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An employer’s status as a contractor with the federal government brings the financial benefit of the contract itself, but with that financial benefit comes the serious responsibility of complying with the federal government's many rules and regulations imposed on contractors. The various laws that apply to contractors and the compliance measures that must be taken oftentimes depend on the number of employees a contractor has and the dollar amount of the contract with the federal government. The following materials outline many key obligations for federal government contractors.
Employers are required to meet certain affirmative action obligations if they do business with the federal government and are covered by federal Rehabilitation Act of 1973 Section 503 (Section 503) , the Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRAA), Executive Order 11246, and the Jobs for Veterans Act. The threshold amounts for these laws begin at the $10,000 contract level, and compliance requirements increase as the amount of the contract and the size of the contractor's workforce increase. Please see the national Affirmative Action. section.
An affirmative action program is a management tool designed to ensure equal opportunity in recruiting, hiring, training, promoting, and compensating individuals. Affirmative action goes beyond equal employment opportunity measures, requiring employers to eliminate discriminatory conditions, whether inadvertent or intentional, and to treat all employees equally in the workplace.
The OFCCP, part of the U.S. DOL, administers these laws and has issued regulations implementing each of them. Contractors' affirmative action obligations vary, depending on the size of the contract and the date on which the contract was entered into or modified. Please see the national Affirmative Action, national Disabilities, national Vietnam Veterans, national Prevailing Wages sections.
DOL’s OFCCP published final regulations, making significant changes to the rules implementing Section 503 and VEVRAA. The rules took effect on March 24, 2014, with the exception of Subpart C (pertaining to affirmative action plans (AAPs)). Please see the national Affirmative Action. section.
For more information on the final rules, go to BLR's online resource center, OFCCP Regs for Federal Contractors, at http://hr.blr.com/resource-centers/OFCCP-Regs-for-Federal-Contractors.
Note: In 2015, the jurisdictional thresholds for Section 503 and VEVRAA were adjusted for inflation by the Federal Acquisition Regulatory (FAR) Council from $10,000 to $15,000 (Section 503) and from $100,000 to $150,000 (VEVRAA). Although OFCCP’s Section 503 and VEVRAA regulations have not been changed to reflect this adjustment, OFCCP has indicated that they will follow the FAR Council’s inflation-adjusted thresholds.
Executive Order 13495, titled Nondisplacement of Qualified Workers Under Service Contracts, requires that contractors and subcontractors acquiring contracts that succeed contracts for the performance of the same or similar services at the same location must offer the predecessor contractor's employees a right of first refusal of employment. Protected employees would be terminated as a result of the award to a successor contractor.
Requirements. Under the Executive Order, employment openings cannot be offered to nonpredecessor employee prospects until a right of first refusal has been provided to the predecessor employees. In addition, if a contractor terminates its relationship with a subcontractor under a particular contract and decides to perform the work itself, the contractor is required to offer employment to the subcontractor’s employees who would otherwise be displaced.
In order to be protected, an employee must have worked for the predecessor contractor or subcontractor for at least 3 months immediately before the start of the follow-on contract. In addition, the employee must not have been otherwise subject to termination and must be a service employee within the meaning of the Service Contract Act.
Notice. At least 10 days’ notice must be given to affected employees, and the notice must state the period within which the offer must be accepted. In addition, no later than 10 days before the completion of the predecessor contract term, the predecessor contractor must provide the successor contractor with a certified list of names and employment anniversary dates of all the service employees working under the contract and its subcontractors during the last month of contract employment.
Contracting agencies must include the new requirements in solicitations, new contracts, and contract modifications. Contractors' obligations do not begin until the new requirements are included in the relevant contracting document by the contracting agency.
Exceptions. Short-term employees are exempted from protection, as are employment where federal service work constitutes only part of the employee’s job; managerial and supervisory staff; certain contracts or subcontracts awarded for services produced or provided by persons who are blind or have severe disabilities; and contracts and subcontracts under the simplified acquisition threshold of $150,000, even when the prime contract is for a greater amount. The Executive Order does not apply to any employee who the successor contractor reasonably believes, based on credible written information, that the employee failed to sufficiently perform the job based on past performance.
Penalties. If a covered contractor fails to comply with the Executive Order, the DOL has the power to issue sanctions and remedies, including payment of lost wages and for willful violations, to debar the contractor for up to 3 years. The DOL may also withhold contract funds.
The Federal Acquisition Regulations (FAR) require that federal government contractors with contracts that are expected to exceed $5 million and have a 120-day-or-more performance period requirement must have a written code of business ethics and conduct, an ongoing awareness program, and display the federal agency office of inspector general fraud hotline poster on-site and on website(s). The code must be established within 30 days of the contract award and must be distributed to each employee engaged in the performance of the contract. An ongoing awareness program must be established within 90 days after the contract award. These time frames may be extended by the contracting officer (72 Fed. Reg. 65873 (2007)). The rules apply only to contracts entered into on or after December 24, 2007.
Code of ethics and conduct requirements. The FAR does not mandate any particular content or format for the code of business ethics and conduct requirements. However, an effective program must contain an employee awareness program and internal reporting and control mechanisms. Standard provisions for contractor codes include limits of gifts; restricting conduct to that which is fair, consistent, and professional; avoiding conflicts of interest; and avoiding or refusing to seek information that provides an unfair advantage. The code of ethics and conduct requirement in the FAR rule is in addition to any ethics and training required of publicly traded companies under the Sarbanes-Oxley Act of 2002. Please see the national Ethics section.
Internal control mechanisms. According to the FAR, an internal control system must be suitable to the size of the company and extent of its involvement in government contracting, facilitate timely discovery of improper conduct in connection with government contracts, and ensure corrective measures are promptly instituted and carried out.
The FAR mandates specific characteristics for an internal control system as follows:
1. Establish standards and procedures to facilitate timely discovery of improper conduct in connection with government contracts;
2. Ensure that corrective measures are promptly instituted and executed;
3. Assign responsibility to a high-ranking individual at the company with sufficient resources to ensure the effectiveness of the business ethics and compliance program;
4. Prevent individuals who previously violated the company’s code of ethics and business conduct from serving in senior leadership positions;
5. Include a periodic audit and review of the company’s business practices, procedures, and policies for compliance with the code of ethics and business conduct and other government contracting requirements;
6. Feature an internal reporting mechanism, such as a hotline, which allows employees to report improper conduct anonymously;
7. Implement disciplinary action for improper conduct or for failing to take reasonable steps to prevent improper conduct; and
8. Provide full cooperation with any government agencies responsible for audits, investigations, or corrective action.
Posting. During contract performance, the contractor must prominently display any agency fraud hotline poster or Department of Homeland Security (DHS) fraud hotline poster in common work areas within business segments performing work under the contract and at contract worksites along with any DHS fraud hotline poster subsequently identified by the contracting officer. If the contractor maintains a company website as a method of providing information to employees, the contractor must display an electronic version of the poster(s) on the website. If the contractor has implemented a business ethics and conduct awareness program, including a reporting mechanism, such as a hotline poster, the contractor need not display any agency fraud hotline posters, other than any required DHS posters.
Exemptions. Contracts less than $5 million or that can be performed in less than 120 days are exempt, as are contracts that are performed outside of the United States and commercial item contracts (i.e., items that can be bought "off the shelf"). Firms that represent themselves as a small business in connection with the contract will be exempt from the awareness program and internal control system requirements.
OFCCP has discontinued inspecting employers’ I-9 forms during on-site reviews. In the past, OFCCP reviewed I-9 forms during on-site reviews in accordance with a memorandum of understanding between DOL and the Immigration and Customs Enforcement (ICE). Under the agreement, OFCCP had authority to review I-9 forms and refer cases of noncompliance to ICE. OFCCP has announced that it will no longer be requesting and inspecting I-9 forms.
Federal contractors and subcontractors are required to use the U.S. Citizenship and Immigration Services’ E-Verify system to verify their employees’ eligibility to legally work in the United States. The E-Verify rule requires federal contractors to agree, through language inserted into their federal contracts, to use E-Verify to confirm the employment eligibility of all persons hired during a contract term, and to confirm the employment eligibility of federal contractors’ current employees who perform contract services for the federal government within the United States.
Participation in the E-Verify program does not provide safe harbor from worksite enforcement. However, using E-Verify creates a rebuttable presumption that the contractor’s organization has not knowingly hired an unauthorized alien.
For more information on the E-Verify program, see the U.S. Citizenship and Immigration Services website at www.uscis.gov/E-verify.
The E-Verify requirements apply to solicitations issued and contracts awarded after September 8, 2009, the effective date of the final rule. The rule requires the insertion of the E-Verify clause for prime federal contracts with a period of performance longer than 120 days and a value above the simplified acquisition threshold ($100,000). The rule applies only to employees working in the United States, which includes the fifty states and the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.
