President Obama recently signed an Executive Order mandating that companies seeking federal contracts must disclose all labor law violations from the previous three years in order to be eligible for such contracts. The Fair Pay and Safe Workplaces Executive Order will govern new federal procurement contracts valued at more than $500,000 and provide information on companies’ compliance with federal labor laws for agencies. The Executive Order is expected to be implemented on new contracts in stages, on a prioritized basis, during 2016.

The goal of the process created by the Executive Order is to help contractors come into compliance with workplace protections, not to deny contracts to contractors. 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. Contracting officers will take these steps into account before awarding a contract and ensure the contractor is living up to the terms of its agreement.

Contracting officers at the federal government will take into account only the most egregious violations and the Executive Order will ensure that the worst actors, those who repeatedly violate the rights of their workers and put them in danger, do not receive contracts. One of the goals of the Executive Order is to promote efficient federal contracting by avoiding contractors who delay important projects and waste taxpayer money. Studies have shown that there is a strong relationship between contractors with a history of labor law violations and those that cannot deliver adequate performance for the taxpayer dollars they receive.