Friday, March 6, 2015
President Obama’s Executive Orders Affecting Government Contractors Through Labor & Employment Law
Since taking office in January 2009, President Barack Obama has issued several significant Executive Orders (“EO”) affecting government contractors, particularly in the area of labor and employment law. We summarize the most important of these EOs below:
On January 30, 2009, the President issued EO 13495 – Nondisplacement of Qualified Workers Under Service Contracts. The implementing regulations became effective as of January 18, 2013. This EO generally requires the successor contractor in all government contracts covered by the Service Contract Act to offer employment to the incumbent contractor’s employees who worked on the predecessor contract prior to offering employment to others. However, there are several qualifications and exceptions to this general rule. First, the successor contractor is not obligated to maintain as large a total workforce as the incumbent. Second, the successor contractor may apply its own pre-existing workforce to performance of the contract. Third, the successor contractor is not required to offer employment to an employee who the incumbent will retain. Finally, the successor contractor need not offer employment to one who it reasonably believes has failed to perform suitably on the job. The successor contractor bears the burden of proving this exception with credible, written evidence.
On July 31, 2014, the President issued EO 13673 – Fair Pay and Safe Workplaces. It is expected to be implemented on new contracts beginning in 2016. This EO requires pre-award disclosure of all violations during the previous three years of a wide range of federal and state labor laws. It further requires an awardee to update its disclosures every six months after award. It directs that all such violations will bear on the contractor’s present responsibility and, thus, its eligibility for government contracts. In addition, contractors will be required every pay period to provide to their employees documentation reflecting all hours worked, overtime hours, pay, and deductions. This EO also purports to render mandatory arbitration clauses ineffective in regard to civil rights and certain other types of claims. As it will not be implemented until 2016, it is impossible to predict precisely how this EO will affect contractors. However, with its heightened focus on virtually all labor-law violations, this EO is clearly intended to shift power away from employers and towards the plaintiffs’ bar and their employee-clients.
On April 8, 2014, the President issued EO 13665 – Non-Retaliation for Disclosure of Compensation Information. The Department of Labor published a Notice of Proposed Rulemaking on September 17, 2014, reflecting Labor’s proposed implementing regulations. This EO prohibits adverse employment action based on an employee’s disclosure of compensation information, even if the employer has a policy against such disclosure. Violations are punishable by contract termination and/or suspension or debarment from government contracting.
On January 30, 2009, the President issued EO 13494 – Economy in Government Contracting. The implementing regulations became effective as of December 2, 2011. Despite its innocuous name, the sole purpose of this EO is to make it more expensive for government contractors to dissuade organized labor and collective bargaining. It designates as unallowable all costs associated with persuading employees whether to organize and bargain collectively. Examples of such unallowable costs include: (a) publication and distribution of materials, (b) related attorneys’ fees, and (c) the costs of conducting meetings.