Trump Blocks ‘Blacklisting Rule’

Federal contractors will not be required to report possible labor law violations

Allen Smith, J.D. By Allen Smith, J.D. March 29, 2017

President Donald Trump signed a resolution to permanently block the so-called blacklisting regulations that would have required federal contractors to report labor violations and that prevented them from receiving contracts if they had serious infractions.

The Congressional Review Act resolution, signed March 27, bars the labor-violation reporting requirement, in addition to the Fair Pay and Safe Workplaces regulations' arbitration and paycheck transparency mandates.

Rep. Virginia Foxx, R-N.C., chairwoman of the House Committee on Education and the Workforce, said, "The flawed 'blacklisting rule' was always completely unnecessary. There has long been a system in place to hold federal contractors accountable, and the best way to ensure fair pay and safe workplaces is to enforce that system effectively."

"Signing this bill into law prevents future administrations from introducing a substantially similar rule," said Patrick Brady, senior advisor, government relations for the Society for Human Resource Management (SHRM), who noted that SHRM supported the legislation. "SHRM opposed the executive order and its implementing regulations because of the unnecessary burdens they placed on employers and their punitive nature," according to a statement released by the organization.

"The president's signing [of] the resolution is a relief to many government contractors who were quite concerned over the breadth of the disclosure requirements," said Alissa Horvitz, an attorney with Roffman Horvitz in McLean, Va. Critics of the rule may have been more amenable if the regulations had required the disclosure of final adjudications or judgments. "But that is not what the rule required," she noted. The rule "would have required companies to list matters that were far from final, risking the loss of valuable and important contracts and the jobs that went with them over nonfinal judgments."

Horvitz noted, "Contractors already are required to reveal important and significant items in pre-award disclosures, so taxpayers should not fear that President Trump's signing of the resolution suddenly will mean the award of taxpayer dollars to government contractors who have not been sufficiently vetted."

The resolution to block the blacklisting rule had to pass through the House and the Senate to reach the president's desk. The vote was close in the Senate (49-48), with Sen. Elizabeth Warren, D-Mass., voicing support and issuing a report in favor of keeping the rule. "Too often, federal contractors break labor laws while continuing to suck down millions in taxpayer dollars," she said.

Blacklisting Provisions

The blacklisting rule would have implemented former President Barack Obama's 2014 Fair Pay and Safe Workplaces Executive Order and required large federal contractors and subcontractors to disclose any violations of 14 federal labor laws or their state counterparts in the past three years as part of the bidding process. Contractors also would have been required to update their disclosures every six months during the performance of a covered contract and to undertake some tracking of their subcontractors' compliance with the regulations, said Maryelena Zaccardelli, senior director of affirmative action plans and contractor compliance with Michael Best in Washington, D.C. Under the rule, companies that had unsatisfactory records would be barred from receiving government contracts.

The U.S. District Court for the Eastern District of Texas temporarily blocked the rule in October 2016 because the regulations required contractors to disclose administrative merits decisions in addition to court and arbitration decisions. "The blacklisting provisions of the rule present multiple challenges for federal contractors," Zaccardelli said. "Companies could be at risk of losing federal contracts or subcontracts based on agency allegations that are ultimately determined to be unfounded by the courts or administrative judges. The Texas court found that this scenario runs afoul of the due process and First Amendment rights of contractors."

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

Under the Congressional Review Act, federal agencies cannot create a rule similar to the one that has been blocked, noted Linda Jackson, an attorney with Littler in Washington, D.C.

Mandatory Arbitration

A less-discussed but still important section of the Fair Pay and Safe Workplaces final rule was the restriction on the use of arbitration agreements, noted Eric Leonard, an attorney with Wiley Rein in Washington, D.C. This section, which also was blocked by the court, provides that, for contracts worth more than $1 million, agencies were required to include a statement that arbitration under Title VII of the Civil Rights Act of 1964 may be made only with the voluntary consent of employees.

Employers were not prohibited from using arbitration, but the employee no longer could be asked to waive his or her rights until after the unlawful conduct occurred, Horvitz said. "Once the claim for discrimination or harassment arose, the employer could thereafter ask an employee if he or she wanted to waive the right to litigation and have the matter arbitrated," she said. But at that point it would be unlikely for the employee to agree to waive his or her right to litigation, she noted.

Paycheck Transparency

As of Jan. 1, the rule required contactors bidding on new contracts worth $500,000 or more to provide wage statements giving workers information on their hours worked, overtime hours, pay, and additions to or deductions from pay. While this part of the rule was not barred by the court, Trump blocked it when he signed the resolution. 

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