Fair Pay and Safe Workplaces FAR Rule Enjoined

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.

 

FAC 2005-90 Finalizes Fair Pay and Safe Workplaces Rule

The Federal Acquisition Regulatory Council has issued Federal Acquisition Circular 2005-90, which contains one final rule amending the Federal Acquisition Regulation. The rule, Fair Pay and Safe Workplaces (FAR Case 2014-025), implements Executive Order 13673 (as amended by E.O. 13683 and E.O. 13738). E.O. 13673 was designed to improve contractor compliance with labor laws and increase efficiency and cost savings in federal contracting. As stated in the E.O., ensuring compliance with labor laws drives economy and efficiency by promoting “safe, healthy, fair, and effective workplaces. Contractors that consistently adhere to labor laws are more likely to have workplace practices that enhance productivity and increase the likelihood of timely, predictable, and satisfactory delivery of goods and services to the [f]ederal [g]overnment.”

Requirements

The E.O. requires 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. In addition, the E.O. creates new paycheck transparency protections to ensure that workers on covered contracts are given the necessary information each pay period to verify the accuracy of what they are paid. Finally, the E.O. limits the use of pre-dispute arbitration clauses in employment agreements.

New Subpart

Accordingly, the rule creates FAR Subpart 22.20 to implement these policies and procedures. FAR 22.2002 provides definitions for terms used in the subpart. FAR 22.2003 sets forth the government’s policy to promote economy and efficiency in procurement by awarding contracts to contractors that comply with labor laws. The general requirements for compliance with labor laws are specified at FAR 22.2004-1. Contracting requirements for preaward assessment of an offeror’s labor law violations are found in FAR 22.2004-2, while requirements regarding postaward assessment of a prime contractor’s labor law violations are specified in FAR 22.2004-3. FAR 22.2004-4 applies to contractor preaward and postaward assessment of a subcontractor’s labor law violations. FAR 22.2005 addresses paycheck transparency and FAR 22.2006 involves arbitration of contractor employee claims. Also, the final rule adds new FAR 22.104 to specify the duties of agency labor advisors.

Clauses and Provisions

FAR 22.2007 prescribes new solicitation provisions and contract clauses that further implement the requirements of E.O. 13673 and FAR Subpart 22.20. The FAR 52.222-59 clause, Compliance with Labor Laws (Executive Order 13673), is prescribed for use in solicitations with an estimated value of $50 million or more, issued from October 25, 2016, through April 24, 2017, and resultant contracts; and in solicitations issued after April 24, 2017, that are estimated to exceed $500,000, and resultant contracts. FAR 52.222-57, Representation Regarding Compliance with Labor Laws (Executive Order 13673), is used in solicitations that contain the FAR 52.222-59 clause. For solicitations issued on or after October 25, 2017, COs are instructed to insert the provision at FAR 52.222-58, Subcontractor Responsibility Matters Regarding Compliance with Labor Laws (Executive Order 13673), in solicitations that contain FAR 52.222-59. In addition, COs must insert the clause at FAR 52.222-60, Paycheck Transparency (Executive Order 13673), in solicitations if the estimated value exceeds $500,000. COs must also use the clause at 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.

Phased-in Applicability

The rule provides a measured phase-in process for the disclosure of labor law decisions to recognize that contractors and subcontractors were not previously required to track and report labor law decisions and to provide the time affected parties may need to familiarize themselves with the rule, set up internal protocols, and create or modify internal databases to track labor law decisions in a more readily retrievable manner.

  • From October 25, 2016, through April 24, 2017, the prime contractor disclosure requirements will apply to solicitations with an estimated value of $50 million or more, and resultant contracts; after April 24, 2017, the requirements apply to solicitations estimated to exceed $500,000, and resultant contracts.
  • The requirements apply to subcontractors starting October 25, 2017.
  • The decision disclosure period covers labor law decisions rendered against the offeror between October 25, 2015, and the date of the offer, or for three years preceding the offer, whichever period is shorter.
  • The paycheck transparency clause applies to solicitations starting January 1, 2017.

See the final rule for a discussion and analysis of the extensive public comments received in response to the proposed rule. This FAC also contains a Small Entity Compliance Guide, which indicates a regulatory flexibility analysis was prepared for the rule. The final rule goes into effect on October 25, 2016.