Nearly one year has passed since the signing of the Fair Pay and Safe Workplaces Executive Order (EO 13673) by President Obama on July 24, 2014. On May 28, 2015, a news release announced the publication of the proposed guidance issued by the Department of Labor (DOL) on implementing EO 13673. In their current form, the proposed guidelines raise a number of major concerns for federal contractors subject to OFCCP enforcement.
Recall that the order establishes new requirements within the procurement process for evaluating contractor “fitness” for contract awards exceeding $500,000. The evaluation, which will be conducted by agencies’ contracting officers under the counsel of newly appointed “Labor Compliance Advisors,” will focus on contractor violations that have occurred within the three-year period preceding the contract bid or proposal. Specifically, contractors are required to report on violations of 14 labor laws identified within the order (including EO 11246, Section 503, and VEVRAA).
Among other objectives, the DOL-issued guidance aims to define the criteria put forth by the order for identifying and assessing covered violations. The guidance also proposes several “mitigating factors” that contracting officers will consider when assessing violations. A summary of the most relevant violation criteria and mitigating factors related to OFCCP enforcement, as described in the proposed guidance, is presented below along with relevant concerns in italics.
Administrative Merits Determinations: Notices/findings of violations issued by an enforcement agency following a compliance investigation.
- Violations falling under this category include notices/findings that are subject to appeal or up for further review.
- An OFCCP-issued show cause notice constitutes a covered violation under this category – this is particularly concerning for covered Federal contractors/subcontractors, as the OFCCP commonly issues show cause notices to contractors for reasons outside of those originally intended under the compliance evaluation process (e.g., contractors who fail to submit requested documents within the allotted timeframe often receive an OFCCP-issued show cause notice; many of these contractors eventually submit their materials and complete the review with no identified violations.)
Serious Violations: Violations are deemed serious on the basis of factors such as the number of employees involved or the extent of risk/harm inflicted upon a worker in terms of health, safety, or well-being.
Willful Violations: Violations are deemed willful on the extent to which they demonstrate a lack of disregard or indifference to the provisions of the labor laws (example of willful violation - contractor refuses to hire IWD without first evaluating the impact of the disability on ability to perform job).
Repeated Violations: Violations that are the same or “substantially similar” in terms of nature of violation/underlying obligation.
- Violations can be deemed “repeated” even if differences exist between impacted group, personnel process, and/or facility involved in the violations. Below is an example of violations that would be deemed “repeated” due to the common obligation of non-discrimination for race/ethnicity.
- Example: Audit of Facility A finds evidence of discrimination within promotion process impacting Black/African American employees AND audit of Facility B finds evidence of discrimination in hiring process impacting Asian applicants
- Repeated violations are weighted more heavily in relation to serious or willful violations when determining whether violations are “pervasive” – this is concerning when considering the major differences permitted between violations deemed “repeated” under the proposed guidance.
Pervasive Violations: Contractor violations will be deemed “pervasive” when suggesting a basic disregard for labor laws as evidenced by multiple violations of a serious and/or willful nature.
Mitigating Factors: A number of mitigating factors will be considered in light of contractor violations during the evaluation.
- One mitigating factor identified in the proposed guidance is the number of violations in relation to the size of the contractor. This factor indicates that smaller contractors will likely be evaluated more severely in comparison to larger companies for reporting small numbers of violations. The proposed guidance may have failed to account for the reality that smaller companies typically have fewer resources (e.g., finances, personnel) for achieving full compliance, which can result in unintentional violations. Larger companies, on the other hand, tend to have a more substantial budget for acquiring the knowledge and resources necessary for avoiding violations. The potential for smaller contractors to experience greater difficulty when bidding on contracts is concerning and should be considered, along with other concerns discussed, in the final guidance.
- The contractor’s efforts to remedy violations and subsequent “clean reporting” are also identified as mitigating factors when determining whether or not a contract may be awarded.
- The proposed rule stated that, generally, a single reported violation will not automatically disqualify a potential contractor from the bidding process. However, it is still possible that an awarding agency’s review may declare a single reported violation (or a very small number of violations) “serious” and “willful” enough to warrant excluding the potential contractor from the bidding process.
DCI encourages contractors to submit comments during the review period (ending on July 27, 2015) to bring these concerns to light.
By Rachel Gabbard, M.A., Associate Consultant and Jeff Henderson, M.P.S., HR Analyst