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VIEWPOINT: New rules require federal contractors to assess policies, procedures

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By Sara Svedberg
Published Feb. 15, 2016

Is your federal contracting business in compliance with new rules and regulations? A series of executive orders signed or implemented this year imposes substantial new obligations on employers contracting with the federal government. These executive orders have established a minimum wage for employees of federal contractors, expanded protected classes, and set additional requirements for hiring veterans and individuals with disabilities.

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And more changes are underway. The minimum wage rose Jan. 1. A new pay transparency rule took effect Jan. 11. And regulations are expected on mandatory reporting of labor and employment law violations.

Pair these new obligations with increased enforcement by the U.S. Department of Labor, and it is high time for employers that contract with the federal government to audit existing policies and procedures.

The stakes are high. Federal contractors that fail to comply with applicable rules are subject to sanctions, including the possible suspension of federal work, financial penalties, and even possible criminal penalties, and the DOL does not limit its audits to large federal contractors. Below are summaries of new and updated rules.

Minimum wage: Beginning Jan. 1, the minimum wage for work performed under covered federal contracts increased to $10.15 an hour. The wage requirements apply, with a few narrow exceptions, to contracts arising out of solicitations on or after Jan. 1, 2015, that are (1) under the Davis-Bacon Act; (2) under the Service Contract Act; (3) for concessions; or (4) in connection with federal property or lands related to services for federal employees, their dependents, or the public. Requirements under Executive Order 13658 flow down to subcontractors.

Pay transparency: On Jan. 11, Executive Order 13665 took effect. It prohibits federal contractors from discriminating against employees who inquire about, discuss, or disclose their compensation or that of another employee or applicant. The rule applies to employers with federal contracts or subcontracts totaling more than $10,000 formed or modified after Jan. 11. The rules contain some exceptions to enforcement, relating to performing essential job functions and to workplace rules.

Expanding protected classes: New rules have implemented an amended Executive Order 11246, which prohibits discrimination in the workplace of federal contractors. Under the new rules, contractors now are prohibited from discriminating not only on the basis of race, color, religion, sex, or national origin, but also on the basis of sexual orientation and gender identity. Employers with federal contracts or subcontracts in excess of $10,000 are subject to the executive order and must take affirmative action to ensure equal opportunities in employment. Also, employers with a single federal contract or subcontract of $50,000 or more and 50 or more employees must prepare an annual affirmative action plan.

Veterans and individuals with disabilities: New Labor Department rules significantly have modified federal contractors’ affirmative action obligations for veterans under the Vietnam Era Veterans’ Readjustment Assistance Act and for individuals with disabilities under Section 503 of the Rehabilitation Act of 1973.

Among the most significant changes, covered federal contractors now must meet a hiring benchmark for veterans and follow a national utilization goal for individuals with disabilities, and they must audit, and report on, their affirmative action programs.

The rules concerning veterans apply to federal contractors and subcontractors with a single contract of $150,000 or more. Rules concerning individuals with disabilities apply to employers with contracts of more than $15,000, with increased obligations for those with 50 or more employees and contracts of $50,000 or more.

Reporting violations: Making its way toward final regulations is Executive Order 13673. With final rules expected in 2016, this executive order will require contractors seeking new federal contracts valued at $500,000 or more to report past and future violations of labor and employment laws.

Sara Svedberg is an employment and labor law attorney at Nexsen Pruet in Columbia. She can be reached at (803) 540-2156 or email

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