A webinar sponsored by the American Bar Association Oct. 27th delved into the so-called “blacklisting” regulations implementing President Barack Obama’s Fair Pay and Safe Workplaces Executive Order. E.O. 13,673 requires federal contractors and subcontractors bidding on certain government contracts to disclose violations of federal and state labor laws.
John M. Tenaglia, deputy director of the Defense Procurement and Acquisition Policy, Marc Freedman, executive director of labor law policy at the U.S. Chamber of Commerce, and Michael Schrier, special counsel in Duane Morris LLP’s Washington office, discussed the uncertain future of the regulations in light of a recent preliminary injunction. The panelists also shared their concerns and proffered advice on regulatory compliance. Eric Crusius moderated the program.
The Elephant in the Room
A federal court in Texas recently issued a preliminary injunction staying most parts of E.O. 13,673 and its implementing Final Rule and Guidance. The only exception—the paycheck transparency provision, takes effect on Jan. 1, 2017.
As grounds for the stay, the court held that the FPSW regulations were preempted by other federal labor laws and violated the First and Fifth Amendment rights of contractors that would be compelled to report and defend themselves against non-final allegations of labor law violations without a hearing.
DPAP’s Tenaglia noted that the Office of Federal Procurement Policy issued a memorandum shortly after the E.O. was issued to make it clear to the federal workforce that they needed to comply with the order.
The initial Oct. 25 implementation date for the stayed provisions already has passed. Whether additional scheduled implementation dates in April and October 2017 will hold will depend on the outcome of the Texas case and any potential appeals.
Although the government has yet to announce plans to appeal, Crusius considered it a foregone conclusion given the amount of work that has gone into the regulations. “There is a political overtone to all this,” Schrier added, noting that which party wins the presidency “could have significant impact on whether these regulations survive.”
Under the sole provision still in effect, prime and subcontractors covered by the Fair Labor Standards Act, the Davis Bacon Act and the Service Contract Act now must provide additional information about pay, including hours worked, overtime and any additions or deductions, Schrier said.
At the start of any contract, separate written notice also must be provided to individual workers categorized as independent contractors. This requirement dovetails nicely with recent attempts by the Labor Department to confront misclassifications, Schrier noted. “This will be Exhibit A should DOL come knocking about any potential misclassification violations,” he warned.
Initial Reporting Requirements
In the event the stay is lifted, contractors’ proposal teams must be prepared to truthfully and accurately report violations to avoid False Claims Act violations.
For initial reporting requirement purposes, remember:
Freedman warned that most companies’ systems aren’t set up to capture the granular violations required for FPSW certifications, noting “the level of effort that’s required to make that certification is going to be extraordinary.”
These problems grow exponentially when dealing with larger companies with different business units, locations and regional in-house counsel, Schrier added. These companies typically have separate business capture units, compliance functions and HR functions that don’t talk to each other. For this reason, he recommended that these functions conduct regular meetings and consider using software to capture information on various reportable violations so compliance and business-capture units can make proper representations.
The Crucial Role of Mitigating Factors
Tenaglia described the role that the new Agency Labor Compliance Advisors will play if the stay is lifted.
The ALCAs will classify reported violations, weigh any mitigating factors presented and make recommendations to the contracting officers. Contracting officers then may decide whether to enter into labor compliance agreements with the contractor prior to an award, or whether to consider mitigating factors.
For these reasons, it’s crucial for contractors reporting adverse decisions to raise any available mitigating factors for contract officers’ and ALCAs’ consideration. Examples include remedial measures taken, a low number of violations relative to company size or a history of compliance.
The panel offered the following advice on mitigating factors:
Additionally, Crusius has cautioned clients not to take advantage of pre-assessment evaluations offered by the DOL. There’s no advantage to doing so, he said, where the department may be inclined to judge more harshly than the ALCAs and compliance officers once they have information on all prior violations.
Labor Compliance Agreements—The Great Unknown
While the contracting officer may determine the requirement for there to be a labor compliance agreement, Schrier highlighted the “guts” of what goes into the agreement is at the ultimate discretion of the enforcement agency, which has different motivations and incentives than the contracting agency. “Nobody knows what these things are going to look like—there is no template or form attached to the regulations,” he said.
Further, Schrier warned that LCAs might provide enforcement agencies with leverage to “bludgeon a contractor into submission” with a long-term agreement, various reporting requirements and trigger clauses for violations. Until there’s a body of law and we know what LCAs look like, he said, “they scare the hell out of me.”
Schrier also reminded practitioners that disclosed information on violations will be publically available, potentially providing unions and plaintiffs’ council with a centralized list of potential organizing opportunities or clients.
For these reasons, he suggested counseling clients to start putting aside larger reserves to deal with prevention and enforcement issues and a potential uptick in litigation.
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