President Obama Signs Executive Order Requiring Federal Contractors to Provide Paid Sick Leave
September 10, 2015
New York Labor and Employment Law ReportFederal ContractorsPresident Obama Signs Executive Order Requiring Federal Contractors to Provide Paid Sick LeaveSeptember 10, 2015
President Obama signed an Executive Order on September 7, 2015, requiring that Federal contractors provide at least seven days of paid sick leave per year to employees working on Federal contracts and subcontracts that are solicited or awarded on or after January 1, 2017. According to a White House Fact Sheet summarizing and explaining the rationale behind the Executive Order, an estimated 44 million private sector workers (approximately 40%) do not have access to paid sick leave. Along with issuing the Executive Order, President Obama also urged Congress to pass the Healthy Families Act, which would require all businesses with 15 or more employees to offer up to seven days of paid sick leave annually.
The Executive Order applies to the following types of contracts or contract-like instruments: (1) procurement contracts for services or construction; (2) contracts for services covered by the Service Contract Act; (3) contracts for concessions; and (4) contracts entered into in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public. All Federal contracts falling within one of these categories will be subject to the Executive Order if the solicitation for the contract is issued on or after January 1, 2017, or if the contract is awarded outside the solicitation process on or after January 1, 2017.
The Executive Order requires covered Federal contracts and subcontracts to contain a clause “specifying, as a condition of payment, that all employees, in the performance of the contract or any subcontract thereunder, shall earn not less than 1 hour of paid sick leave for every 30 hours worked." The Executive Order also provides that a contractor may not cap the total annual accrual of paid sick leave at less than 56 hours (seven days). Paid sick leave earned under the Executive Order may be used by an employee for an absence resulting from: (1) physical or mental illness, injury, or medical condition; (2) obtaining diagnosis, care, or preventive care from a health care provider; (3) caring for family members, domestic partners, and other individuals whose close association with the employee is the equivalent of a family relationship; and (4) domestic violence, sexual assault, or stalking. The use of paid sick leave cannot be made contingent upon the employee finding a replacement.
Accrued unused sick leave earned under the Executive Order must be carried over from one year to the next. In addition, although Federal contractors are not required to pay employees for accrued unused sick leave upon separation from employment, Federal contractors are required to reinstate any accrued unused sick leave that an employee had upon separation from employment if that employee is rehired within 12 months.
The paid sick leave required by the Executive Order is in addition to a Federal contractor's obligations under the Service Contract Act and the Davis-Bacon Act. Federal contractors may not receive credit toward their prevailing wage or fringe benefit obligations for any paid sick leave provided in satisfaction of the requirements of the Executive Order.
The Secretary of Labor has been directed to issue regulations by September 30, 2016, to carry out the terms of the Executive Order.
OFCCP Issues Final Rule Protecting Workers From Discrimination Based on Sexual Orientation and Gender IdentityDecember 31, 2014
In early December, the U.S. Department of Labor's Office of Federal Contract Compliance Programs ("OFCCP") announced the issuance of its final rule implementing Executive Order 13672, which amends Executive Order 11246 by prohibiting Federal contractors from discriminating against employees or applicants based on their sexual orientation or gender identity. The final rule was published in the Federal Register on December 9, 2014, and will become effective April 8, 2015.
The OFCCP did not release a notice of proposed rulemaking. According to an OFCCP FAQ: “President Obama’s Executive Order was very clear about the steps the Department of Labor was required to take, and left no discretion regarding how to proceed. In such cases, principles of administrative law allow an agency to publish final rules without prior notice and comment when the agency only makes a required change to conform a regulation to the enabling authority, and does not have any discretion in doing so.”
The regulations will apply to employers that enter into or modify Federal contracts on or after April 8, 2015. Contractors will need to revise the equal employment opportunity clause in new or modified subcontracts or purchase orders, “ensuring that applicants and employees are treated without regard to their sexual orientation and gender identity, and by updating the equal opportunity language used in job solicitations and posting updated notices.” OFCCP and EEOC are working together to update the EEO is the Law Poster; Federal contractors should continue to use the existing poster until a new one is finalized.
Executive Order 13672 and the new final rule are in addition to the pre-existing prohibition on gender identity discrimination, which is a form of sex discrimination in violation of Executive Order 11246. OFCCP memorialized this in an Agency Directive dated August 19, 2014.
The regulations also make a change to the visa reporting provision. Contractors that are unable to obtain a visa for an employee and believe that it is because of the employee’s sexual orientation or gender identity will be required to report it to the OFCCP and the State Department.
