Public Contract Law Journal

History Repeating: Deja vu of Failed Labor Law Regulations in Government Contracting

by Danielle Bereznay

Danielle Bereznay (dbereznay@law.gwu.edu) is a J.D. candidate at The George Washington University Law School and is a Notes Editor for the Public Contract Law Journal. She wishes to thank Professor Bryan Byrd and Judge Jeri Somers for their insight and feedback throughout the Note writing process.

I. Introduction

In 2014, President Obama issued Executive Order 13673, known as “Fair Pay and Safe Workplaces” (“FPSW”).1 The purpose of FPSW was to ensure that federal contractors provide “safe, healthy, fair, and effective workplaces”2 by complying with fourteen federal labor laws and the state equivalents.3 FPSW sought to weed out bad actors not complying with labor laws by publicizing labor law violations that occurred in the preceding three years and requiring that contractors engage in a new reporting process of violations.4

The contracting community, practitioners, and courts heavily criticized President Obama’s FPSW. Met with criticism from the contracting community, the final rule implementing the Executive Order received a substantial number of public comments.5 Federal contractors at both small businesses and large corporations contested the bureaucratic expansion of the reporting process.6 Conversely, unions were pleased with the provisions of FPSW because it protected the interests of workers and cracked down on labor law violations.7 The oversight provided by FPSW ensured that workers would be protected from “wage theft, safety violations[,] and discrimination.”8

However, just like the labor law regulations promulgated in the early 1990s, FPSW did not survive initial judicial scrutiny.9 On October 24, 2016, the day before expected implementation, a Texas judge enjoined FPSW.10 With the exception of one provision, the court issued a preliminary injunction barring implementation of FPSW.11 The injunction changed the course of action for contractors preparing to overhaul existing procedures.12 As evidenced by the court’s focus in the opinion, the reporting requirements were at the heart of the controversy.13

In addition to the injunction, the changing political climate altered the course of direction for FPSW.14 President Trump faced several options regarding the previous administration’s Executive Orders: he could rescind all of President Obama’s Executive Orders at the same time or elect to go through each Executive Order individually — deciding which orders could be revised and which should be repealed.15 President Trump, in deciding to do the latter, elected to permanently repeal FPSW.16 On January 30, 2017, Republican lawmakers issued a joint resolution of disapproval, which blocked FPSW under the Congressional Review Act.17 The joint resolution was a permanent rollback of FPSW, indicating to the public that lawmakers drastically disapproved of FPSW and its goals.18 Additionally, President Trump signed an Executive Order revoking President Obama’s initial Executive Order setting forth FPSW.19

Despite the drastic disapproval of FPSW by the Trump administration, the overarching goal of implementing successful labor laws should not die with the Obama administration. FPSW provided a framework for future regulations that, with some changes, would offer a medium between stringent regulations and ensure that employees felt safe and fairly treated in the workplace. In the future, two aspects of reporting labor law violations should be changed: (1) building upon the current reporting system to ensure efficiency and (2) introducing a reporting system that does not violate contractors’ constitutional rights by compelling contractors to disclose non-final determinations of violations. Enacting these changes to future regulations will safeguard the regulations from both judicial scrutiny and criticism from the contracting community.

Part II of this Note provides background and insight into previous Executive Orders that sought to regulate labor and employment issues in the government contracting community. Part III introduces the relevant provisions of FPSW. Part IV argues that the FPSW reporting requirements are convoluted and burdensome, and it also analyzes the preliminary injunction. Part V identifies the consequences of utilizing reporting requirements such as those in FPSW and provides a solution to effectuate fairness for both employees and contractors. In addition, Part V discusses aggregating existing databases to efficiently track labor law violations and suggests that using Agency Labor Compliance Advisors would be a beneficial way to assist with any reporting requirements. Last, Part VI concludes by suggesting that reporting requirements of future labor law regulations should be changed in order to ease the burden on federal contractors and satisfy constitutional requirements.

II. History of Labor Law Regulations in Government Contracting

In the 1990s, there was a strong focus on reforming and overhauling contractor responsibility systems.20 These reforms were established with the goals of increasing competition and streamlining the procurement process.21 However, the Clinton administration also focused on political support from labor unions, which became the driving force behind the early labor law and procurement reforms.22 Despite the push for these changes, the Clinton administration failed to muster public support, and the reforms ultimately failed to pass judicial scrutiny.23

President Obama’s FPSW is not the first time that a president attempted to reform contractor responsibility and regulate the contracting community.24 In 1995, President Clinton issued Executive Order 12954, “Ensuring the Economical and Efficient Administration and Completion of Government Contracts,” with the purpose of punishing contractors that terminated and replaced employees for participating in union strikes.25 President Clinton’s goal in Executive Order 12954 was to provide means for efficiently fulfilling government contracts as well as protecting employees.26 In Executive Order 12954, President Clinton asserted that replacing workers involved in labor disputes negatively affected the contractual relationship with the federal government because an employer would lose “the accumulated knowledge, experience, skill, and expertise of its incumbent employees.”27 If a contractor was found to have unlawfully terminated an employee for engaging in a strike, then the contractor would be subject to debarment.28 Further, the Federal Register would list the contractor as one that was subject to debarment due to a labor law violation.29 As a result of publicizing the names of delinquent contractors in the Federal Register, the regulation became known as “blacklisting” government contractors.30 The name stuck and has also been used to refer to the practice in President Obama’s FPSW.31

However, President Clinton’s Executive Order 12954 failed to withstand judicial scrutiny in 1996 because it directly conflicted with federal law.32 In 1995, the Chamber of Commerce, American Trucking Associations, Inc., the Labor Policy Association, the National Association of Manufacturers, and Bridgestone/ Firestone, Inc. challenged the Executive Order in court — arguing that it violated federal law and the Constitution.33 The court focused on the consequences of the regulations and the direct conflict that the regulations had with provisions of the National Labor Relations Act.34

