The U.S. Government Accountability Office (GAO) recently issued a detailed report examining the Department of Defense’s (DOD) efforts to limit the use of mandatory arbitration in contracts. The study highlights both significant progress and areas requiring further action. This examination stems from a critical mandate introduced in 2010 following a notable case of alleged workplace misconduct involving a DOD contractor. At the time, the victim was required to resolve the claim through arbitration, a process mandated by her employment agreement, which drew scrutiny over its fairness and transparency.

The GAO’s analysis reviewed 14 contracts from fiscal year 2023, focusing on the inclusion of a key clause restricting mandatory arbitration for claims involving sexual harassment, sexual assault, and certain civil rights violations. This clause, mandated under the Defense Federal Acquisition Regulation Supplement (DFARS), prohibits the use of appropriated funds for contracts over $1 million unless contractors agree to allow employees to seek relief in court for such claims.

GAO’s findings were largely positive. Contracting officers included the clause in 12 of the 14 reviewed contracts, ensuring compliance with the DFARS requirements. The contractors interviewed also adhered to the restriction, often exceeding requirements by avoiding mandatory arbitration for all types of workplace disputes. Many contractors demonstrated a commitment to transparent and fair processes by offering employees multiple reporting channels and ensuring claims were investigated internally.

However, the report identified shortcomings within the Defense Logistics Agency (DLA). Two out of three contracts reviewed from DLA omitted the required clause due to a misunderstanding of its applicability. The contracting officers mistakenly interpreted the clause’s effective date and scope, relying on a contract writing system that recommended but did not mandate inclusion of the clause. While DLA has since updated its contract writing system to address this gap for future contracts, the oversight leaves an estimated 900 contracts awarded in fiscal year 2023 potentially lacking the required clause. Without a comprehensive review of these ongoing contracts, DLA cannot fully assess the extent of non-compliance or determine necessary corrective actions.

The implications of these findings are relevant. By addressing non-compliance issues, DOD can reinforce employee protections, ensuring that workplace claims are handled with the seriousness they deserve. The report emphasizes that this issue is not only about compliance but also about fostering a culture of accountability and fairness within DOD contracting. The recommendation that DOD assess ongoing contracts for clause inclusion and take remedial action reflects this priority.

The GAO report also underscores a broader legislative shift. Recent federal legislation, such as the 2022 Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, complements the DOD’s efforts by enabling victims of such misconduct to bypass arbitration agreements and pursue claims in court. This evolving legal landscape highlights growing recognition of the limitations of mandatory arbitration in ensuring justice and accountability.

In conclusion, while the GAO’s findings demonstrate substantial compliance with restrictions on mandatory arbitration, they also highlight areas for improvement. The Defense Logistics Agency must act decisively to review existing contracts and address any gaps to fully align with DFARS requirements. These efforts are not only essential for legal compliance but also crucial for maintaining trust in the integrity of the defense contracting process.

Disclaimer: This blog post is based on publicly available information and is intended for informational purposes only. Accuracy is not guaranteed, and it does not constitute legal advice. Readers should consult appropriate legal or professional advisors for specific guidance.