The following post was authored by Compliance Advisory Board member and employment law expert, Jon Zimring of Greenberg Traurig LLP. This is the second post in a series that will take a deep dive into what federal contractors need to know about Executive Order 13673, or “Fair Pay and Safe Workplaces.”

Part one in this blog post series provided an overview of President Obama’s Executive Order 13673, titled “Fair Pay and Safe Workplaces” and its scheme to judge federal contractors’ eligibility for contract awards in excess of $500,000 by their self-reported records of compliance with fourteen federal labor laws and their State counterparts. Specifically, contractors must self-report applicable “Administrative Merits Determinations”, “Civil Judgments” and “Arbitral Awards or Decisions,” then be judged on whether this self-reported history should count against their contract bids. This Part 2 will now focus on the U.S. Department of Labor (“DOL”) guidance on the definitions of these critical terms and its somewhat foggy window into how they may affect contract awards.

DOL’s definition of self-reportable “Administrative Merits Determinations” focuses on any enforcement agency determination that any of the fourteen labor laws may have been violated. The enforcement agencies are DOL’s Wage and Hour Division, OSHA, OFCCP, EEOC and NLRB. “Administrative Merits Determinations” include both actual administrative adjudications of labor law violations and any of these agencies completing an investigation with a determination that a labor law violation may have occurred. Significantly, DOL thus sets the threshold for self-reporting, and for what might be considered in procurement, at essentially preliminary agency determinations. A specific, detailed list of such agency determinations that must be self-reported is in the guidance.

DOL’s definition of “Civil Judgment” is no less broad. It includes any federal or state court decision that a contractor engaged in any labor law violation, or enjoining a contractor to prevent one. This may arise out of cases brought either by enforcement agencies or by private parties. It may also include decisions which are not final or are subject to appeal. Finally, it may include consent or default judgments, so even the practical settlement of a mere allegation of labor law violations, depending on how the settlement is structured, may turn out to be reportable.

Finally, DOL’s definition of “Arbitral Award or Decision” casts a similarly wide net. As with “Civil Judgments,” contractors must self-report any arbitration determination that the contractor violated any labor law or which enjoins a contractor to prevent a violation. This includes determinations by single arbitrators and arbitral panels and those arising from private and confidential arbitral proceedings. Finally, the reporting duty extends to arbitral determinations which are: (1) not final; (2) subject to being confirmed, modified or vacated; and/or (3) subject to further review within the same proceeding.

What these definitions essentially communicate is that contractors’ prospects for large contract awards are placed at risk by the mere unproven initial appearance of labor law violations. All it takes for a contractor to have to report is for a low level DOL, OSHA, OFCCP, EEOC or NLRB investigator to believe there is sufficient evidence, or be sufficiently concerned about the allegations presented, that a determination is made to move the charge or complaint to the next level. Given how these agencies actually operate, particularly under the Obama administration, this is an extremely low threshold with significantly high stakes for contractors competing for high dollar contracts.

Happily, DOL also clarifies that not every self-reported violation is relevant to procurement, but only those deemed “serious”, “willful”, “repeated” or “pervasive.” For the term “serious,” DOL cites nine situations, including both certain general types of violations and some specific thresholds like 25% or more of the workforce affected, $5,000 in fines or $10,000 in backpay assessed. For the term “willful,” DOL cites five statutorily defined “willful” violations while stating it will otherwise examine each violation for evidence of “reckless disregard” or “plain indifference” to labor laws. In determining whether any given contractor’s set of self-reported labor law violations are “repeated,” DOL says it will consider timeframe, separateness of proceedings, types and similarities of violations and the size of the contractor.” Finally, DOL indicates that “pervasive” violations will be assessed by whether the overall record of violations evidences patterns of serious, willful, continuing or numerous violations, especially involving or with the knowledge of higher level officials.

Significantly, DOL’s guidance clearly articulates that “mitigating factors” will also be taken into account. Whether as reported initially or in required six-month updates, DOL solicits and will consider contextual explanations for any self-reported “Administrative Merits Determination”, “Civil Judgment” or “Arbitral Award or Decision.” Appeals and escalation to higher level proceedings are among the relevant contexts. Other mitigating factors DOL will consider include single, isolated violations; low number of violations for contractor size; existence and effectiveness of internal compliance programs; recent changes in law, “good faith” compliance efforts and significant periods of past compliance. Clear emphasis is placed, however, on the contractor’s efforts to settle, remediate and take steps to prevent any recurrence of whatever led to adverse findings.

Part three of this post will consider the practical aspects of accomplishing E.O. 13673 compliance without adversely affecting procurement.

ZIMRINGJJon Zimring practices management side labor and employment law, representing clients before both the courts and administrative agencies, including the U.S. Department of Labor (DOL), the Office of Federal Contract Compliance Programs (OFCCP), the National Labor Relations Board (NLRB), the Equal Employment Opportunity Commission (EEOC), numerous state and local counterparts to these agencies, and additional other federal, state, and local agencies that investigate, audit compliance with, and enforce labor and employment laws. Drawing on this experience, he also has an active practice assisting employers with prevention through proactive audits, compensation analyses, investigations and consultation, and the development of policies, procedures, systems and training. Jon’s practice includes the representation of employers through virtually all workplace issues, including traditional labor relations with unions, affirmative action compliance, wage and hour, leave and disability, and all forms of discrimination, harassment, and retaliation.

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