The negative response to Executive Order 12954 did not stop President Clinton from promulgating further contractor responsibility regulations.35 In 1999, President Clinton set forth “Federal Acquisition Regulation; Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings.”36 The proposed rule provided that contractors would be subject to debarment if they did not “have a satisfactory record of integrity and business ethics (examples may include pervasive evidence of the prospective contractor’s lack of compliance with tax laws, or substantial noncompliance with labor laws, employment laws, environmental laws, antitrust laws or consumer protection laws).”37 Like the previous Executive Order 12954, the contracting community scrutinized this rule, with the proposed rule alone receiving 1,500 public comments.38 Contractors criticized the rule because it “would effectively shift the responsibility for reviewing and penalizing violations of law from debarring officials, law enforcement officials[,] and judicial officers to [C]ontracting [O]fficers.”39

The Federal Acquisition Regulatory Council (“FAR Council”) published the final rule on December 20, 2000.40 The incoming Bush administration strongly opposed the rule and “urged the applicable executive agencies to delay its implementation….”41 Ultimately, this rule was deemed unworkable, and the “blacklisting” rule did not replace the existing responsibility schemes.42

Opposition by the Bush administration and the contracting community did not halt future attempts to regulate government contractors.43 In 2009, within the first several months of his presidency, President Obama issued three Executive Orders.44 Each of the Executive Orders sought to reform government contracting by increasing the regulation of labor practices in the contracting community.45 Further, in 2010, President Obama attempted to push forward an initiative substantially similar to President Clinton’s attempts at regulation.46 This “high-road contracting” policy was unsuccessful at both implementation attempts in 2010 and 2011.47

There have been years of tried and failed labor law regulations in the contracting community. Government contractors have pushed back at each regulation — preferring to maintain the status quo, which has been met with heavy criticism from labor unions and supporters of stringent labor and employment regulations.48 In 2014, President Obama again attempted to reform the workplace for government contractors with FPSW.49 The following part discusses the relevant portions of President Obama’s FPSW.

III. Overview of Fair Pay and Safe Workplaces

On August 25, 2016, the Federal Register published the final rule implementing FPSW.50 The final rule set forth four major requirements. The first requirement specified that from October 25, 2016 until April 24, 2017, “the prime contractor disclosure requirements will apply to solicitations with an estimated amount of $50 million or more, and resultant contracts; after April 24, 2017, the requirements apply to solicitations estimated to exceed $500,000, and resultant contracts.”51 The second requirement stated that subcontractors would be held to the reporting requirements beginning October 25, 2017.52 Third, the rule stated that the covered period for reporting violations would be from “October 25, 2015 to the date of the offer, or for three years preceding the offer, whichever period is shorter.”53 Finally, FPSW required that a paycheck transparency provision be implemented on January 1, 2017.54 According to the final rule, these requirements would curb the occurrence of egregious labor law violations, which in turn, would remedy lackluster performance on contracts.55

In 2010, the Government Accountability Office (“GAO”) reported that the federal government was continuously awarding large contracts to companies that did not appropriately pay employees or protect employees from hazardous work environments,56 among other egregious violations.57 FPSW sought to remedy these violations by scrutinizing contractors that violated fourteen federal labor laws and the state equivalents, including: (1) the Fair Labor Standards Act; (2) the Occupational Safety and Health Act of 1970; (3) 40 U.S.C. chapter 31, subchapter IV, formerly known as the Davis-Bacon Act; (4) 41 U.S.C. chapter 67, formerly known as the Service Contract Act; (5) Executive Order 11246 of September 25, 1965 (Equal Employment Opportunity); (6) Section 503 of the Rehabilitation Act of 1973; (7) Family and Medical Leave Act; (8) Title VII of the Civil Rights Act of 1964; (9) the Americans with Disabilities Act of 1990; (10) the Age Discrimination in Employment Act of 1967; (11) Executive Order 13658 of February 24, 2014 (Establishing Minimum Wage for Contractors); (12) the Vietnam Era Veterans’ Readjustment Assistance Act of 1972 and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974; (13) the Migrant and Seasonal AgriculturalWorker Protection Act; and (14) the National Labor Relations Act.58

As noted in the final rule, “many labor violations that are serious, repeated, willful, and/ or pervasive are not being considered in procurement decisions, in large part because [C]ontracting [O]fficers are not aware of them.”59 For the contracting community, it was apparent that the “blacklisting” rule had reappeared in the context of increasing awareness for safe and fair workplaces.60 However, like the previous “blacklisting” rules, FPSW — specifically the reporting requirements — revealed themselves to be particularly burdensome.61

The following part discusses FPSW’s reporting requirements and analyzes the judicial scrutiny of the reporting requirements. If the regulation of reporting labor law violations is revisited in the future, the reporting requirements should be carefully fashioned to satisfy constitutional standards and provide clear guidelines for contractors to follow.

IV. FPSW Reporting Requirements

Contractors vigorously opposed the FPSW reporting requirements for two specific reasons: (1) they altered the relationship between prime and subcontractors, and (2) they required that contractors disclose preliminary assessments of violations that did not constitute final agency action.62 In addition to contractor opposition, President Trump’s repealing of the rule through a joint resolution under the Congressional Review Act showed additional FPSW disapproval.63 The following sections explain the “impossibility” of the FPSW reporting requirements, contractors’ rights as analyzed in the injunction, and finally, argue that despite the opposition, reporting labor law violations should remain an important goal for future administrations.64

A. The “Impossibility” of the Reporting Requirements

The public comments on FPSW’s proposed rule explained the problematic nature of reporting labor law violations on every federal contract and voiced the “impossibility” of the requirements.65 The public comments make evident the heavy burden felt by federal contractors, as they indicated that the burden was both administrative and financial.66 As one contractor explained in opposition to the proposed rule:

[T]his would require us to add new employees just to solicit, analyze, track, report[,] and keep current on the information; it would also require us to SPEND more than $100,000 to modify our contract flow down and company-wide reporting systems to collect information that we do not have any reason to collect today.67

