Although a Texas federal district court judge barred the implementation of the Fair Pay and Safe Workplaces (FPSW) final rule, the paycheck transparency requirements of FPSW are still scheduled to become effective for federal contractors with new contracts worth more than $500,000 issued after January 1, 2017. For new contracts issued after January 1, 2017, prime contractors will need to insert the paycheck transparency requirements in all subcontracts that exceed $500,000 except for those involving commercial off-the-shelf products.
What contractors should know about their obligations
The paycheck transparency requirements apply only to contractors and subcontractors that are required to maintain wage records under the Fair Labor Standards Act (FLSA), the Davis-Bacon Act (DBA), or the Service Contract Act (SCA). Covered contractors must provide pay-related information to all workers subject to the requirements regardless of whether they are classified as employees or independent contractors. The requirements must be incorporated into all covered subcontracts.
The paycheck transparency provisions require contractors and subcontractors to provide covered employees the following information:
- Wage statements that include hours worked and pay;
- Notice of exemption from the FLSA’s overtime requirements; and
- Notice to workers who will be considered independent contractors.
The first requirement—providing a wage statement to employees—specifies that for each pay period, the contractor and subcontractor must give covered employees a statement that lists:
- The total number of hours worked in the pay period;
- The number of overtime hours worked in the pay period;
- The rate of pay (such as hourly or per day);
- Gross pay; and
- An itemized listing of any additions to or deductions from gross pay.
If the contractor or subcontractor does not provide weekly pay stubs, it must break down the hours worked and overtime hours to correspond to the period for which the overtime was calculated and paid. Reportable additions to gross pay could include bonuses, awards, and shift differentials, while deductions could include withholding for taxes and voluntary deductions by the employee. The additions and deductions must be listed separately, along with the specific amount of each.
Contractors and subcontractors that currently comply with the wage statement requirements of Alaska, California, Connecticut, the District of Columbia, Hawaii, New York, and Oregon will be deemed to have fulfilled the paycheck transparency requirements.
The second notification applies to employees considered exempt by a contractor or subcontractor. The contractor or subcontractor must either keep a record of hours worked by those employees or notify them that it considers them exempt. If the contractor or subcontractor notifies employees of their exempt status, it doesn’t have to include hours worked on their wage statements.
The notice to exempt employees can be an offer letter, an employment contract, a job description, or a wage statement, and it needs to be provided only once, either before the employee performs work under a covered contract or in the first wage statement under the contract. If an employee’s status changes, the contractor or subcontractor must notify the employee either before providing a wage statement without hours worked or in the first wage statement after the status change.
The third and final requirement is that all individuals working as independent contractors on a covered contract or subcontract be notified of their contractor status. The notice must be provided in writing before workers begin work on each covered contract, and it must be provided separately from any independent contractor agreement between the contractor and the worker.
The contractor or subcontractor must provide all three notices in English and in the language in which “significant portion(s) of the workforce is fluent.” The U.S. Department of Labor (DOL) did not set a specific threshold for what constitutes a “significant portion” of the workforce, so contractors will have to determine the criteria that will be used to make this determination. The notices can be provided electronically as well.
Need to learn more? Listen to the BLR on-demand webinar New Blacklisting Reporting Requirements for Federal Contractors: How to Comply with New Regulations Before the Impending Deadline. Hosts David S. Fortney and H. Juanita Beecher, are attorneys from Fortney & Scott, LLC with extensive experience in government contracting and labor law regulations. They will explain how the new blacklisting reporting requirements apply to your company and offerBest practices for ensuring that your payroll system is equipped to handle new pay stub reporting requirements taking effect January 1, 2017. For more information, click here.
Federal contractors should prepare to comply with the paycheck transparency requirements, although it’s likely that President-elect Donald Trump will rescind the underlying Executive Order (EO 13673) once he takes office on January 20.
H. Juanita M. Beecher is a nationally-recognized expert on Office of Federal Contract Compliance Programs (OFCCP) and U.S. Equal Employment Opportunity Commission (EEOC) matters. She is Counsel to Fortney & Scott, LLC with a focus on OFCCP regulatory affairs. She may be contacted at firstname.lastname@example.org
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Excerpted from Federal Employment Law Insider written by attorneys at the law firm of Fortney & Scott, LLC. FEDERAL EMPLOYMENT LAW INSIDER does not attempt to offer solutions to individual problems but rather to provide information about current developments in federal employment law. Questions about individual problems should be addressed to the federal employment law attorney of your choice. Contact the attorneys at Fortney & Scott, LLC.