A new executive order from President Obama will mean closer scrutiny of companies that want to obtain federal contracts. Under the Fair Pay and Safe Workplace Executive Order, bidders on projects valued at more than $500,000 in goods, services, or a combination of both would be required to report violations of the OSH Act, the Migrant and Seasonal Agricultural Worker Protection Act, the Americans with Disabilities Act and others that they were cited for during the three years prior to the start of a bidding process.
It doesn’t seem to mean, however, that OSHA violators will necessarily be barred from being awarded federal contracts. The EO will be implemented on new contracts in stages during 2016 and does not affect contracts already in place. Companies with violations will still be eligible to receive contracts, but their violations will be weighed as part of the decision-making process.
The order looks to identify contractors with "track records of compliance," which means preference will be given to contractors who have not had administrative merits determinations, arbitral awards or decisions, or civil judgments issued by the Department of Labor in the past three years for several labor laws, including the OSH Act of 1970.
The order doesn’t seem to have been created in a vacuum. According to a report released in 2013 by the Senate Health, Education, Labor and Pensions Committee, 18 federal contractors "were recipients of one of the largest 100 penalties issued by the Occupational Safety and Health Administration (OSHA) of the Department of Labor between 2007 and 2012." That same report also mentioned that eight federal contractors were found to be responsible for the deaths of 42 U.S. workers in 2012 and that taxpayers provided $3.4 billion in contracts to those companies.
But according to a fact issued by the White House, the executive order isn’t just about singling out companies: It’s also a way to identify where remediation might be in order. The order requires federal procurement officers to provide contractors with an opportunity to disclose any steps taken to correct any violations or improve compliance with labor laws, including any agreements entered into with an enforcement agency.
“Companies with labor law violations will be offered the opportunity to receive early guidance on whether those violations are potentially problematic and remedy any problems,” according to the fact sheet.
When awarding contracts, procurement officers will consider the information when deciding if a contractor is "a responsible source that has a satisfactory record of integrity and business ethics."
The fact sheet also says that, “Contracting officers will take into account only the most egregious violations.” Those violations must “rise to the level of a lack of integrity or business ethics.”
So, while it appears one-time, level citations from OSHA aren’t likely to bar a company from obtaining a federal contract, it’s important to remember that if agency finds similar violations again for the same company, subsequent violations could be categorized as repeat. The best policy seems to be to have a safety program in place that will not lead to an OSHA inspection due to employee injuries.