The National Labor Relations Board (NLRB) fired off some fireworks of its own just before the Fourth of July weekend. Specifically, the NLRB announced a new procedure to implement Executive Order 13673 Fair Pay and Safe Workplaces (EO 13673), and facilitate the flow of NLRB case data into the databases used by contracting agencies. The goal of the procedure is to identify employers with federal contracts and ensure that federal contracting agencies know when the NLRB has issued a complaint against a federal contractor. The timing of the new procedure is curious, since the final regulations and guidance to implement EO 13673 are still being reviewed by the White House’s Office of Management and Budget, and the U.S. House of Representatives and U.S. Senate are debating legislation that would exclude defense contractors from the EO 13673 framework. However, the NLRB’s approach in this regard will come as no surprise to anyone following the agency’s recent actions. 

The question for federal contractors is whether the NLRB’s action sheds any light on what they can expect either from the final regulations and guidance or from the NLRB once the “contractor blacklisting” regulations are final. Here are five key insights worth noting:

1. Unique Impact of NLRB Charges and Complaints

Under EO 13673, all NLRB complaints will be reportable, and virtually all NLRB complaints either will be treated as "serious" violations by themselves or will result in “serious” violations if found meritorious by an administrative law judge (ALJ). This point is underscored by the fact that the NLRB’s new procedure applies to all complaints the NLRB issues against federal contractors, regardless of the nature of the underlying unfair labor practice (ULP) charge. Under the U.S. Department of Labor’s (DOL) proposed guidance, any NLRB complaint alleging that an employee has suffered an adverse employment action because of his or her union affiliation or because he or she engaged in protected concerted activity will be a “serious” administrative merits determination that a contracting officer will have to consider before making a contract award. Also, virtually every NLRB complaint can lead to a “serious” administrative merits determination because any ALJ order calling for an employer to refrain from an unlawful practice—a sine qua non of every ALJ decision finding a ULP—will constitute a “serious” violation.

2. Louder Saber-Rattling

Employers should expect regional directors to increase their saber-rattling and threats to issue complaints once they learn that an employer is a federal contractor. The NLRB clearly sees the issuance of a complaint as a key point of leverage to force a contractor into settling a charge rather than face an NLRB complaint, which could jeopardize current and future contracts. This fact is evident from the template email that the NLRB has developed for regional officers to send to employers to solicit contractor information. The NLRB has instructed its regional personnel to send the email once they have determined that a complaint should be issued—but before the actual issuance of the complaint. Notably, the template email emphasizes that the details of a charge will not be forwarded to contracting agencies if the charged party enters into a settlement with the NLRB before the complaint issues. In other words, the email implies, resolve charges without a fight, and your government contracts will be safe. This ultimatum will be particularly hard for contractors to accept when aggrieved by erroneous unit determinations in union elections. Their only avenue for judicial relief—litigating a “technical” 8(a)(5) refusal-to-bargain charge—will be foreclosed unless they are willing to put their contracts at risk. Federal contractors also may find themselves uniquely hamstrung when trying to fight NLRB complaints based on aggressive enforcement positions or novel interpretations of the Act.

3. Increased Pre-Award Scrutiny

The NLRB’s procedure will enhance the ability of agency labor compliance advisors (ALCAs) to scrutinize National Labor Relations Act (NLRA) violations before a contract award decision is made. Under the proposed regulations, contractors must disclose labor violations in periodic snapshots—when they submit bids on contracts and then once every six months during contract performance. Thus, a contractor that submits a bid to the Air Force Materiel Command on January 31, 2017, would have to disclose labor violations as of January 31, but would not have to update those disclosures until six months after being awarded the contract. Assuming the Air Force were to take six months to make an award decision, nearly a year would have passed before the successful bidder would have to disclose an NLRB complaint issued on February 1, 2017. The NLRB’s procedure will change that by helping the Air Force’s ALCA identify the NLRB complaint during the pre-award period so that the Air Force’s contracting officer could factor the NLRB’s allegations into the responsibility determination. This enhanced scrutiny may lead to spikes in union organizing during pre-award periods.

4. ALCAs Up the Ante

Even after a contract is awarded, the NLRB’s database coordination procedure will increase the pressure on contractors to sign labor compliance agreements with the NLRB. Under the proposed implementing regulations, ALCAs will monitor the government’s database for new labor violations assessed against contractors that have been awarded covered contracts. When an ALCA discovers new violations, he or she has discretion to initiate further review by the responsible contracting officer(s), a potential consequence of which is termination of the applicable contract(s).  Thanks to the NLRB’s new procedure, it will be easier for ALCAs to discover NLRB complaints in real time, which will position ALCAs to seek mitigating and other information from contractors while NLRB complaints against the contractors are still pending. The ALCA’s visibility and his or her ability to initiate scrutiny by contracting officers will up the ante for contractors once they are hit with NLRB complaints.

5. The Two-Front War and Accelerated Preparation of “Mitigating Information”

The NLRB’s database coordination procedure is likely to create situations in which contractors have to defend NLRB complaints on two fronts simultaneously: Contractors may find themselves arguing with ALCAs and contracting officers about how the NLRB’s complaint affects the contractor’s reputation for integrity and business ethics at the same time as they are answering a regional director’s complaint and developing their strategy for a ULP trial. Fighting a two-front war will require that a contractor develop its “mitigating information” in advance of the time when its six-month disclosures ordinarily would be due. Additionally, a contractor will need to think through how its litigation position harmonizes with the case it will want to make about its ethics and business integrity. This challenge will be most acute in cases such as technical 8(a)(5) refusal-to-bargain cases, where the contractor is compelled to violate the NLRB’s interpretation of the NLRA in order to obtain review in a court of appeals. 

For now, regional personnel will be asking employers to disclose their federal contractor statuses and provide certain identifiers (Commercial and Government Entity codes, Federal Employment Identification Numbers, etc.). When an employer fails to provide that information, regional personnel are supposed to note that fact in the NLRB’s database and then continue to ask the employer for the information. Whether the NLRB’s procedure will have any impact on contractors depends in part on pending Congressional action, but also on the contours of the final regulations and guidance from the Federal Acquisition Regulatory Council and the DOL. If, for example, administrative merits determinations are limited to adjudicated agency findings, NLRB complaints would cease to be reportable, thereby blunting the NLRB’s procedure. That outcome would go a long way to ensuring that contractors are not forced to forego their due process rights as the price of doing business with the federal government. Unfortunately, as rational as that outcome might sound, federal contractors should know better than to count on it.