'Blacklisting' Rule Goes into Effect October 25

August 25, 2016

The Labor Department released the final rule and guidance document  for the “Fair Pay and Safe Workplaces” order Wednesday that requires firms bidding on federal projects to disclose past labor law violations and supply more information about their track record complying with workplace safety, labor, medical and family leave, and civil rights laws before they can win a federal contract.

President Obama ordered the rule in the Fair Pay and Safe Workplaces Executive Order, which he issued over two years ago.  “Contractors that illegally cut corners at the expense of their workers should not benefit from taxpayer-funded federal contracts,” Labor Secretary Thomas Perez said in a statement.  “At the same time, employers who meet their legal responsibilities should not have to compete with those who do not.”

The rule requires prospective contractors to disclose any violation of the 14 basic workplace protections, including wage and hour, safety and health, collective bargaining, family and medical leave, and civil rights protections.  

Industry groups opposing the new rule are already looking at litigation options and GOP lawmakers are calling the rule a “flawed regulatory policy.”

Things to know about the final rule:

The rule is effective on October 25, 2016.  This is earlier than anticipated and shortens the time for contractors to prepare to comply with the order. The rule phases in a number of the disclosure and compliance obligations, lessening the initial burden of the implementation.

The phase-in has these key components:

--The rule contains a three-year look back for covered violations.  Recognizing that contractors have not been cataloging covered labor violations prior to the issuance of the Order, the Final Rule only requires contractors to look back one year for reportable violations when the rule becomes effective.  The look-back period will increase each year by one year until October 2018, when it will become a three-year look back.

--The rule limits which contractors must make labor law violation disclosures in the first six months following the effective date.  Contractors will not be required to disclose labor law violations until April 24, 2017, unless the contractor is responding to a solicitation for a contract valued at $50 million or more after the effective date of the Final Rule.  This provides an additional six-month window to prepare for the implementation of the disclosure obligations for many contractors.

--The phase-in of disclosure obligations does not just impact prime contractors.  The final rule also includes a lengthier phase-in for subcontractor disclosure obligations.  Subcontractors must begin disclosing labor violations for solicitations issued after October 25, 2017, one year after the effective date.

Information submitted to the contracting agency will be publicly disseminated. Information made available will be:

  • Law violated
  •  Case identification number or docket number
  •  Date of the decision finding a violation
  • Name of the body issuing the judgment

The contractor will input this information into the System for Award Management (“SAM”).  From SAM, the information will be made available to the public through the Federal Awardee Performance and Integrity Information System (“FAPIIS”).  The contractor has the choice as to whether any additional documents provided by the contractor to demonstrate its responsibility and mitigation efforts shall be made public.

Advice from the August 25, 2016 edition of the National Law Review includes:

Contractors should start cataloging any violations during the past six months that constitute covered violations as well as any evidence of mitigation efforts taken as a consequence of the violations.  Because complaints and charges alleging violations of the 14 federal laws covered by the order, a central official of office should be designated to coordinate the collection of this information (concerning both past and future violations) and a central repository for it.  Contractors should view the ability quickly to provide a comprehensive list to the contracting officer as a competitive advantage, as competitors may not be prepared to do so in a timely manner.

Additionally, if the ALCA makes an inquiry concerning the disclosed violations, contractors should be prepared to advocate, with appropriate evidence, why certain violations are not willful, repeated, pervasive or severe.  For instance, the contractor could point to its size or the number of employees in the organization.  It can also identify measures taken by the contractor to address the issues raised in the violation.  It will be important that these disclosures be vetted by a central authority within the organization.

In addition to preparing to report labor violations, contractors should also work internally to reduce and mitigate the risk of future violations.  This can be achieved by: (1) developing and implementing effective policies and training; (2) auditing compliance; (3) adopting a robust internal complaint mechanism; (4) developing alternative dispute resolution processes; and (5) undertaking early case assessment and management. Taking these proactive measures can help lessen the impact of future compliance by reducing the number of violations that must be reported.