“Fair Pay and Safe Workplaces” Executive Order Imposes New Terms for Federal Contractors: Executive Order Requires Federal Contractors to Report Adverse Labor and Employment Law Decisions, Provide Detailed Wage Statements to Employees, and Forgo Using Pre-Dispute Arbitration Agreements for Employment Discrimination and Sexual Assault Claims

Sullivan & Cromwell LLP - August 6, 2014

On July 31, 2014, President Obama issued an executive order, entitled Fair Pay and Safe Workplaces (the “Order”), that imposes new terms under which the federal government will do business with certain contractors.  For new contracts over prescribed dollar amounts, the Order requires contractors to (i) disclose adverse labor and employment law decisions; (ii) provide detailed wage statements to employees; and, most significantly, (iii) agree not to require their employees and independent contractors to submit to pre-dispute arbitration agreements related to employment discrimination and sexual assault claims.  These requirements likely will not come into effect until the issuance of final regulations after public comment, which the Obama administration estimates may not take place until 2016.  The portion of the President’s Order concerning arbitration is in tension with the Federal Arbitration Act (“FAA”), which embodies a strong congressional endorsement of arbitration.  As the President issued the Order unilaterally, not through adoption of legislation, we expect the Order to be challenged in court, with government contractors arguing that it improperly contravenes the FAA without congressional sanction.