The rule exempts:
• Contracts that include only commercially available off-the-shelf (COTS) items (or minor modifications to a COTS item) and related services;
• Contracts of less than the simplified acquisition threshold ($100,000);
• Contracts of less than 120 days; and
• Contracts where all work is performed outside the United States.
A COTS item is a commercial item that is sold in substantial quantities in the commercial marketplace and is offered to the government in the same form that it is available in the commercial marketplace, or with minor modifications. Nearly all food and agricultural products fall within the definition of COTS items.
Federal contractors are required to use E-Verify for all new employees, following completion of the Employment Eligibility Verification Form I-9 (Form I-9), and all existing employees who are classified as “employees assigned to the contract.” Those employees who normally perform support work, such as indirect or overhead functions, and do not perform any substantial duties applicable to the contract, would be excluded.
Employees who have already been verified through E-Verify should not be reverified. However, an employee’s previous employment authorization through E-Verify from another employer does not satisfy the contractor’s obligation to use E-Verify once the contractor has hired him or her. Under the E-Verify rule, only those employers that win a contract or subcontract that includes the E-Verify clause may run existing employees through E-Verify. A federal contractor must verify their new hires and the employees who are assigned to the contract, and may elect to also verify their entire workforce.
There are some exceptions to the requirement to use E-Verify for all new hires. The exceptions apply to institutions of higher learning, state and local governments, governments of federally recognized Indian tribes and for sureties performing under a takeover agreement with a federal agency. Under the rule, such entities may choose to only use E-Verify on new and existing employees assigned to the covered federal contract.
Contractors are required to enroll in the E-Verify program if and when they are awarded a federal contract or subcontract that requires participation in E-Verify as a provision of the contract. Before a contractor can start using E-Verify, it must enroll in the program and provide basic contact information for the organization and agree to follow the rules of the program. At the end of the enrollment process, the contractor will be required to sign a Memorandum of Understanding (MOU) that provides the terms of agreement between the company and the Department of Homeland Security (DHS).
Prescreening of job applicants is not allowed; the system may be used for new hires only after the employee has been offered the job and has accepted. Contractors must continue to use E-Verify for the life of the contract for all new hires, whether or not they are employees assigned to the contract, unless an exception applies. Once the enrollment process is completed, the U.S. Citizenship and Immigration Services (USCIS) will review all information and activate an account for the contractor. After the account is activated, the contractor will receive an e-mail with login instructions, user ID, and password.
Employers participating in the E-Verify program are required to post the notice provided by DHS, as well as the antidiscrimination notice issued by the Office of Special Counsel for Immigration-Related Unfair Employment Practices at the Department of Justice. The posting must be in a prominent place that is clearly visible to prospective employees and all employees who are to be verified through the system. Once an employer is enrolled, it will be able to log into the E-Verify online system and download these notices in the “On-line Resources” section of the E-Verify website.
Executive Order (EO) 13658, “Establishing a Minimum Wage for Contractors,” requires that federal contractors with new covered contracts, contract-like instruments, and solicitations (collectively referred to as “contracts”) pay a minimum wage of $10.10 per hour to workers performing on or in connection with covered contracts. Covered contractors must also include a clause in covered contracts and lower-tier subcontracts, specifying, as a condition of payment, that the minimum wage is to be paid to workers performing on or in connection with the contract or any subcontract.
Beginning January 1, 2016, the rate will be increased to $10.15 per hour and will be adjusted annually thereafter. The Secretary of Labor will determine the EO minimum wage, indexed to inflation. The amount of the EO minimum wage will be published by the secretary at least 90 days before such new minimum wage is to take effect. The wage rate will also be posted on the Wage and Hour Division’s (WHD) website at www.dol.gov/whd and theWage Determinations OnLine website at www.wdol.gov.
Covered contracts. The minimum wage EO applies to a wide range of contracts with the federal government for services or construction. Four major categories of contractual agreements are covered by the EO:
1. Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
2. Service contracts covered by the Service Contract Act (SCA);
3. Concessions contracts, including any concessions contract excluded from the SCA by the Department’s regulations at 29 CFR 4.133(b); and
4. Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.
The EO applies only to prime contracts covered by the DBA that exceed $2,000 and prime contracts covered by the SCA that exceed $2,500. For procurement contracts where workers’ wages are governed by the FLSA, the EO specifies that it applies only to contracts that exceed $3,000. There is no value threshold requirement for subcontracts awarded under such prime contracts.
The EO minimum wage generally applies to workers performing on or in connection with the above types of contracts if the wages of such workers are governed by the DBA, the SCA, or the FLSA. The EO minimum wage requirements apply only to new contracts with the federal government. A “new” contract is 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. This term includes both new contracts and replacements for expiring contracts.
The implementing regulations for EO 13658 prohibit the taking of kickbacks from wages paid to workers on covered contracts as well as retaliation against any worker for exercising his or her rights under the EO or the implementing regulations.
Covered workers. The final rule defines the term “worker” as any person engaged in performing work on or in connection with a contract covered by the EO, and whose wages under the contract are governed by the FLSA, the SCA, or the DBA, regardless of the contractual relationship alleged to exist between the individual and the employer. The EO minimum wage applies to workers performing on covered contracts, as well as workers performing in connection with covered contracts. The DOL has stated that it views a worker performing “on” a covered contract as any worker who directly performs the specific services called for by the contract’s terms. The DOL regards a worker performing “in connection with” a covered contract as any worker who performs work activities that, although are not the specific services called for by the contract’s terms, are necessary to the performance of those specific services.
The minimum wage rate will apply to workers with disabilities who are otherwise eligible for a subminimum wage under 29 USC 214(c). Effective January 1, 2015, covered contractors must pay tipped workers a minimum hourly wage of $4.90, in addition to the amount earned in tips. If the combination of a worker’s tips and hourly wages does not total at least $10.10 an hour, the employer must contribute the balance. Beginning in 2016, the required minimum cash wage that generally must be paid to tipped employees is $5.85 per hour. The minimum wage for tipped workers will increase each year until the tipped minimum wage equals 70 percent of the minimum wage for nontipped workers under government contracts.
Exempt from EO coverage. Employees who are exempt from the minimum wage protections of the FLSA are not entitled to the minimum wage protections of the EO. For example, learners, apprentices, messengers, and full-time students employed under special certificates pursuant to FLSA Sections 14(a) and 14(b) are not entitled to the EO minimum wage. Similarly, individuals employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in FLSA’s regulations at 29 CFR 541, are exempt from coverage of the EO.
Any FLSA-covered worker performing in connection with covered contracts for less than 20 percent of his or her hours worked in a given workweek will not be entitled to EO minimum wage. This 20 percent exclusion applies only to FLSA-covered workers performing in connection with a covered contract for less than 20 percent of their hours worked in a given workweek. The exclusion does not apply to any workers performing on a covered contract, regardless of whether such covered work constitutes less than 20 percent of his or her overall hours worked in a particular workweek.
Recordkeeping and notice requirements. Covered contractors and subcontractors must make and maintain, the following records for each worker for a period of at least 3 years:
1. Name, address, and Social Security number (SSN) of each worker;
2. The worker’s occupation(s) or classification(s);
3. The rate or rates of wages paid;
4. The number of daily and weekly hours worked by each worker;
5. Any deductions made; and
6. The total wages paid.
Contractors must permit authorized representatives of the DOL’s Wage and Hour Division to conduct interviews with workers at the worksite during normal working hours.
Notice. Under the final rule implementing the minimum wage EO (29 CFR 10.29), covered contractors must notify all workers performing work on or in connection with a covered contract of the applicable minimum wage rate under the EO. With respect to service employees on contracts covered by the SCA and laborers and mechanics on contracts covered by the DBA, the contractor may meet this requirement by posting, in a prominent and accessible place at the worksite, the applicable wage determination under those statutes.
With respect to workers performing work on or in connection with a covered contract whose wages are governed by the FLSA, the contractor must post a notice provided by the DOL in a prominent and accessible place at the worksite so it may be readily seen by workers. Contractors that customarily post notices to workers electronically may post the notice electronically, provided such electronic posting is displayed prominently on any website that is maintained by the contractor, whether external or internal, and customarily used for notices to workers about terms and conditions of employment.
Contract clauses. Covered contractors and subcontractors must include the EO contract clause in any covered contracts and lower-tiered subcontracts. The full contract clause will be deemed to have been incorporated by reference in a covered contract if the contract contains the incorporation provisions stated in the regulations. Contractors and subcontractors must pay covered workers the EO minimum wage for all hours worked on or in connection with covered contracts and must comply with pay frequency and recordkeeping obligations.
