Proposals for ‘Blacklisting’ Executive Order Are Costly


By Allen Smith September 4, 2015

Proposals to implement the Fair Pay and Safe Workplaces Executive Order—E.O. 13673, the so-called Blacklisting Executive Order—grossly underestimate the costs to employers, the Society for Human Resource Management (SHRM) wrote in comments. The comments were submitted in response to implementing guidance from the Department of Labor (DOL) and a proposed rule from the FAR (Federal Acquisition Regulatory) Council.

The proposals also would put a thumb on the scales against federal contractors facing administrative determinations that aren’t final orders, SHRM added.

‘Significant Concerns’

“SHRM notified the U.S. Department of Labor and FAR Council of our significant concerns with the Fair Pay and Safe Workplaces Executive Order,” said Mike Aitken, SHRM vice president of government affairs. “SHRM’s membership includes many federal contractors—small and large—that will be drastically impacted.”

The government estimates that approximately 22,153 contractors and 3,622 subcontractors, for a total of 25,775 entities, will be impacted by the guidance.

“While SHRM agrees with the DOL’s underlying objective that federal contractors should comply with labor laws, the proposal is fundamentally flawed and will significantly alter the current federal contracting process,” Aitken said. “SHRM requests that certain provisions are withdrawn, while others are significantly modified, and suggests alternatives to the administration’s proposals.”

In its comments, SHRM noted that at the core of the proposals is a “responsibility determination,” which a newly selected labor compliance advisor at each agency is to make. The responsibility determination boils down to whether contractors are good corporate citizens complying with 14 various labor laws—including Title VII, the Fair Labor Standards Act, the Family and Medical Leave Act and the National Labor Relations Act—and state laws that go beyond the federal requirements. If contractors are ruled to be bad corporate citizens and have not complied with these laws, they may be barred (i.e., blacklisted) from federal contracts.

Writing jointly with the College and University Professional Association for Human Resources and SHRM affiliate the Council for Global Immigration, SHRM said, “It is our collective judgment that the proposals as drafted would impose significant new and unnecessary burdens and obligations across the entire federal contractor community to address the shortcomings of an admittedly small minority” of bad actors.

Costly Proposed Regulations

SHRM took issue with the DOL’s and the FAR Council’s estimates of how costly the rule would be.

SHRM noted that the guidance includes:

  • No estimates of the cost to contractors of establishing databases for the collection of information regarding countless violations of scores of federal and state labor laws or of purchasing database services from outside vendors.
  • No projection about the enormous cost to contractors of maintaining a centralized file of the “wildly disparate named ‘violations.’ ” (“Violations” is in quotation marks because it’s defined to include nonfinal charges.)
  • No estimate of the enormous cost to create and maintain a system to gather and report such a huge amount of data. (Under the proposals, contractors are responsible for self-reporting charges and violations to the agencies with which it wants to contract.)
  • No projection of training costs needed to comply with the broadened responsibilities for compliance, including the costs of educating and training key field and headquarters managers and employees inputting letters from enforcement agencies concerning charges and violations.

Agency Determinations

Agency labor compliance advisors are being asked to examine vague criteria, including nonfinal agency determinations, SHRM said.

For example, the advisors are supposed to consider Equal Employment Opportunity Commission (EEOC) letters of determination that reasonable cause exists to believe an unlawful employment practice has occurred. But the letters mean nothing more than that the EEOC has determined it is more likely than not that the charging party was subject to discrimination.

“This is a preliminary conclusion based on an investigation, which is often cursory,” SHRM noted. And the agency only litigates a small percentage of these cases.

“Therefore, a large number of cases where reasonable cause has been found are essentially dropped by the EEOC,” SHRM observed.

But under the FAR Council’s proposed regulations, all reasonable-cause determinations will be reportable to the agency, even though the EEOC may have determined that there is insufficient cause to litigate and despite the contractor never having had an opportunity to challenge the EEOC’s determination.

Due Process Concerns

Ilyse Schuman, an attorney with Littler and co-chair of the Workplace Policy Institute (which called for the proposals to be withdrawn in their entirety), said the proposals violate due process by forcing some businesses to lose out on enormous business opportunities because of nonfinal determinations that may later be overturned.

Federal contractors will pass the costs of compliance on to the government or will get out of contracting with the federal government entirely, she said. Schuman predicted that that, in turn, will result in less competition, higher prices and a slowdown in the contracting process.

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.


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