On October 25, 2016, the Federal Acquisition Regulatory Council (FAR Council) and the U.S. Department of Labor implemented former President Obama’s Executive Order 13673: “Fair Pay and Safe Workplaces” rules. The rules became effective on October 25, 2016 and fundamentally altered the way federal contractors and subcontractors will need to handle and resolve employment and labor claims, as well as compliance issues involving their entire workforce. The final rules can also result in otherwise-capable companies being “blacklisted” and effectively barred from federal contracts and subcontracts based on labor and employment law violations related or unrelated to prior or current federal contract performance. The centerpiece of the new regulatory scheme was the new disclosure and responsibility requirements. Contractors and subcontractors needed to disclose all “labor law decisions” that they had during the three years (prior to bid submission) as part of the process of applying for a new federal contract or subcontract. If a contractor or subcontractor has too many “labor law decisions” to report or the few it has are too severe, pervasive, repeated, or willful in the eyes of the government “experts,” the company could be deemed “non-responsible” and denied a contract.
In the world of federal contracting, agencies are permitted to award contracts only to “responsible sources.” A “responsible” source means a prospective contractor that has a satisfactory record of “integrity and business ethics.” If a contracting officer determines that a contractor is not responsible, the federal government may pass on doing business with such a company. The final rule applies to all prime contractors and federal contract solicitations issued on or after April 24, 2017 and valued in excess of $500,000. It does not apply to contracts valued less than $500,000.
Perhaps the only good news about the final rules is that there is a “lookback” period of no more than three years for labor law violations. Subcontractors are covered starting October 25, 2017, with subcontracts at any tier valued in excess of $500,000. Generally speaking, all contractors will have the same disclosure requirements.
Congressional Review Act
Both the U.S. House of Representatives and Senate have started a series of votes to force withdrawal of controversial rules issued in late 2016 by former President Obama. Congress is using the Congressional Review Act, a mid-1990s law that allows Congress to review and reject any new regulation within 60 legislative days of its final publication. (Final rules issued after mid-June 2016.) Of a particular interest to contractors is a House resolution which would force the withdrawal of the “Fair Pay and Safe Workplaces” rules issued by the Federal Acquisition Counsel on August 26, 2016, which became effective on October 25, 2016.
Upon the rule becoming effective, a District Court for the Eastern District of Texas issued an injunction preventing implementation of the order from moving forward. The lawsuit was filed by the Associated Builders and Contractors of Southeast Texas. The judge found that the order constituted an overreach of the Executive Branch’s authority, as Congress had never intended for labor laws it passed to be enforced as a weapon against government contractors. Since the Court’s issuance of the injunction, the future of the Fair Pay and Safe Workplaces rules has remained up in the air.
House of Representatives Action
On February 6, 2016, the House of Representatives passed a measure disapproving the Fair Pay and Safe Workplaces rules. The power to disapprove pending administrative rules was granted Congress by the 1996 Congressional Review Act, and has only been successfully deployed once since then, in 2001 to disapprove an Occupational Safety and Health Administration (OSHA) rule on ergonomic workplace injuries. If this resolution passes the Senate and receives the signature of the President, Fair Pay and Safe Workplaces rules will be permanently blocked. Given the current political climate in Washington, it is safe to assume that it is not the only time regulations affecting government contractors that will be challenged. Both Congress and the President have strongly indicated they plan to pursue a deregulatory agenda, and control over who can and cannot receive federal grants and contracts is often considered the “low-hanging” fruit of regulation. To end that, there will likely be many actions affecting federal contractors that are on the chopping block.
March 6, 2017, the Senate voted to advance the repeal of the Fair Pay and Safe Workplace Order to the President’s desk for signature. If President Trump signs the legislation, as he is widely expected to do, all three of the new regulatory requirements promulgated under the Order will officially be rescinded.
Comment: The restrictions and regulations of the Fair Pay and Safe Workplaces Order are no longer likely to be implemented, so contractors should continue to make sure the clauses pertaining to Executive Order #13673 do not appear in their contracts. The Trump Administration appears ready to back away from the Obama Administration’s regulatory position. The Senate rules of the 1990 Congressional Review Act require at least 10 hours of debate on each rule considered. The Senate therefore could consider as few as 10 rules, most of the rules under consideration for CRA review involve energy, environmental, and financial issues.[i]
[i] Thanks to Michael Schrier at Duane Morris and to Edward DeLisle for bringing this matter to our attention.