Administration Proposes Sweeping Rules Implementing Blacklisting Executive Order

Employment Law

This week, the Obama administration issued proposed rules and guidance on the Fair Pay and Safe Workplaces (a.k.a. Blacklisting) Executive Order, proposing that the required disclosures of employment law violations by federal contractors include a broad range of accusations well before final adjudication, even as the Department of Labor in a conference call briefing dismissed the new rules' impact as applying to only four percent of contractors.  Executive Order 13673 requires prospective federal contractors to report whether they, or their subcontractors, have violated 14 federal employment laws and equivalent state laws when they bid on contracts.  Federal contracting officers are then required to consider the violations in determining whether a contract should be awarded or discontinued, or whether debarment should be considered by the agency.  HR Policy will send our members an analysis of the proposed rule soon and conduct a conference call briefing in June.  Meanwhile, here is a quick review of how the proposals address some of the key issues that have been raised regarding implementation of the Blacklisting Executive Order:

• Violations That Must Be Reported – An issue of concern to our members has been whether contractors must report instances where they have been accused of violating a law but the matter has not been settled or fully adjudicated.  The DOL guidance provides a broad scope of actions that must be reported.  For example, the issuance of a complaint by the NLRB General Counsel would have to be reported, even though employers are often successful in proving the legality of their actions before an administrative law judge, the five-member National Labor Relations Board or, ultimately, a federal court.  Moreover, an activist NLRB General Counsel, as we have seen in the current administration, often seeks to stretch the law beyond what employers and their attorneys had contemplated, as in the recent notorious Boeing, McDonald's and social media cases.  Because of the breadth of what has to be reported, DOL's estimate of 4 percent of affected contractors seems unrealistic.  Moreover, on the aforementioned conference call, the Department was unable to adequately explain the basis for the estimate, referring to a terse economic analysis in the proposed FAR rules in which the 4 percent estimate applies only to small entities and subcontractors. The percentage is critical because it goes to the heart of claims by the administration that the EO will have minimal impact.
  
  
• Degree and Nature of Violations That Must be Considered in Awarding the Contract – Once violations are reported, those which are deemed "serious," "willful," "repeated," or "pervasive" are to be considered in the contract awarding process to determine whether the company is a "responsible contractor" with "a satisfactory record of integrity and business ethics."  The DOL guidance devotes over 50 pages to clarifying each of these terms, which underscores the difficulty federal contracting officers will have in making the determination.  The guidance does note that "one violation" will not "give rise to a determination of lack of responsibility."  Rather, the violations are to be assessed "on a case-by-case basis," including a review of the extent to which they have been remedied.
  
  
• Role of Agency Labor Compliance Advisors – The EO establishes within each federal agency an Agency Labor Compliance Advisor (ALCA) to assist in the award determinations.  According to the proposed FAR rules, contracting officers will be required to request a review of reported violations by the ALCA, who must respond within three days with a recommendation regarding whether the contractor does or does not have a "satisfactory record of integrity and business ethics" and, if not, whether the agency's suspending and debarring official should be notified.  The contracting officer is to then make a responsibility determination based on DOL guidance and the ALCA recommendation.
  
  
• Reporting by Subcontractors – The EO requires contractors to collect reports of violations and make responsibility determinations regarding any subcontractors with contracts of more than $500,000.  Although the proposed FAR rule would require prime contractors to collect reports from their subcontractors, the proposal asks for comments on a potential alternative that would allow prime contractors to direct their subcontractors to report their violations directly to DOL, with DOL then providing guidance to the prime contractor regarding the responsibility determination. 
  

After review of the public comments, we anticipate the final rules will be issued late this year.  There will likely be an effort to block these in Congress—possibly as part of the appropriations process—but the 60-vote threshold in the Senate along with an expected presidential veto will pose a formidable challenge.  The courts are likely to present a more promising venue and HR Policy is in discussions with other key business groups about the possibility of litigation.