A key example of the convolution of the initially proposed reporting system — and one of the most burdensome aspects of the reporting requirements, the system mandated prime contractors to keep close track of subcontractor violations from information provided by the subcontractor.68 This was problematic for several reasons. First, assessing subcontractor labor law violations would increase the time, cost, and administrative burdens associated with analyzing violations.69 Second, it was unlikely that prime contractors would have the prerequisite experience to determine what behavior fell into the “serious, repeated, willful, or pervasive” categories.70 This meant that monitoring subcontractor violations would “add to systems costs, both to track and properly protect the information …”71 The proposed rule gave prime contractors the discretion to analyze whether or not a subcontractor committed a violation.72 However, the government indicated that these changes were necessary to maintain a positive relationship between contractors.73

On the other hand, in the final rule, the reporting requirements mandated that subcontractors report labor law violations directly to the Department of Labor (“DoL”).74 The purpose of this change was to minimize the burden on prime contractors — particularly contractors working with many subcontractors.75 This was also done to protect competitors, as commenters on the proposed rule noted that “companies may be reluctant to share information that they may believe is proprietary or otherwise harmful to their competitive interests.”76 The regulations reconciled the issues by determining that subcontractors would submit detailed explanations of labor law violations to the DoL, which would then pass along the information to the prime contractor.77 However, the prime contractor would still determine if the subcontractor was a responsible business.78 The DoL noted that, “the Order does not change the underlying principle in the FAR that it is the prime contractor (and not the Department) that has the duty to make a determination that its subcontractors are responsible sources.”79 The DoL Guidance made it clear that prime contractors still had significant responsibility in determining whether their subcontractors were “responsible sources.”80 However, the regulations indicated that in order to maintain consistency in subcontractor evaluations, it would be beneficial for the DoL to initially assess the violations.81

The final rule attempted to shift the burden of reporting labor law violations by not exclusively holding prime contractors responsible for reporting such violations.82 When soliciting a subcontract, prime contractors would instruct subcontractors to report relevant labor law violations to the DoL.83 The prime contractor would then consider the labor law violation once it received the DoL’s assessment of the subcontractor.84 Finally, if a contract was awarded, subcontractors would “update the information semiannually.”85

A problematic aspect of this reporting system was the assumption that the DoL would return assessments within three business days.86 This process was difficult because if the DoL did not provide a timely assessment, the prime contractor could “proceed with making a subcontractor responsibility determination without DoL’s input, using available information and business judgment.”87

The requirement that contractors disclose non-final determinations of “violations” was another point of contention for the contracting community.88 As the final rule noted, “the requirement to provide information on the existence of covered violations applies not only to civil judgments and administrative merits determinations, but also arbitral awards, including awards that are not final or still subject to court review.”89 Contractors viewed this as punishing a contractor before the contractor had the opportunity to utilize the judicial process.90 As discussed below, asking contractors to report non-final decisions violates contractors’ constitutional rights.91

The Eastern District of Texas took on this issue. The following section explains the preliminary injunction issued by Judge Marcia Crone in Associated Builders and Contractors of Southeast Texas v. Rung.

B. Judicial Scrutiny of the Reporting Requirements

On October 24, 2016, a day before the first phase of the FPSW final rule was set to be implemented, Judge Crone issued a preliminary injunction barring the federal government from implementing the final rule.92 In order to issue a preliminary injunction, Judge Crone asserted that the plaintiffs were required to “demonstrate (1) a substantial likelihood of success on the merits of their case; (2) a substantial threat of irreparable injury; (3) that the threatened injury outweighs any damage that the injunctive order might cause Defendants; and (4) that the order will not be adverse to the public interest.”93 Judge Crone found the case ripe for judicial review because FPSWwould directly impact the plaintiffs’ ability to conduct business, and the “plaintiffs [would] suffer hardship if the court were to withhold consideration.”94 Finally, Judge Crone analyzed several issues in her opinion — two of which are discussed below.

1. The Reporting Requirements as a Violation of the First Amendment

Judge Crone held that the Executive Order, final rule, and DoL Guidance violated the First Amendment.95 Judge Crone asserted that requiring “a form of compelled speech” would infringe on contractors’ First Amendment rights.96 The “immediate disclosure requirement” created an obligation for contractors and subcontractors to report violations of fourteen labor laws occurring since October 25, 2015.97 These reports were required even if the violations did not take place in the course of fulfilling a government contract and even if they had not yet been adjudicated or settled.98

Government contractors are entitled to First Amendment protections.99 The government cannot violate a contractor’s First Amendment rights by compelling it to disclose violations in order to maintain eligibility for contracts.100 This is an established right,101 and the court here found that FPSW’s reporting requirements violated this right.102 The court also found that the government did not establish a compelling enough interest to impose the burden of reporting all labor law violations — whether or not they occurred in the course of a government contract and were considered final.103

The court identified several important issues with the public reporting system. First, it required contractors and subcontractors to identify the violated labor laws, as well as the case number and agency that determined there was a violation of the specified labor law.104 Further, it required contractors and subcontractors to disclose an immense amount of information — even if it was not particularly harmful or serious.105 The required disclosures included “court actions, arbitrations, and ‘administrative merits determinations.’ ”106 Generally, the bulk of these determinations are either “dismissed or settled and … without benefit of a hearing or review by any court.”107 The requirements infringed on contractors’ First Amendment rights by “compel[ling] contractors to engage in public speech on matters of considerable controversy adversely affecting their public reputations …”108

The court focused on the fact that contractors and subcontractors had to disclose “merely alleged” violations.109 Reporting the alleged violations did not prove that a labor law violation actually occurred, which was emphasized by the fact that the phrase “labor law violation” also encompassed “administrative merits.”110 “Administrative merits” included any opinion-based notices.111 These notices generally were determined to be non-factual, meaning that publicly listing violations were at the subjective mercy of those issuing the notices.112

According to the court, the bottom line was that the government did not provide compelling reasons for how “public disclosure of non-adjudicated determinations of labor law violations on private projects correlates in any way to poor performance of government contracts …. None of the studies purported to show a relationship between mere non-adjudicated, unresolved allegations of labor law violations and government contract performance.”113 The government argued that the reports were no different than what contractors were already required to do in other areas of the law.114 However, as the court pointed out, the inclusion of reporting requirements in the statute and regulations indicated that the government intended these reporting requirements to be different from the current reporting system.115