The CWHSSA covers federal service contracts and federal and federally assisted construction contracts over $100,000. It requires contractors and subcontractors on covered contracts to pay their laborers and mechanics 1 1/2 times their normal rate of pay for any hours worked over 40 in a week.
The CWHSSA also prohibits unsanitary, hazardous, or dangerous working conditions on federal and federally financed and assisted construction projects. The compensation requirements of the CWHSSA are enforced by DOL's Wage and Hour Division, while the safety and health requirements are enforced by DOL's Occupational Safety and Health Administration.
Employees performing work under federal contract must be paid specified minimum hourly rates corresponding to the wages paid to other employees working locally in the same occupation. The specified “prevailing wages”--typically, the rates agreed to in local collective bargaining pacts--become part of the contract with the government, along with all other specifications. The federal laws requiring the payment of prevailing wages on government contracts--the Walsh-Healey Act, the SCA, and the DBA--were adopted in an effort to protect organized labor from being underbid in the letting of government contracts. Exempt from coverage are:
• Public works contracts valued at less than $2,000
• Contracts for services valued at less than $2,500
• Manufacturing contracts of less than $25,000
For more information, see the DOL Wage and Hour Division's Service Contact Act Directory of Occupations. The directory is available online through DOL's website at http://www.dol.gov/esa. The directory provides a common vocabulary for occupations most often included in Service Contract Act wage determinations. Contractors wanting a hard copy of the directory may download and print a copy from the website, or they may request a printed copy from DOL's Wage and Hour Division.
Please see the national Prevailing Wages section.
The Lilly Ledbetter Fair Pay Act of 2009 eliminated the time limit within which an employee must file a complaint of pay discrimination as long as he or she continues on the payroll. The Ledbetter Act amended federal fair employment laws by clarifying that an unlawful discriminatory act occurs each time an employee is paid wages, benefits, or other compensation that reflect a discriminatory decision or unlawful practice. The amendment overturned a U.S. Supreme Court ruling holding that only intentional discriminatory pay decisions were unlawful acts and subsequent paychecks did not qualify as discriminatory acts under Title VII (Ledbetter v. Goodyear Tire and Rubber Co., 127 S. Ct. 2162 (2007)).
Due to the OFCCP's focus on systemic pay discrimination in auditing government contractors, contractors should already be highly vigilant in monitoring pay practices. With the advent of the Lilly Ledbetter Act, government contractors should take the following precautions to guard against pay discrimination claims:
Audit pay procedures. Employers may want to conduct an audit of their existing pay practices and pay levels to identify any disparities that might give rise to a claim of pay discrimination. Before conducting an audit, it is a good idea to consult the company’s employment counsel for advice on the scope of the audit and whether it is possible to conduct the audit in such a way as to have information related to the audit protected by the attorney-client privilege. The goal of the audit is to provide the organization with information that will help it correct any disparities, and in general, it will want to keep this information confidential.
Review retention policies. The types of documentation that should be retained include anything related to the pay decision. This includes performance appraisals, information on employees’ performance and experience, merit increase guidelines and policies, documentation regarding salary discussions with employees and applicants, and documents related to salary offers and negotiations including discussions related to the various components of compensation. Employers should also include any information related to decisions to pay one employee more than another if they are in similar jobs with similar experience. It is critical that the company have a document retention policy that specifically addresses compensation so that all decisions are properly documented in a consistent manner.
Update policies and procedures. Employers should review job descriptions to make sure they are up to date and accurate. Employers should also review antidiscrimination policies to ensure they clearly reflect the employer’s commitment to fair pay practices and prohibit retaliation.
Other practices and policies to be reviewed should include compensation policies and practices related to starting salaries, promotions, and merit increases to make sure they provide for fair and consistent administration and appropriate documentation of decisions. Employers should review compensation practices to ensure that there is a process for objective review of compensation decisions that includes comparisons of individuals in similar jobs, with similar experience, at similar levels. Establish a procedure that provides for a review of decisions that affect compensation (e.g., performance appraisals, transfers, promotions, and training opportunities) by a higher level decision maker or the Human Resources department.
Employers should create a document retention system that will allow the organization to defend itself against pay discrimination claims that include retention of documentation of pay decisions and decisions related to promotions, job assignments, layoffs, and other decisions that affect compensation. Finally, employers should maintain contact information for former managers and supervisors responsible for pay decisions, or decisions that might have affected compensation, even after those employees have retired.
Train supervisors. In order to avoid claims of pay discrimination, employers should train supervisors, managers, and those who make decisions about hiring, compensation, promotions, transfers, benefits, training, and other terms and conditions of employment, on topics such as: policies related to compensation administration, including setting starting salaries, promotional increases, and merit increases; documenting decisions related to performance ratings and merit increase; rules for creating and retaining records and documentation related to compensation decision; and a refresher course on the types of discrimination prohibited under Title VII, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act.
For all covered contracts entered into or modified on or after January 11, 2016, EO 13665 prohibits federal contractors from discharging or discriminating in any way against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. Protected compensation information is interpreted very broadly to include not only wages and salary, but also any form of payment, overtime, benefits, bonuses, commissions, and awards. Also protected is compensation information such as salary and pay structures, incentives, union agreements, and job analysis and descriptions. The final rule generally applies broadly to any business or organization that is covered by EO 11246.
Employer exceptions. Employers may take adverse action against an employee who discloses or discusses compensation information under two circumstances:
(1) When an employee, as part of that employee’s essential job functions, has access to the compensation information of other employees or applicants, and the employee discloses the compensation information to individuals who do not otherwise have access to it; and
(2) If the adverse action is the result of a violation of a consistently and uniformly applied rule, policy, practice, agreement, or other instrument that does not prohibit, or tend to prohibit, employees or applicants from discussing or disclosing their compensation or the compensation of other employees or applicants.
Equal opportunity clause. The equal opportunity clause that is included in qualifying federal government contracts, federally assisted construction contracts, subcontracts, and purchase orders has been revised to reflect the pay transparency requirements. Affected contractors must include the revised clause in covered contracts, or may continue to incorporate the clause by reference.
Nondiscrimination provision. After January 11, 2016, covered contractors must also disseminate a mandatory nondiscrimination provision by either electronic posting or by posting a copy of the provision in conspicuous places available to employees and applicants for employment. Contractors are also required to incorporate a nondiscrimination provision, as prescribed by the OFCCP, into existing employee manuals or handbooks.
Effective in early 2017, employees performing work on covered federal contracts and subcontracts will earn 1 hour of paid sick leave for every 30 hours worked, accruing up to 56 hours (or 7 days) of earned paid sick leave per year. The Secretary of Labor will issue implementing regulations by September 30, 2016, and the regulations will apply to covered contracts solicited or entered into outside the solicitation process after January 1, 2017.
Covered contracts. A contract will be covered by paid sick leave requirements if it is a procurement contract for services or construction; a contract or contract-like instrument for services covered by the SCA; a contract or contract-like instrument for concessions; or a contract or contract-like instrument entered into with the federal government in connection with Federal property or lands and related to offering services for federal employees, their dependents, or the general public.
In order to be covered, employees’ wages must be governed by the Davis-Bacon Act, the SCA, or the FLSA. The paid sick leave requirements only apply to contracts or contract-like instruments at the thresholds specified in those statutes.
Reasons for leave. Paid sick leave may be used by an employee for a physical or mental illness, injury, or medical condition; obtaining diagnosis, care, or preventive care from a healthcare provider; caring for a child, a parent, a spouse, a domestic partner, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship and who has any of the conditions or needs for diagnosis, care, or preventive care from a healthcare provider or is otherwise in need of care.
Paid sick leave may also be used for an absence resulting from domestic violence, sexual assault, or stalking if the time absent from work is to seek medical attention, obtain counseling, seek relocation, seek assistance from a victim services organization, or take related legal action, including preparation for or participation in any related civil or criminal legal proceeding; or to assist an individual related to the employee in any of these activities.
Existing paid sick leave policies. If a contractor has an existing paid leave policy (provided in addition to the fulfillment of SCA or Davis-Bacon Act obligations), it will satisfy the paid sick leave requirements if leave is made available to all covered employees; if the amount of paid leave meets the new paid sick leave; and if it may be used for the same purposes and under the same conditions as are required under the new paid sick leave rules.
Carryover and reinstatement of leave. Paid sick leave will carry over from year to year and must be reinstated for employees rehired by a covered contractor within 12 months after a job separation. However, contractors will not be required to make a financial payment to an employee upon a separation from employment for accrued sick leave that has not been used.
Requests and certification. Employees may request paid sick leave orally or in writing. Requests for leave must be made at least 7 calendar days in advance if the need for the leave is foreseeable, and as soon as is practicable when leave is not foreseeable. When making a request for leave, the employee must say how long he or she expects the leave to last.