The final rule does not require contractors to: (1) make changes to Affirmative Action Plans; (2) collect data or set placement goals on the sexual orientation or gender identity of applicants or employees; or (3) solicit voluntary self-identification of applicants’ or employees’ sexual orientation or gender identity. In addition, there is no change to the current religious exemption.
The Department of Labor’s Wage and Hour Division has published on its website a list of frequently asked questions and President Obama's Press Secretary has published a fact sheet about Executive Order 13672.
U.S. Department of Labor Issues Final Rule Implementing Executive Order 13658 (Minimum Wage for Certain Federal Contractors)October 7, 2014
On October 1, the U.S. Department of Labor announced the issuance of its final rule implementing Executive Order 13658, which establishes a minimum wage requirement for certain federal contractors. The final rule was published in the Federal Register today, October 7.
As we stated in a prior blog post, Executive Order 13658 requires that certain types of new federal contracts and subcontracts contain a clause specifying that the minimum wage to be paid to workers must be at least $10.10 per hour beginning January 1, 2015. The new $10.10 minimum wage will also apply to disabled employees who are currently working under a special certificate issued by the Secretary of Labor permitting payment of less than the minimum wage.
The final rule defines "new contract" as a contract that results from a solicitation issued on or after January 1, 2015, or a contract that is awarded outside the solicitation process on or after January 1, 2015. A contract that was entered into prior to January 1, 2015 will constitute a "new contract" if, through bilateral negotiation, on or after January 1, 2015: (1) the contract is renewed; (2) the contract is extended (unless the extension is made pursuant to a term in the existing contract providing for a short-term limited extension; or (3) the contract is amended pursuant to a modification that is outside the scope of the existing contract.
The final rule also clarifies, to some degree, the types of federal contracts and subcontracts covered by the Executive Order. The following types of contracts and subcontracts are covered: (1) procurement contracts for construction covered by the Davis-Bacon Act; (2) contracts for services covered by the Service Contract Act; (3) contracts for concessions, including any concessions contract excluded from coverage under the Service Contract Act; and (4) contracts entered into in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public. Grants, within the meaning of the Federal Grant and Cooperative Agreement Act, are expressly excluded from coverage.
Beginning January 1, 2016, and annually thereafter, the minimum wage for federal contractors will be increased by the Secretary of Labor based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, and rounded to the nearest multiple of five cents. The Secretary of Labor is required to publish the new minimum wage at least 90 days before the new minimum wage is scheduled to take effect.
For tipped employees, the hourly cash wage paid by a federal contractor must be at least $4.90 beginning on January 1, 2015. In each subsequent year, the federal contractor minimum wage for tipped employees will be increased by 95 cents until it equals 70 percent of the federal contractor minimum wage in effect for non-tipped employees. If an employee’s tips, when added to the hourly wage, do not add up to the federal contractor minimum wage for non-tipped employees, the federal contractor will be required to supplement the employee’s hourly wage to make up the difference.
The final rule also provides an investigation and enforcement procedure with respect to alleged violations of Executive Order 13658. The potential remedies and sanctions that could be imposed include: (1) requiring payment of back wages owed; (2) withholding of amounts due to the contractor under the federal contract to the extent necessary to satisfy the contractor's wage obligations; and (3) debarment for a period of up to three years.
The Department of Labor's Wage and Hour Division has published on its web site a list of frequently asked questions and a fact sheet about Executive Order 13658.
OFCCP Proposes Rule Regarding Annual Submission of Employee Compensation DataAugust 14, 2014
On August 6, 2014, the Office of Federal Contract Compliance Programs (“OFCCP”) issued a proposed rule requiring covered Federal contractors and subcontractors with more than 100 employees to submit an annual Equal Pay Report on employee compensation. Prior to this proposed rule, President Obama signed a Presidential Memorandum on April 8, 2014, instructing the Secretary of Labor to propose a rule within 120 days to collect compensation data from Federal contractors and subcontractors.
The Equal Pay Report applies to contractors and first-tier subcontractors who are required to file EEO-1 Reports, have more than 100 employees, and have a Federal contract, subcontract, or purchase order worth $50,000 or more that covers a period of at least 30 days. The Report requires contractors to submit:
President Obama Signs Fair Pay and Safe Workplaces Executive OrderAugust 4, 2014
On July 31, 2014, President Obama signed the "Fair Pay and Safe Workplaces" Executive Order, which requires bidders on federal procurement contracts for goods and services (including construction) in excess of $500,000 to disclose labor law violations that have occurred within the three-year period immediately preceding the bid. In addition, the Executive Order requires federal contractors to provide individuals who perform work under the federal contract with information regarding hours worked, overtime hours, pay, and any additions made to or deductions made from pay. The Executive Order also prohibits federal contractors with contracts in excess of $1,000,000 from entering into mandatory pre-dispute arbitration agreements with their employees or independent contractors to resolve complaints under Title VII of the Civil Rights Act ("Title VII") or tort claims arising out of alleged sexual assault or harassment.
