Many Federal Contracts Granted to Labor Law Violators, Senate Report Finds

Author: Ashley Shaw, XpertHR Legal Editor

December 12, 2013

A new report by a US Senate Committee finds that the government awards many federal contracts to labor law violators, specifically safety and wage and hour violators. Employers that enter into contracts with the federal government or the District of Columbia should take steps to comply with particular federal contractor and subcontractor requirements, including any prevailing wage requirements.

The government grants federal contracts to many private companies for the supply and use of goods and services (e.g., security or cleaning services). The report states that the federal government spends over $500 billion in taxpayer dollars per year on these private company contracts.

The Senate Health, Education, Labor and Pensions Committee Report criticizes the compliance practices of many employers that receive these federal contracts. According to the report, "[m]any of the most flagrant violators of federal workplace safety and wage laws are also recipients of large federal contracts." The report finds that "almost 30 percent of the top violators of federal wage and safety laws are also current federal contractors."

For example, all of the following employers were cited for safety or wage and hour violations between the years of 2007-2012 and still received a federal contract in 2012:

  • Imperial Sugar, fined $6 million for violations resulting from an explosion that killed 14 workers in 2008, received $94.8 million in federal contracts;
  • Tyson Foods, fined over $3 million for safety violations and reporting 11 on-the-job deaths since 1999, received $555.5 million (and has received over $4 billion from the government since 2000);
  • General Motors, fined close to $3 million for safety violations, received $398.3 million;
  • AT&T, assessed $4.7 million in back wages for wage and hour violations, received $620.6 million;
  • Nestlé, assessed $2.75 million in back wages for violations, received $231.7 million; and
  • BP, although banned from receiving federal contracts for 18 months after the 2010 Deepwater Horizon oil spill, received close to $2 million in federal contracts.

Overall, the report cites that 35 companies who received federal contracts had also been fined for both safety and wage and hour violations.

The report suggests that flagrant violators may continue to receive contracts due to incomplete databases and limited information-sharing. Currently, contracting officers have limited access to information regarding labor law violations when deciding whether to grant a contract.

The report recommends expanding the amount of misconduct information available in the existing databases, finding ways to limit human error, and increasing the quality and transparency of Department of Labor enforcement information.