Fair pay and safe workplaces rule becomes effective on October 25
Government contractors are now going to have to learn a new abbreviation—ALA—which stands for agency labor advisor. You may also see this official referred to as the agency labor compliance advisor (ALCA).
As the result of a new procurement rule that becomes effective on October 25, 2016, ALAs will participate in the process of awarding government contracts. This rule is designed to improve the enforcement of government policies that have been in place for quite a while, but not always enforced. The policies concern whether government contractors comply with federal employment laws:
- Fair Labor Standards Act (FLSA)
- Migrant and Seasonal Agricultural Worker Protection Act
- Davis-Bacon Act
- Service Contract Act
- Family and Medical Leave Act (FMLA)
- Executive Order 13658 (establishing a minimum wage for federal contractors)
- Occupational Safety and Health Act
- Section 503 of the Rehabilitation Act of 1973
- Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA)
- Executive Order 11246 (equal employment opportunity)
- National Labor Relations Act (NLRA)
- Title VII of the Civil Rights Act of 1964
- Americans With Disabilities Act (ADA)
- Age Discrimination in Employment Act (ADEA)
- Equal Pay Act
The ALAs will advise contracting officers about whether bidders are “acceptable” employers, as defined by the number, type, and severity of labor law violations. A bidder that doesn’t measure up can be eliminated from receiving a government contract.
The new rule will be phased in, according to a number of criteria. Guidance is available from the U.S. Department of Labor (DOL).
September 12, 2016—Preassessment: Before the rule takes effect, current or prospective government contractors can voluntarily have the DOL evaluate their compliance with labor laws. The contracting officer and the ALA for the procuring agency can accept the DOL’s assessment that a bidder passes muster under the new rule without having to initiate an independent evaluation. If the contractor fails the DOL assessment, it can work with the DOL to create a labor compliance agreement, which will mitigate the contractor’s “bad” record and potentially keep it in the running for being awarded a contract.
October 25, 2016: The final rule takes effect. Beginning on this date, bidders must disclose their record of labor-law violations from the past year if both of the following conditions are met:
- The bidder will be the prime contractor for the procurement.
- The contract will be equal to or greater than $50 million in value.
January 1, 2017: The paycheck transparency clause takes effect, requiring all contractors to provide wage statements and notice of any independent contractor relationship to their covered workers.
April 25, 2017: The threshold amount for prime contractors will decrease from $50 million to $500,000.
October 25, 2017: All subcontractors under consideration for subcontracts equal to or greater than $500,000 will have to be assessed for labor law compliance.
October 25, 2018: The disclosure period will be for any labor law violations will increase from the past year to the past 3 years.
Since 1884, Federal law has required government contracts to be awarded to responsible sources. To implement this law, contracting officers must affirmatively determine that a contractor has a satisfactory record of integrity and business ethics. Some have suggested that numerous violations of federal labor laws should raise questions about a potential contractor’s integrity and business ethics.
In 1996, the General Accounting Office (GAO), now known as the Government Accountability Office, issued two reports about how government contractors were violating various labor laws. In 2010, the GAO released a similar report. In 2013, the Senate Health, Education, Labor, and Pensions Committee issued a report about how some 49 government contractors had paid $196 million in penalties and back wage assessments because of violations of federal labor laws.
All these reports indicate that government contracting officers have the legal authority to consider labor law violations in the procurement process, but were not doing so. Apparently, contracting officers were reluctant to venture outside of their normal realm of expertise, and they certainly had no guidance of when labor law violations amounted to an unsatisfactory record of integrity and business ethics.
The new rule is designed to reduce these violations of federal labor laws.
Significant new requirements
Both prime contractors and subcontractors will have to disclose their labor law violations to DOL and receive an evaluation from DOL.
ALAs will evaluate the integrity and ethics of prime contractors for contracting officers.
Prime contractors will consider the statement from DOL, as provided to the prime contractor by the subcontractor, in evaluating the subcontractor’s integrity and ethics.
Both prime contractors and subcontractors will have to provide their employees with wage statements that clearly state the following, with all numbers being based on weekly data:
- Rate of pay.
- Hours worked, including overtime hours.
- Gross pay.
- Any additions to pay or deductions from pay.
If an employee is exempt from overtime payments, the employee must receive a written notice to that effect.
If a worker is treated as an independent contractor, the worker must receive a written notice to that effect, separate from any agreement between the worker and the contractor.
What does this mean for government contractors?
1. Your record as an employer will be subject to more government scrutiny than ever before.
2. Work with your accountant (and the supplier of any payroll software) to make sure that your wage statements conform to the requirements of the new rule.
3. Carefully review whether your exempt employees are truly exempt. Because of new overtime rules that are going into effect on December 1, 2016, this review will have the added advantage of possibly allowing you to implement the new overtime rules in a less expensive way.
More information about new overtime rules.
4. Carefully review whether your independent contractors are properly classified. The DOL and the Internal Revenue Service, as well as the Alabama Department of Revenue, have intensified their enforcement efforts for misclassification of employees. The new rule is designed to make your workers more aware of their potential misclassification as independent contractors so that they can possibly trigger an investigation of your practices of treating some workers as independent contractors.
More information about misclassification of workers as independent contractors.
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Items on this web page are general in nature. They cannot—and should not—replace consultation with a competent legal professional. Nothing on this web page should be considered rendering legal advice.