Obama’s Fair Pay Executive Order Was Blocked. Now What?

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By Jon Steingart and Ben Penn

Oct. 25 — The Obama administration’s controversial Fair Pay and Safe Workplaces executive order is mostly dead for now, and employment attorneys agreed the litigation challenging it will next head to an appeals court ( Assoc. Builders and Contractors of Se. Texas v. Rung , E.D. Tex., No. 1:16-cv-00425, preliminary injunction 10/24/16 ).

A preliminary injunction issued Oct. 24 that blocks most of the executive order (RIN:9000-AM81) is a major setback in the Obama administration’s attempt to ensure business ethics among government contractors and to steer federal spending to contractors that protect workers’ rights. The order would require federal contractors to disclose recent labor violations when bidding on a new contract, and it allows agencies to deny contracts to egregious violators who don’t take remedial action.

Judge Marcia A. Crone of the U.S. District Court for the Eastern District of Texas set aside the bulk of the order but retained a less-publicized provision requiring contractors to improve paycheck transparency. Starting Jan. 1, this clause mandates that companies bidding on contracts valued at $500,000 or more inform workers about their independent contractor status and provide other wage and benefit details.

Government Expected to Appeal

“The Labor Department and Department of Justice will surely appeal this,” Charles Tiefer, a law professor at the University of Baltimore, told Bloomberg BNA Oct. 25. “The executive branch gets very broad authority over government contracts from the Procurement Act of 1949,” said Tiefer, a supporter of the order who’s written a book about procurement law.

“It reads like a final opinion,” Tiefer said. “There is no reason to hang around the district court.”

The sentiment was joined by Jim Murphy, a shareholder in the Washington, D.C., office of management-side law firm Ogletree, Deakins, Nash, Smoak & Stewart P.C. “The first thing that is likely to occur—I would expect that the government’s going to appeal the preliminary injunction,” he told Bloomberg BNA Oct. 25.

“It has been an enormous undertaking on the administration’s side to put it into place so far,” said Murphy, who previously worked as in-house labor counsel for defense contractors Northrop Grumman Corp. and General Dynamics Corp. “I can’t imagine that they’re ever going to walk away.”

While the administration defends the order in court, government contracting officers are going to need guidance as to how to proceed, Murphy said. “There are an awful lot of government contracting officers who need some direction as to what they’re going to do,” he said. “I expect we’re going to see some sort of internal communication within the executive branch.”

Injunction Preserves Status Quo

“A preliminary injunction is designed to prevent irreparable harm while the case is pending,” Murphy said. “It preserves the status quo so the parties aren’t prejudiced while they’re getting to the merits.”

“In a lot of disputes, a preliminary injunction might be enough to force the parties to reach a resolution,” he said. “Given the importance and the political dynamics that surround this initiative, I wouldn’t see any possibility of a truce.”

The lead attorney representing the Associated Builders and Contractors, one of the plaintiffs in the challenge, left open the possibility of reconciliation with the administration. “So many defects have been revealed in the rule that it would be prudent for them to withdraw it, but I can’t speak for what they plan to do,” Maury Baskin, a shareholder in Littler Mendelson P.C.'s Washington, D.C., office, told Bloomberg BNA Oct. 25.

“We do anticipate that the merits would be decided on summary judgment,” Baskin said in an interview hours after learning his request for a preliminary injunction had been granted. “The judge’s opinion was well and strongly reasoned and the rule is defective on many levels and should never be restored.”

The Labor Department, which issued the executive order’s implementing rules and guidance with the Federal Acquisition Regulatory Council, demurred when asked about litigation. “We are confident that the rule and guidance are legally sound and the Department of Justice is considering options for next steps,” DOL spokeswoman Amanda McClure said in a statement Oct. 25.

Elections Have Consequences

“You could see a legislative solution to do what the court here said the president couldn’t do on his own” if Democrats win control of the House and Senate, Murphy said. “The judge viewed this as an executive overreach” beyond the enforcement authority he has under labor laws as they’re now written. A Democratic Congress could grant the president the authority Crone said he lacks, Murphy said.

Regardless of who’s in charge in the Capitol, there could be a change of course if voters choose Republican Donald Trump over Democrat Hillary Clinton in the presidential election. “If that eventuality were to pass, then I think he would find a way to rescind” the executive order, Murphy said.

“On the other hand, of course, if it’s a President Clinton, the fight will continue.”

To contact the reporters on this story: Jon Steingart in Washington at jsteingart@bna.com; Ben Penn in Washington at bpenn@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com

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