Understanding The Fair Pay Final Rule

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On August 25, 2016, a final rule was published to implement the Fair Pay and Safe Workplaces Executive Order (EO 13673) which was signed by President Obama on July 31, 2014. The purpose of EO 13673, also referred to as “Fair Pay” or “blacklisting”, is to increase efficiency and cost savings in Federal contracting by improving contractor compliance with labor laws. Simply put, the intent of EO 13673 is to ensure that federal agencies do business with responsible contractors by encouraging the agencies to make purchasing decisions that consider the contractors’ compliance with federal and state labor laws.

The requirements needed to accomplish this goal significantly increases contractor (both prime and sub) labor law compliance disclosure, requires agencies to consider contractor compliance when making source selection decisions, and creates new agency responsibilities to assess contractor compliance and provide assistance.

Examples of federal labor laws that will be evaluated from a compliance standpoint include the Davis-Bacon Act, Service Contract Act, Fair Labor Standards Act, Family and Medical Leave Act, and many others. Compliance with similar state laws must also be considered, but these will be addressed in a future rulemaking.

The October 25, 2016, effective date will have a limited phase-in period. Contractors who work on contracts with a value of $50 million or more must start reporting any labor law violations received within one year before the start of the contract beginning October 25, 2016. The phase-in ends April 24, 2017, at which time any contracts with a value of $500,000 or more must start reporting. By October 25, 2018, there will be a three-year look back period.

Subcontractors have one additional year in which to comply. Subcontractor reporting will begin October 25, 2017. In general, reporting requirements are complicated given the phase-in, contract value differences, and one-year extension for subcontractors. Contractors should review the final rule and talk with legal counsel.  A copy of the final rule can be found at https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-19676.pdf

Efforts to enforce compliance with state and federal regulations are increasing, as evidenced by this new ruling (EO 13673).