Fair Pay policy a ‘solution in search of a problem’

The Fair Pay and Safe Workplaces executive order gives law-abiding contractors a fair shake at doing business with the government, the Obama administration says, but government contract attorneys say the order not only misses the bulls-eye, but the target doesn’t exist.

The Labor Department and the Federal Acquisition Regulatory (FAR) Council this week published the final rule and guidance for the policy, with the goal of ensuring workers are protected under a variety of labor laws, and taxpayer dollars are going to law-abiding businesses.

The final regulations go into effect Oct. 25 and require companies to disclose violations for 14 labor law protections that occurred in the past three years.

“It won’t surprise me to see either legislative or litigation pursuits in connection with the rule,” said Scott McCaleb, a partner in the law firm Wiley Rein’s government contracts practice. “And I say that because despite efforts — or purported efforts — by the government to minimize the impact of the final rule and DOL guidance. At the end of the day we still have a very costly and burdensome solution that remains in search of a problem.”

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“I think it’s difficult for companies who are operating in this field,” said Linda Jackson, an attorney and co-chair of the government contractors group at Littler Mendelson. “And while I do think that it’s a good idea for companies to step back, and do some self-audits, to see where they maybe could improve from a compliance perspective and try to get out there in front of the issues so they can present as well as they possibly can during the procurement process, I think that the executive order — while it may be well-intended — adds a layer of complexity to government contracting that frankly I don’t think is a good idea.”

The regulations come more than two years after President Barack Obama signed the order, and are scheduled to be phased in through Oct. 2018.

The violations requiring disclosure are those considered serious, repeated, willful and pervasive.

“While the vast majority of federal contractors play by the rules, every year tens of thousands of American workers are unlawfully denied overtime wages, discriminated against in hiring or pay, put in physical danger on the job, or otherwise denied basic workplace protections by the federal contractors who employ them using taxpayer dollars,” the Labor Department said in a statement. “Taxpayer dollars should not reward companies that break the law, and contractors who meet their legal responsibilities should not have to compete with those who do not.”

According to numbers provided by Labor and the FAR Council, “less than 10 percent of covered contractors and subcontractors will have labor violations involving enforcement-agency action that requires disclosure.”

And of that percentage, only contractors in the running for a contract will have to disclose their labor law violations.

But Eric Crusius,  attorney at Miles & Stockbridge, said that percentage is likely much higher than the administration is willing to acknowledge.

A large company, even if it tries to do everything right, is inevitably going to have some kind of reportable violation, he said.

“I just don’t see multi-billion dollar companies not having any civil judgments, not having any arbitration, not having any administrative merit determinations against them,” Crusius said while joining Jared Serbu on Federal Drive with Tom Temin. “In a life of a company, mistakes are made, even if they’re innocent mistakes, and those become reportable violations because there’s no monetary barrier to those reports … so I just don’t see it being a 10 percent thing, where only 10 percent of companies would have to check the box.”

Crusius said large companies as well as small and medium-sized contractors are going to feel the weight of the policy when it comes to compliance history.

Companies with far-flung operations will have to dig into its contracting background and funnel that information to the right sources to the government, while smaller businesses will need to find the resources to do the same.

Crusius said there is also worry about inconsistencies across agencies and even within agencies, because contracting officers “have a lot of discretion as to whether or not a contractor has the necessary skills, the necessary compliance history, to perform a government contract.”

McCaleb shared similar sentiments, saying some might find these new efforts for both sides of the contracting community”wholly unnecessary.”

“It’s certainly a burden and a financial burden, the government recognizes this in the final rule, for contractors to establish the systems and processes to enable them to comply with the obligations that the final rule imposes,” McCaleb said. “When you couple that with the establishment of what will essentially be a new bureaucracy of persons who are government employees who are supposedly or purportedly experts in labor law, who will analyze the information provided to them, and weigh in and offer thoughts on how that impacts the responsibility of contractors, I think you’re seeing burdens that attach not just to industry, but to government as well.”

Staggered implementation dates ease compliance

Time will tell whether the EO prompts contractors to leave the government sector, Jackson said, adding the final rule did include some things that were more palatable than previous iterations.

Jackson said the staggered implementation dates will help make it easier for companies to square up their compliance, and allowing subcontractors to report directly to the government rather than the prime contractors “is a good change.”

Under the phased-in implementation:

  • Only prime contractors must make disclosures beginning October 2016. Subcontractors must make disclosures starting Oct. 25, 2017.
  • Disclosure requirements are included only in solicitations for $50 million or more. Solicitations worth $500,000 or more will require disclosures beginning April 25, 2017.
  • Paycheck transparency requirements become effective Jan. 1, 2017.

Jackson did say, however, that she had hoped for a narrowing of reportable violations.

Because the reportable violations are so broad, Jackson said, it includes final orders as well as potential violations in their earliest stages of administration.

“Any agency may indicate that they think there’s an issue worth pursuing, but there hasn’t been a final adjudication, so you have a situation where a company is basically litigating the same issue in parallel tracks, and a situation where an issue that hasn’t reached the final determination, may end up causing a company not to get a contract,” Jackson said. “That’s where the litigation comes in and that raises some significant due process concerns.”

Regardless of any litigation or legislative push back, Jackson said the timeline of the EO’s implementation means contractors need to get to work.

“This is going to go live in some form, so get out in front of it,” Jackson said. “Get out in front of the issues you know you have, get out there and try to do the training, or do the overhaul on whatever you think your weak spots might be, so that you can be out of the box with your mitigating circumstances, and letting the government know that you are geared toward compliance and you want to be in compliance with these labor laws.”

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