Federal Contractor `Blacklisting’Rule Target of Lawsuit

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By Ben Penn

Oct. 7 — The Associated Builders and Contractors filed a lawsuit in federal court to block the administration’s Fair Pay and Safe Workplaces rules requiring federal contractors to disclose labor violations ( Associated Builders and Contractors of Se. Texas v. Rung, E.D. Tex., No. 1:16-cv-00425, 10/7/16 ).

The trade group alleges President Barack Obama’s executive order and its implementing regulations exceed the government’s procurement authority, violate the Federal Arbitration Act and are preempted by the National Labor Relations Act and other labor and employment laws. ABC is seeking injunctive relief from the U.S. District Court for the Eastern District of Texas.

The Fair Pay and Safe Workplaces regulation and guidance require federal contractors and subcontractors to disclose violations of 14 federal labor and employment laws, and state-law equivalents, when bidding on a contract. The rule was finalized in August and is set to take effect in gradual stages, starting Oct. 25 with prime contracts valued at $50 million or more.

The rule is the latest in a series of Obama administration regulations to face litigation in Texas from the business community. More lawsuits are expected over the regulation, which contractors refer to as “blacklisting.” They’ve called it a compliance headache and unnecessary because of existing debarment procedures.

The case was assigned to Judge Marcia A. Crone.

The plaintiffs, ABC and the National Association of Security Corporations, are suing on behalf of their government contractor members.

Due Process, First Amendment Counts

The litigants also charged the government with violating contractors’ due process rights by allowing contracting officers to make determinations based on companies’ alleged violations that haven’t been fully adjudicated.

The executive order, rule and guidance “thereby deprive government contractors of their liberty interests without due process of law,” violating the constitution, the ABC argues. “Such harm is irreparable in nature and is both imminent and certain, calling for injunctive relief.”

The same provision of the executive order that requires contractors to report mere allegations also infringes on companies’ First Amendment rights by coercing speech, the lawsuit alleges.

The plaintiffs further accused the administration of issuing a regulation that is “arbitrary and capricious” under the Administrative Procedure Act.

The Fair Pay and Safe Workplaces rule “creates additional costs and regulatory burdens that will discourage qualified firms, particularly small businesses, from pursuing federal contracts, and will drive up costs to taxpayers,” Ben Brubeck, ABC’s vice president of regulatory, labor and state affairs, said in a statement. “In addition, it will cause litigation and delays that will disrupt the federal procurement process for critical goods and services purchased by the government.”

The named defendants include the top officials at the Labor Department and the Federal Acquisition Regulatory Council, which issued the guidance and rules.

Representatives for the DOL and FAR Council were not immediately available for comment.

Littler Mendelson P.C. is representing the plaintiffs.

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

For More Information

The lawsuit is at http://src.bna.com/jfV.

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