On August 25, 2016, the Department of Labor (“the Department” or “DOL”) published its final guidance regarding implementation of Executive Order 13673, “Fair Pay and Safe Workplaces” (“the Order”).  The Order requires contractors and subcontractors to disclose “administrative merits determinations,” “civil judgments,” and “arbitral awards” or decisions rendered for violations of 14 different Federal Labor Laws and Executive Orders[1], as well as their State-law counterparts to be identified in future guidance. This has been deemed the “Blacklisting Rule” by commentators because DOL promises to use the disclosures as the basis for decisions that include the rejection of bids or debarment from future federal contracts.

The Order requires contractors to disclose adverse Labor Law decisions rendered against them within the preceding 3-year period.  The regulations provide for a phase-in of the 3-year disclosure period prior to October 25, 2018.  Accordingly, disclosure is required for Labor Law decisions rendered during the period beginning on October 25, 2015 to the date of the offer, or for three years preceding the date of the offer, whichever period is shorter. The “preceding 3-year period” refers to the 3 years preceding the date of the offer (i.e., the contract bid or proposal). Contractors and subcontractors must disclose Labor Law decisions rendered during this 3-year disclosure period even if the underlying conduct that violated the Labor Laws occurred more than 3 years prior to the date of the disclosure.  Additionally, contractors and subcontractors must disclose Labor Law decisions whether or not the underlying conduct occurred in the performance of work on a covered contract.

The Order requires disclosure only of a “civil judgment, arbitral award or decision, or administrative merits determination . . . .”  81 FR 58663.  Each of those terms is more complicated than may appear and is discussed below.

Administrative Merits Determinations

An “administrative merits determination” includes notices or findings-whether final or subject to appeal or further review-issued by an enforcement agency following an investigation that indicates that the contractor or subcontractor violated any provision of the Labor Laws.

Enforcement Agency

“Enforcement agency” means any agency that administers the Federal Labor Laws and includes DOL and its agencies (OSHA, WHD, and OFCCP); the Occupational Safety and Health Review Commission (OSHRC); the EEOC; and the NLRB.

“Enforcement agency” also includes a State agency designated to administer an OSHA-approved State Plan, but only to the extent that the State agency is acting in its capacity as administrator of such plan. Once DOL’s second guidance is finalized–to be published at a later date–and identifies the State laws that are equivalent to the Federal Labor Laws, “enforcement agency” will also include any State agency that enforces those identified equivalent State laws.

“Administrative merits determinations” requiring disclosure include:  

(1.) From the Wage Hour Division:

  • a WH-56 “Summary of Unpaid Wages” form;
  • a letter indicating that an investigation disclosed a violation of the FLSA or a violation of the FMLA, SCA, DBA, or Executive Order 13658;
  • a WH-103 “Employment of Minors Contrary to The Fair Labor Standards Act” notice;
  • a letter, notice, or other document assessing civil monetary penalties;
  • a letter that recites violations concerning the payment of sub-minimum wages to workers with disabilities under section 14(c) of the FLSA or revokes a certificate that authorized the payment of sub-minimum wages;
  • a WH-561 “Citation and Notification of Penalty” for violations under the OSH Act’s field sanitation or temporary labor camp standards;
  • an order of reference filed with an administrative law judge.

(2.) From OSHA (Occupational Safety and Health Administration) or any State agency designated to administer an OSHA-approved State Plan:

  • a citation;
  • an imminent danger notice;
  • a notice of failure to abate; or
  • any State equivalent;

(3.) From OFCCP (Office of Federal Contract Compliance Program):

  • a show cause notice for failure to comply with the requirements of Executive Order 11246, section 503 of the Rehabilitation Act, the Vietnam Era Veterans’ Readjustment Assistance Act of 1972, or the Vietnam Era Veterans’ Readjustment Assistance Act of 1974;

(4.) From the EEOC (Equal Employment Opportunity Commission):

  • a letter of determination that reasonable cause exists to believe that an unlawful employment practice has occurred or is occurring;

(5.) From the NLRB (National Labor Relations Board):

  • a complaint issued by any Regional Director;

(6.) A complaint filed by or on behalf of an enforcement agency with a Federal or State court, an administrative law judge or other administrative judge alleging that the contractor violated any provision of the Labor Laws (At 59-60); or

(7.) Any order or finding from any administrative law judge or other administrative judge, the Department’s Administrative Review Board, the Occupational Safety and Health Review Commission or State equivalent, or the NLRB that the contractor violated any provision of the Labor Laws.

(8.) Documents, notices and findings issued by State enforcement agencies when they find violations of the State laws equivalent to the Federal Labor Laws (guidance to be published later).

The above list is exhaustive, meaning if a document does not fall within one of categories above, DOL (Department of Labor) does not consider it to be an “administrative merits determination.” 81 FR 58721.

Civil Judgments

A “civil judgment” requiring disclosure is defined as any judgment or order entered by any Federal or State court in which the court determined that the contractor or subcontractor violated any provision of the Labor Laws, or enjoined or restrained the contractor or subcontractor from violating any provision of the Labor Laws.

The judgment or order in which the court determined that a violation occurred may be the result of a jury trial, a bench trial, or a motion for judgment as a matter of law, such as a summary judgment motion.

The definition is limited to those judgments or orders in which the court “determined” that there was a Labor Law violation or “enjoined or restrained” a violation. This means that, for example, a court order denying an employer’s motion to dismiss a complaint about an alleged Labor Law violation or an order denying an employer’s motion for summary judgment would not be “civil judgments.” In both of those examples, the court has found only that it is possible that the complainant may be able to succeed later at trial; it has not made a determination that a Labor Law has been violated.

