Fair Pay Order Is Safe, Former White House Attorney Says

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

By Ben Penn

Oct. 13 — Federal contractors think they have a strong shot at convincing a judge to halt the Fair Pay and Safe Workplaces executive order, which requires disclosure of labor violations.

Not so fast, says a former White House attorney who focused on labor and administrative law.

“The courts have consistently exercised a great deal of deference to the president’s judgment about what kinds of rules are necessary to further economy and efficiency in procurement,” Kate Andrias told Bloomberg BNA. The disclosure rule “surely meets the standard that has been applied by courts in the past.” Andrias was chief of staff for the White House counsel’s office in President Barack Obama’s first term.

Her words offer a preview of the government’s response to an Associated Builders and Contractors lawsuit filed Oct. 7 in federal court in Texas, the first of several legal challenges expected in the coming weeks.

The executive order and implementing rules require federal contractors to report their recent history of labor and employment law violations when bidding on contracts. Contracting officers can deny awards to the most egregious violators that don’t take remedial steps. The order is slated to take effect in gradual steps, starting Oct. 25 for contracts valued at $50 million or more.

“The order is set up to make sure that the government is doing business with contractors that will provide high-quality, efficient services to the government,” Andrias said. That is “fully within the president’s constitutional and statutory power and also eminently good policy.”

Ever since Obama signed the executive order in 2014, contractors have argued that the policy is unnecessary and extremely burdensome. They’ve said it will dissuade companies from doing business with the government.

Could Injunction Happen by Oct. 25?

ABC is seeking injunctive relief from the U.S. District Court for the Eastern District of Texas. By filing its complaint less than three weeks from the enforcement date, the trade group is leaving little time for a judge to act, although the Eastern District is known as the “rocket docket” for speedily moving cases.

The traditionally business-friendly federal courts in Texas may be more likely to enjoin an Obama administration labor regulation. The Northern District in June issued an injunction to stop the DOL from implementing its “persuader rule,” which expands disclosure requirements for employers that use advisers to help fight unionization drives. The ABC lawsuit was assigned to Judge Marcia A. Crone, who was nominated by President George W. Bush.

Andrias, now a law professor at the University of Michigan, said there’s enough precedent negating ABC’s complaint that the judge’s political affiliation should have no bearing.

“I would hope any judge, whether appointed by a Democratic or a Republican president, would follow the law. And I think that the government has a really strong case on the law here,” said Andrias, who said she left the White House before it began work on the executive order.

Post-Deadline Delay Still a Win

If the court were to enjoin the rules after the Oct. 25 deadline, that would still be a win for most contractors, said James Murphy, who represents defense contractors at management firm Ogletree Deakins Nash Smoak & Stewart PC in Washington.

“Even if an injunction is entered in, say, early November, it’s still going to create meaningful benefits to the vast majority of federal contractors,” Murphy, former labor and employment counsel for defense contractors Northrop Grumman Corp. and General Dynamics Corp., told Bloomberg BNA.

Contracts valued at less than $50 million aren’t subject to the rules until April 2017 and subcontractors don’t need to report until October 2017.

More judges could be presented a chance to shoot down the order and rules in the next few months after other lawsuits are filed. A coalition of business groups, including the National Association of Manufacturers, the U.S. Chamber of Commerce and the HR Policy Association, have all argued the rule is legally vulnerable under multiple statutes but have yet to file a complaint.

The Labor Department, along with the Federal Acquisition Regulatory Council, took extra time to finalize the implementing rules and guidance specifically to ensure it would be legally defensible, Labor Secretary Thomas Perez said on a call for reporters in August. “I have every confidence that we will be able to successfully defend it” in court, Perez said.

Conflict Between Order and NLRA?

ABC also alleged that 14 federal labor and employment laws—all subject to contractor reporting—preempt the order.

Out of the six counts in the ABC’s lawsuit, this was “particularly compelling,” Murphy said. “When it comes to the National Labor Relations Act in particular, I think that argument is the strongest.”

But on the NLRA preemption issue, “the administration has a very strong argument,” Andrias said. “The regs are structured in a way to make it clear that they’re carefully targeted to contracting needs and the EO was not trying to intervene as a regulator in labor law.”

A federal appeals court struck down an executive order by President Bill Clinton that would have penalized government contractors that hired strike replacement workers. The court was concerned with the president intervening as a labor regulator.

But with the Fair Pay and Safe Workplaces order, the implementing rules were written so that they’re “tailored to the president’s contracting needs,” thereby avoiding the same problem, Andrias said.

Due Process Violations Feared

The complaint further alleged that the administration is denying contractors their due process rights by allowing companies to be disqualified from government business based on alleged violations that haven’t been fully adjudicated.

This claim is one that business groups have said they feel particularly strong about because the rules create penalties for employers that haven’t had their day in court.

Andrias isn’t convinced.

“Before the contracting officer makes a decision, there’s an opportunity to be heard by submitting additional information, including mitigating circumstances related to the violation,” she said. “Just simply requiring contractors to report nonfinal decisions that are still appealable doesn’t deny them due process when there are many mechanisms in the order to ensure that process is given before any decisions are made.”

Even if a judge disagrees with the litigants, there’s still a chance Congress could succeed in setting aside the order for the majority of contractors that receive awards from the Pentagon.

Defense contractors would be exempt from the order under pending defense authorization bills passed in both chambers. A conference committee will determine whether this language remains in the final bill when it reconvenes after the election.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com

To contact the editor responsible for this story: Peggy Aulino at maulino@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.