Constitutional protections thwart White House’s ‘blacklisting rule’

Sources: Associated Builders & Contractors, Washington, D.C.; CP staff

Free speech and due process protections in the First and Fifth Amendments of the Constitution frame a judge’s preliminary injunction order that prevents the Federal Acquisition Regulatory (FAR) Council from implementing key provisions of its final rule—plus companion Department of Labor (DOL) guidance—supporting President Barack Obama’s Fair Pay and Safe Workplaces Executive Order.

“Injunctive relief is necessary to protect the public interest,” contends U.S. District Court Judge Marcia Crone. “Public policy demands that governmental agencies be enjoined from acting in a manner contrary to the law. It is in the public interest to ensure the delivery of economical and efficient services from government contractors to federal government agencies, which would likely be impaired by the arbitrary and unnecessary burdens imposed by the Executive Order, FAR Rule, and DOL Guidance.”

The rule and guidance apply to federal government contractors and subcontractors, and spell new reporting and disclosure requirements surrounding 14 federal employment laws or provisions, plus arbitration agreement restrictions. Critics dub FAR’s measure “the blacklisting rule,” as it bars from federal work those contractors or subcontractors that have violated, or allegedly violated, laws or rules under the Equal Employment Opportunity Commission, National Labor Relations Board, Occupational Safety and Health Administration, and other federal agencies.

The Council published the final rule implementing the Fair Pay and Safe Workplace Act in August 2016, with one-year, phased compliance period beginning October 25. Associated Builders & Contractors, ABC Southeast Texas Chapter and the National Association of Security Companies filed an FAR rule challenge and motion for a temporary restraining order in the U.S. District Court for the Eastern District of Texas, Beaumont, in early October.

In their court order analysis, ABC General Counsel Maury Baskin and fellow shareholders of leading employment law specialist Littler Mendelson P.C. observe, “This controversial blacklisting rule requires federal contractors to disclose adverse findings and decisions related to their compliance with federal and state labor and employment laws, and empowers federal agencies to deny contracts to employers who are deemed to lack a satisfactory record of integrity and business ethics based on such disclosures.”

The attorneys also note their clients’ argument that the Obama order ban on certain pre-dispute arbitration agreements “violates the Federal Arbitration Act because it forces contractors that enter into contracts for non-commercial items over $1 million to agree to not enter into mandatory pre-dispute arbitration agreements clauses with their workers for matters arising under Title VII of the Civil Rights Act or sexual assault and harassment claims. The Federal Arbitration Act allows for these agreements, a fact that has been reinforced by Supreme Court precedent.”

“The Executive Order and FAR Rule present an imminent and non-speculative threat to Plaintiffs’ members’ First Amendment rights by virtue of the fact that their public reports of alleged violations may be used by their competitors and adversaries to gain competitive advantage over Plaintiffs and their members,” writes Judge Crone. “They will likely suffer increased costs, loss of customers, and loss of goodwill, regardless of whether they are actually disqualified from government contracts, by being labeled labor law violators.

“The same principles apply to the Fifth Amendment violations of due process, which similarly deprive Plaintiffs’ members of their liberty interests in reputation and again constitute irreparable harm. Plaintiffs will suffer irreparable harm by being required to forego the ability to negotiate pre-dispute arbitration agreements to resolve labor law claims.”

The preliminary injunction does not affect the FAR rule’s “paycheck transparency” provisions, effective in January and requiring contractors to provide wage statements—detailing number of hours worked, pay rate and any deductions—and notice of any independent contractor relationship and overtime exemptions to their covered workers.