On Oct. 24, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction that prevents the Federal Acquisition Regulatory (FAR) Council from implementing the Fair Pay and Safe Workplaces final rule, commonly referred to as the blacklisting rule, which was scheduled to go into effect on Oct. 25.

Specifically, the court’s decision blocks the federal government from implementing any provision of the FAR Rule or the U.S. Department of Labor (DOL) guidance relating to the new reporting and disclosure requirements on government contractors and
subcontractors and the restriction on arbitration agreements. As a result, these provisions of the final blacklisting rule—which would have increased costs for taxpayers, threatened the livelihood of millions of Americans who work for responsible federal contractors, and crippled the federal procurement process with needless uncertainty, delays and litigation—will not go into effect.   
However, the preliminary injunction does not block implementation of the paycheck transparency provisions of the final rule. The rule’s paycheck transparency provisions are still scheduled to take effect on Jan. 1, 2017, requiring contractors to provide wage statements (which include the number of hours worked, pay rate and any deductions) and notice of any independent contractor relationship and overtime exemptions to their covered workers.

Associated Builders and Contractors (ABC), its ABC Southeast Texas Chapter and the National Association of Security Companies (NASCO) filed its legal challenge on Oct. 7 and filed a motion for temporary restraining order and preliminary injunction on Oct. 13. ABC was represented by its General Counsel Maury Baskin of the law firm Littler Mendelson, PC.

It is unknown at this time whether the U.S. government plans to appeal the district court’s decision. And until the legal challenge is resolved, uncertainty still exists as to whether the final rule will be fully implemented at a future date. 

Background on Final Rule
On Aug. 24, the Obama administration accomplished one of its top priorities when it finalized the Fair Pay and Safe Workplaces Executive Order 13673. President Obama originally signed the executive order in July 2014, and the final rule was accompanied by a guidance document from the DOL and a White House amendment.

Under the final rule, federal contractors and subcontractors were required to disclose any “violations” of 14 federal labor laws and OSHA-approved state plans to an Agency Labor Compliance Advisor (ALCA), who would perform an assessment of the violations and make a recommendation to the contracting officer about whether a federal contractor is responsible enough to be awarded a contract covered by this rule. Information submitted to contracting agencies would have been publicly disseminated.

For the first time, when bidding on projects, contractors would have been required to declare if they have had any violations of the covered labor laws that resulted in “administrative merit determinations, civil judgments, or arbitral awards or decisions.” The DOL’s definition includes actions that have not been fully adjudicated and are still under investigation. Federal contractors would have been stripped of their due process rights and been forced to disclose pre-adjudicated “labor law decisions” and alleged violations to government officials as a basis to deny a contract to an otherwise qualified firm.

Rule Phase-In and Applicability
The rule would have impacted contractors pursuing prime federal contracts and subcontracts of $500,000 or more. Subcontractors would have been required to disclose violations directly to the DOL, which in turn would provide a review of the subcontractor’s record. Prime contractors would then rely on the DOL’s review of the subcontractor’s violations to decide if the firm is qualified for a subcontract award.

Binding Arbitration Prohibition
For goods and services contracts worth more than $1 million, contractors would have been prohibited from arbitrating Title VII claims, as well as sexual assault and sexual harassment claims, unless the complaining employee agreed to arbitration after the claim arises. Contracts would have been obligated to incorporate this requirement into qualifying subcontracts worth more than $1 million.

Paycheck Transparency
All federal contractors pursuing solicitations issued on or after Jan. 1, 2017, for prime contracts and subcontracts of $500,000 or more (other than subcontracts that are for “Commercial Off-The-Shelf items”) still must comply with the rule’s paycheck transparency provisions. The paycheck transparency provisions require contractors to provide wage statements (which include the number of hours worked, pay rate and any deductions), and notice of any independent contractor relationship and overtime exemptions to their covered workers.

Protecting Contractors’ Rights
While ABC supports a level and transparent playing field for federal contractors and believes that unethical firms should be held accountable, the final rule presented many troubling practical and technical flaws. ABC has long maintained that this rule would violate the constitutional rights of contractors and drive up costs to taxpayers.

Not only does the court’s preliminary injunction ruling protect the constitutional rights of government contractors and their employees, but it also prevents a disruption to the federal government’s procurement process for critical goods and services that benefit the public.

Ben Brubeck is vice president of regulatory, labor and state affairs for Associated Builders and Contractors and Lauren Williams is manager of labor and employment policy. For more information, email brubeck@abc.org or lewilliams@abc.org.