On January 30, 2009, President Barack Obama signed three Executive Orders that will have a direct impact on federal contractors. The following is a summary of the three orders:

Executive Order-Notification of Employee Rights Under Federal Labor Laws

This Executive Order requires all federal contractors to post a notice informing workers of their rights under federal labor laws. The Order requires posting of such notices throughout the term of the government contract "in conspicuous places in and about plants and offices where employees covered by the National Labor Relations Act engage in activities relating to the performance of the contract." The Order provides that notices must be posted "both physically and electronically" in accordance with the contractor's customary practices.

Failure to comply with the notice requirement could result in cancelation, termination or suspension of the underlying contract.

The Executive Order applies to contractors and subcontractors alike. Thus, the same notice posting requirements are binding on all subcontractors hired in connection with the government contract at issue.

Although the form of the notice will require posting information about workers' rights under the NLRA, the Executive Order gives the Secretary of Labor 120 days from January 30, 2009, to initiate rulemaking to prescribe the size, form and specific content of the notice.

This Executive Order also expressly reverses President George W. Bush's Executive Order 13201, which had required contractors and subcontractors to post what is known as a "Beck notice," alerting workers to the fact that they did not have to join a union to keep their jobs.

Executive Order-Nondisplacement of Qualified Workers Under Service Contracts

This Executive Order requires incoming federal contractors to offer jobs to workers currently on the job when they take over and is applicable to "service contracts" covered by the Service Contract Act, 41 U.S.C. § 351, et seq. The Order requires contractors and subcontractors working under a federal contract that succeeds a contract for performance of the same or similar services at the same location to offer those employees (other than managerial or supervisory employees) employed under the predecessor contract whose employment will be terminated as a result of the award of the successor contract, a "right of first refusal" to positions under the contract for which they might be qualified.

The Order provides that the predecessor employees must be given at least 10 days to consider and accept the offer of employment.

Violators of this Executive Order may be ineligible to be awarded any government contract for a period of up to 3 years. Appropriate sanctions and remedies shall include orders requiring employment and payment of lost wages.

Not all federal service contracts are covered by the Executive Order. Specific enumerated exceptions include contracts or subcontracts of less than $100,000, contracts awarded to blind or severely disabled persons, and certain contracts for vending facilities. The Order also exempts employees who were hired to work under a federal service contract and one or more nonfederal service contracts as part of a single job.

The requirement that new contractors must offer jobs to the employees of their predecessor revives an order dating back to the Clinton Administration, which President Bush had rescinded with an Executive Order in 2001.

Executive Order-Economy In Government Contracting

This Executive Order treats as "unallowable" the costs of any activities undertaken to persuade employees "to exercise or not to exercise, the right to organize and bargain collectively through representatives of the employees' own choosing." In other words, those costs that are not directly related to a federal contractor's provision of goods or services to the government must be excluded from any billing, claim proposal or disbursement applicable to the contract.

As dictated by the Executive Order, the following costs, when related to efforts to influence union organizing, are unallowable: (a) preparing and distributing materials, (b) hiring or consulting legal counsel or consultants, (c) holding meetings, and (d) planning or conducting activities by managers, supervisors or union representatives during work hours. The Order specifically exempts, however, those costs incurred in maintaining satisfactory relations between the contractor and its employees, including costs of labor-management committees, employee publications (unrelated to "unallowable" costs) and other related activities.

The Executive Order requires the Federal Acquisition Regulatory Council to adopt rules and regulations related to the Order within 150 days from January 30, 2009.


While each of these Executive Orders is subject to challenge and may ultimately be deemed unconstitutional or preempted by the NLRA, employers need to know now whether they are subject to these Orders and if so, what steps they need to take to ensure compliance.