The reporting requirements for prime and subcontractors were a reach. The court asserted that in defending the regulations, the government relied on the most egregious violations of labor and employment laws.116 According to the court, the government did not rely on on-going cases or investigations of violations but instead, provided examples of resolved cases.117 This indicates that there may not be examples of severe violations readily available. The court focused on the speculation surrounding the reporting requirements and held that requiring government contractors to disclose non-final determinations of violations was burdensome and a violation of the First Amendment.118

2. The Reporting Requirements as a Violation of the Fifth Amendment

In addition to being a violation of the First Amendment, the court also found the reporting requirements as a violation of Fifth Amendment due process rights.119 It is an established right for contractors to be free from stigmatization.120 The court noted that the rule “likely violates the due process rights of Plaintiffs’ government contractor members by compelling them to report and defend against non-final agency allegations of labor law violations without being entitled a hearing at which to contest such allegations.”121

The reporting requirements mandated that government contractors report citations made by the Occupational Health and Safety Administration (“OSHA”), the National Labor Relations Board (“NLRB”), and the Equal Employment Opportunity Commission (“EEOC”), among other agencies.122 Government contractors were required to report these citations — even if they were purely investigative and “without judicial or quasi-judicial safeguards.”123 The court emphasized that the citations should not be considered in awarding a contract because they were “non-final determinations” and did not fit within the definition of a “violation.”124 Because contractors would not be given a hearing prior to reporting the citations, the court determined that publicly reporting the citations was also a violation of due process.125

Finally, the court analyzed the harm that would come from allowing the final rule to be implemented in its current form and determined that it would be “irreparable,” meeting one of the requirements for granting an injunction.126 The court did not shy away from stressing the negative effects of these regulations on contractors, with Judge Crone stating that both the First Amendment and the Fifth Amendment due process violations would “deprive Plaintiffs’ members of their liberty interests in reputation and again constitute irreparable harm” because “[t]hey will likely suffer increased costs, loss of customers, and loss of goodwill, regardless of whether they are actually disqualified from government contracts, by being labeled labor law violators.”127

Among other arguments in the lengthy opinion, the court found no evidence to indicate that government contractors, employees, or the public would be harmed by the injunction.128 The court actually determined that the government would “benefit … by maintaining the status quo.”129 Further, the court determined that public interest would be protected by issuing the injunction because the public would benefit from timely and efficient contracting services.130

3. Effective Reporting Requirements Are Important Because They Protect Both Contractors and Employees

Implementation of effective labor law violation reporting requirements is important for both the contracting community and employees. However, the contracting community will have to wait for reporting reforms because on March 6, 2017, the Senate voted to repeal FPSW.131 As previously stated, after the Senate vote, President Trump signed the joint resolution of disapproval to repeal FPSW.132 The Congressional Review Act (“CRA”) — a rarely used law that allows Congress to review and overrule a regulation, such as FPSW — making eliminating a final regulation possible.133 In order to overrule a regulation, a joint resolution of disapproval is required.134 After a joint resolution passes and is signed by the President, the CRA prohibits a future rule that is similar in form or substance and allows a similar rule only if “the reissued or new rule is specifically authorized by a law enacted after the date of a joint resolution disapproving the original rule.”135 In short, President Trump ended the possibility of FPSW returning in its current form or in a substantially similar form.136

As seen through the previous rejections of labor law regulations in the contracting community, regulations have been unsuccessful at providing a happy medium.137 Specifically, the controversial reporting requirements — fashioned in various ways and over long periods of time — have been unsuccessful at gaining traction in the contracting community.138 It is apparent that government contractors, as with other industries in business with the government, do not want burdensome regulations or additional bureaucratic measures.139 However, at the core of these regulations is a protective measure for government contractors and workers.

The death of FPSW should not mean the end of protecting workers from labor law violations. If the opportunity arises to revisit labor law regulations in government contracting, the next wave of regulations must be inclusive of the contracting community’s and the courts’ criticisms.140 The lesson from several historical attempts at “blacklisting” regulations — that were criticized and ultimately failed — is that the contracting community is not sympathetic to public shaming and bureaucratic measures, even if the contractor presumably made poor labor law decisions.141 For some critics, the lack of support for labor law regulations suggests that the contracting community is more sympathetic to keeping secrets of severe misconduct; however, there is a possibility that the contracting community would support less costly, less detrimental reporting requirements that further the government goal of protecting employees without putting contractors out of business.142

V. Reconmendations for Refashioning the Reporting Requirements in the Future to Address Prime and Subcontractor Reporting Concerns and Meet Constitutional Standards

Awarding government contracts to those who violate labor and employment laws is problematic. Large contracting companies employ one in five U.S. workers, meaning the elimination of FPSW could have “wide ranging effects.”143 While FPSW did not survive the Trump administration, regulations including a reformed reporting system for labor law violations should still be a goal for the contracting community. The goal of future regulations should be twofold: (1) protecting employees from being victims of labor and employment law violations and (2) achieving fairness for contractors by maintaining an efficient system that does not violate contractors’ constitutional rights. Specifically, the reporting requirements outlined in FPSW created more problems than it solved. The reporting requirements were costly, burdensome on Contracting Officers, negatively affected the prime and subcontractor dynamic, and violated contractors’ constitutional rights.144 In the future, proposing similar reporting requirements will not achieve fairness for any of the involved parties and likely, would not survive judicial scrutiny. The death of FPSW provides a future administration with the opportunity to feasibly rework the reporting requirements and successfully introduce labor law regulations in the contracting community.

