One of President Obama’s most important contributions to better pay and working conditions in the United States is his executive order on Fair Pay and Safe Workplaces, which he issued two years ago and is finally taking effect this month. The order, which addresses wage theft and on-the-job hazards, including sexual harassment and race discrimination, affects 25 million employees working for businesses that provide goods and services under contract to the federal government – businesses that range from janitorial services to ship builders.

The first provisions are set to take effect in two weeks – unless a lawsuit filed in Texas by various business groups succeeds in delaying or blocking enforcement of the rules.

Why is the Executive Order Needed?

The federal government purchases over $500 billion in goods and services from the private sector, and the firms it deals with employ about 20 percent of the nation’s total workforce. It is important that the government chooses to deal with honest employers and that, when given a choice of two otherwise similar contractors, it chooses to do business with the one that demonstrates superior integrity and a greater inclination to obey the law. That is common sense.

Until now there was no effective way to distinguish between good, law-abiding employers, and those that violate labor laws. Billions of dollars have been provided to companies that cheat their workers out of pay, unlawfully subject workers to safety and health hazards, sexually harass them, or discriminate against them on the basis of race, religion, or ethnicity. The Executive Order provides mechanisms for the government to identify employers that lack integrity and for employees to protect themselves against abuse.

Public Disclosure of Labor Law Violations

The key change in how agencies buy goods and services involves the identification of scofflaw employers. Federal government contractors will be required to disclose violations of 14 federal labor laws and executive orders. The government’s contracting agencies will take these violations into account when deciding whether an employer has enough integrity to do business with the government. The laws include, among others, the National Labor Relations Act, the Occupational Safety and Health Act, the Fair Labor Standards Act, the Service Contract Act, the Davis Bacon Act, and the Family and Medical Leave Act. The executive orders include E.O. 13658 (Establishing a Minimum Wage for Contractors) and E.O. 1124 (Equal Employment Opportunity). The rule requires contractors to update their reports of violations every six months.

All disclosures under the new rule will be public, but the main purpose is to inform agency contracting officials about the integrity of the contractors. If they violate labor law, they may be assumed to be less trustworthy than their law-abiding competitors and the government may choose not to do business with them until their compliance improves.

The disclosure requirements will become effective as to prime contracts valued at $50 million or more on October 25, 2016. By April 25, 2017, those requirements will apply to prime contracts valued at $500,000 or more. Subcontracts become subject to the rule on October 25, 2017. Initially, the disclosure rules will look back only one year for labor law violations, but the “look back” period will grow to three years by October 25, 2018.

Paycheck Transparency

Each year, across the nation, millions of workers are cheated out of billions of dollars of hard-earned pay by deceptive employers. Employees are often misclassified as independent contractors and denied such important protections as overtime pay requirements, unemployment insurance, and worker’s compensation insurance. Usually, no explanation of their status is provided. Many employees never receive a pay stub or other documentation of their rate of pay, hours worked, or whether they were paid time and a half for overtime. This makes asserting and enforcing their rights to fair pay extremely difficult, and most employees who are cheated never recover a dime of what they are owed.

Starting on January 1, 2017, federal contractors will be required to provide notices to workers each pay period about hours worked, overtime hours, gross pay, and any additions made to or deductions made from pay, as well as their status as independent contractors and whether they are exempt from overtime pay.

Arbitration Restrictions

Because employers have more control over arbitration proceedings  than they do over lawsuits filed by employees in state or federal courts, many employers (think Gretchen Carlson and Fox News) force their employees to sign agreements not to sue in court and to give up any right to bring a collective action – even in arbitration — with their sister employees. Employers tend to win more suits in arbitration, and when they lose, the judgments against them for damages tend to be far smaller.

The Executive Order bans pre-dispute arbitration agreements for claims arising under Title VII of the Civil Rights Act or torts related to or arising out of sexual assault or harassment. This means that contractor employees alleging discrimination based on sex, race, ethnicity, or religion go to court—unless they agree to arbitration voluntarily and after the dispute arises. They can no longer be forced to sign an agreement as a condition of employment.

The business groups that oppose the Executive Order complain about the cost of keeping track of their labor law violations and disclosing them, but there’s an obvious solution: comply with the law. A company with no violations has nothing to disclose. Their lawsuit should fail, but if it succeeds, millions of employees will have fewer rights, will be more likely to be cheated, injured or killed at work, and more likely to be subjected to sexual harassment or discrimination without an adequate remedy.