A contractor can only require certification issued by a healthcare provider for paid sick leave of 3 or more consecutive work days used for the employee’s or a covered family member’s physical or mental illness, injury, or medical condition, diagnosis, care, or preventive care. Certification must be provided no later than 30 days from the first day of the leave.
For leave of 3 or more consecutive days due to domestic violence, sexual assault, or stalking, documentation may be required to be provided from an appropriate individual or organization. The contractor may require the minimum necessary information establishing a need for the employee to be absent from work. The contractor may not disclose any verification information and must maintain confidentiality about the domestic violence, sexual assault, or stalking unless the employee consents or when disclosure is required by law.
Every October the federal government issues a list of “labor surplus areas”--towns, cities, and counties with substantial unemployment. Federal agencies are required to use these lists to establish preferences in federal procurement and in the location of new plants and equipment. Procurement set-asides to benefit labor surplus areas may be reflected in bid specifications and contract provisions. In addition, federal agencies may reject bids involving foreign materials in favor of higher domestic bids, provided the domestic supplier produces substantially all materials in labor surplus areas. For further information, contact the Department of Labor, Employment, and Training Administration at www.doleta.gov.
There are a number of notices and postings required of contractors and subcontractors with the federal government depending on the amount and type of contract held.
For a full listing of required postings, see Please see the federal Notices and Postings section. and the U.S. DOL website at www.dol.gov.
Note: The DOL is in the process of revising the “EEO is the Law” poster. Contractors may continue to use the current version of the poster until a revised poster is issued. In the interim, the OFCCP has created a supplement for contractors to use along with the current “EEO is the Law” poster that will reflect recent regulatory changes. The supplement is available on OFCCP’s website atwww.dol.gov/ofccp.
Voluntary poster. In an effort to increase public awareness of the OFCCP and its mission, the agency has issued a voluntary outreach and education poster. The poster outlines employers’ and employees’ rights and responsibilities under the law, and provides contact information for those who believe they have been discriminated against.
There is no requirement that employers post the new notice. The voluntary poster is available at www.dol.gov/ofccp.
Federal contractors and their subcontractors are required to post notices informing employees of their rights under the National Labor Relations Act (NLRA). Employers and employees covered by the NLRA are subject to the notice requirements. These regulations implement Executive Order 13496 and require federal contractors to agree to post the required employee notice and to agree to insert provisions in their subcontracts that require their subcontractors to post the employee notice as well. The employee notice that must be posted and the contract provisions that must be inserted into federal contracts and subcontracts can be found at 29 CFR Part 471, Appendix A. The notice clause may be incorporated by reference, instead including the full notice clause in all subcontracts. The reference should specifically mention 29 CFR Part 471, Appendix A to Subpart A.
Posting requirements. Contractors and subcontractors must post the employee notice conspicuously in and around their plants and offices so that it is prominent and readily seen by employees who are covered by the NLRA and who engage in contract-related activity. In particular, contractors and subcontractors must post the notice where other notices to employees about their jobs are posted.
Contractors and subcontractors who post notices to employees electronically must also post the required notice electronically, which requires posting a link to the DOL’s website containing the employee notice where they customarily place other electronic notices to employees about their jobs. This language and the link should be included on the employer’s intranet or Internet in the same manner and location as other notices to employees.
Where a significant portion of a contractor's workforce is not proficient in English, contractors and subcontractors must provide the employee notice in languages spoken by employees, and the DOL will provide translations of the employee notice that can be used to comply with the physical and electronic posting requirements. Although the term “significant portion” is not defined, contractors that translate other policies and notices should do so for this notice as well.
Exceptions.De minimis subcontracts of less than $10,000 are exempted from the posting requirements. The posting requirements do not apply to government contracts for work performed exclusively by employees of U.S. firms operating outside the United States. Prime contractors are not liable for a subcontractor’s noncompliance, as long as the prime contractor does not turn a blind eye toward noncompliance of its subcontractors and diligently seeks subcontractor compliance following an order by the DOL.
Enforcement. The OFCCP shares enforcement responsibilities for this posting requirement with the U.S. DOL's Office of Labor Management Standards (OLMS). OFCCP is responsible for investigating complaints, compliance evaluations, and conciliation, and will refer violations to OLMS for enforcement.
Penalties. Covered employers that do not post the required notice may lose individual contracts or be debarred from all federal contracts. An employer may also be debarred if it violates the terms of the notice or otherwise interferes with the right of employees to unionize. Any substantive violations of the provisions of the employee rights notice may constitute a violation of the NLRA and will be referred to and adjudicated solely by the National Labor Relations Board.
The "Anti-Kickback" section of the Copeland Act precludes a contractor or subcontractor from inducing an employee to give up any of his or her compensation. The Act and implementing regulations require the employer to submit a weekly statement of the wages paid to each employee during the preceding payroll period.
The "Anti-Kickback" section of the Copeland Act applies to all contractors and subcontractors performing on any federally funded or assisted contract for the construction, prosecution, completion, or repair of any public building or public work, except contracts for which the only federal assistance is a loan guarantee. The regulations pertaining to the Copeland Act payroll deductions and submittal of the weekly statement of compliance apply only to contractors and subcontractors performing on federally funded contracts in excess of $2,000 and federally assisted contracts in excess of $2,000 that are subject to federal wage standards.
The following chart summarizes the compliance requirements for government contracts.
Value of ContractRequirements
More than $10,000Advertising. include a phrase such as "Equal Opportunity Employer" and “Women/Minorities” in all recruiting ads.
Equal employment opportunity. Take affirmative action to eliminate discrimination on the basis of race, color, religion, sex, and national origin; include EO clauses in all covered subcontracts and purchase orders.
Prevailing wages. Pay at hourly rate established for each occupation under collective bargaining agreements. For more information. Please see the national Prevailing Wages section.
More than $15,000Affirmative action for individuals with disabilities. Take affirmative action to employ and promote individuals with physical or mental disabilities.
Advertising. Include a phrase such as “Equal Opportunity Employer” and “Disabilities” in all recruiting ads.
Equal employment opportunity. Take affirmative action to eliminate discrimination on the basis of disability; include EO clauses in all covered subcontracts and purchase orders.
More than $25,000Executive compensation. All first-tier subcontract awards expected to amount to $25,000 or more must report annually the names and total compensation of the contractor's five highest-paid executives for the contractor's preceding completed fiscal year.
More than $50,000Affirmative action plans (AAPs) for women, minorities, and individuals with disabilities. For contractors that employ 50 or more people, prepare and maintain a written AAP for each of their establishments. Please see the national Affirmative Action section.
EEO-1 form. For all nonexempt federal contractors with 50 or more employees and a prime contract, first-tier subcontract, or purchase order amounting to $50,000 or more, file EEO-1 report annually. For more equal employment opportunity reporting requirements. Please see the national Civil Rights section. for more information on the EEO-1 Report requirements Please see the national Affirmative Action section.
More than $100,000Drug-free workplace. Establish procedures to guarantee a drug-free workplace. Please see the national Alcohol and Drugs section.
For contracts entered into or modified on or after December 1, 2003, contractors who employ 50 or more people must prepare and maintain a written AAP for protected veterans for each of their establishments. File a VETS-4212 report.
Contract Work Hours and Safety Standards Act. Pay laborers and mechanics 1 1/2 times their basic rate of pay for all hours worked over 40 in a workweek for federal service contracts and federal and federally assisted construction contracts .
More than $150,000Nondisplacement of Qualified Workers Under Service Contracts. Requires that contractors and subcontractors acquiring contracts that succeed contracts for the performance of the same or similar services at the same location offer the predecessor contractor's employees a right of first refusal of employment.
Veterans affirmative action and recruiting. Create a written AAP for protected veterans. List all required job openings with the appropriate employment service delivery system.
Veterans Advertising. Include a phrase such as “Equal Opportunity Employer” and “Veterans” in all recruiting ads.
Veterans Equal Employment Opportunity. Take affirmative action to eliminate discrimination on the basis of protected veterans’ status; include veterans’ EO clauses in all covered subcontracts and purchase orders.
More than $500,000Minority business enterprise (MBE) program. If required by the contracting agency involved, establish an MBE program with contract provisions.
$5 million or more with a 120-day-or-more performance periodHave a written code of business ethics, conduct an ongoing awareness program, and display the federal agency office of inspector general fraud hotline poster on-site and on website(s).
Please see the national Affirmative Action for more information. section. OFCCP's website, www.dol.gov/ofccp, includes a summary of the agency's administrative requirements, the text of various laws and regulations, and other compliance information.
OFCCP may be contacted through its regional offices at www.dol.gov/ofccp:
Last reviewed November 2015.
