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Agencies issue proposed rule, guidance on contractor ‘Blacklisting’ EO

The federal agencies charged with implementing President Obama’s July 2014 Fair Pay and Safe Workplaces Executive Order have released their much-anticipated proposed rule on this directive. The Department of Labor (DOL) issued a 106-page proposed guidance document, and the Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA), issued a 131-page proposed rule, governing the terms of the so-called “Blacklisting” Executive Order (EO).

 

If finalized in their current form, the rule and guidance would immediately upend the current system of federal contracting by enabling federal agencies to reject a bid or cancel an existing contract—as well as initiate suspension and debarment proceedings—based on labor and employment law violations that a contractor may have already resolved or that have already been adjudicated.

Among other mandates, the EO requires federal contractors to disclose whether there has been any administrative merits determination, civil judgment, or arbitral award or decision rendered against them during the preceding three-year period for violations of any of 14 identified federal labor laws and executive orders or equivalent state laws (“equivalent state laws,” according to the proposed rule, will be defined later).

Contracting officers and newly created Labor Compliance Advisors (LCAs) will be charged with assessing whether the contractor at issue has a “satisfactory record of integrity and business ethics.” As part of this assessment, the contracting officers and LCAs will evaluate the severity of the reported violations and any information the contractor chooses to submit with respect to any “violation” to the extent the adjudicatory process has not been completed. In addition, contractors and subcontractors must provide their workers with information each pay period regarding how their pay is calculated and whether the workers are considered independent contractors.

The DOL proposal provides some detail as to what constitutes a “labor violation” by further defining what constitutes “an administrative merits determination, arbitral award or decision, or civil judgment.” Significantly, an administrative merits determination includes, for instance, an EEOC reasonable cause determination as well as complaints filed in court by enforcement agencies. Civil judgments include any order or finding of a court even if not final (though it excludes private settlement agreements if a judgment has not been awarded). The rule recognizes that “violations” are reportable before the adjudicatory process may be completed, and provides that contractors may offer information to assist in assessing the “violation.”

Specifically, the DOL, in its proposed guidance, delineates reportable violations by defining the terms “administrative merits determination,” “civil judgment,” “arbitral award or decision,” and also defines the terms “serious,” “repeated,” “willful,” and “pervasive” violations to assess the impact, if any, the reported violations will have on the award and/or performance of the contract at issue.

As to reportable violations, the DOL guidance articulates seven categories of documents, notices, and findings—whether final or subject to appeal or further review—issued by an enforcement agency following an investigation that would constitute an administrative merits determinations that must be reported under the EO. These items are as follows:

(a) From the Department’s Wage and Hour Division: a WH-56 “Summary of Unpaid Wages” form; a letter indicating that an investigation disclosed a violation of sections six or seven of the FLSA or a violation of the FMLA, SCA, DBA, or Executive Order 13658; a WH-103 “Employment of Minors Contrary to The Fair Labor Standards Act” notice; a letter, notice, or other document assessing civil monetary penalties; a letter that recites violations concerning the payment of special minimum wages to workers with disabilities under section 14(c) of the FLSA or revokes a certificate that authorized the payment of special minimum wages; a WH-561 “Citation and Notification of Penalty” for violations under the OSH Act’s field sanitation or temporary labor camp standards; or, an order of reference filed with an administrative law judge;

(b) From the Department’s Occupational Safety and Health Administration (OSHA) or any state agency designated to administer an OSHA-approved State Plan: a citation, an imminent danger notice, a notice of failure to abate, or any state equivalent;

(c) From the Department’s Office of Federal Contract Compliance Programs (OFCCP): a show cause notice for failure to comply with the requirements of Executive Order 11246, Section 503 of the Rehabilitation Act, the Vietnam Era Veterans’ Readjustment Assistance Act of 1972, or the Vietnam Era Veterans’ Readjustment Assistance Act of 1974;

(d) From the Equal Employment Opportunity Commission (the EEOC): a letter of determination that reasonable cause exists to believe that an unlawful employment practice has occurred or is occurring, or a civil action filed on behalf of the EEOC;

(e) From the National Labor Relations Board: a complaint issued by any Regional Director;

(f) A complaint filed by or on behalf of an enforcement agency with a federal or state court, an administrative judge, or an administrative law judge alleging that the contractor or subcontractor violated any provision of the Labor Laws; or,

(g) Any order or finding from any administrative judge, administrative law judge, the Department’s Administrative Review Board, the Occupational Safety and Health Review Commission or state equivalent, or the National Labor Relations Board that the contractor or subcontractor violated any provision of the Labor Laws.

Section III of the DOL guidance—”Weighing Violations of the Labor Laws”— describes what constitutes “serious, repeated, willful, or pervasive violations.” Notably, because each employment statute includes its own set of definitions, the DOL guidance explains that: [u]ltimately, each contractor’s disclosed violations of Labor Laws will be assessed on a case-by-case basis in light of the totality of the circumstances, including the severity of the violation or violations, the size of the contractor, and any mitigating factors. In most cases, even for violations subject to disclosure and consideration under the Order, a single violation of one of the Labor Laws will not give rise to a determination of lack of responsibility. To this end, the guidance includes a number of examples of such violations by employment law.

The public comment period on the Federal Acquisition Regulations: Fair Pay and Safe Workplaces (FAR Case 2014-025) Proposal and Guidance: Fair Pay and Safe Workplaces is open through July 27 at www.regulations.gov.


CONTRACTORS SPELL RULE PITFALLS

The Associated Builders and Contractors firmly opposes the Federal Acquisition Regulatory Council-proposed “Fair Pay and Safe Workplaces” rule, which along with a Department of Labor guidance memo implement President Obama’s sweeping “Blacklisting” Executive Order 13673 targeting the federal contracting community.

“This rule creates a murky, absurdly cumbersome federal acquisition system that allows contracts to be awarded in a subjective nature by unelected bureaucrats,” says ABC Vice President of Government Affairs Geoff Burr. “The ‘blacklisting’ proposal will unnecessarily complicate the federal acquisition process by adding undue subjectivity and may result in some of the best federal contractors being blacklisted from winning future contracts. Additionally, the administration’s latest assault on federal contractors via illegal executive overreach will result in more bid protests and more frequent and costly labor and employment disputes.

“Taxpayers, contractors and their employees deserve a fair and transparent process award[ing] contracts to firms that will deliver the highest quality product at the best price … This proposal is a clear step in the wrong direction [and] will discourage small businesses from pursuing federal contracts; threaten the livelihood of millions of Americans employed by federal contractors; and, expose taxpayers and businesses to increased costs and risk. We are committed to fighting this proposal in the courts, Congress and through any additional avenue.”

ABC officials challenged the Executive Order in an October 2014 White House listening session, hosted by Labor Secretary Thomas Perez, Director of the White House Domestic Policy Council Cecilia Muñoz and Deputy Director at the Office of Management and Budget Beth Cobert. ABC also joined 19 other business trade groups in a letter the following month to Secretary Perez and Director Muñoz requesting the president withdraw the Fair Pay and Safe Workplaces Executive Order.