New Executive Order Targets Federal Contractors Who Violate Labor Laws

President Barack Obama issued an Executive Order ("EO" or the "Order") on July 31, 2014, aimed at federal contractors who violate labor laws. In the EO, the President asks that contractors working with the federal government disclose if they have violated any labor laws within the last three years, among other provisions.

According to the fact sheet issued with the EO, every year thousands of workers are not paid overtime wages, discriminated against because of age or gender, or do not have safe workplace environments.

The Department of Labor estimates the new EO affects over 24,000 business and 28 million workers. "The goal here is to make sure this action raises standards across the economy," President Obama said before signing the Order. The Order will be implemented gradually in 2016.

Business interests representatives have argued that the new EO will subject businesses to increased compliance costs and potentially punish even law abiding federal contractors.

Key Provisions

Along with the requirement to disclose labor law violations, federal contractors will have to designate a senior official to oversee federal labor law compliance. Agencies within the federal government also received new guidance on how to award federal contracts to businesses with or without previous labor law violations. The EO also aims to limit the ability of businesses with repeat offenses to gain new federal contracts.

According to the Obama Administration, the goal is not to prevent contractors from receiving project work, but to help businesses become compliant and improve workplace rights and efficiency.

Importantly, the EO also prevents companies with a contract of $1 million or more from requiring employees to submit to an arbitration agreement regarding Title VII discrimination and harassment issues. Employees will instead have the option of taking an employer to court if the harassment or discrimination claim cannot be resolved through settlement negotiations.

The order also mandates that employers provide employees certain basic information about their paychecks, such as overtime hours, hours worked, and any additions or deductions to their paycheck. The Administration hopes this will reduce the amount of unpaid overtime work for employees of federal contractors.

Help for Businesses and Employees

While the Order is an attempt to lower employment law violations, the activities targeted are already illegal in both the private and public sectors. Employers who require employees to work unpaid overtime, discriminate based on a protected status, or violate workplace safety laws are liable for the damages they cause as a result.

The Order is the latest compliance measure required for federal contractors. Obtaining a federal contract requires a thorough understanding of current labor laws. Fe deral contractors and employees concerned about compliance with federal regulations should contact an experienced employment law attorney to discuss their legal situation.

If you have any questions regarding this subject or this posting, please contact James E. Miller ([email protected]) or Michael Ols ([email protected]). We can also be reached toll-free at (866) 540-5505.

Shepherd Finkelman Miller & Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York and Pennsylvania. SFMS also maintains Howard Brown (of counsel), in England and is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.