Recent Developments for Federal Contractors

by Spilman Thomas & Battle, PLLC

Companies and individuals seeking to do business with the federal government have been targeted in the “year of action” promised by President Barack Obama. The President has taken steps to impose a number of additional labor and employment-related obligations on federal contractors in recent months. The developments summarized below involve subjects where the President has unsuccessfully sought legislative action from Congress. 

Executive Order 13658, “Establishing a Minimum Wage for Contractors” was signed by the President on February 12, 2014. The Executive Order raises the hourly minimum wage paid to employees working on covered federal contracts to $10.10, effective January 1, 2015. The Secretary of Labor will then determine the contractor minimum wage rate for each following year. This order affects procurement contracts for construction, service contracts, contracts for concessions and contracts in connection with federal properties or lands. One notable exception involves contracts subject to the Walsh-Healy Act, which applies to contracts for manufacture or furnishing of materials, supplies, articles or equipment to the federal government. The Department of Labor published a proposed rule on June 17, 2014, and the comment period closed on July 28, 2014.

On April 8, 2014, President Obama signed an Executive Order on “Non-Retaliation for Disclosure of Compensation Information.” The stated goal was to increase the ability of workers to identify equal pay violations. Consistent with its title, the Order prohibits the discharge of (or discrimination against) employees or applicants who inquire about, discuss or disclose their own compensation or the compensation of another. The prohibition does not apply to employees who have access to such information as part of their essential job functions. The order was effective immediately, but only applies to federal contracts entered into or after the effective date of rules to be issued by the Department of Labor. The draft rule is expected to be published in September 2014.

The President signed a Memorandum on April 8, 2014, requiring the Secretary of Labor to propose rules for federal contractors to annually report equal pay compensation data to the Office of Federal Contract Compliance Programs. This is in addition to the information already submitted by employers in their EEO-1 reports. A proposed rule to implement the order was published by the Department of Labor on August 8, 2014, and comments must be received by November 6, 2014.

Click here to read an in-depth article regarding Executive Order 11246 – extending existing protections against discrimination to cover sexual orientation and gender identity.

Executive Order 13673, “Fair Pay and Safe Workplaces” was signed by the President on July 31, 2014. This order requires contractors bidding for new federal procurement contracts in excess of $500,000 to disclose certain labor law violations and to provide additional paycheck information to employees. The provisions summarized below are expected to be implemented in 2016:

  • Prospective contractors must disclose labor law violations rendered against them in the preceding three-year period under 14 federal statutes, Executive Orders and equivalent state laws. These include the National Labor Relations Act, the Fair Labor Standards Act, Title VII, FMLA and OSHA. Successful bidders will be required to update the required information every six months during the performance of the contract. The stated goal for this requirement is to ensure contractors “understand and comply with labor laws.” Contractors will be provided with governmental guidance on how to remedy compliance problems.
  • The additional paycheck information required by the Executive Order concerns hours worked, overtime hours, pay additions and deductions. The stated purpose for the “transparency” requirement is to make it easier for workers to be sure they have been paid what they are owed.

Executive Order 13673 also bars federal contractors from requiring employees to enter into mandatory arbitration agreements covering disputes arising out of Title VII or torts related to sexual assault or harassment. This prohibition, to be effective sometime in 2016, will apply to new federal contracts of $1 million or more. This restriction is not applicable to employees covered by collective bargaining agreements.

It is likely that there will be further developments in the Administration’s efforts to advance its employment-related agenda in the face of legislative inaction. Rules to implement the Presidential actions summarized above have been (or will soon) be issued by the Department of Labor and are subject to public comment before they can be finalized. Businesses that rely on federal contracts to survive are advised to pay close attention in the coming months. 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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