A. Improving the Current Reporting System Will Result in Successful Reporting of Prime and Subcontractor Labor Law Violations

The FPSW reporting requirements were heavily criticized for being costly and burdensome — with a specific focus on the survivability of companies overhauling current reporting systems to be inclusive of reporting subcontractor violations.145 The cost of compliance did not further the purported government goal of equalizing opportunities for contractors.146 Instead, contractors would not have been able to withstand the immediate increase in costs from overhauling current reporting systems.147 Therefore, in the future, it is important to note that incorrectly overhauling the current system would cause contractors to incur immense costs and potentially violate established constitutional rights.148 While the general public would not initially feel the burden of these costs, contract prices inevitably would rise and place the burden of these costs on taxpayers.149

The current responsibility framework has a reporting system in place that successfully keeps track of final violations.150 Refashioning the reporting system would begin by fine-tuning the existing structure and aggregating existing data of violations into one database.151 By updating the existing systems, contractors would not have to keep close track of each contract, the award date, and the violations that need to be reported before the contract is deemed final.152 However, final violations would still be reported to protect workers from delinquent contractors and keep the government informed of misconduct.153 Further, fine-tuning the existing systems means that prime contractors would not have to keep close track of subcontractor violations or determine the responsibility of a subcontractor — easing the burden on prime contractors.154 The FPSW process was drawn-out and confusing, and accordingly, any future regulations should limit the burden of prime contractors reporting subcontractor violations. Limiting the burden of reporting requirements on contractors will also minimize contractors exiting the market, which cannot withstand the difficulty of complex reporting requirements.155

Hypothetically, a future regulation could require the aggregation of data from the System for Award Management (“SAM”) database, the Federal Awardee Performance and Integrity Information System (“FAPIIS”), the OSHA database, and any other relevant databases that the DoL maintains.156 The creation of a combined database that provides a comprehensive overview of final determinations of violations would streamline the reporting process and make the final determinations easy to access. In addition to including past final violations, the new database could require annual updates of recent violations, providing a reasonable timeline for contractor compliance with the reporting requirements. Assuming a future regulation created such a database, a Contracting Officer could check the combined database when making an evaluation. If questions arise about the responsibility of a contractor, or subcontractor, the Contracting Officer could consult with an Agency Labor Compliance Advisor (“ALCA”), as discussed below.

The use of ALCAs could be a beneficial and reasonable way to strengthen and maintain communication between contractors and the government regarding labor and employment violations. FPSW envisioned that the ALCAs would provide prime contractors with subcontractor responsibility evaluations, but it would not “provide any substantive way to advise or assist with subcontractor responsibility determination.”157 Unlike the FPSW vision of what an ALCA would do, this position could be utilized as a resource for contractors to understand their rights and processes available if they are faced with reporting a labor law violation.158 In FPSW, ALCAs had three days to provide contractors with a responsibility evaluation — a turnaround deemed to be unrealistic and “likely to be ignored.”159

The ALCA position would be efficient if there was a reasonable amount of time given to the ALCA to report back to the Contracting Officer, so the Contracting Officer could utilize the ALCA recommendations.160 Although the ALCA position was criticized for the potential of providing inconsistent information to contractors, this could be remedied by establishing uniform training and resources to ALCAs across agencies, encouraging consistent recommendations.161 Finally, the burden on Contracting Officers could be remedied by allowing them to consult with ALCAs outside of a mandatory requirement.162 If the ALCAs responded in a timely manner to prime contractors — and there was a centralized database increasing efficiency for the ALCA, it would incentivize Contracting Officers to utilize the ALCAs as a resource to assist in avoiding future liabilities, even without a mandatory requirement.

B. Improving The Current Reporting System Will Protect Contractors’Constitutional Rights

In creating and passing FPSW, the government sought to equalize the playing field for contractors and make opportunities fair by awarding contracts to responsible contractors.163 However, requiring contractors to comply with invasive reporting requirements that included administrative merits infringed on contractors’ Fifth Amendment due process rights.164 The requirements asked contractors to divulge citations of possible violations and ultimately characterized these preliminary assessments as violations without awarding contractors the benefit of judicial scrutiny or reference to a statute.165 Compelling contractors to disclose this kind of information would presumably negatively affect business, even if the preliminary assessment resulted in a negative finding of a labor or employment law violation.166 Further, compelling contractors to disclose non-final decisions would encourage contractors to avoid doing business with the government, as well as violate contractors’ First Amendment rights.167

As discussed above, streamlining the reporting process through the use of ALCAs would assist contractors in understanding whether they are in compliance with labor laws and also avoid awarding contracts to contractors in violation of such laws.168 The violation will not have been publicly reported if it is determined to be minor or non-material — avoiding a convoluted process that violates the contractor’s constitutional rights.169 A streamlined reporting system will ensure the protection of contractors’ rights by avoiding the “violation” label on a non-final determination, and it will put the contractor on notice of the available options without publicly shaming. Either way, the process is more efficient without infringing on contractors’ established rights similar to the FPSW.

Although there is no possibility of FPSW coming back in its current form in the future, the goal of consolidating and reforming the reporting system for labor law violations should not die with President Trump’s signature. While FPSW, including the constitutional law violations apparent in the reporting requirements, was flawed, future supporters of fair and safe workplaces for employees should improve what already exists.170 Congress is unlikely to pass a law regulating labor law violations in government contracting; however, a future administration may be able to enhance the current reporting system by meeting constitutional standards in addition to providing an effective medium for contractors and the government to utilize.171 The solution is two-pronged: balancing workplace safety and fairness with the efficiency contractors seek.172 To do so, there must be a reporting system that ensures violations are being heard with an effective screening system to categorize violations and determine which violations require hearings.

When it comes to labor law regulations, the new administration should emphasize the following among its goals: refashioning the current reporting system to protect relationships between prime and subcontractors, making the requirements fair for both employees and contractors, and meeting constitutional standards.

VI. Conclusion

FPSW has been a highly discussed and controversial regulation. The contracting community has criticized the regulation for being unworkable and unrealistic.173 The complex reporting requirements failed to appeal to the contracting community and the court.174 Like the previous “blacklisting” regulations, FPSW has not survived judicial scrutiny, and in particular, the reporting requirements have been found to violate constitutional law.175 Additionally, President Trump has decided to invoke the CRA — permanently repealing FPSW.176 If there is a future possibility of introducing a reporting system, the reporting requirements should be reworked to remedy the costs, burdens, and stigmatization of disclosing non-final determinations by updating and consolidating the current reporting systems and utilizing the ALCAs to minimize the burden on contractors.