Related Topics:
National
An employer’s status as a contractor with the federal government brings the financial benefit of the contract itself, but with that financial benefit comes the serious responsibility of complying with the federal government's many rules and regulations imposed on contractors. The various laws that apply to contractors and the compliance measures that must be taken oftentimes depend on the number of employees a contractor has and the dollar amount of the contract with the federal government. The following materials outline many key obligations for federal government contractors.
Employers are required to meet certain affirmative action obligations if they do business with the federal government and are covered by federal Rehabilitation Act of 1973 Section 503 (Section 503) , the Vietnam Era Veterans' Readjustment Assistance Act of 1974 (VEVRAA), Executive Order 11246, and the Jobs for Veterans Act. The threshold amounts for these laws begin at the $10,000 contract level, and compliance requirements increase as the amount of the contract and the size of the contractor's workforce increase. Please see the national Affirmative Action. section.
An affirmative action program is a management tool designed to ensure equal opportunity in recruiting, hiring, training, promoting, and compensating individuals. Affirmative action goes beyond equal employment opportunity measures, requiring employers to eliminate discriminatory conditions, whether inadvertent or intentional, and to treat all employees equally in the workplace.
The OFCCP, part of the U.S. DOL, administers these laws and has issued regulations implementing each of them. Contractors' affirmative action obligations vary, depending on the size of the contract and the date on which the contract was entered into or modified. Please see the national Affirmative Action, national Disabilities, national Vietnam Veterans, national Prevailing Wages sections.
DOL’s OFCCP published final regulations, making significant changes to the rules implementing Section 503 and VEVRAA. The rules took effect on March 24, 2014, with the exception of Subpart C (pertaining to affirmative action plans (AAPs)). Please see the national Affirmative Action. section.
For more information on the final rules, go to BLR's online resource center, OFCCP Regs for Federal Contractors, at http://hr.blr.com/resource-centers/OFCCP-Regs-for-Federal-Contractors.
Note: In 2015, the jurisdictional thresholds for Section 503 and VEVRAA were adjusted for inflation by the Federal Acquisition Regulatory (FAR) Council from $10,000 to $15,000 (Section 503) and from $100,000 to $150,000 (VEVRAA). Although OFCCP’s Section 503 and VEVRAA regulations have not been changed to reflect this adjustment, OFCCP has indicated that they will follow the FAR Council’s inflation-adjusted thresholds.
Executive Order 13495, titled Nondisplacement of Qualified Workers Under Service Contracts, requires that contractors and subcontractors acquiring contracts that succeed contracts for the performance of the same or similar services at the same location must offer the predecessor contractor's employees a right of first refusal of employment. Protected employees would be terminated as a result of the award to a successor contractor.
Requirements. Under the Executive Order, employment openings cannot be offered to nonpredecessor employee prospects until a right of first refusal has been provided to the predecessor employees. In addition, if a contractor terminates its relationship with a subcontractor under a particular contract and decides to perform the work itself, the contractor is required to offer employment to the subcontractor’s employees who would otherwise be displaced.
In order to be protected, an employee must have worked for the predecessor contractor or subcontractor for at least 3 months immediately before the start of the follow-on contract. In addition, the employee must not have been otherwise subject to termination and must be a service employee within the meaning of the Service Contract Act.
Notice. At least 10 days’ notice must be given to affected employees, and the notice must state the period within which the offer must be accepted. In addition, no later than 10 days before the completion of the predecessor contract term, the predecessor contractor must provide the successor contractor with a certified list of names and employment anniversary dates of all the service employees working under the contract and its subcontractors during the last month of contract employment.
Contracting agencies must include the new requirements in solicitations, new contracts, and contract modifications. Contractors' obligations do not begin until the new requirements are included in the relevant contracting document by the contracting agency.
Exceptions. Short-term employees are exempted from protection, as are employment where federal service work constitutes only part of the employee’s job; managerial and supervisory staff; certain contracts or subcontracts awarded for services produced or provided by persons who are blind or have severe disabilities; and contracts and subcontracts under the simplified acquisition threshold of $150,000, even when the prime contract is for a greater amount. The Executive Order does not apply to any employee who the successor contractor reasonably believes, based on credible written information, that the employee failed to sufficiently perform the job based on past performance.
Penalties. If a covered contractor fails to comply with the Executive Order, the DOL has the power to issue sanctions and remedies, including payment of lost wages and for willful violations, to debar the contractor for up to 3 years. The DOL may also withhold contract funds.
The Federal Acquisition Regulations (FAR) require that federal government contractors with contracts that are expected to exceed $5 million and have a 120-day-or-more performance period requirement must have a written code of business ethics and conduct, an ongoing awareness program, and display the federal agency office of inspector general fraud hotline poster on-site and on website(s). The code must be established within 30 days of the contract award and must be distributed to each employee engaged in the performance of the contract. An ongoing awareness program must be established within 90 days after the contract award. These time frames may be extended by the contracting officer (72 Fed. Reg. 65873 (2007)). The rules apply only to contracts entered into on or after December 24, 2007.
Code of ethics and conduct requirements. The FAR does not mandate any particular content or format for the code of business ethics and conduct requirements. However, an effective program must contain an employee awareness program and internal reporting and control mechanisms. Standard provisions for contractor codes include limits of gifts; restricting conduct to that which is fair, consistent, and professional; avoiding conflicts of interest; and avoiding or refusing to seek information that provides an unfair advantage. The code of ethics and conduct requirement in the FAR rule is in addition to any ethics and training required of publicly traded companies under the Sarbanes-Oxley Act of 2002. Please see the national Ethics section.
Internal control mechanisms. According to the FAR, an internal control system must be suitable to the size of the company and extent of its involvement in government contracting, facilitate timely discovery of improper conduct in connection with government contracts, and ensure corrective measures are promptly instituted and carried out.
The FAR mandates specific characteristics for an internal control system as follows:
1. Establish standards and procedures to facilitate timely discovery of improper conduct in connection with government contracts;
2. Ensure that corrective measures are promptly instituted and executed;
3. Assign responsibility to a high-ranking individual at the company with sufficient resources to ensure the effectiveness of the business ethics and compliance program;
4. Prevent individuals who previously violated the company’s code of ethics and business conduct from serving in senior leadership positions;
5. Include a periodic audit and review of the company’s business practices, procedures, and policies for compliance with the code of ethics and business conduct and other government contracting requirements;
6. Feature an internal reporting mechanism, such as a hotline, which allows employees to report improper conduct anonymously;
7. Implement disciplinary action for improper conduct or for failing to take reasonable steps to prevent improper conduct; and
8. Provide full cooperation with any government agencies responsible for audits, investigations, or corrective action.
Posting. During contract performance, the contractor must prominently display any agency fraud hotline poster or Department of Homeland Security (DHS) fraud hotline poster in common work areas within business segments performing work under the contract and at contract worksites along with any DHS fraud hotline poster subsequently identified by the contracting officer. If the contractor maintains a company website as a method of providing information to employees, the contractor must display an electronic version of the poster(s) on the website. If the contractor has implemented a business ethics and conduct awareness program, including a reporting mechanism, such as a hotline poster, the contractor need not display any agency fraud hotline posters, other than any required DHS posters.
Exemptions. Contracts less than $5 million or that can be performed in less than 120 days are exempt, as are contracts that are performed outside of the United States and commercial item contracts (i.e., items that can be bought "off the shelf"). Firms that represent themselves as a small business in connection with the contract will be exempt from the awareness program and internal control system requirements.
OFCCP has discontinued inspecting employers’ I-9 forms during on-site reviews. In the past, OFCCP reviewed I-9 forms during on-site reviews in accordance with a memorandum of understanding between DOL and the Immigration and Customs Enforcement (ICE). Under the agreement, OFCCP had authority to review I-9 forms and refer cases of noncompliance to ICE. OFCCP has announced that it will no longer be requesting and inspecting I-9 forms.
Federal contractors and subcontractors are required to use the U.S. Citizenship and Immigration Services’ E-Verify system to verify their employees’ eligibility to legally work in the United States. The E-Verify rule requires federal contractors to agree, through language inserted into their federal contracts, to use E-Verify to confirm the employment eligibility of all persons hired during a contract term, and to confirm the employment eligibility of federal contractors’ current employees who perform contract services for the federal government within the United States.
Participation in the E-Verify program does not provide safe harbor from worksite enforcement. However, using E-Verify creates a rebuttable presumption that the contractor’s organization has not knowingly hired an unauthorized alien.
For more information on the E-Verify program, see the U.S. Citizenship and Immigration Services website at www.uscis.gov/E-verify.
The E-Verify requirements apply to solicitations issued and contracts awarded after September 8, 2009, the effective date of the final rule. The rule requires the insertion of the E-Verify clause for prime federal contracts with a period of performance longer than 120 days and a value above the simplified acquisition threshold ($100,000). The rule applies only to employees working in the United States, which includes the fifty states and the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.
