Whether it’s minimum wage hikes, increasing the salary threshold for overtime pay or mandating additional paid sick and parental leave, the federal government has placed labor regulations at the top of its agenda with the aim of reducing income inequality and modernizing how workers are compensated.
Last year, President Barack Obama signed an executive order (as part of the Fair Pay and Safe Workplaces Executive Order), making it more challenging for companies to win federal contracts if they violate workers’ rights. The proposed guidance and regulation, which are open for comment until July 26 and 27 respectively, would require prospective government contractors whose estimated value of supplies or services exceeds $500,000 to disclose whether they’ve violated any labor laws in the past three years. Once they’ve secured the contract, contractors must continue to update their disclosures every six months.
From the outset, these amendments would pose a significant headache for federal contractors, who will need to allocate more resources to tracking, cataloguing and reporting any offenses across the entire organization. The proposed guidance stipulates that the contractor must provide details on the specific labor law that was violated, the case number or other unique identification number, the date of the judgment and the name of the court or arbitrator that presided it.
However, the reforms are overdue and frankly, warranted. Each year, a lengthy list of businesses face or settle class action lawsuits from skirting labor laws. Millions of dollars have been shelled out for failing to pay overtime premiums alone – LinkedIn, Walmart and Staples are just a few companies that have experienced lawsuits from unpaid employee hours, off-the-clock work, employee misclassification, and missed meals and breaks. The extent of businesses failing to meet overtime labor regulations is significant — in 2012, almost $1 billion was recovered from wage theft, a mere drop in the ocean from the estimated $50 billion.
While many industry pundits and national trade associations argue that the labor reforms are overly complex and will add more administrative burdens on government contractors, far too often businesses have pushed their employees to skirt existing labor rules — particularly as businesses look to cut costs and squeeze more out of their existing resources. Many businesses should already have the basic processes and tools in place to adhere to these reforms. At the most basic level, one department should centrally manage the process, identify the business units to work with (including HR, finance and legal teams) and develop the systems to monitor, identify and report potential labor violations.
The right tools will be crucial to helping would-be contractors better define how, when and where employees work, and manage the complexity of staying labor compliant with ever-changing reforms as the company grows. While the initial costs of establishing the best processes, policies and technologies may seem overwhelming, as labor and employment law becomes a core criteria of the contracting process, it makes sense for federal contractors to get this right. Rather than view these changes in a negative light, these proposed reforms should be seen as part of a welcome transformation for businesses to be more accountable to their employees, foster open lines of employee-employer communication and transparency, and ultimately improve the private-public sector partnership.
Raj Narayanaswamy is the co-founder and co-CEO of Replicon, which works with organizations of all sizes to capture, manage and optimize their most important asset — time — to drive business growth and ensure labor compliance.