Will an OSHA Fine Keep You from Getting a Government Contract?

Last summer, President Obama signed the Fair Pay and Safe Workplaces Executive Order to improve contractor compliance with federal labor laws. The order will require companies bidding for federal contracts to disclose labor law violations. While this includes all sorts of violations, including those concerning worker pay, we’ll concentrate on OSHA regulations. Implementation is scheduled to roll out in stages stages in 2016. In preparation, the Department of Labor has issued proposed guidance to help agencies gather information from companies seeking federal contracts over $500,000.

Violations considered would need to be within the three years before the bid date. Safety violations from federal and state OSHAs would be considered the same way.  So what exactly is a violation? The proposed guidance says it’s “a letter, notice or other document assessing civil monetary penalties.”

From OSHA, that could include: 

  • a citation
  • an imminent danger notice, or
  • a notice of failure to abate.

The violations would also need to be either serious, repeated, willful or pervasive. For purposes of OSHA, the definitions of serious, repeat and willful are basically the same as those designations for individual safety violations. “Pervasive” would mean a pattern of violations.

But there are also mitigating factors that agencies will be recommended to take into account, such as:

  • the extent of remediation of the problem
  • a low number of violations relative to the size of the company
  • whether the company has a safety and health program for employees
  • violations of recent regulatory changes
  • good faith efforts by the company to follow regulations, or
  • a significant period of compliance following a violation (the document uses 2.5 years as an example).

After publication in the Federal Register, there will be a 60-day comment period.

A 2010 U.S. Government Accountability Office report found almost 40 percent of the 50 largest workplace safety and health penalties issued from 2005 to 2009 were against companies that went on to receive new government contracts.  A study by the Center for American Progress in 2013 found one quarter of the 28 companies with the top workplace violations that received federal contracts had significant performance problems, indicating a link between problematic contractors and violations.

When the Fair Play and Safe Workplace EO was issued, the White House said, “Taxpayer dollars should not reward corporations that break the law.”

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