About Us  |  About Cheetah®  |  Contact Us

Contractor “blacklisting”: The Once and Future (?) Rules

August 31st, 2016  |  Cynthia L. Hackerott

Once upon a time, there was a controversial rule requiring federal contracting officials to take into consideration a prospective contractor’s track record of compliance with multiple federal laws in determining whether to award federal contracts. Alas, that regulation did not withstand the political tides and was revoked without any attempt at implementation. Now, however, it appears a similar rule may successfully re-emerge in the future. Or perhaps, like its predecessor, it will be vanquished by opposition forces.

The federal contractor community is currently abuzz with the news that implementation of an executive order (EO) requiring prospective federal contractors to disclose specified labor law violations is scheduled to occur in phases beginning on October 25, 2016, pursuant to a final rule of the Federal Acquisition Regulatory Council (FAR Council) and a final guidance by the Department of Labor (DOL), both published in the Federal Register on August 25, 2016. The DOL guidance (81 FR 58654-58768) is designed to assist contracting agencies and the contracting community in applying the requirements of President Obama’s “Fair Pay and Safe Workplaces” Executive Order (EO 13673), and the FAR Council regulations (81 FR 58562-58651) integrate the EO’s requirements as well as the provisions of the DOL’s guidance into the existing federal contract procurement rules. Contractors and federal agencies may begin using the DOL guidance on August 25, 2016.

What once was. Many critics of the executive order and its implementing provisions have characterized them as “blacklisting.” Some may recall that the (Bill) Clinton Administration published a somewhat similar, but broader, FAR Council final rule of “contractor responsibility” regulations in its waning days, and detractors of that action also referred to it as a “blacklisting” rule. The Clinton Administration rule would have not only barred companies with poor labor law compliance records (as determined by federal contracting officers) from federal government contracts, but it would have required prospective federal contractors to have a satisfactory record of compliance with tax, environmental, anti-trust, and consumer protection laws as well. However, following the political and legal joust between the Democrats and Republications in the 2000 election year, the Clinton Administration’s final rule was initially suspended, and ultimately revoked, by the successor (George W.) Bush Administration.

Will “might make right”? The rationale behind both the Clinton and Obama Administrations’ actions was/is to prevent the awarding of government contracts to companies with poor track records of compliance with federal laws. Thereby, the proponents reason, increasing efficiency and cost savings in the federal procurement process. Still, both actions have been criticized by employer advocacy groups and legal counsel. Some opponents argue that such rules could be used as weapons for unions, plaintiffs, and various interest groups to demand concessions or settlements from contractors, and, as a result, could also cause unwarranted delays in the procurement process. Another major criticism asserts, if you will, that the “might” of these requirements will not “make right” in terms of the due process rights of prospective contractors. (For a couple of examples, see here and here.)

Obama’s Fair Pay and Safe Workplaces EO. President Obama first issued EO 13673 on July 31, 2014 (79 FR 45309-45315; August 5, 2014). It was amended by EO 13683 on December 11, 2014 (79 FR 75041-75042; December 16, 2014) to correct a statutory citation, and further amended on August 23, 2016, to modify the handling of subcontractor disclosures and clarify the requirements for public disclosure of documents.

It requires prospective federal contractors to disclose labor law violations from the past three years and adds to existing agency guidances on how to consider labor violations when awarding federal contracts. Under the EO, contracting officers must review a contractor’s labor law violations to assess the contractor’s record of labor law compliance during the preaward “responsibility” determination and when making postaward decisions such as whether to exercise contract options. It prohibits covered federal contractors from requiring employees to enter into predispute agreements to arbitrate claims brought under Title VII or tort claims arising from sexual assaults or harassment. In addition, the EO requires contracting agencies to ensure that certain workers on covered federal contracts receive a wage statement that that contains information concerning that individual’s hours worked, overtime hours, pay, and any additions made to or deductions made from pay. Further, it requires covered contractors and subcontractors to inform individuals in writing if the individual is being treated as an independent contractor, and not an employee.

The EO directs the DOL and the FAR Council to issue regulations and guidance to implement the new requirements. The agencies in the FAR Council —the Department of Defense (DoD), the Government Services Administration (GSA) and the National Aeronautical and Space Administration (NASA) — are the federal agencies most heavily involved in entering into contracts to procure goods and services for the federal government. The Federal Acquisition Regulation (FAR) is the principal set of rules in the Federal Acquisition Regulations System, which governs the acquisition process through which the federal government purchases goods and services.

Final regulations and guidance. According to a DOL press release, the guidance creates a process for agencies and the DOL to help contractors come into compliance with labor laws. The DOL noted that contractors are already required to disclose findings of fault and liability made in administrative or civil proceedings. However, current disclosures do not give the whole picture of the contractor’s labor compliance track record, leaving federal agencies at risk of making awards to contractors that “cheat their workers, competitors, and the taxpayers,” the DOL said.

The guidance and regulations build on the existing procurement system, and most federal contractors will only have to attest that they comply with laws providing basic workplace protections, according to the DOL statement. Designated Agency Labor Compliance Advisors (ALCAs) will coordinate with the relevant enforcement agency experts to help contractors with reported violations come into compliance. The ALCAs will, or will not, classify the disclosed violations as serious, repeated, willful, and/or pervasive. Only those violations classified as serious, repeated, willful, and/or pervasive will be considered as part of the weighing step and will factor into the ALCA’s written analysis and advice. The ALCAs will also be available to members of the public who have information they feel that prospective contractors should have disclosed about their labor violations.

The Clinton Administration “contractor responsibility” rule. Unlike the Obama Administration actions, the Clinton Administration’s “contractor responsibility” rule did not start with an executive order. Rather, it started with a proposed rule to amend the FAR published in the Federal Register on July 9, 1999 (64 FR 37360-37361) and a revised proposal published on June 30, 2000 (65 FR 40830-40834). The final rule was published in the Federal Register on December 20, 2000 (65 FR 80255-80266), and it was scheduled take effect on January 19, 2001.

However, after President Bush took office, he urged the applicable executive agencies to delay its implementation, and several agencies issued class deviations for a six-month delay (because deviations are internal agency guidance, they do not require public notice or comment prior to issuance). The FAR Council suspended the Clinton Administration rule with a Federal Register notice (66 FR 17753-17756) on April 3, 2001. Along with that notice, the FAR Council published a new interim rule and requested comments on revoking the Clinton Administration rule. The interim rule restored the sections of the federal acquisition regulations that were in effect prior to the Clinton Administration rule. The April 3, 2001 action by the FAR Council suspended the Clinton Administration rule for 270 days or until the interim rule was adopted. On December 27, 2001, the FAR Council published a notice (66 FR 66984-66986) adopting the interim rule as final and, thus, revoking the Clinton Administration rule.

The upcoming battles. Similar to efforts to stop the Clinton Administration rule, legislation has been introduced, and opponents have threatened lawsuits, to stop the Obama Administration’s actions. Should Donald Trump succeed Barack Obama as President, it’s likely that the Fair Pay and Safe Workplaces EO will be rescinded, and the FAR regulations and DOL guidance will be revoked, similar to what the George W. Bush Administration did in regard to the Bill Clinton Administration’s “midnight” regulations. In any event, time will answer to the following question:

Will a modified, albeit narrower, version of “blacklisting” regulations that “once were” in the Bill Clinton Administration, but never actually came to fruition, be the future “blacklisting” regulations enforced by a potential Hillary Clinton Administration?