The Fair Pay and Safe Workplaces rule’s almost three-year journey is over. On March 27, 2017, President Trump revoked the Fair Pay and Safe Workplaces rule when he signed a Congressional Joint Resolution of Disapproval that was passed under the Congressional Review Act.
The Fair Pay and Safe Workplaces rule, often referred to as the “blacklisting” rule because the penalty for violations could be the denial of an award or extension of a federal contract, spawned a great deal of controversy. The stated goal of Executive Order 13673, which gave rise to the implementing rule, was “to increase efficiency and cost saving in the work performed by parties who contract with the federal government by ensuring that they understand and comply with labor laws.” One industry concern was that the Federal Acquisition Regulation already provides mechanisms to achieve that goal without the imposition of a new compliance regime. The revocation of the Obama Executive Order that authorized the Fair Pay and Safe Workplaces rule also instructed agencies to rescind regulations prepared to implement the rule.
History Repeats: The Previous Clinton Era Rule was Also Revoked
While contractors are likely pleased with the revocation of this rule, they should note that this is the second instance of the demise of a rule imposing requirements on contractors regarding the reporting of violations of labor laws and the consideration of such violations in the responsibility determination. The first involved a rule issued late in the Clinton Administration that was to be effective January 19, 2001, the last day of the Clinton Administration. Industry groups opposed that rule, and several government agencies registered concerns about the rule. The concerns focused on the vagueness of the rule, the potential for inconsistent treatment, the redundancy with the existing process used to determine contractor responsibility, and the subjectivity provided to contracting officers in determining whether to make an award to a contractor with a violation. These concerns were presented to the incoming Bush Administration, and after studying the rule, the new Administration revoked the rule.
The Obama Administration’s Fair Pay and Safe Workplaces rule and guidance appeared to reflect efforts to respond to concerns with the elaborate compliance regime for reporting and addressing labor violations in the Clinton era rule. However, contractors remained concerned with the compliance burdens and broad discretion afforded to agencies in deciding whether labor law issues should impact eligibility for contract award presented by the Obama Administration’s version of the rule. Steptoe’s earlier advisories on the Fair Pay and Safe Workplaces rule and the rule’s associated guidance are available here: Proposed Fair Pay and Safe Workplaces Rules and Guidance Raise Compliance and “Blacklisting” Concerns and Fair Pay and Safe Workplaces Final Rule and Guidance: Good News and Bad News.
The Long View
Contractors may be entitled to their sigh of relief as a result of the revocation of this rule. However, contractors should take the long view and understand that the issue of labor law compliance by government contractors is one that generates strong feelings from both supporters and opponents of this regulation. Contractors should recognize that a regulation addressing this issue may come back again in the future.
One reason is that that the underlying purpose of the revoked rule was to police companies that flaunt the labor laws in order to get an edge and, in doing so, put workers at risk. Contractors that follow the rules also want to see that companies that do not comply with labor laws are prevented from receiving federal contract awards. However the reality, as noted in the White House Fact Sheet on Obama’s Executive Order 13673, is that “[t]he vast majority of federal contractors have clean records” and “the vast majority of companies play by the rules.” Thus, those contractors prefer eliminating the bad actors with rifle shots, not shotgun blasts that hit the entire industry (which the now revoked rule represented) and they believe that the government can use currently available procedures to exclude companies that violate labor laws from government contracting.
Even without this rule, keeping violators of the law from being awarded contracts has been and remains an important part of the present responsibility framework that is in the Federal Acquisition Regulation. This was noted during the debate on the recently revoked rule when it was issued in draft form. For example, House Workforce Protections Subcommittee chair Tim Walberg (R-Mich.) and Health, Employment, Labor, and Pensions Subcommittee chair Phil Roe (R-Tenn.) issued a joint statement which said the proposed rule would waste resources as contracting agencies already had oversight over the actions of contractors, and rather than impose new and burdensome regulations, the Administration should “ensure the current system is enforced and used effectively.”