On October 24, 2016, on the eve of implementation of the US Department of Labor’s (DOL’s) Fair Pay and Safe Workplaces final rule, US District Judge Marcia Crone of the Eastern District of Texas gave government contractors a win, issuing an injunction that blocked much of the controversial rule from taking effect. The controversial rule, known as the “Blacklisting” rule, is scheduled to phase in on October 25, 2016, for contracts in excess of $50 million and on April 24, 2017, for contracts in excess of $500,000. On August 24, 2016, the FAR Council and the DOL simultaneously released a final rule and corresponding guidance implementing the Fair Pay and Safe Workplaces Executive Order that President Obama signed in July 2014. The final rule requires companies bidding on federal contracts or subcontracts of at least $500,000 to disclose violations of labor laws and contracting officers to take into account such violations in the process of making their contract awards. In particular, the contracting officer is required to request follow-up information on the number and types of violations. The final rule imposes substantial burdens on federal contractors because the mandatory disclosure requirements are very comprehensive, encompassing violations of 14 federal labor laws as well as non-final agency determinations that may still be subject to appeal or review.

Judge Crone blocked provisions mandating contractor reporting of labor law violations. She justified the injunction by noting that the rule likely exceeded the authority of the issuing agencies; conflicted with existing labor and employment laws; and violated contractors’ due process and First Amendment rights. She only permitted the paycheck transparency requirements, which go into effect January 1, 2017, to stand. Thus, with the exception of the paycheck transparency requirements, the preliminary injunction preserves the status quo ante.

After the injunction was issued, the FAR Council’s members sent a memo out directing compliance with the preliminary injunction until further notice. Associated Builders & Contractors of Se. Tex. v. Anne Rung, No. 1:16-CV-425 (E.D. Tex. Oct. 24, 2016) (order granting preliminary injunction).

Despite this victory for contractors, there is a strong potential for either a government appeal or an amended rule. For this reason, companies are advised to continue planning for potential compliance enhancements.