the company to conduct additional statistical analyses of pay for hundreds of employees. OFCCP rescinded the 2006 standards for assessing pay discrimination and published an advance notice of proposed rulemaking announcing a…