Senate Strikes Down Reporting Requirement for Federal Contractors

President expected to sign resolution into law

Allen Smith, J.D. By Allen Smith, J.D. March 6, 2017
Senate Strikes Down Reporting Requirement for Federal Contractors

The U.S. Senate voted 49-48 on March 6 to strike down so-called blacklisting regulations requiring federal contractors to report labor violations and potentially barring them from receiving contracts if they had serious infractions. President Donald Trump is expected to sign the resolution, which already passed the House of Representatives, according to Patrick Brady, senior advisor, government relations at the Society for Human Resource Management.

Although a federal district court temporarily blocked the blacklisting regulations, the Congressional Review Act (CRA) resolution would permanently bar the labor-violation reporting requirement, as well as the Fair Pay and Safe Workplaces regulations' arbitration provision and paycheck transparency mandates.   

Contractors' Concerns About Blacklisting Rule

The blacklisting rule was the most controversial part of the Fair Pay and Safe Workplaces regulations, which were based on an executive order issued by former President Barack Obama on July 31, 2014. The blacklisting provisions would have required contractors to disclose in the initial bid process whether they had been the subject of adverse litigation, arbitration or administrative proceedings involving any of 14 federal labor laws in the last three years, noted Alissa Horvitz, an attorney with Roffman Horvitz in McLean, Va.  

"The blacklisting rule was problematic for federal contractors because it would have required them to disclose nonfinal matters," Horvitz said. "Before the contractor had a right to full due process and before the matter had reached a final resolution, the contractor would have been compelled to reveal it. The concern was that federal procurement officers, who did not have labor law or employment law training, would use the disclosed information inappropriately to decide not to award the contract."

[SHRM members-only toolkit: Managing Federal Contractor Affirmative Action Programs]

In addition, the final rule would have created a publicly available repository of contractor violations, regardless of whether there had been a final determination on administrative proceedings, noted Susan Schaecher, an attorney with Fisher Phillips in Denver.

"The rule would have required contractors to consolidate data from disparate parts of their enterprises—requiring in some cases expensive new systems and databases—for analysis by understaffed agency labor compliance advisors and final decisions by nonexpert contracting officers. And that's just the prime contracts," noted Eric Leonard, an attorney with Wiley Rein in Washington, D.C. He said contractors might have been hamstrung in contesting allegations, no matter how frivolous, to fend off the risk of reportable labor law decisions that would have led to blacklisting by risk-averse contracting officers. And plaintiffs would have had undue leverage to extract settlements of dubious claims because defendants would have wanted to avoid reportable labor law decisions, he added.

While some companies might have been able to comply using off-the-shelf software, many companies would have been required to build additional modules for existing systems or even develop wholly new Web-based compliance systems, noted Maryelena Zaccardelli, senior director of affirmative action plans and contractor compliance with Michael Best in Washington, D.C. The rule estimates the initial system setup would have cost in total approximately $322 million and there would have been recurring annual costs of $260 million. "Many companies believe that the regulatory estimates of public costs significantly understate the actual cost of implementation," she noted.

Most of these costs would have been associated with tracking administrative merit decisions, Zaccardelli said. "For multistate employers with numerous offices, putting systems into place to be sure that there is a central tracking of federal administrative merit decisions under the 14 federal labor laws would take significant effort, and those employers must also identify all the state counterparts for those laws and the covered administrative decisions under the state laws."

Report Indicates Labor Law Violations Are Common

Sen. Elizabeth Warren, D-Mass., defended the Fair Pay and Safe Workplaces regulations, asserting that Republicans voted to make it easier for federal contractors to hide labor law violations, which, she emphasized, are common.

"All Americans deserve a safe workplace and fair pay for a day's work," Warren said. "But too often, federal contractors break labor laws while continuing to suck down millions in taxpayer dollars. Instead of making it easier for companies to cheat their employees or threaten workers' health and safety, President Trump and Republicans in Congress should join Democrats in standing up for the hardworking Americans who do important jobs for our country."

She released a report on March 6 that stated that:

  • Half of the largest wage assessments in 2009 were made against 20 companies that received federal contracts.
  • 66 of the 100 largest federal contractors have been caught breaking federal labor laws.
  • All of the top 10 contractors have been cited for federal labor law violations.

More than 1 in 5 U.S. workers are employed by a federal contractor and contractors receive approximately $500 billion in taxpayer funds each year, the report said. But contractors "frequently underpay workers or illegally put their health and safety at risk," it stated, criticizing Trump and congressional Republicans revoking protections Obama put into place. "Doing so will harm millions of American workers," the report concluded.

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