One day before an October 25, 2016, effective date, the District Court for the Eastern District of Texas enjoined on a nationwide basis the implementation of portions of the final rule issued in FAC 2005-90 and related Department of Labor guidance because they conflicted with the National Labor Relations Act and other labor laws (Associated Builders and Contractors, et al. v. Rung, et al.). The rule, Fair Pay and Safe Workplaces (FAR Case 2014-025), implements Executive Order 13673, as amended. The injunction applies to the rule’s labor law violation reporting requirements and limitation on use of pre-dispute arbitration clauses in employment agreements, but not its paycheck transparency requirement.
Implementation of E.O. 13673
New FAR Subpart 22.20 implements the E.O.’s requirement that prospective and existing contractors on covered contracts disclose decisions regarding violations of certain labor laws, and that contracting officers, in consultation with agency labor compliance advisors, consider the decisions as part of the CO’s decision to award or extend a contract. As prescribed by FAR 22.2007, the following new solicitation provisions and contract clauses must be used on or after October 25, 2016:
- FAR 52.222-59, Compliance with Labor Laws (Executive Order 13673), for solicitations with an estimated value of $50 million or more;
- FAR 52.222-57, Representation Regarding Compliance with Labor Laws (Executive Order 13673), for solicitations and resultant contracts that contain the FAR 52.222-59 clause; and
- FAR 52.222-61, Arbitration of Contractor Employee Claims (Executive Order 13673), in solicitations if the estimated value exceeds $1,000,000, other than those for commercial items, and resultant contracts.
Conflict with NLRA, Other Laws
According to the court, the E.O. and the final rule “arrogate[d] to contracting agencies the authority to require contractors to report for public disclosure mere allegations of labor law violations, and then to disqualify or require contractors to enter into premature labor compliance agreements based on their alleged violations of such laws in order to obtain or retain federal contracts.” Finding the E.O. and the rule directly conflicted with longstanding judicial interpretation of the NLRA and labor laws that specify debarment procedures after full hearings and final adjudications, the court concluded “the Executive Branch appears to have departed from Congress’s explicit instructions dictating how violations of the labor law statutes are to be addressed.” Moreover, even if agencies could properly disqualify contractors based on final administrative decisions, arbitration awards, and court orders, the E.O. and the rule impermissibly extended their reach far beyond those limited circumstances. Finally, the reporting requirements appeared to violate the First Amendment and due process rights, the rule’s “onerous” requirements suggested arbitrary and capricious rulemaking, and provisions of the E.O. and rule violated the Federal Arbitration Act.