Entity:
Topic:
  1. Exec. Order No.13,673, 79 Fed. Reg. 45,309 ( July 31, 2014).
  2. Id.
  3. Id. at 45,309–10.
  4. Id.
  5. See, e.g., Letter from Michael P. Aitken et al., Vice President of Gov’t Affairs, Soc’y for Human Res. Mgmt., to Hada Flowers et al., Gen. Servs. Admin. Regulatory Secretariat 3 (Aug. 26, 2015).
  6. See Charles R. Lucy, Michael D. Maloney & Steven M. Guiterrez, Fair Pay and Safe Workplaces Final Rule Presents Challenges to Government Contractors, NAT’L L. REV. (Aug. 30, 2016), http://www.natlawreview.com/article/fair-pay-and-safe-workplaces-final-rule-presents-challenges-to-government [https://perma.cc/BKC7-L7FT] (noting that the proposed rule received more than 10,000 comments); see also Guidance for Executive Order 13673 “Fair Pay and Safe Workplaces,” 81 Fed. Reg. 58,654, 58,657–58 (Aug. 25, 2016).
  7. See, e.g., Galen Munroe, Teamsters Denounce Lawsuit to Block Fair Pay and Safe Workplaces Executive Order, TEAMSTERS (Oct. 11, 2016), https://teamster.org/news/2016/10/teamstersdenounce-lawsuit-block-fair-pay-and-safe-workplaces-executive-order [https://perma.cc/A9RH-TNJZ] (explaining that the “federal contractors that have violated labor law continued to receive government contracts because of a lack of oversight and enforcement”).
  8. Id.
  9. See Associated Builders & Contractors of Se. Tex. v. Rung, No. 1:16-CV-425, slip op. at 1–2 (E.D. Tex. Oct. 24, 2016).
  10. Id. at 1.
  11. Id. at 31.
  12. See id.
  13. See id. at 22, 26, 32.
  14. Sam Skolnik, Contractors Stay Hopeful Trump Will Rescind Executive Orders, BLOOMBERG BNA (Nov. 15, 2016), https://www.bna.com/contractors- stay-hopeful-n57982082742/ [https://perma.cc/3JDG-QUVG].
  15. Id.
  16. See H.R.J. Res. 37, 115th Cong. (2017).
  17. Because the Federal Acquisition Regulatory Council had already issued a final rule implementing FPSW, President Trump had to take extra steps to repeal it. Under the Congressional Review Act, Congress may repeal rules by using a resolution of disapproval, issued within sixty legislative days of a new Congress. This is an expediting process that requires only a simple majority of the House and Senate and President Trump’s signature. See S.J. Res. 12, 115th Cong. (2017); see also 5 U.S.C. § 801 (1996).
  18. See H.R.J. Res. 37.
  19. See Exec. Order No. 13,782, 82 Fed. Reg. 15,607 (Mar. 27, 2017).
  20. See Kelly Sherrill & Kate McQueen, Note, The High Price of Campaign Promises: Ill-Conceived Labor Responsibility Policy, 30 PUB. CONT. L.J. 267, 272 (2001).
  21. Id. at 273.
  22. Id.
  23. See Chamber of Commerce v. Reich, 74 F.3d 1322, 1339 (D.C. Cir. 1996).
  24. See Federal Acquisition Regulation; Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings, 65 Fed. Reg. 80,256 (Dec. 20, 2000).
  25. See Exec. Order No. 12,954, 60 Fed. Reg. 13,023 (Mar. 8, 1995).
  26. Id.
  27. Id.
  28. Id. at 13,024.
  29. Id.
  30. See FAR Council Issues Revised “Blacklisting” Regulations Concerning Contractor Responsibility, FRIED FRANK ( June 1, 2000), http://www.friedfrank.com/index.cfm?pageID=25&itemID=454 [https://perma.cc/A227-ZXP5].
  31. See, e.g., Letter from John Luddy et al., Vice President, Nat’l Sec. & Acquisition Policy, to Hada Flowers, Gen. Servs. Admin. Regulatory Secretariat, and Tiffany Jones, U.S. Dep’t of Labor 1, 3 (Aug. 26, 2015).
  32. See Chamber of Commerce v. Reich, 74 F.3d 1322, 1339 (D.C. Cir. 1996).
  33. See Chamber of Commerce v. Reich, 886 F. Supp. 66, 68 (D.D.C. 1995).
  34. Reich, 74 F.3d at 1338–39.
  35. See Federal Acquisition Regulation; Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings, 64 Fed. Reg. 37,360 ( July 9, 1999).
  36. See id.; see generally FAR Council Issues Revised “Blacklisting” Regulations Concerning Contractor Responsibility, supra note 30.
  37. See Federal Acquisition Regulation; Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings, 64 Fed. Reg. at 37,361.
  38. See FAR Council Issues Revised “Blacklisting” Regulations Concerning Contractor Responsibility, supra note 30.
  39. Id.
  40. See Federal Acquisition Regulation; Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings, 65 Fed. Reg. 80,256 (Dec. 20, 2000).
  41. See Cynthia L. Hackerott, Contractor “Blacklisting”: The Once and Future (?) Rules, WOLTERS KLUWER (Aug. 31, 2016), http://www.employmentlawdaily.com/index.php/2016/08/31/contractor-blacklisting-the-once-and-future-rules/ [https://perma.cc/A485-3GL2].
  42. The FAR Council determined that the preexisting responsibility schemes were sufficient. The FAR Council adopted the April 3, 2001, interim rule as the final rule, which revoked Clinton’s “blacklisting” rule. See Federal Acquisition Regulation; Contractor Responsibility, Labor Relations Costs, and Costs Relating to Legal and Other Proceedings, 66 Fed. Reg. 66,984, 66,986 (Dec. 27, 2001).
  43. See Exec. Order No.13,673, 79 Fed. Reg. 45,309 ( July 31, 2014).
  44. See Exec. Order No. 13,494, 74 Fed. Reg. 6101 ( Jan. 30, 2009); Exec. Order No. 13,495, 74 Fed. Reg. 6103 ( Jan. 30, 2009); Exec. Order No. 13,496, 74 Fed. Reg. 6107 ( Jan. 30, 2009).
