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Federal Contractors

A federal contractor is a person or entity that contracts with the federal government to provide services, supplies, or other work. Federal contractors are subject to many special employment laws and regulations. These laws and regulations usually also apply to subcontractors that furnish supplies or services necessary to perform a federal contract.

Audit your diversity and affirmative action policies and practices with the Employment Practices Self-Audit Workbook

Federal Contractors and E-Verify
Federal contractors and subcontractors will be required to begin using the E-Verify system under Executive Order 12989. This order directs federal agencies to require that federal contractors agree to electronically verify the employment eligibility of their employees. Executive Order 12989 also reinforces the policy that the federal government does business with companies having a legal workforce. The current effective date for federal contractors and subcontractors to begin using E-Verify has been moved to September 8, 2009.

Discrimination and affirmative action laws and regulations
The Office of Federal Contract Compliance Programs (OFCCP) ensures employers doing business with the federal government are in compliance with discrimination and affirmative action laws and regulations. The OFCCP administers and enforces the following laws: Executive Order 11246, Section 503 of the Rehabilitation Act of 1973 and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA).

In order to comply with basic Equal Employment Opportunity (EEO) requirements, a federal contractor needs to:

  • prevent discrimination
  • Post EEO posters
  • Include an EEO statement in employment advertising
  • Keep records
  • Allow the OFCCP access to books and records during a compliance evaluation or complaint investigation; and
  • File annual EEO-1 reports.

Hiring and employing veterans
As discussed above, federal contractors are required to take affirmative action to employ and advance qualified veterans. Federal contractors are also required to annually report statistics on their veteran workforce through a VETS-100 report. Federal contractors must submit VETS-100 reports if they received a federal contract of $25,000 or more before December 1, 2003 or they received a federal contract of $100,000 or more on or after December 1, 2003.

Wage and hour laws for federal contractors
Several wage and hour laws also pertain to federal contractors. Some of these laws include the following:

  • Davis Bacon and Related Acts: These Acts apply to federal contractors with contracts over $2,000 for the construction, alteration, or repair of public buildings or works. Contractors under these Acts must pay employees under the contract no less than the locally prevailing wages and fringe benefits for equivalent work on similar projects in the locality.
  • McNamara-O-‘Hara Service Contract Act (SCA): This Act requires federal contractors with contracts over $2,500 to pay employees under the contract no less than the prevailing wage rates and fringe benefits found in the area or the rates in a predecessor contractor’s collective bargaining agreement.
  • Walsh-Healey Public Contracts Act (PCA): This Act establishes minimum wage, maximum hours, and health and safety standards for work on contracts over $10,000 involving the manufacturing or furnishing of materials, supplies, articles or equipment to the U.S. Government or the District of Columbia.
  • Copeland “Anti-Kickback” Act: This Act prohibits federal contractors involved in building construction or repair from inducing employees to give up any compensation they are entitled to under their employment contract. The Act also requires contractors to submit weekly statements of compliance.
  • Executive Order 13201: This Order requires federal contracts to include an employee notice clause requiring non-exempt federal contractors to post notices informing employees of certain rights under federal law regarding union membership and the use of union fees. This clause only has to be included in government contracts for purchases below the Simplified Acquisition Threshold (which is currently $100,000).

There is some overlap between the above wage and hour laws. Under the Davis Bacon and Related Acts and the SCA, if a federal contractor is working under a prime contract over $100,000, the contractor must pay employees at least one and one-half times their regular rate of pay for all overtime under the Contract Work Hours and Safety Standards Act. Under the Davis Bacon and Related Acts, the SCA, and the PCA, the employing contractor is required to post the required notice under each statute at the work site in a prominent and accessible place.