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President Trump poised to kill 'blacklisting rule'

Joe Mont | March 8, 2017

President Trump is poised to formalize Congressional action that kills the Obama Administration’s so-called “blacklisting rule” for federal contractors.

On Monday, the Senate voted 49 to 48 to eliminate the Fair Pay and Safe Workplaces rule, echoing a House vote in February.

Republicans in both chambers relied upon the Congressional Review Act to repeal the rule. That once infrequently used law allows for a majority vote to repeal late term rules by the previous administration.

On Aug. 24, the Department of Labor and the Federal Acquisition Regulatory Council announced final regulations and guidance implementing a 2014 executive order by President Barack Obama. The Fair Pay and Safe Workplaces Directive set the stage for requiring that prospective federal contractors disclose labor law, civil rights, and wage violations. It also required guidance for contracting agencies on how to factor in labor violations when awarding federal contracts and sub-contracts valued at more than $500,000.

Pervasive, prolonged, willful, or serious violations could be used to block a company’s bid under the rule.

Prospective contractors were required to disclose violations of 14 laws (among them the Fair Labor Standards Act, Occupational Safety and Health Act, National Labor Relations Act; Americans with Disabilities Act, and Family and Medical Leave Act). The rule also limits the use of pre-dispute arbitration clauses in employment agreements on covered federal contracts.

A “paycheck transparency” clause required contractors to provide wage statements and notice of any independent contractor relationship to their covered workers.

A prevailing point of contention was that companies would be forced to report citations in the midst of an agency appeal or court challenge.

Among the critics of the rule was the National Association of Manufacturers. President and CEO Jay Timmons said the rule would block businesses from working with the federal government whether or not they have violated workplace laws. “This regulation is akin to a bizarre ‘guilty until proven innocent’ policy that significantly burdens manufacturers who will have to expend countless hours and resources to ensure they do not run afoul of a fundamentally unfair regulation,” he said at the time the rules were issued..

“These regulations will bury federal contractors and sub-contractors under mountains of paperwork and then prevent some from getting work for a labor violation they didn’t commit,” Senate Labor Committee Chairman Lamar Alexander (R-Tenn.) said.

Concerns like these led to a legal challenge. In October 2016, a federal court in Texas issued an emergency injunction that halted implementation of the “blacklisting” rule ahead of its planned Oct. 25 effective date.

The restraining order, issued in the U.S. District Court for the Eastern District of Texas by Judge Marcia Crone, was in response to a lawsuit filed by Associated Builders and Contractors and the National Association of Security Companies.

The plaintiffs argued, and Judge Crone agreed, that the rule, as written, violates the due process rights of government contractors by compelling them to report and defend against non-final agency allegations of labor law violations without being entitled to a hearing at which to contest such allegations.

Absent injunctive relief, Plaintiffs’ members will be required to report pending “violations”…even though years later they may be vindicated—such as by demonstrating to a court that the government’s case wholly lacked merit,” she wrote.

The Court also agreed with the assertion that the Executive Order and resulting rule violated the First Amendment by requiring that federal contractors and their subcontractors, for the first time, report and publically disclose any “violations” of federal labor laws occurring since Oct. 25, 2015, regardless of whether “the alleged violations occurred while performing government contracts, and without regard to whether such violations have been finally adjudicated after a hearing or settled without a hearing, or even occurred at all.”

As the Senate was preparing to vote on March 6, Sen. Elizabeth Warren (D-Mass.) released a staff report defending the need for the rule.

Warren’s report is thematically similar to one in the mid-1990s, the Government Accountability Office (then known as the General Accounting Office). Over the course of two reports it found that that federal contracts worth more than $60 billion had been awarded to companies that had violated the National Labor Relations Act and the Occupational Safety and Health Act.

A decade later, the GAO found a similar pattern and that nearly two-thirds of the 50 largest wage-and-hour violations and almost 40 percent of the 50 largest workplace health-and-safety penalties issued between Fiscal Years 2005 and 2009 were made against companies that went on to receive new government contracts.

Warren’s report detailed repeated violations of labor laws by companies that receive billions of dollars in taxpayer-funded federal contracts. Nearly a quarter of the American workforce is employed at a company that holds at least one federal contract.

“The U.S. government pays hundreds of billions of dollars to federal contractors, corporations that hire workers to do everything from securing nuclear waste to serving food at national parks. But some of the biggest corporations often underpay their workers and put their health and safety at risk,” Warren said.

The report purports to shows that 66 of the federal government's 100 largest contractors have been caught breaking federal wage and hour laws, and more than a third of the 100 largest penalties levied by the Occupational Safety and Health Administration since 2015 were issued to companies that held federal contracts.

“U.S. taxpayers have the right to expect that the giant companies that receive federal contracts will follow the law, including worker protections,” Warren said, testifying against the repeal. “Who does this Congress work for? Hardworking Americans who want their tax dollars spent responsibly, or the giant corporations that can’t even follow basic safety rules for their workers?”

“Instead of addressing the problem, Republicans in Congress are voting today to make it easier for companies who have abused their workers to get massive contracts from the government,” she added.