Executive Order 13496, signed by President Obama shortly after he took office, requires certain federal contractors and subcontractors to post notices informing employees of their rights under “Federal labor laws.” On May 20, 2010, the Department of Labor’s Office of Labor-Management Standards published its final rules implementing this Executive Order. The final rules set forth the content of the required notice, provide guidance on how the notice is to be posted and otherwise communicated to employees, identify which federal contractors and subcontractors are required to post the notices, and explain how the Department of Labor will enforce the posting requirements.

Employers Covered by the Posting Requirements

Under the final rules, federal agencies must, with very few exceptions, include a clause mandating the posting of the employee labor law notice in all contracts for the purchase, sale, or use of personal property (including off-the-shelf commercially available items) or nonpersonal services (for example, utilities, insurance, and construction) that are solicited on or after June 21, 2010, and that are for an amount in excess of $100,000. A prime contractor with a federal contract that contains the employee notice clause must include that clause in each subcontract that is necessary to the performance of the federal contract and that is for an amount in excess of $10,000. Subcontractors that have the employee notice clause in their subcontracts must include the clause in lower tier subcontracts that are necessary to the performance of the federal contract and that meet the $10,000 threshold. The employee notice clause may be included in federal contracts and subcontracts by reference to the Code of Federal Regulations citation for the new final rules rather than by reproducing the text of the clause.

Although the new rules generally require the inclusion of the employee notice clause in most federal contracts and subcontracts, there is an important exception to this requirement. Contractors and subcontractors that are excluded from the definition of “employer” under the National Labor Relations Act (“NLRA”) are not subject to the new final rules and therefore have no obligation to post the notice described in those rules. Among the entities excluded from the definition of “employer” under the NLRA are Federal Reserve Banks, states and political subdivisions thereof, and entities subject to the Railway Labor Act (for example, air carriers and entities operating railroads). Several less significant exceptions are also set forth in the final rules.

The Required Notice

Although Executive Order 13496 refers to the posting of a notice regarding employee rights under “Federal labor laws,” it also contains language indicating that the content of the notice should be limited to rights under the NLRA, the primary federal law governing labor-management relations. Reading the Executive Order as a whole, the Department of Labor concluded that it intended to require a notice describing only NLRA rights, and the text of the notice contained in the final rules is so limited. Thus, there is no mention in the notice of other federal labor laws, such as the Railway Labor Act and the Labor-Management Reporting and Disclosure Act.

The required notice states in very general terms the rights of employees to form, join, or assist a union; to bargain collectively through a representative of their choosing; to discuss terms and conditions of employment with co-workers or a union; to engage in concerted activities with co-workers; to strike and picket; and to refrain from any of these activities. The notice also lists examples of conduct by employers and by unions that is prohibited by the NLRA. Given the complexity and evolving nature of the law under the NLRA, the information about NLRA rights and unlawful conduct contained in the notice is inevitably simplified and generalized, and employees relying solely on what they read in the notice may mistakenly conclude that certain employer conduct is unlawful when, under the particular circumstances, it is lawful under the NLRA.

One aspect of the notice is all too clear, however. The notice informs employees that they should contact the National Labor Relations Board if they believe their rights or the rights of others have been violated, and it provides the Board’s website address and toll-free telephone number for that purpose.

In addition to specifying the content of the required notice, the final rules provide guidance as to the form of the notice and the manner of posting it. Copies of the required notice may be obtained from the contracting agency or from the Department of Labor. It may also be downloaded from the Department of Labor’s website at http://www.olms.dol.gov. Employers may reproduce and use exact duplicate copies of the notice. The preamble published with the final regulations states that employers may use posters from commercial poster services that consolidate into one poster the new NLRA notice and notices required by other federal employment laws.

If a significant portion of a covered employer’s work force is not proficient in English, the employer must provide the required notice in the language the employees speak. Translations of the notice will be available from the contracting agency and on the Department of Labor’s web address listed above.

The notice must be posted in a covered employer’s facilities in conspicuous places where it will be readily seen by employees, including areas where the employer posts notices to employees about terms and conditions of employment. The notice must also be posted where employees covered by the NLRA perform activities related to the federal contract or subcontract. If a covered employer customarily posts notices to employees electronically, it must post the required notice about NLRA rights electronically in addition to posting it physically in the workplace.

Enforcement of the Employee Notice Requirement

The new final rules authorize the Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) to conduct compliance evaluations to determine whether covered contractors and subcontractors are properly posting the employee notice and including the employee notice clause in their subcontracts. The rules also authorize the employees of a covered contractor or subcontractor to file noncompliance complaints with the OFCCP or the Office of Labor-Management Standards (“OLMS”). If a complaint investigation or compliance evaluation indicates noncompliance with the final rules, the OFCCP will attempt to secure compliance through conciliation. If that process fails, the OFCCP will refer the matter to the OLMS for the initiation of administrative enforcement proceedings. Contractors and subcontractors found to be in violation of the final rules may be ordered to comply. In extreme cases, the OLMS may direct the contracting agency to terminate or suspend a contract or subcontract and may debar the noncompliant employer from future federal contracts and subcontracts.

Practical Implications

The final rules implementing Executive Order 13496 mark the first time that employers have been required to post a notice summarizing the full range of employee rights under the NLRA. Although some observers believe that the posting requirement may stimulate unionization efforts, the most immediate impact may be an increase in the number of unfair labor practice charges filed by employees with the National Labor Relations Board. By providing employees with information about rights and unlawful practices under the NLRA in broad, sweeping terms that do not reflect the nuances of NLRA law and by providing employees with contact information for the National Labor Relations Board, the NLRA notices will likely fuel employee inquiries about and challenges to employer practices.

Employers, particularly those with nonunionized employees, would be wise to prepare for the heightened employee awareness of the NLRA before entering into a federal contract or subcontract containing the employee notice clause. For example, employers should review their personnel policies to ensure that they comply with the NLRA. It is not uncommon for employers to have policies prohibiting employees from disclosing their wage rates to anyone, but the new NLRA poster expressly advises employees that they have the right to discuss their terms and conditions of employment with co-workers or a union. Merely maintaining a policy infringing on NLRA rights can constitute an unfair labor practice under that law, even if the employer has not enforced the policy against any employee. Employers should also ensure that their supervisors and managers are familiar with the employee rights established by the NLRA and the employer conduct prohibited by that law. Before becoming covered contractors or subcontractors under the new final rules, employers should consider providing NLRA training to their supervisors, regardless of whether they perceive a threat of union-organizing activity. The NLRA, after all, applies even in the absence of union activity, and employers that are not prepared to comply with it can find themselves mired in protracted unfair labor practice proceedings.