Benefits and Compensation, HR Management & Compliance

Federal Contractors’ FMLA Policies Face New Scrutiny from Executive Order

By Peter A. Susser     Federal contractors’ administration of family leave will face unprecedented scrutiny as a result of a new executive order from President Obama. The order requires the disclosure of labor law violations committed by would-be contractors, and a determination of whether that candidate is satisfactorily responsible and ethical. The order is a sobering wake-up call that will require federal contractors to take important preparatory steps.

The “Fair Pay and Safe Workplaces” executive order incorporates a number of policy positions that the administration and its congressional allies have long advanced, including restrictions on the use of “pre-dispute” mandatory employment arbitration agreements to resolve disputes relating to sex discrimination, harassment or assault and transparency in paycheck practices (including classification issues).

The directive’s major thrust, however, is on the disclosure of labor law violations committed by a contracting candidate within the past three years, and a resulting determination of whether this would-be contractor is a “responsible source” with a satisfactory record of integrity and business ethics.

Supporters say the new executive order will encourage contractors practices that enhance productivity, and improve the likelihood that goods and services will be delivered in a  timely, predictable and satisfactory manner. The applies to contracts worth $500,000 or more and to most subcontracts. It is due to be implemented in 2016 following release of regulations by the Federal Acquisition Regulation Council, with guidance provided by DOL.

Impact on FMLA

The new directive will apply to any administrative merit determination, arbitration award or decision, or civil judgments under the FMLA that have occurred within the preceding three-year period. The reporting obligation also will continue following the award of the contract and during the period of its performance, when covered companies will have to update the previously submitted information every six months.

The executive order envisions that federal agency contracting officers, with the assistance of labor advisers on whom they rely, will review the reported information (which is likely to extend, for certain contracts, to covered subcontractors), and determine what, if any, remedial action is necessary. This might range from consultation and compliance assistance at one end of the spectrum, to agreements to avoid future violations, and ultimately, to consideration of contract suspension, termination and/or debarment.

For employers that are federal contractors, the new executive order poses new compliance concerns under the FMLA. Traditionally, the exclusive avenues for enforcement of rights (and punishment for deficiencies) have been the filing of administrative complaints with DOL’s Wage and Hour Division, or the filing of a private civil action in court. Violators of the FMLA may be liable for damages equal to the amount of any wages, benefits or other compensation denied or lost.

When wages, salaries benefits and/or other compensation have not been denied, an employee may recover actual monetary losses resulting from the violation up to a sum equal to 12 weeks of wages or the salary. Equitable relief, such as reinstatement or promotion, as well as attorney’s fees, may be awarded in litigation. Importantly, findings of willful violations can double the amount of awards.

Sobering Conclusion for Covered Contractors

The compliance process and potential sanctions envisioned by the new executive order are sobering.

Complications and challenges may arise in ways not previously envisioned. For example, with FAR regulations and advice from DOL and the Office of Management and Budget likely to specify the mechanics of administration, single findings of violation may not necessarily give rise to a finding of “lack of responsibility” on the part of the current or potential contractor or subcontractor.

Consequently, all federal contractors should review their histories of compliance and violation under FMLA (and the other covered federal statutes), and make any policy or process improvements that will place them in a better position if and when any adverse parts of their record come under new scrutiny and analysis in the procurement process.

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