Portion of Fair UPATE: Pay and Safe Workplaces Executive Order Blocked

As posted by: jdsupra.com/Hinshaw & Culbertson LLP 2016

On Tuesday of this week, a federal judge in Texas granted a nationwide preliminary injunction blocking the portions of President Obama’s “Fair Pay and Safe Workplaces” Executive Order.

That order, signed in 2014 and scheduled to take effect on October 25, 2016, has three discrete parts, each described as being designed to help executive departments and agencies identify and work with contractors who will comply with labor laws while performing federal contracts.

The first part of the order directs agency contracting officers to consider contractors’ record of “labor law violations” and to be able to do so, the provision requires contractors to disclose violations of fourteen different federal labor laws, executive orders and equivalent state laws.  The agency officer is then to review the contractor’s disclosed violations (if any) to assess the contractors record of compliance when making a pre-award “responsibility” determination as well as when making post-award decisions.  This provision also contains a parallel requirement applicable to certain subcontractors working on covered contracts.

The second part of the Order creates a new paycheck-transparency protection for workers on federal contracts.  It requires contracting agencies to ensure that certain workers on covered contracts receive a wage statement that contains information concerning that individual’s hours worked, overtime hours, pay and any additions or deductions made from the pay.  It also requires covered contractors and subcontractors to inform individuals in writing if the individual is being treated as an independent contractor.

The third part of the Order required that federal contractors entering federal contracts for non-commercial items over $1 million agree not to enter into any mandatory pre-dispute arbitration agreements with their employees or independent contractors on any matter arising under Title VII or any tort arising from sexual assault or harassment.

In the much anticipated ruling, Judge Crone ordered a nationwide preliminary injunction which will temporarily block the first and third parts of the order described above, i.e. the labor law violation disclosure requirements and the restriction on the use of arbitration agreements.  Part two of the final rule, the pay transparency requirement, is not impacted by the ruling and is still scheduled to take effect on January 1, 2017.  A preliminary injunction is only the first step in this challenge and the next likely steps will be a hearing on the request for a permanent injunction and appeal.  Because the injunction is only temporary, it is too early for employers to claim victory.

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