New rule requires labor law violation disclosures from government contractors

Government requires contractors to level on labor law violations to improve workplaces

Construction & Engineering

By Allie Sanchez

The Federal Acquisition Regulatory (FAR) Council recently issued the final rule on an Executive Order approved two years ago to ensure fair pay and safe workplaces to take effect this October. The rule requires government contractors to “tell on themselves” and disclose any labor law violations and court actions against the company during the qualification process.

“Although contracting officers previously could take into account a contractor’s violation of labor laws in making responsibility determinations, several government reports showed they lacked adequate information, and, even when information was available, they were reluctant to act due to the absence of guidance,” Cynthia O. Akatugba of Morrison Foerster LLP said in a recent report. 

She adds, “The new rule and guidance focus on ensuring that contracting officers have accurate information by requiring contractors to furnish that information and by providing a framework for considering the information.”

Gunjan Talati, a partner in Kilpatrick Townsend & Stockton said in a separate report that the final rule specifically outlines the core reporting requirements that applies to prime contracts and sub contracts with the government worth more than $500,000 after October 25.

Further, he explained, it adopts a phased-in approach for both prime contracts and sub-contracts. It will initially apply to prime solicitations and contracts issued on or after October 25 with an estimated value of $50 million. The rule will go into full effect on October 25, 2017.

“The final rule furthers a trend of the government requiring contractors to tell on themselves. To survive in this environment, construction companies can take a few proactive steps to stay ahead of the compliance curve,” Talati further explained.

Among others, he advised contractors to update policies and procedures to track and identify potential disclosures; properly train compliance and proposal teams on the final rule; improve internal controls to minimize labor law violations, and evaluate how legal actions against the company can affect their disclosure requirements.

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