The rule exempts:
• Contracts that include only commercially available off-the-shelf (COTS) items (or minor modifications to a COTS item) and related services;
• Contracts of less than the simplified acquisition threshold ($100,000);
• Contracts of less than 120 days; and
• Contracts where all work is performed outside the United States.
A COTS item is a commercial item that is sold in substantial quantities in the commercial marketplace and is offered to the government in the same form that it is available in the commercial marketplace, or with minor modifications. Nearly all food and agricultural products fall within the definition of COTS items.
Federal contractors are required to use E-Verify for all new employees, following completion of the Employment Eligibility Verification Form I-9 (Form I-9), and all existing employees who are classified as “employees assigned to the contract.” Those employees who normally perform support work, such as indirect or overhead functions, and do not perform any substantial duties applicable to the contract, would be excluded.
Employees who have already been verified through E-Verify should not be reverified. However, an employee’s previous employment authorization through E-Verify from another employer does not satisfy the contractor’s obligation to use E-Verify once the contractor has hired him or her. Under the E-Verify rule, only those employers that win a contract or subcontract that includes the E-Verify clause may run existing employees through E-Verify. A federal contractor must verify their new hires and the employees who are assigned to the contract, and may elect to also verify their entire workforce.
There are some exceptions to the requirement to use E-Verify for all new hires. The exceptions apply to institutions of higher learning, state and local governments, governments of federally recognized Indian tribes and for sureties performing under a takeover agreement with a federal agency. Under the rule, such entities may choose to only use E-Verify on new and existing employees assigned to the covered federal contract.
Contractors are required to enroll in the E-Verify program if and when they are awarded a federal contract or subcontract that requires participation in E-Verify as a provision of the contract. Before a contractor can start using E-Verify, it must enroll in the program and provide basic contact information for the organization and agree to follow the rules of the program. At the end of the enrollment process, the contractor will be required to sign a Memorandum of Understanding (MOU) that provides the terms of agreement between the company and the Department of Homeland Security (DHS).
Prescreening of job applicants is not allowed; the system may be used for new hires only after the employee has been offered the job and has accepted. Contractors must continue to use E-Verify for the life of the contract for all new hires, whether or not they are employees assigned to the contract, unless an exception applies. Once the enrollment process is completed, the U.S. Citizenship and Immigration Services (USCIS) will review all information and activate an account for the contractor. After the account is activated, the contractor will receive an e-mail with login instructions, user ID, and password.
Employers participating in the E-Verify program are required to post the notice provided by DHS, as well as the antidiscrimination notice issued by the Office of Special Counsel for Immigration-Related Unfair Employment Practices at the Department of Justice. The posting must be in a prominent place that is clearly visible to prospective employees and all employees who are to be verified through the system. Once an employer is enrolled, it will be able to log into the E-Verify online system and download these notices in the “On-line Resources” section of the E-Verify website.
Executive Order (EO) 13658, “Establishing a Minimum Wage for Contractors,” requires that federal contractors with new covered contracts, contract-like instruments, and solicitations (collectively referred to as “contracts”) pay a minimum wage of $10.10 per hour to workers performing on or in connection with covered contracts. Covered contractors must also include a clause in covered contracts and lower-tier subcontracts, specifying, as a condition of payment, that the minimum wage is to be paid to workers performing on or in connection with the contract or any subcontract.
Beginning January 1, 2016, the rate will be increased to $10.15 per hour and will be adjusted annually thereafter. The Secretary of Labor will determine the EO minimum wage, indexed to inflation. The amount of the EO minimum wage will be published by the secretary at least 90 days before such new minimum wage is to take effect. The wage rate will also be posted on the Wage and Hour Division’s (WHD) website at www.dol.gov/whd and theWage Determinations OnLine website at www.wdol.gov.
Covered contracts. The minimum wage EO applies to a wide range of contracts with the federal government for services or construction. Four major categories of contractual agreements are covered by the EO:
1. Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
2. Service contracts covered by the Service Contract Act (SCA);
3. Concessions contracts, including any concessions contract excluded from the SCA by the Department’s regulations at 29 CFR 4.133(b); and
4. Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.
The EO applies only to prime contracts covered by the DBA that exceed $2,000 and prime contracts covered by the SCA that exceed $2,500. For procurement contracts where workers’ wages are governed by the FLSA, the EO specifies that it applies only to contracts that exceed $3,000. There is no value threshold requirement for subcontracts awarded under such prime contracts.
The EO minimum wage generally applies to workers performing on or in connection with the above types of contracts if the wages of such workers are governed by the DBA, the SCA, or the FLSA. The EO minimum wage requirements apply only to new contracts with the federal government. A “new” contract is 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. This term includes both new contracts and replacements for expiring contracts.
The implementing regulations for EO 13658 prohibit the taking of kickbacks from wages paid to workers on covered contracts as well as retaliation against any worker for exercising his or her rights under the EO or the implementing regulations.
Covered workers. The final rule defines the term “worker” as any person engaged in performing work on or in connection with a contract covered by the EO, and whose wages under the contract are governed by the FLSA, the SCA, or the DBA, regardless of the contractual relationship alleged to exist between the individual and the employer. The EO minimum wage applies to workers performing on covered contracts, as well as workers performing in connection with covered contracts. The DOL has stated that it views a worker performing “on” a covered contract as any worker who directly performs the specific services called for by the contract’s terms. The DOL regards a worker performing “in connection with” a covered contract as any worker who performs work activities that, although are not the specific services called for by the contract’s terms, are necessary to the performance of those specific services.
The minimum wage rate will apply to workers with disabilities who are otherwise eligible for a subminimum wage under 29 USC 214(c). Effective January 1, 2015, covered contractors must pay tipped workers a minimum hourly wage of $4.90, in addition to the amount earned in tips. If the combination of a worker’s tips and hourly wages does not total at least $10.10 an hour, the employer must contribute the balance. Beginning in 2016, the required minimum cash wage that generally must be paid to tipped employees is $5.85 per hour. The minimum wage for tipped workers will increase each year until the tipped minimum wage equals 70 percent of the minimum wage for nontipped workers under government contracts.
Exempt from EO coverage. Employees who are exempt from the minimum wage protections of the FLSA are not entitled to the minimum wage protections of the EO. For example, learners, apprentices, messengers, and full-time students employed under special certificates pursuant to FLSA Sections 14(a) and 14(b) are not entitled to the EO minimum wage. Similarly, individuals employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in FLSA’s regulations at 29 CFR 541, are exempt from coverage of the EO.
Any FLSA-covered worker performing in connection with covered contracts for less than 20 percent of his or her hours worked in a given workweek will not be entitled to EO minimum wage. This 20 percent exclusion applies only to FLSA-covered workers performing in connection with a covered contract for less than 20 percent of their hours worked in a given workweek. The exclusion does not apply to any workers performing on a covered contract, regardless of whether such covered work constitutes less than 20 percent of his or her overall hours worked in a particular workweek.
Recordkeeping and notice requirements. Covered contractors and subcontractors must make and maintain, the following records for each worker for a period of at least 3 years:
1. Name, address, and Social Security number (SSN) of each worker;
2. The worker’s occupation(s) or classification(s);
3. The rate or rates of wages paid;
4. The number of daily and weekly hours worked by each worker;
5. Any deductions made; and
6. The total wages paid.
Contractors must permit authorized representatives of the DOL’s Wage and Hour Division to conduct interviews with workers at the worksite during normal working hours.
Notice. Under the final rule implementing the minimum wage EO (29 CFR 10.29), covered contractors must notify all workers performing work on or in connection with a covered contract of the applicable minimum wage rate under the EO. With respect to service employees on contracts covered by the SCA and laborers and mechanics on contracts covered by the DBA, the contractor may meet this requirement by posting, in a prominent and accessible place at the worksite, the applicable wage determination under those statutes.
With respect to workers performing work on or in connection with a covered contract whose wages are governed by the FLSA, the contractor must post a notice provided by the DOL in a prominent and accessible place at the worksite so it may be readily seen by workers. Contractors that customarily post notices to workers electronically may post the notice electronically, provided such electronic posting is displayed prominently on any website that is maintained by the contractor, whether external or internal, and customarily used for notices to workers about terms and conditions of employment.
Contract clauses. Covered contractors and subcontractors must include the EO contract clause in any covered contracts and lower-tiered subcontracts. The full contract clause will be deemed to have been incorporated by reference in a covered contract if the contract contains the incorporation provisions stated in the regulations. Contractors and subcontractors must pay covered workers the EO minimum wage for all hours worked on or in connection with covered contracts and must comply with pay frequency and recordkeeping obligations.
