A new executive order from President Obama will make it harder for companies to win federal contracts if they violate their workers’ rights and withhold their wages, the White House announced July 30.

Under the new rules, companies that apply for federal contracts larger than half a million dollars will have to disclose any major labor law violations they or their subcontractors have committed in the previous three years. Agencies will prioritize companies with clean records over those that abuse their workers’ rights when weighing contract bids. Each executive branch agency will have a specific bureaucrat in charge of determining whether a company’s lapses “rise to the level of a lack of integrity or business ethics,” according to a White House fact sheet on the rules.

The package of reforms will also prohibit companies that do business with the government from requiring their workers to agree to arbitration processes for workplace harassment or civil rights complaints, guaranteeing that workers who are sexually harassed or discriminated against can get their day in court.

The Fair Pay and Safe Workplaces Executive Order will not kick in until 2016 and its provisions will only be applicable to new contracts, according to the White House fact sheet. But because the new scrutiny of labor law violations will apply to company performance over three years, the new rules serve to put contractors on notice that their treatment of workers today will affect their odds of winning their next contract. The move earned praise from a top official with the coalition of labor groups and activists that have been rallying low-wage federal contract workers to strike and demand action from the White House since the spring of 2013.

“Once again, the president is leading by example,” said Change to Win deputy director Joseph Geevarghese. “Just like the executive order raising the minimum wage had a ripple effect across the economy, we hope that this bold step by the President sends a clear signal to the private sector that you need to do right by your workers.”

An earlier Obama executive order raising the pay floor for workers on federal contracts to at least $10.10 per hour did not put a stop to strikes and protests by these workers. (See related article). That order also has a delayed phase-in because the President cannot rewrite contracts that have already been signed. But starting with the next round of federal contracts, it will mean that the companies that provide basic food and janitorial services at federally-owned buildings, for example, cannot pay their employees less than $10.10 per hour. Such workers have staged regular strikes and protests calling on Obama to act over the past 15 months.

The lack of rules like these for federal contracts prior to Obama’s actions has meant that the federal government is among the largest employers of low-wage workers in the country. Almost 2 million Americans working for government contractors are paid too little to support a family — “more than the number of low-wage workers at Walmart and McDonalds combined,” according to a Demos report from 2013. By contrast, the executives at these same federal contractors earn a combined $23.9 billion per year.

Obama’s use of executive orders to combat congressional inaction on his legislative priorities has angered Republicans so much that they just voted to sue him over the practice. Obama’s latest focus has specifically been around federal contractors, and most recently he signed off on a package of executive order updates to provide LGBT federal contractors employment protections. Democrats in both houses have set their sights on the newest goal for federal contractors, however, introducing legislation to prevent government contracts from going to companies that move overseas to reduce their U.S. tax liability.