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Executive Order, Legislative Amendments Fight Wage Theft
 

By Allen Smith  7/31/2014

Rep. Keith Ellison, D-Minn., is on a mission to fight wage theft, adding amendments to appropriations bills to debar federal contractors with recent violations of the Fair Labor Standards Act (FLSA) and calling on President Barack Obama to issue an executive order to prevent lawbreakers from receiving federal contracts.

On July 31, 2014, the president seemed receptive to that call, signing an executive order that will require prospective contractors to disclose labor law violations from the past three years before they can be eligible for a contract. But Ellison’s proposals would go much further.

Order

“The most significant piece of this executive order is the pre-contract look-back requirement, which requires contractors to disclose labor, employment and safety and health violations during the prior three years,” said Connie Bertram, an attorney at Proskauer in Washington, D.C. “Although executive orders are almost becoming routine, this one is unique because it requires pre-award disclosures that could disadvantage or disquality contractors in competitive awards. Large and even casual contractors will need to develop systems for tracking claims and findings and making required disclosures, and realign litigation risk management models."

“Taxpayer dollars should not reward corporations that break the law, so today President Obama is cracking down on federal contractors who put workers’ safety and hard-earned pay at risk,” the White House said in a summary about the Fair Pay and Safe Workplaces Executive Order.

The order noted that it will require disclosure not only of wage and hour law violations, but also safety and health law violations, and violations of collective bargaining, family and medical leave, and civil rights protections, such as Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act and the Age Discrimination in Employment Act.

Unlike Ellison’s appropriations amendments, which have passed the House and would debar federal contractors for FLSA violations in the past five years that resulted in penalties of as little as $5,000, the executive order stated that “contracting officers will take into account only the most egregious violations” and repeat violators.

A 2010 Government Accountability Office report found that almost two-thirds of the 50 largest wage and hour violations, and almost 40 percent of the 50 largest workplace health and safety penalties, issued between 2005 and 2009 were at companies that went on to receive new government contracts.

Regulations and guidance will be issued by the Department of Labor after listening sessions with the federal contracting community, the executive order summary noted, observing that “the vast majority of federal contractors have clean records.”

Also unlike Ellison’s appropriations amendments to a defense appropriations bill and to an energy appropriations bill, the president’s executive order would serve to “help more contractors come into compliance with workplace protections, not to deny contracts to contractors.” The defense appropriations bill amendment passed the House in June; the energy appropriations bill amendment passed the House July 10, 2014.

The order applies to large contractors with contracts valued at more than $500,000, and will be implemented on new contracts in stages during 2016. It directs companies with federal contracts of $1 million or more not to require employees to enter into predispute arbitration agreements for disputes arising out of Title VII or from torts related to sexual assault or harassment.

The executive order requires that contractors give employees information concerning their hours worked, overtime hours, pay and any additions to or deductions made from their pay. And it directs the General Services Administration to develop a website for contractors to meet their reporting requirements.

Not a ‘Race to the Bottom’

Ellison applauded the president’s executive order saying, “This executive order builds on the president’s minimum wage executive order and will allow the federal government to lead in the fight for good jobs and hold workplaces accountable to fair standards. It’s common sense to award federal contracts to companies that follow the law.”

The president sounded in agreement in his remarks on the executive order, stating, “Our tax dollars shouldn't go to companies that violate workplace laws,” and personally thanking Ellison at the signing for his work on federal contractor compliance issues. But unlike Ellison's proposals the executive order is not, the president said, going to be on punishments. “It is to give them a chance to follow good workplace practices and come into compliance with the law."

On MSNBC's 
The Ed Showon July 23, 2014, Ellison defended his more far-reaching appropriations amendments, which have been criticized by business groups as "job killers."

“The taxpayers of the United States believe our hard-earned money ought to go to contractors who treat their employees fairly,” he remarked. And the U.S. government, he added, “should help set high labor standards, not a race to the bottom.”

He noted that, “after all, the federal government is the largest purchaser in the country.”

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.

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