The CWHSSA covers federal service contracts and federal and federally assisted construction contracts over $100,000. It requires contractors and subcontractors on covered contracts to pay their laborers and mechanics 1 1/2 times their normal rate of pay for any hours worked over 40 in a week.
The CWHSSA also prohibits unsanitary, hazardous, or dangerous working conditions on federal and federally financed and assisted construction projects. The compensation requirements of the CWHSSA are enforced by DOL's Wage and Hour Division, while the safety and health requirements are enforced by DOL's Occupational Safety and Health Administration.
Employees performing work under federal contract must be paid specified minimum hourly rates corresponding to the wages paid to other employees working locally in the same occupation. The specified “prevailing wages”--typically, the rates agreed to in local collective bargaining pacts--become part of the contract with the government, along with all other specifications. The federal laws requiring the payment of prevailing wages on government contracts--the Walsh-Healey Act, the SCA, and the DBA--were adopted in an effort to protect organized labor from being underbid in the letting of government contracts. Exempt from coverage are:
• Public works contracts valued at less than $2,000
• Contracts for services valued at less than $2,500
• Manufacturing contracts of less than $25,000
For more information, see the DOL Wage and Hour Division's Service Contact Act Directory of Occupations. The directory is available online through DOL's website at http://www.dol.gov/esa. The directory provides a common vocabulary for occupations most often included in Service Contract Act wage determinations. Contractors wanting a hard copy of the directory may download and print a copy from the website, or they may request a printed copy from DOL's Wage and Hour Division.
Please see the national Prevailing Wages section.
The Lilly Ledbetter Fair Pay Act of 2009 eliminated the time limit within which an employee must file a complaint of pay discrimination as long as he or she continues on the payroll. The Ledbetter Act amended federal fair employment laws by clarifying that an unlawful discriminatory act occurs each time an employee is paid wages, benefits, or other compensation that reflect a discriminatory decision or unlawful practice. The amendment overturned a U.S. Supreme Court ruling holding that only intentional discriminatory pay decisions were unlawful acts and subsequent paychecks did not qualify as discriminatory acts under Title VII (Ledbetter v. Goodyear Tire and Rubber Co., 127 S. Ct. 2162 (2007)).
Due to the OFCCP's focus on systemic pay discrimination in auditing government contractors, contractors should already be highly vigilant in monitoring pay practices. With the advent of the Lilly Ledbetter Act, government contractors should take the following precautions to guard against pay discrimination claims:
Audit pay procedures. Employers may want to conduct an audit of their existing pay practices and pay levels to identify any disparities that might give rise to a claim of pay discrimination. Before conducting an audit, it is a good idea to consult the company’s employment counsel for advice on the scope of the audit and whether it is possible to conduct the audit in such a way as to have information related to the audit protected by the attorney-client privilege. The goal of the audit is to provide the organization with information that will help it correct any disparities, and in general, it will want to keep this information confidential.
Review retention policies. The types of documentation that should be retained include anything related to the pay decision. This includes performance appraisals, information on employees’ performance and experience, merit increase guidelines and policies, documentation regarding salary discussions with employees and applicants, and documents related to salary offers and negotiations including discussions related to the various components of compensation. Employers should also include any information related to decisions to pay one employee more than another if they are in similar jobs with similar experience. It is critical that the company have a document retention policy that specifically addresses compensation so that all decisions are properly documented in a consistent manner.
Update policies and procedures. Employers should review job descriptions to make sure they are up to date and accurate. Employers should also review antidiscrimination policies to ensure they clearly reflect the employer’s commitment to fair pay practices and prohibit retaliation.
Other practices and policies to be reviewed should include compensation policies and practices related to starting salaries, promotions, and merit increases to make sure they provide for fair and consistent administration and appropriate documentation of decisions. Employers should review compensation practices to ensure that there is a process for objective review of compensation decisions that includes comparisons of individuals in similar jobs, with similar experience, at similar levels. Establish a procedure that provides for a review of decisions that affect compensation (e.g., performance appraisals, transfers, promotions, and training opportunities) by a higher level decision maker or the Human Resources department.
Employers should create a document retention system that will allow the organization to defend itself against pay discrimination claims that include retention of documentation of pay decisions and decisions related to promotions, job assignments, layoffs, and other decisions that affect compensation. Finally, employers should maintain contact information for former managers and supervisors responsible for pay decisions, or decisions that might have affected compensation, even after those employees have retired.
Train supervisors. In order to avoid claims of pay discrimination, employers should train supervisors, managers, and those who make decisions about hiring, compensation, promotions, transfers, benefits, training, and other terms and conditions of employment, on topics such as: policies related to compensation administration, including setting starting salaries, promotional increases, and merit increases; documenting decisions related to performance ratings and merit increase; rules for creating and retaining records and documentation related to compensation decision; and a refresher course on the types of discrimination prohibited under Title VII, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act.
For all covered contracts entered into or modified on or after January 11, 2016, EO 13665 prohibits federal contractors from discharging or discriminating in any way against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. Protected compensation information is interpreted very broadly to include not only wages and salary, but also any form of payment, overtime, benefits, bonuses, commissions, and awards. Also protected is compensation information such as salary and pay structures, incentives, union agreements, and job analysis and descriptions. The final rule generally applies broadly to any business or organization that is covered by EO 11246.
Employer exceptions. Employers may take adverse action against an employee who discloses or discusses compensation information under two circumstances:
(1) When an employee, as part of that employee’s essential job functions, has access to the compensation information of other employees or applicants, and the employee discloses the compensation information to individuals who do not otherwise have access to it; and
(2) If the adverse action is the result of a violation of a consistently and uniformly applied rule, policy, practice, agreement, or other instrument that does not prohibit, or tend to prohibit, employees or applicants from discussing or disclosing their compensation or the compensation of other employees or applicants.
Equal opportunity clause. The equal opportunity clause that is included in qualifying federal government contracts, federally assisted construction contracts, subcontracts, and purchase orders has been revised to reflect the pay transparency requirements. Affected contractors must include the revised clause in covered contracts, or may continue to incorporate the clause by reference.
Nondiscrimination provision. After January 11, 2016, covered contractors must also disseminate a mandatory nondiscrimination provision by either electronic posting or by posting a copy of the provision in conspicuous places available to employees and applicants for employment. Contractors are also required to incorporate a nondiscrimination provision, as prescribed by the OFCCP, into existing employee manuals or handbooks.
Effective in early 2017, employees performing work on covered federal contracts and subcontracts will earn 1 hour of paid sick leave for every 30 hours worked, accruing up to 56 hours (or 7 days) of earned paid sick leave per year. The Secretary of Labor will issue implementing regulations by September 30, 2016, and the regulations will apply to covered contracts solicited or entered into outside the solicitation process after January 1, 2017.
Covered contracts. A contract will be covered by paid sick leave requirements if it is a procurement contract for services or construction; a contract or contract-like instrument for services covered by the SCA; a contract or contract-like instrument for concessions; or a contract or contract-like instrument entered into with the federal government in connection with Federal property or lands and related to offering services for federal employees, their dependents, or the general public.
In order to be covered, employees’ wages must be governed by the Davis-Bacon Act, the SCA, or the FLSA. The paid sick leave requirements only apply to contracts or contract-like instruments at the thresholds specified in those statutes.
Reasons for leave. Paid sick leave may be used by an employee for a physical or mental illness, injury, or medical condition; obtaining diagnosis, care, or preventive care from a healthcare provider; caring for a child, a parent, a spouse, a domestic partner, or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship and who has any of the conditions or needs for diagnosis, care, or preventive care from a healthcare provider or is otherwise in need of care.
Paid sick leave may also be used for an absence resulting from domestic violence, sexual assault, or stalking if the time absent from work is to seek medical attention, obtain counseling, seek relocation, seek assistance from a victim services organization, or take related legal action, including preparation for or participation in any related civil or criminal legal proceeding; or to assist an individual related to the employee in any of these activities.
Existing paid sick leave policies. If a contractor has an existing paid leave policy (provided in addition to the fulfillment of SCA or Davis-Bacon Act obligations), it will satisfy the paid sick leave requirements if leave is made available to all covered employees; if the amount of paid leave meets the new paid sick leave; and if it may be used for the same purposes and under the same conditions as are required under the new paid sick leave rules.
Carryover and reinstatement of leave. Paid sick leave will carry over from year to year and must be reinstated for employees rehired by a covered contractor within 12 months after a job separation. However, contractors will not be required to make a financial payment to an employee upon a separation from employment for accrued sick leave that has not been used.
Requests and certification. Employees may request paid sick leave orally or in writing. Requests for leave must be made at least 7 calendar days in advance if the need for the leave is foreseeable, and as soon as is practicable when leave is not foreseeable. When making a request for leave, the employee must say how long he or she expects the leave to last.