  45. See Exec. Order No. 13,494, 74 Fed. Reg. 6101 ( Jan. 30, 2009); Exec. Order No. 13,495, 74 Fed. Reg. 6103 ( Jan. 30, 2009); Exec. Order No. 13,496, 74 Fed. Reg. 6107 ( Jan. 30, 2009).
  46. The initiative, called the “high road contracting” policy would have given “contractors a leg up if they [had] better practices than their competitors on wages, benefits, compliance and other measures of corporate citizenship.” See Hilary Russ, GOP Senators Oppose High-Road Contract Rules, LAW360 (Sept. 24, 2010, 2:34 PM), https://www.law360.com/publicpolicy/articles/196401/gop-senators-oppose-high-road-contract-rules [https://perma.cc/97ED-T77S].
  47. See Robert Brodsky, OMB Not Moving to Implement ‘High Road’ Contracting Policy, GOV’T EXECUTIVE (Mar. 8, 2011), http://www.govexec.com/oversight/2011/03/omb-not-moving-to-implement-high-road- contracting-policy/33488/ [https://perma.cc/D6LW-TVTY].
  48. See, e.g., Virginia Rodino, Workers Cheer Obama Administration’s New ‘Contractor Accountability’ Rules, SEIU (Aug. 24, 2016), http://www.seiu.org/2016/08/workers-say-congress-needs-to-act-on-fair-pay-and-safe-workplaces-executive-order [https://perma.cc/6U4L-QRLL].
  49. See Exec. Order No.13,673, 79 Fed. Reg. 45,309 ( July 31, 2014).
  50. Federal Acquisition Regulation; Fair Pay and Safe Workplaces, 81 Fed. Reg. 58,562 (Aug. 25, 2016).
  51. Id.
  52. Id.
  53. Id.
  54. Id.
  55. The final rule cites to studies done in 1985 and 2003 to demonstrate the “direct relationship” between labor law violations and performance. Id. at 58,564.
  56. See id. at 58,562, 58,564; see also U.S. GOV’T ACCOUNTABILITY OFF., GAO-10-1033, FEDERAL CONTRACTING: ASSESSMENTS AND CITATIONS OF FEDERAL LABOR LAW VIOLATIONS BY SELECTED FEDERAL CONTRACTORS 7, 8 (2010).
  57. See Federal Acquisition Regulation, Fair Pay and Safe Workplaces, 81 Fed. Reg. at 58,562, 58,564.
  58. Id. at 58,569, 58,648.
  59. Id. at 58,564.
  60. See Ken M. Kanzawa, Legal and Practical Issues in Implementing Executive Order 13673: Fair Pay and Safe Workplaces, 44 PUB. CONT. L.J. 417, 430 (2015) (explaining the history of executive orders that sought to remedy labor law violations in federal contracting).
  61. See id. at 441.
  62. See Associated Builders & Contractors of Se. Tex. v. Rung, No. 1:16-CV-425, slip op. at 2–3 (E.D. Tex. Oct. 24, 2016).
  63. See supra Part II.
  64. See Letter from S. Bradford Antle, President and CEO, Salient Fed. Sols., to Hada Flowers, Gen. Serv. Admin. Regulatory Secretariat 1 (Aug. 13, 2015) (explaining that the rule is “impossible to comply with”).
  65. See, e.g., id.
  66. See, e.g., id. at 1, 2.
  67. Id. at 2.
  68. The proposed rule required that prime contractors monitor subcontractor violations of the same fourteen labor laws and the state equivalents. See Federal Acquisition Regulation; Fair Pay and Safe Workplaces, 80 Fed. Reg. 30,548, 30,549 (May 28, 2015). Under the proposed rule, the prime contractor would gather information on violations from subcontractors with contracts of $500,000 or more. Id. The prime contractor would then consult with the Department of Labor, the labor compliance advisor, and the Contracting Officer to determine the gravity of the violations. Id. This evaluation would determine if the subcontractor violations were “serious, repeated, willful, or pervasive.” Id. This burdensome process was to be completed before the contract was awarded. Id.
  69. Federal Acquisition Regulation; Fair Pay and Safe Workplaces, 81 Fed. Reg. 58,562, 58,566 (Aug. 25, 2016).
  70. Id.
  71. Id.
  72. Id.
  73. See id.
  74. Id. at 58,649.
  75. Id. at 58,577.
  76. Id. at 58,566.
  77. Id. at 58,649.
  78. Id.
  79. Guidance for Executive Order 13673 “Fair Pay and Safe Workplaces,” 81 Fed. Reg. 58,654, 58,703 (Aug. 25, 2016).
  80. Id.
  81. Id.
  82. See Lucy, Maloney & Guiterrez, supra note 6 (explaining the “silver lining” to the reporting requirements).
  83. The Department of Labor would have provided a subcontractor with an “assessment” of violations. See Federal Acquisition Regulation; Fair Pay and Safe Workplaces, 81 Fed. Reg. 58,562, 58,598 (Aug. 25, 2016). Included in the assessment would be a recommendation for the prime contractor. Id. An interesting aspect of this process was that the Department of Labor would not provide the subcontractor assessment to the prime contractor, but would return the assessment to the subcontractor and leave the responsibility on the subcontractor to provide this information to the prime contractor.
  84. Id. at 58,599.
  85. Id. at 58,640.
  86. See id. at 58,602.
  87. Id. at 58,598.
  88. See id. at 58,584.
  89. Id. at 58,566.
  90. See Letter from John Luddy et al. to Hada Flowers and Tiffany Jones, supra note 31, at 1, 19.
  91. See infra Part IV.B.
  92. Associated Builders & Contractors of Se. Tex. v. Rung, No. 1:16-CV- 25, slip op. at 1 (E.D. Tex. Oct. 24, 2016).
  93. Id. at 10 ( Judge Crone stated that “[t]o preserve the status quo, federal courts in the Fifth Circuit have regularly enjoined federal agencies from implementing and enforcing new regulations pending litigation challenging them”).
