‘Blacklisting’ Rule Threat Alleviated for Federal Contractors

House passes resolution to strike down regulation requiring contractors to report labor violations

By Allen Smith, J.D. Feb 7, 2017
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A rule for federal contractors that already was temporarily blocked by a federal district court was dealt another setback when the House of Representatives passed a resolution to permanently bar it.

The Fair Pay and Safe Workplaces regulations comprise three rules, including one referred to as the "blacklisting" rule. That rule requires federal contractors to report their own violations and alleged violations of 14 federal labor laws and equivalent state labor laws for the previous three years. The rule requires contractors to collect and report this information every time they submit a proposal for a contract and every six months during the contract's performance.

The regulations also state that an arbitration agreement involving sexual harassment would be valid only if it were executed after the employee makes a sexual harassment claim, negating the validity of arbitration agreements executed on this topic at the beginning of employment with other new-hire documents, noted Cheryl Behymer, an attorney with Fisher Phillips in Columbia, S.C. An employee is much likelier to agree to arbitration at the start of employment than after a claim has been made.

In addition, the rule had paycheck transparency provisions—the only part of the rule to survive the vigorous legal challenge that resulted in the blacklisting rule and arbitration agreement provision being enjoined the day before they were to have taken effect, she noted.

Opponents of Blacklisting Rule List Concerns

The rule should be permanently revoked for due process reasons, said Rep. Jason Chaffetz, R-Utah.

"One of the most disturbing parts of the rule is that contractors would be required to report alleged violations—not confirmed—just the alleged violations of the 14 federal labor laws," he said. The rule "deprives contractors of their legal rights to challenge such allegations."

Contractors would have to disclose National Labor Relations Board complaints, Occupational Safety and Health Administration citations and Equal Employment Opportunity Commission nonfinal letters of determination, even though these cases would not have been adjudicated.

The Society for Human Resource Management supported the resolution to block the rule, saying it was overly burdensome for employers.

 "The federal acquisition system is already a very complex, inefficient system. This contractor blacklisting rule is exactly the type of requirement an already complex federal acquisition system does not need," Chaffetz said. "The rule adds another contractor clause to an increasingly long list of clauses in every federal contract. It slows down a process that already has trouble delivering goods and services in a timely manner."

Moreover, "the rule imposes significant costs on contractors, which means the government, which ultimately means the taxpayers. The rule itself is estimated to cost contractors and subcontractors more than $458 million in the first year and $413 million in the second year of its implementation," he said.

"The cost to establish a new information collection, reporting and assessment system to comply with the rule would be prohibitively expensive for most contractors, especially the small contractors."

Opposition to Resolution

Democrats opposed the resolution, which passed Feb. 2 by a vote of 236 to 187 with nine members of Congress not voting. "It would be premature to dismantle this rule because it hasn't even been put into effect because it has been under a court injunction," said Rep. Bobby Scott, D-Va., before the vote. "Further, repealing the rule under the CRA [Congressional Review Act] would bar future consideration of substantially similar rules unless Congress enacts subsequent enabling legislation."

The CRA empowers Congress to revoke new regulations. If Congress passes a resolution disapproving certain regulations and the president signs the resolution, the regulations are rescinded.

"President Obama's Fair Pay and Safe Workplaces rule reinforces employment protections and laws that help veterans, individuals with disabilities, older Americans, minorities and LGBTQ [lesbian, gay, bisexual, transgender and queer (and/or questioning)] workers," said Rep. Suzanne Bonamici, D-Ore. "This rule was passed in response to discovering that billions of taxpayer dollars went to companies that violated federal workplace laws. A contractor who cheats workers out of their pay, endangers their safety at work or engages in discriminatory practices should be required at least to disclose this information when bidding for federal contracts. Taxpayer dollars should not support the exploitation of workers. That is just common sense."

[SHRM members-only toolkit: Avoiding Adverse Impact in Employment Practices]

However, Rep. Virginia Foxx, R-N.C., chair of the House Committee on Education and the Workforce and lead sponsor of the resolution, said, "We all agree employers who do business with the federal government should be held to high standards and their employees deserve strong protections. That is why for decades the federal government has had a system in place to deny contracts to employers who violate federal labor laws." But she emphasized that the old system should be enforced rather than enacting a new rule "in search of a problem that doesn't exist."

The resolution now advances to the Senate.

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