‘Blacklisting’ Executive Order Blasted on Hill


By By Allen Smith February 27, 2015

The “blacklisting” executive order (E.O.) is “completely unworkable in the real world,” Willis Goldsmith, an attorney with Jones Day in New York City, said in written testimony on behalf of the U.S. Chamber of Commerce before a joint meeting of the House Subcommittee on Workforce Protections and House Subcommittee on Health, Employment, Labor and Pensions on Feb. 26, 2015.

The Fair Pay and Safe Workplaces Executive Order (E.O. 13673) is intended to bar federal contracting by businesses that have repeatedly violated labor laws.

Angela Styles, an attorney with Crowell & Moring in Washington, D.C., agreed with Goldsmith, saying in written testimony, “I can tell you with a high degree of certainty that this E.O. will:

(1) Grind essential federal purchases to a standstill.

(2) Alter the current legal relationship between prime contractors and subcontractors.

(3) Illegally and unfairly exclude responsible companies from doing business with the federal government.

(4) Devastate small businesses.

(5) Substantially increase the government’s costs of buying goods and services.”

Red Tape

Styles noted that the executive order requires the following new steps be taken prior to each contract award exceeding $500,000:

  • Prime contractor reporting. The prime contractor must report actual and potential labor violations at the federal and state level from the past three years.
  • Contracting officer review. The contracting officer must review the actual and potential labor violations submitted by the prime contractor.
  • Labor compliance advisor review. The labor compliance advisor must review the actual and potential labor violations submitted by the prime contractor.
  • Consultation with enforcement authorities. The labor compliance advisor must consult with enforcement authorities at the federal and state level to determine whether agreements are in place or are otherwise needed to address appropriate remedial measures, compliance assistance, steps to resolve issues to avoid further violations or other related matters.
  • Consultation by contracting officer. The contracting officer must consult with the labor compliance officer subsequent to the labor compliance advisor’s consultation with federal and state enforcement authorities.
  • Responsibility determination. The contracting officer must determine whether the prime contractor is a responsible source that has a satisfactory record of integrity and business ethics.

With the U.S. government executing 99,822 contracts over $500,000 in fiscal year 2014, adding these steps “while assuming the government contracting process will not grind to a halt borders on the irrational,” Styles said.

Rep. Jared Polis, D-Colo., asked if Styles literally meant the contracting process really would come to an absolute halt, and she responded that she meant it would generally come to a halt.

“As though the new process and information required prior to contract award for almost 100,000 actions is somehow an insufficient burden, the E.O. requires that virtually the same process be repeated every six months after prime contract award,” she added in written testimony. “Whether it is the purchase of equipment necessary for our warfighter[s], getting checks out the door to our senior citizens or ensuring the safety of our food, none of it gets done without federal contractors,” said Styles, who is a former administrator for federal procurement policy at the Office of Management and Budget.

“Our federal contracting officers do not have the bandwidth to review extensive volumes of labor information, consult with the labor compliance advisors, determine appropriate remedial action and consult with prime contractors regarding the labor practices of hundreds of thousands of subcontractors,” Styles asserted, predicting the executive order would lead to less competition for federal contracts and higher costs. “And I reiterate—there is already a whole body of labor law, and labor law remedies, designed by Congress and the executive branch to ensure labor law compliance, so there is no sensible reason to introduce this duplicative and inefficient bureaucracy.”

‘Broken System’

However, Karla Walter, associate director of the American Worker Project at the Center for American Progress Action Fund, said in written testimony, “the current system is broken.” The executive order “strives to help fix the broken system and ensure that law-breaking contractors come into compliance before they are able to receive new contracts.”

She predicted it “will make a considerable difference for the more than one in five American workers employed by companies receiving federal contracts; ensure law-abiding companies compete on an even playing field; improve the quality of services provided to the government; and prevent waste of taxpayer dollars.”

Walter noted that a 2013 Senate report found that nearly 30 percent of the top violators of wage and hour as well as safety laws were federal contractors that still were receiving contracts after having committed these violations.

She added that “a 2003 Fiscal Policy Institute survey of New York City construction contractors found that contractors with workplace law violations were more than five times more likely to receive a low performance rating than contractors with no workplace law violations.”

House Subcommittee on Workforce Protections Ranking Member Rep. Frederica Wilson, D-Fla., asked Walter, “One witness testified that there’s no evidence of willful, pervasive or repeated violations of federal contractors that would merit adopting this executive order. Do you agree with this conclusion? Could you please give us some specific examples of pervasive or repeated violations?”

“Certainly,” Walter responded. “I said in my opening remarks that the HELP [Senate Committee on Health, Education, Labor and Pensions] committee’s report found that there were $82 million in wage theft violations found at these companies that were severe violators of wage theft laws that continue to receive federal contracts.”

Is violation of federal wage and hour laws a way for companies that are “cheating” to underbid law-abiding companies? Wilson asked.

“Certainly, it is,” Walter answered.

Current Process Defended

Rep. Bradley Byrne, R-Ala., asked Goldsmith if he agreed with Walter that there is a problem with the current process to determine if there is a bad-acting government contractor.

“I don’t,” Goldsmith answered. “As pointed out by other witnesses, the government has in place for many, many years systems to deal with bad actors and the like. I would add, saying an entity is a bad actor is a question of definition. It doesn’t necessarily suggest that an employer is a bad actor for having, for example, had a charge filed by the NLRB [National Labor Relations Board], the EEOC [Equal Employment Opportunity Commission] or for that matter, the Department of Labor under the FLSA [Fair Labor Standards Act] and have decided for whatever reasons to resolve that charge.”

He added, “Part of the problem with this entire executive order is that words are used without really much care for what they mean and how they’ve been interpreted even by the courts. And frankly, to use words like ‘bad actor,’ ‘pervasive,’ ‘long-standing’ and other words—‘law-breaking’—just simplifies something that is not at all simple.”

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

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