Last year, President Obama issued Executive Order 13,673, entitled the Fair Pay and Safe Workplace Order. The Order requires prospective and active federal contractors to disclose violations of 14 federal labor and related laws as part of the contract acquisition process. Federal agencies offering contracts will use this information as part of the decision making process for awarding the work on contracts exceeding $500,000 beginning in 2016. The Order is intended to spur preventative measures by contractors to avoid violation of labor laws that will impact their ability to obtain future federal work.

Last week, the Department of Labor issued a proposed guidance designed to implement the Executive Order. In addition to setting forth procedures for self-reporting violations, the DOL guidance contains several proposals that will affect federal contractors’ human resource practices.

First, the guidance proposes prohibiting use of mandatory arbitration agreements between contractors and their employees. Many employers use these agreements to avoid litigating disputes in state and federal courts viewed as excessively plaintiff-friendly. The guidance also requires federal contractors to provide information to employees about how their pay is calculated, in order to allow determinations that all wages owed have actually been paid. Certain independent contractors must be given a statement explaining their work status. Each federal agency will have a designated compliance adviser who reviews contractor disclosures with contracting officers.

DOL also announced that it intends to issue a second guidance that will detail contractor reporting obligations for violations of state labor laws. Federal contractors and companies contemplating bidding for federal work should review these requirements to determine their reporting requirements, and to decide if the additional regulatory burden affects their willingness to seek federal work. DOL is accepting comments on the proposed guidance through July 27.