Just hours before taking effect, a federal district court in Texas issued a preliminary injunction stopping the government from moving forward with most aspects of the Fair Pay and Safe Workplaces Executive Order and its Final Rules (the Rules). A copy of the Court’s decision can be accessed here.
For a full discussion of the Rules themselves, what they could mean for government contractors, and best practices for compliance, see our previous client advisory.
The injunction—issued by US District Court Judge Marcia A. Crone, from the Eastern District of Texas—resulted from a complaint and emergency motion for a temporary restraining order and preliminary injunction filed on October 7, 2016 by three national and local trade associations (the Associated Builders and Contractors, the Associated Builders and Contractors of Southeast Texas, and the National Association of Security Companies). The Court held a preliminary injunction hearing and oral argument on Friday October 21, 2016, and the Court issued its decision late yesterday (October 24, 2016). The government is expected to immediately appeal the decision to the Fifth Circuit, and may also seek expedited briefing and/or a stay of the injunction, although we note that stays of preliminary injunctions in these circumstances are not common.
For the time being, government contractors should be aware of the following consequences of the injunction:
First, the Rules’ reporting and disclosure requirements are enjoined. These requirements were set to take effect on October 25, 2016 for all prime contractors bidding on covered contracts valued at US$50,000,000 or more after the effective date. This means that contractors bidding on covered prime contracts worth at least US$50,000,000 will not be required, as of now, to start reporting and disclosing labor law violations.
(As a reminder, the Rules only applied to: (i) new prime contracts worth US$50,000,000 or more bid on or entered into after October 25, 2016; (ii) new prime contracts worth US$500,000 or more bid on or entered into after April 25, 2017; and (iii) new subcontracts worth US$500,000 or more bid on or entered into after October 25, 2017, and not preexisting contracts or basic option renewals.)
Second, the Court has enjoined the Rules’ prohibition on mandatory pre-dispute arbitration agreements covering Title VII or sexual assault/harassment claims. This requirement was set to kick in on October 25, 2016 for contractors and subcontractors with covered contracts of more than US$1,000,000, not including commercial items.
Third, the Rules’ paycheck transparency and independent contractor notice requirements were not enjoined, and remain scheduled to go into effect on January 1, 2017 for contractors and subcontractors with covered contracts of more than US$500,000 (other than commercially available off-the-shelf items).