A contractor can only require certification issued by a healthcare provider for paid sick leave of 3 or more consecutive work days used for the employee’s or a covered family member’s physical or mental illness, injury, or medical condition, diagnosis, care, or preventive care. Certification must be provided no later than 30 days from the first day of the leave.
For leave of 3 or more consecutive days due to domestic violence, sexual assault, or stalking, documentation may be required to be provided from an appropriate individual or organization. The contractor may require the minimum necessary information establishing a need for the employee to be absent from work. The contractor may not disclose any verification information and must maintain confidentiality about the domestic violence, sexual assault, or stalking unless the employee consents or when disclosure is required by law.
Every October the federal government issues a list of “labor surplus areas”--towns, cities, and counties with substantial unemployment. Federal agencies are required to use these lists to establish preferences in federal procurement and in the location of new plants and equipment. Procurement set-asides to benefit labor surplus areas may be reflected in bid specifications and contract provisions. In addition, federal agencies may reject bids involving foreign materials in favor of higher domestic bids, provided the domestic supplier produces substantially all materials in labor surplus areas. For further information, contact the Department of Labor, Employment, and Training Administration at www.doleta.gov.
There are a number of notices and postings required of contractors and subcontractors with the federal government depending on the amount and type of contract held.
For a full listing of required postings, see Please see the federal Notices and Postings section. and the U.S. DOL website at www.dol.gov.
Note: The DOL is in the process of revising the “EEO is the Law” poster. Contractors may continue to use the current version of the poster until a revised poster is issued. In the interim, the OFCCP has created a supplement for contractors to use along with the current “EEO is the Law” poster that will reflect recent regulatory changes. The supplement is available on OFCCP’s website atwww.dol.gov/ofccp.
Voluntary poster. In an effort to increase public awareness of the OFCCP and its mission, the agency has issued a voluntary outreach and education poster. The poster outlines employers’ and employees’ rights and responsibilities under the law, and provides contact information for those who believe they have been discriminated against.
There is no requirement that employers post the new notice. The voluntary poster is available at www.dol.gov/ofccp.
Federal contractors and their subcontractors are required to post notices informing employees of their rights under the National Labor Relations Act (NLRA). Employers and employees covered by the NLRA are subject to the notice requirements. These regulations implement Executive Order 13496 and require federal contractors to agree to post the required employee notice and to agree to insert provisions in their subcontracts that require their subcontractors to post the employee notice as well. The employee notice that must be posted and the contract provisions that must be inserted into federal contracts and subcontracts can be found at 29 CFR Part 471, Appendix A. The notice clause may be incorporated by reference, instead including the full notice clause in all subcontracts. The reference should specifically mention 29 CFR Part 471, Appendix A to Subpart A.
Posting requirements. Contractors and subcontractors must post the employee notice conspicuously in and around their plants and offices so that it is prominent and readily seen by employees who are covered by the NLRA and who engage in contract-related activity. In particular, contractors and subcontractors must post the notice where other notices to employees about their jobs are posted.
Contractors and subcontractors who post notices to employees electronically must also post the required notice electronically, which requires posting a link to the DOL’s website containing the employee notice where they customarily place other electronic notices to employees about their jobs. This language and the link should be included on the employer’s intranet or Internet in the same manner and location as other notices to employees.
Where a significant portion of a contractor's workforce is not proficient in English, contractors and subcontractors must provide the employee notice in languages spoken by employees, and the DOL will provide translations of the employee notice that can be used to comply with the physical and electronic posting requirements. Although the term “significant portion” is not defined, contractors that translate other policies and notices should do so for this notice as well.
Exceptions.De minimis subcontracts of less than $10,000 are exempted from the posting requirements. The posting requirements do not apply to government contracts for work performed exclusively by employees of U.S. firms operating outside the United States. Prime contractors are not liable for a subcontractor’s noncompliance, as long as the prime contractor does not turn a blind eye toward noncompliance of its subcontractors and diligently seeks subcontractor compliance following an order by the DOL.
Enforcement. The OFCCP shares enforcement responsibilities for this posting requirement with the U.S. DOL's Office of Labor Management Standards (OLMS). OFCCP is responsible for investigating complaints, compliance evaluations, and conciliation, and will refer violations to OLMS for enforcement.
Penalties. Covered employers that do not post the required notice may lose individual contracts or be debarred from all federal contracts. An employer may also be debarred if it violates the terms of the notice or otherwise interferes with the right of employees to unionize. Any substantive violations of the provisions of the employee rights notice may constitute a violation of the NLRA and will be referred to and adjudicated solely by the National Labor Relations Board.
The "Anti-Kickback" section of the Copeland Act precludes a contractor or subcontractor from inducing an employee to give up any of his or her compensation. The Act and implementing regulations require the employer to submit a weekly statement of the wages paid to each employee during the preceding payroll period.
The "Anti-Kickback" section of the Copeland Act applies to all contractors and subcontractors performing on any federally funded or assisted contract for the construction, prosecution, completion, or repair of any public building or public work, except contracts for which the only federal assistance is a loan guarantee. The regulations pertaining to the Copeland Act payroll deductions and submittal of the weekly statement of compliance apply only to contractors and subcontractors performing on federally funded contracts in excess of $2,000 and federally assisted contracts in excess of $2,000 that are subject to federal wage standards.
The following chart summarizes the compliance requirements for government contracts.
Value of ContractRequirements
More than $10,000Advertising. include a phrase such as "Equal Opportunity Employer" and “Women/Minorities” in all recruiting ads.
Equal employment opportunity. Take affirmative action to eliminate discrimination on the basis of race, color, religion, sex, and national origin; include EO clauses in all covered subcontracts and purchase orders.
Prevailing wages. Pay at hourly rate established for each occupation under collective bargaining agreements. For more information. Please see the national Prevailing Wages section.
More than $15,000Affirmative action for individuals with disabilities. Take affirmative action to employ and promote individuals with physical or mental disabilities.
Advertising. Include a phrase such as “Equal Opportunity Employer” and “Disabilities” in all recruiting ads.
Equal employment opportunity. Take affirmative action to eliminate discrimination on the basis of disability; include EO clauses in all covered subcontracts and purchase orders.
More than $25,000Executive compensation. All first-tier subcontract awards expected to amount to $25,000 or more must report annually the names and total compensation of the contractor's five highest-paid executives for the contractor's preceding completed fiscal year.
More than $50,000Affirmative action plans (AAPs) for women, minorities, and individuals with disabilities. For contractors that employ 50 or more people, prepare and maintain a written AAP for each of their establishments. Please see the national Affirmative Action section.
EEO-1 form. For all nonexempt federal contractors with 50 or more employees and a prime contract, first-tier subcontract, or purchase order amounting to $50,000 or more, file EEO-1 report annually. For more equal employment opportunity reporting requirements. Please see the national Civil Rights section. for more information on the EEO-1 Report requirements Please see the national Affirmative Action section.
More than $100,000Drug-free workplace. Establish procedures to guarantee a drug-free workplace. Please see the national Alcohol and Drugs section.
For contracts entered into or modified on or after December 1, 2003, contractors who employ 50 or more people must prepare and maintain a written AAP for protected veterans for each of their establishments. File a VETS-4212 report.
Contract Work Hours and Safety Standards Act. Pay laborers and mechanics 1 1/2 times their basic rate of pay for all hours worked over 40 in a workweek for federal service contracts and federal and federally assisted construction contracts .
More than $150,000Nondisplacement of Qualified Workers Under Service Contracts. Requires that contractors and subcontractors acquiring contracts that succeed contracts for the performance of the same or similar services at the same location offer the predecessor contractor's employees a right of first refusal of employment.
Veterans affirmative action and recruiting. Create a written AAP for protected veterans. List all required job openings with the appropriate employment service delivery system.
Veterans Advertising. Include a phrase such as “Equal Opportunity Employer” and “Veterans” in all recruiting ads.
Veterans Equal Employment Opportunity. Take affirmative action to eliminate discrimination on the basis of protected veterans’ status; include veterans’ EO clauses in all covered subcontracts and purchase orders.
More than $500,000Minority business enterprise (MBE) program. If required by the contracting agency involved, establish an MBE program with contract provisions.
$5 million or more with a 120-day-or-more performance periodHave a written code of business ethics, conduct an ongoing awareness program, and display the federal agency office of inspector general fraud hotline poster on-site and on website(s).
Please see the national Affirmative Action for more information. section. OFCCP's website, www.dol.gov/ofccp, includes a summary of the agency's administrative requirements, the text of various laws and regulations, and other compliance information.
OFCCP may be contacted through its regional offices at www.dol.gov/ofccp:
Last reviewed November 2015.
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