Employment violations may impact government contractors

On May 28, 2015, the Federal Acquisition Regulation (FAR) Council proposed a new rule that could impact a government contractor’s ability to obtain, and sometimes retain, a government contract.

Under the proposed rule, contractors would be required to report certain labor law violations that occurred within the prior three years. The contracting officers would then be responsible for soliciting additional information from the contractor to make a final determination whether the bidder has a satisfactory record of integrity and business ethics.

If bidding on a contract, the proposal states that most violations would not result in being omitted from consideration, but instead the bidder would be required to enter into a “labor compliance agreement” as a condition of obtaining the federal contract. Such agreement is yet to be defined, but the terms are left to each federal agency to develop, negotiate, and monitor.

After winning a federal contract, contractors would be required to disclose any new information every six months. A Labor Contract Advisor (LCA) will review the information and determine whether further action is required from the government. If so, the LCA will notify the contracting officers and provide a recommendation for next steps. These could include a referral to the Department of Labor, a new or revised labor compliance agreement, a determination not to exercise a contract option, termination of the contract, and/or notification of the agency suspension and debarring official.

The proposed guidelines, as written, appear to be very subjective and give contracting officers and LCA’s a lot of latitude in the proposed response to any violations that are required to be reported. Serious, repeated, or willful violations or those of “particular gravity” should raise concerns and be dealt with accordingly. “Particular gravity” violations include violations relating to death, those that involve termination of employment as retaliation, those that involve working conditions of all or nearly all the workforce, and violations that include back pay, fines, or damages greater than $100,000.

Contracting officers and LCA’s are supposed to consider mitigating factors in making their final determinations. Such factors include, but are not limited to, whether the violation has been corrected, whether it is the first violation, the number of violations the contractor has compared to the number of employees it retains, existing safety and grievance procedures, and subsequent compliance after the violation.

Under the proposed rule, prime contractors and higher tier subcontrators would be required to evaluate subcontractor labor violation information to determine whether any action should be taken. The proposal recognizes that this will create a lot of challenges to the contractors, so it is soliciting comments on whether the subcontractors should be required to report directly to the Department of Labor rather than the prime or the higher tier subcontractor. Under this methodology, the Department of Labor would coordinate with the prime on the appropriate remediation that should be recommended.

With all that said, here are steps government contractors should take now:

  • Review the proposal and provide comments by July 27, 2015.
  • Determine the potential implications of the proposed rule.
  • Review existing labor and grievance policies and procedures to determine whether they need to be updated.
  • Determine whether new policies should be established.
  • Review any existing employment related issues with legal counsel to determine whether any changes should be made in the contemplated response.

David E. Shaffer can be reached at Email or 215.441.4600.

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