“Educating the Government Contracting Community”

Past Labor Law Violations To Haunt Government Contractors

On August 5, 2014, the Federal Register published President Obama then-recently issued Executive Order 13673, which directs agencies to ensure that before they make award of a contract for more than $500,000 that they take steps to demonstrate that the prospective government contractor and its subcontractors understand and comply with labor laws. Instead of relying on certifications and representations that the prospective contractors and their subcontractors will or intend to comply with state and federal labor laws, Executive Order 13673 requires contractors to make pre-award disclosures to contracting officials regarding their record of past compliance with applicable labor laws. Contractors must also flow down to its subcontractor those same disclosure requirements to its subcontractors. Procurement officials must consider those disclosures in reaching their contractor responsibility determinations.

What kind of information does the Executive Order require contractors and subcontractors to disclose when competing for federal government contracts? They must disclose “whether there has been any administrative merits determination, arbitral award or decision, or civil judgment, as defined in guidance issued by the Department of Labor, rendered against the offeror within the preceding 3 years” for violations of certain federal and state laws including labor law-related Executive Orders. The list of statutes and Executive Orders includes, but is not limited to, the Fair Labor Standards Act, Executive Order 11246 (Equal Employment Opportunity), Family and Medical Leave Act, Americans with Disabilities Act, Age Discrimination Act, and Executive Order 13658 (Minimum Wage for Federal Contractors) and any state-law equivalent to these federal legal authorities.

The disclosure obligations under the Executive Order do not end with the award of the contract. Instead, the Executive Order makes such disclosure a continuing obligation of contractors and subcontractors. As mandated by the Executive Order, agencies shall require contractors and subcontractors to update the information contained in their initial disclosures every six (6) months. The Executive Order obligates agencies to take appropriate actions where information regarding any labor law violations by contractor is brought to the attention of the contracting officer by another source. Such actions may include: remedial measures, compliance assistance, as well as remedies such as decisions not to exercise an option on a contract, contract termination or referral for suspension or debarment.

This Executive Order will create numerous issues for Government Contractors. Government Contractors will need to give intense scrutiny to how this Executive Order finds implementation in solicitation documents. Also, for those Government Contractors eliminated from competitive procurements, not included in the competitive range, or otherwise receiving adverse procurement selection or post-award Contracting Officer's decisions, serious issues exist regarding viable alternatives for challenging or appealing those decisions. On the other hand, this Executive Order creates potential legions of new would-be Whistle Blowers who could be looking to cash in on a contractor or subcontractor failing in its duty to disclose and its representations regarding the same. Consider also the impact this Executive Order will have on employment contracts that required dispute resolution through confidential binding arbitration. The Executive Order is silent about how appeals of administrative decisions and civil judgments are to be handled. It's not that difficult to imagine that a Government Contractor might lose at a trial level but prevail on appeal. But according to the Executive Order the trial level loss would still have to be disclosed.

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