Defense contractors recently expressed questions and concerns about implementation of Section 8116 of the Department of Defense Appropriations Act for Fiscal Year 2010 (Pub. L. No. 111-118), known as the "Franken Amendment." The Amendment contains two requirements related to arbitration of sexual harassment claims by employees of government contractors. First, prime contractors entering into contracts of more than $1 million must agree not to require employees to arbitrate claims under Title VII of the Civil Rights Act of 1964 or "any tort related to or arising out of sexual assault or harassment" — either by requiring employees to sign an agreement to arbitrate as a condition of employment or by enforcing such existing agreements. This provision takes effect February 17, 2010. Second, prime contractors must certify that they have "flowed down" non-arbitration requirements on subcontracts of more than $1 million under prime contracts subject to the first requirement. This provision takes effect June 17, 2010. Contracts cannot be funded under the Act if they do not meet the Franken Amendment's requirements.

In an effort to clarify the Amendment's reach, the Council of Defense and Space Industry Associations (CODSIA) sent a letter to Defense Acquisition and Procurement Policy Director Shay Assad on January 20, 2010, to identify questions and concerns that CODSIA members believe should be addressed in any Department of Defense (DoD) guidance or rulemaking on the Amendment. The letter attached a list of ten issues, recommendations and concerns, including:

  • Scope of covered contracts and subcontracts — CODSIA seeks confirmation that the provision applies only to new contracts awarded between February 17 and September 30, 2010, new subcontracts awarded between June 17 and September 30, 2010, and the portion of multi-year contracts funded with fiscal year 2010 funds between February 17 and September 30, 2010.
  • Treatment of existing contracts and subcontracts — CODSIA requests clarification regarding the treatment of task or delivery orders issued under existing contracts, purchase orders issued under existing subcontracts, modifications of existing contracts and undefinitized contract actions.
  • Applicability to commercial items and commercially available off-the-shelf (COTS) items — CODSIA believes that the Amendment should not apply to contracts for commercial items and COTS items because it does not explicitly state that those contracts are covered, and 41 U.S.C. §§ 430 and 431 require that the Federal Acquisition Regulation (FAR) exempt those contracts from government restrictions and requirements whenever possible.
  • Scope of covered employees — The Amendment explicitly limits the subcontract provisions to "any employee or independent contractor performing work related to such subcontract" but does not apply that same limitation to the prime contract provisions. Nonetheless, because the Amendment is limited to specific DoD prime contracts funded in fiscal year 2010, CODSIA urges DoD to interpret the phrase "any employee" in the Amendment's prime contract provisions to include only those employees performing work under a covered contract.
  • Clarification of Amendment language — CODSIA requests that any DoD implementation guidance clarify additional aspects of the Amendment, particularly the national security waiver, when a contractor has "agreed" to the Amendment's requirements, the definition of "existing agreements," and application of the Amendment to arbitration agreements unrelated to Title VII claims or the covered torts.

As the CODSIA letter highlights, implementation of the Franken Amendment requirements raises many unresolved questions, and it is likely that DoD will issue an interim rule or other implementing guidance to clarify these issues before the provisions take effect. In addition, it is possible that similar provisions could be included in upcoming legislation, so that these or similar requirements would apply beyond DoD contracts funded in fiscal year 2010. Wiley Rein is tracking implementation of the Amendment as well as similar legislative efforts.