For procurement contracts for goods and services, including construction, where the estimated value of the supplies acquired and services required exceeds $500,000, each bidder must disclose whether there has been any administrative merits determination, arbitral award or decision, or civil judgment against the bidder within the preceding three-year period for violations of any of the following labor laws and Executive Orders:
President Obama Signs Executive Order Prohibiting Sexual Orientation and Gender Identity Discrimination By Federal ContractorsJuly 21, 2014
As expected, President Obama signed an Executive Order today which amends Executive Order 11246 to prohibit federal contractors from discriminating against employees or applicants based on their sexual orientation or gender identity. The prohibition against discrimination based on sexual orientation is not new to federal contractors who operate in New York State, because the New York Human Rights Law already prohibits employment discrimination based on sexual orientation. Nevertheless, all federal contractors in New York should take this opportunity to review their policies and practices to ensure compliance with the new Executive Order. Specifically, all anti-discrimination and anti-harassment policies should specifically list sexual orientation and gender identity among the protected categories, and all solicitations for employees should include a statement that qualified applicants will receive consideration for employment without regard to sexual orientation or gender identity (in addition to the other protected categories).
The Secretary of Labor has been directed to issue regulations implementing the amendments to Executive Order 11246 within 90 days. The amendments to Executive Order 11246 will apply to federal contracts entered into on or after the effective date of the regulations issued by the Secretary of Labor.
President Signs Executive Order Establishing Minimum Wage For Federal ContractorsFebruary 13, 2014 On February 12, 2014, President Obama signed an Executive Order requiring that all new federal contracts and subcontracts contain a clause specifying that the minimum wage to be paid to workers under those federal contracts and subcontracts must be at least $10.10 per hour beginning January 1, 2015. The federal contracts and subcontracts covered by this Executive Order include procurement contracts for services or construction and contracts for concessions. This new $10.10 minimum wage will also apply to disabled employees who are currently working under a special certificate issued by the Secretary of Labor permitting payment of less than the minimum wage. Beginning January 1, 2016, and annually thereafter, the minimum wage for federal contractors will be increased by the Secretary of Labor based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, and rounded to the nearest multiple of five cents. The Secretary of Labor is required to publish the new minimum wage at least 90 days before the new minimum wage is scheduled to take effect. For tipped employees, the hourly cash wage that must be paid by a federal contractor must be at least $4.90 beginning on January 1, 2015. In each subsequent year, the federal contractor minimum wage for tipped employees will be increased by 95 cents until it equals 70 percent of the federal contractor minimum wage in effect for non-tipped employees. If an employee’s tips, when added to the hourly wage, do not add up to the federal contractor minimum wage for non-tipped employees, the federal contractor will be required to supplement the employee's hourly wage to make up the difference. The Secretary of Labor is expected to issue regulations by October 1, 2014, to implement the provisions of the Executive Order. Ten Steps Federal Contractors Should Take to Prepare for OFCCP's Revised Regulations Applicable to Veterans and Disabled IndividualsNovember 19, 2013 The revised Regulations issued by the Department of Labor, Office of Federal Contract Compliance Programs (“OFCCP”), addressing affirmative action obligations applicable to disabled individuals under the Rehabilitation Act of 1973, as amended (“Section 503”), and to protected veterans pursuant to the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, as amended (“VEVRAA”), become effective March 24, 2014. Due to the numerous requirements in these new Regulations, contractors should start reviewing and implementing procedures to ensure compliance. Ten steps that covered contractors should implement by March 24, 2014 include:
OFCCP Increases Its Focus on Compensation IssuesOctober 17, 2012 The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) has significantly increased its focus on employers’ compensation systems during scheduled affirmative action compliance audits. In fiscal year 2011, OFCCP had 27 compliance evaluations with pay provisions for alleged compensation disparities, totaling $1.06 million in monetary benefits. In 2010, OFCCP reached 10 settlements for alleged bias in compensation. These are significant increases from 2009 and 2008; only two findings of alleged compensation discrimination were found in 2009 and zero in 2008. Under Executive Order 11246, Federal contractors are required to conduct self-audits of their pay systems to identify potential gender or race based disparities. If pay disparities are found, contractors are expected to correct the disparities prior to any potential government audit. In light of the OFCCP’s increased scrutiny of compensation