With the stroke of a pen, President Donald Trump has blocked former President Barack Obama’s executive order that would have required federal contractors and subcontractors to report labor and employment law violations when bidding on federal contracts. March 27, Trump signed a bill that passed Congress a few weeks earlier to disapprove the Fair Pay and Safe Workplaces rule.
Sue Schaecher, Partner, Fisher Phillips, Denver
Commonly referred to as the “blacklisting order,” the 2014 executive order was based on the premise that a prospective contractor must have a satisfactory record of integrity and business ethics to be determined responsible, and the federal procurement process is more efficient and economical when contractors comply with labor laws. The executive order required prospective and existing federal contractors to disclose violations of 14 federal labor laws and their state law equivalents over the three prior years, required them to provide certain information to workers each pay period to enable workers to verify the accuracy of their pay and prohibited certain contractors from using predispute arbitration agreements to address sexual assault and civil rights claims.
Criticisms of the order.
Critics of the executive order assailed the fact the “violations” to be reported, included pending claims, unadjudicated agency determinations and decisions that were subject to further review. They also found the requirements to be burdensome. Contractors awarded contracts were to be responsible for updating information about their own violations and obtaining updates from each of their subcontractors semi-annually. Implementing rules issued by the Federal Acquisition Regulatory Council (Department of Defense, General Services Administration and NASA) and guidance issued by the U.S. Department of Labor explained some of the burdens and responsibilities on the parties involved but left many questions unanswered.
The rules set forth an involved process under which government employees in newly created positions would review and analyze reports to determine whether contractors were satisfactory bidders and make reports to the contracting officers. The critics also argued the order was unnecessary because contracting officers already have ample authority to bar contractors with bad labor histories and because existing employment laws adequately punish wrongdoers.
Partial, temporary block.
The order would have applied to new contracts and subcontracts over $500,000, other than contracts for commercially available off-the-shelf items, starting in 2016. However, on Oct. 24, 2016, a United States District Court judge in Texas ruled that the federal government appeared to have exceeded its authority when it issued the rules, and she temporarily blocked the disclosure and arbitration provisions from taking effect nationwide. The judge also said that the blacklisting law ran afoul of current labor and employment laws by creating punishments for violations that already carry their own consequences. Further, she said, the law permitted contractor disqualification based solely upon “administrative merits determinations” that are nothing more than allegations of fault asserted by agency employees and are not final agency findings. According to the judge, the mandatory disclosure provisions violated contractors’ First Amendment right not to speak and improperly limited their right to enter arbitration agreements.
Unaffected by the judge’s order were the executive order’s “pay transparency provisions” that required contractors and subcontractors to provide each employee working under the contract with a document each pay period indicating hours worked, overtime hours, pay and any additions or deductions from pay. The court also refused to enjoin the requirement that contractors and subcontractors provide documentation indicating independent contractor status to any individual performing work under a federal contract as an independent contractor. By signing the bill passed by Congress, Trump also undid the pay transparency and independent contractor provisions.
Congressional Review Act action.
The bill passed by Congress and signed by Trump was authorized under the Congressional Review Act. That act provides Congress with a check on federal agencies by giving Congress a certain amount of time to review a rule issued under an executive order after the rule is submitted to Congress. Under the act, Congress may enact a joint resolution of disapproval that then goes to the president for his signature. If signed, the rule does not take effect or, if it already took effect, it is treated as though it had never taken effect.
Importantly, once the resolution is signed by the president, the agency may not issue a rule “substantially similar” to the disapproved rule without the specific approval of Congress. The meaning of “substantially similar” has not been tested in the courts.
The act, which was enacted in 1996, had only been used successfully once prior to Trump taking office.