Arbitral Awards and Decisions

An “arbitral award or decision” requiring disclosure is defined as any award or order by an arbitrator or arbitral panel in which the arbitrator or arbitral panel determined that the contractor or subcontractor violated any provision of the Labor Laws, or enjoined or restrained the contractor or subcontractor from violating any provision of the Labor Laws.

Arbitral awards and decisions must be disclosed “even if the arbitral proceedings were private or confidential.” But such an award or decision is subject to disclosure only if there is an adverse Labor Law decision. The Department agrees that an arbitrator’s decision finding only a CBA violation does not trigger the disclosure requirement. However, where the arbitrator does make an express finding that there was a violation of one of the Labor Laws, then the decision or award must be disclosed, regardless of whether the same conduct also violated the CBA.

What About Settlements?

The regulations address settlements in both the administrative and judicial proceeding settings. At the administrative level, settlements are not “administrative merits determinations,” and therefore contractors are not required by the Order to disclose them. The Department believes that the inclusion of settlements as administrative merits determinations could serve as a disincentive against settlements. Settlements at the earliest possible stage of a dispute are often the ideal outcome for both employers and their employees and the most efficient outcome for contracting agencies, as early settlements generally include improved compliance with the Labor Laws. Therefore, the Department considers the addition of settlements themselves as a type of administrative merits determination to be unwarranted.

On the other hand, the Order does require the disclosure of violations (i.e., an “administrative merits determination”). The fact that a violation was subsequently settled does not negate the fact that the enforcement agency, after a thorough investigation, found a violation to have occurred. Consequently, unless an enforcement agency has agreed to vacate or rescind the underlying violation entirely, the contractor must still disclose the related Labor Law decisions when required by the Order, notwithstanding any subsequent settlement agreement.

In the judicial setting, the guidance is fairly straightforward. A private settlement where the lawsuit is dismissed by the court without any judgment being entered is not a “civil judgment.” The Department also agrees that accepted offers of judgment under Federal Rule of Civil Procedure 68 are akin to settlements and are not “civil judgments” for the purposes of the Order. Consequently, settlement prior to a judgment on the merits would appear to be safe from disclosure.

What Must the Contractor Disclose?

For each adverse Labor Law decision, the contractor [must] disclose: (1) the Labor Law that was violated; (2) the case number, inspection number, charge number, docket number, or other unique identification number; (3) the date of the determination, judgment, award, or decision; and (4) the name of the court, arbitrator(s), agency, board, or commission that rendered it. With regard to the second element of information listed above, the contractor should provide the inspection number for OSH Act citations, the case number for NLRB proceedings, the charge number for EEOC proceedings, the investigation or case number for WHD investigations, the case number for investigations by OFCCP, the case number for determinations by administrative tribunals, and the case number for court proceedings.

Delay for Disclosures by Smaller Contractors and Subcontractors

For the six month period beginning on October 25, 2016, only prime contractors on solicitations valued at $50 million or more will be required to disclose Labor Law violations. Contractors involved in solicitations valued at $500,000 or more will be covered starting April 25, 2017.

In addition, the Order puts off the requirement that subcontractors make required disclosures until October 25, 2017 – one year after the prime contractor requirement goes live.  When subcontractors are covered, they will make their disclosures directly to DOL rather than to the prime contractor. At that point, prime contractors will be able to rely on the DOL’s review and approval of their subcontractors.

Paycheck Transparency

In addition to the “Blacklisting” rule, the regulations also address two paycheck transparency requirements. First, the Order requires contractors to provide all individuals performing work under the contract for whom they are required to maintain wage records under the FLSA, DBA, SCA, or equivalent State laws with a wage statement that contains information concerning that individual’s hours worked, overtime hours, pay, and any additions made to or deductions made from pay. The wage statement for exempt employees need not include a record of hours worked if the contractor informs the individuals of their exempt status. Contractors can satisfy the Order’s wage statement requirement by providing a wage statement that complies with an applicable State or local wage-statement requirement that the Secretary has determined is substantially similar to the Order’s wage-statement requirement. Second, the Order provides that if a contractor is treating an individual performing work under a covered contract as an independent contractor, and not an employee, the contractor must provide a document informing the individual of this status.

Prohibition on Certain Pre-Dispute Arbitration

Contractors will be prohibited from requiring arbitration of disputes arising under Title VII of the Civil Rights Act of 1964 if they hold goods and services contracts in excess of $1 million. The prohibition will also apply to claims for sexual assault and sexual harassment. Contractors will still be able to arbitrate these claims if the employee agrees after the dispute arises.

With just over a month to go before these new requirements begin to go into effect, current and prospective contractors would be wise to assess their history of Labor Law compliance and prepare to meet the obligations imposed by the Order. Contractors who have “serious,” “repeated,” “willful” or “pervasive” violations will be subject to a determination that they lack a sufficient record of “integrity and business ethics.”

If your organization has questions or concerns about being “blacklisted” under these new rules, please contact a member of the Woods Rogers Labor & Employment team.

[1] The federal laws and orders are: The Fair Labor Standards Act, The Family and Medical Leave Act, Title VII of the Civil Rights Act of 1964, The Americans with Disabilities Act, The Age Discrimination in Employment Act, The National Labor Relations Act, The Occupational Safety and Health Act, The Davis-Bacon Act, The Service Contract Act, Executive Order 11246, Section 503 of the Rehabilitation Act, The Vietnam Era Readjustment Assistance Act, The Migrant and Seasonal Agricultural Worker Protection Act, and Executive Order 13658 (Establishing a Minimum Wage for Contractors).