systems, contractors need to protect themselves by collecting and storing detailed data on factors affecting employees’ pay, such as years of prior job experience, time at the company, time in the position, education, performance ratings, pay grade or level, and additional compensation (commissions, bonuses, incentives, overtime, etc.). Federal contractors should also be sure to preserve all salary records for employees, to allow for the creation of a salary history for individual employees. In addition, contractors should have written compensation guidelines, as well as defined polices influencing compensation, such as the impact of performance evaluations on compensation. It is expected that OFCCP’s heightened focus on compensation will continue to grow. To avoid significant back pay awards based on perceived pay disparities due to race or gender, employers must be proactive in self-auditing their compensation practices and making appropriate adjustments prior to any government review. Federal Contractors Should Prepare for OFCCP's New Enforcement EffortsMay 29, 2012 Federal contractors may want to start preparing for proposed changes to the regulations issued by the U.S. Department of Labor, Office of Federal Contract Compliance Programs ("OFCCP"), in connection with federal contractors' affirmative action obligations. OFCCP expects to have new final regulations in place during 2012, which will increase federal contractors' obligations regarding veterans and disabled individuals, as well as modify the documentation required during compliance evaluations. Proactive steps that covered employers should consider taking include:
The proposed Itemized Listing requires covered employers to provide the OFCCP with individualized compensation data for all employees, which will enable the OFCCP to run a variety of analyses. Covered employers should keep in mind that the OFCCP may not have appropriate measures to safeguard this sensitive data from Freedom of Information Act requests. Before submitting any compensation data, covered employers should take steps to protect such information. Major Changes Proposed for Affirmative Action Plans Covering Individuals with DisabilitiesJanuary 9, 2012 The U.S. Department of Labor, Office of Federal Contract Compliance Programs ("OFCCP"), recently issued a proposal to revise the regulations applicable to Section 503 of the Rehabilitation Act of 1973, which requires Federal contractors to take affirmative action to hire, retain, and promote qualified individuals with disabilities. The proposed changes, if implemented, will substantially increase the obligations imposed on Federal contractors with respect to individuals with disabilities. The OFCCP proposal includes the following requirements:
Comments on the proposed rule from interested parties may be submitted to the OFCCP on or before February 7, 2012. OFCCP anticipates a final rule will be published around Fall of 2012. Recent OFCCP and EEOC Enforcement Actions Suggest an Increased Focus on Alleged Discriminatory Hiring PracticesDecember 2, 2011 Recent complaints filed by the Office of Federal Contract Compliance Programs ("OFCCP") and the Equal Employment Opportunity Commission ("EEOC") against employers suggest that those federal agencies are aggressively pursuing allegations of discriminatory hiring practices. On November 29, the OFCCP filed an administrative complaint against Cargill Meat Solutions, a federal contractor, alleging that the company violated Executive Order 11246, by favoring Asian and Pacific Islander applicants over applicants of other races and by favoring male applicants over female applicants. In the complaint, the OFCCP alleges that over 4,000 qualified applicants were unlawfully rejected based only on their race or sex. Significantly, the OFCCP seeks cancellation of the company's government contracts worth more than $550 million. In the last several months, the EEOC has also filed two high-profile lawsuits against employers for alleged discriminatory hiring practices. In September, the EEOC filed a lawsuit against Bass Pro Shops in the U.S. District Court, District of Massachusetts, alleging that the company engaged in a pattern or practice of failing to hire African-American and Hispanic applicants. In the lawsuit, the EEOC alleges that managers made overt racist comments acknowledging the company's discriminatory hiring practices, and stated that African-American applicants did not fit their corporate profile. In October, the EEOC filed a lawsuit against Texas Roadhouse in the U.S. District Court, Southern District of Texas, alleging that the company systematically failed to hire individuals over 40 years of age for "front of the house" positions. In the lawsuit, the EEOC alleges that only 1.9% of the "front of the house" employees are over 40 years of age (which the EEOC believes is a statistically significant disparity when compared to the general population, industry statistics, and the applicant pool) and that the company instructed managers to hire younger employees by emphasizing youth in its hiring training. At this point, these enforcement actions by the OFCCP and EEOC have not resulted in any final determinations or judgments. Nevertheless, these enforcement actions serve as a useful reminder for employers of all sizes to continually monitor their hiring practices and periodically train managers who have hiring responsibilities to ensure compliance with federal, state, and local laws. |
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