  94. Id. at 12.
  95. Id. at 18.
  96. Id. at 17.
  97. Id.
  98. Id.
  99. See O’Hare Truck Serv., Inc. v. City of Northlake, 518 U.S. 712, 713 (1996) (establishing First Amendment rights for independent government contractors).
  100. Associated Builders, slip op. at 21.
  101. Id.
  102. Id. at 22.
  103. Id. at 17.
  104. See id. at 18.
  105. See id.
  106. Id.
  107. Id.
  108. Id.
  109. Id. at 20 (emphasis in original).
  110. Id.
  111. Id.
  112. Id.
  113. Id. at 20–21 (emphasis in original).
  114. Id. at 21 n.8.
  115. The court notes that prior to the new rule, contractors had to disclose labor and employment laws only if the proceeding “is in connection with the award or performance of a grant, cooperative argument, or procurement contract from the Federal Government” and has “reached its final disposition during the most recent five year period” and is either “a criminal proceeding that resulted in a conviction[,] a civil proceeding that resulted in a finding of fault and liability[, or] any other criminal, civil, or administrative proceeding. . . .” 2 C.F.R. pt. 200, app. XII (2016); see Associated Builders, slip op. at 21 n.8.
  116. Associated Builders, slip op. at 21.
  117. Id.
  118. Id. at 21–22.
  119. Id. at 22. This is not the first time a labor and employment regulation has been found to be a violation of contractors’ due process rights. In 1999, the Clinton “blacklisting” rule was also deemed a violation of due process rights. See supra Part II.
  120. See Old Dominion Dairy Prods., Inc. v. Sec’y of Def., 631 F.2d 953, 961 (D.C. Cir. 1980).
  121. Associated Builders, slip op. at 22.
  122. See Federal Acquisition Regulation; Fair Pay and Safe Workplaces, 81 Fed. Reg. 58,562, 58,648 (Aug. 25, 2016).
  123. Associated Builders, slip op. at 23.
  124. Id.
  125. Id. at 22–23.
  126. Id. at 29.
  127. Id.
  128. Id. at 30.
  129. Id.
  130. Id. at 30–31.
  131. H.R.J. Res. 37, 115th Cong. (2017).
  132. See id.
  133. See 5 U.S.C. § 801 (1996).
  134. See id. § 802(a).
  135. Id. § 801(b)(2).
  136. Id.; see, e.g., Kimberly Kindy, Senate Votes to Kill Worker Safety Rule Aimed at Federal Contractors, WASH. POST (Mar. 6, 2017), https://www.washingtonpost.com/national/republicans-poised-to-roll-back-worker-safety-regulations/2017/03/06/87a6c266-fd27-11e6-8f41-ea6ed597e4ca_story.html?utm_term=.cb556c903feb [https://perma.cc/3RRK-775S].
  137. See generally Hackerott, supra note 41 (comparing Obama’s “blacklisting” initiatives to Clinton’s “blacklisting” initiatives).
  138. See id. (pointing out that Clinton’s regulations were broader than FPSW).
  139. See id.
  140. See generally Letter from Aerospace Indus. Ass’n et al. to U.S. Congress (Feb. 1, 2017), available at https://www.pscouncil.org/Downloads/documents/Coalition%20letter%20on%20CRA%20Disapproval%20of%20Fair%20Pay%2002-01-17.pdf [https://perma.cc/NC2JKBBG] (highlighting industry criticisms of FPSW).
  141. See generally id.
  142. See Pamela Wolf, Final ‘Blacklisting’ Rule and Guidance: What Do They Mean?, WOLTERS KLUWER (Aug. 24, 2016), http://www.employmentlawdaily.com/index.php/2016/08/24/final-blacklisting-rule-and-guidance-what-do-they-mean/ [https://perma.cc/3QBK-FGRW].
  143. See Kindy, supra note 136; see also OFFICE OF SENATOR ELIZABETH WARREN, BREACH OF CONTRACT: HOW FEDERAL CONTRACTORS FAIL AMERICAN WORKERS ON THE TAXPAYER’S DIME 1, 2, 11 (2017).
  144. See Associated Builders & Contractors of Se. Tex. v. Rung, No. 1:16-CV-425, slip op. at 5, 9, 29 (E.D. Tex. Oct. 24, 2016).
  145. See Letter from John Luddy et al. to Hada Flowers and Tiffany Jones, supra note 31, at 6.
  146. See Associated Builders, slip op. at 26–27.
  147. See Letter from John Luddy et al. to Hada Flowers and Tiffany Jones, supra note 31, at 5.
  148. See Associated Builders, slip op. at 26–27, 29.
  149. See Letter from John Luddy et al. to Hada Flowers and Tiffany Jones, supra note 31, at 11.
  150. See id. at 4.
  151. See id. at 5.
  152. See id.
  153. See id.
  154. See id. at 9.
  155. See id. at 47.
  156. See id. at 5.
  157. Id. at 2.
  158. See Letter from John Luddy et al. to Hada Flowers and Tiffany Jones, supra note 31, at 8–9 (suggesting that “provid[ing] add[itional] resources to create legions of ALCAs to match legions of COs” may make the position more efficient).
  159. See Robert K. Stewart, Fair Pay and Safe Workplaces Regulation, a/k/a/ Federal Contractor Blacklisting Regulation, DAVIS WRIGHT TREMAINE LLP (Oct. 12, 2016), http://www.dwt.com/Fair-Pay-and-Safe-Workplaces-Regulation-aka-Federal-Contractor-Blacklisting-Regulation-10-12-2016/ [https://perma.cc/C5UT-S89S]; see also Letter from John Luddy et al. to Hada Flowers and Tiffany Jones, supra note 31, at 8.
  160. Letter from John Luddy et al. to Hada Flowers and Tiffany Jones, supra note 31, at 44.
  161. See Letter from Roger Waldron, President, Coal. of Gov’t Procurement, to Hada Flowers, Gen. Servs. Admin. Regulatory Secretariat Div. 1, 9 (Aug. 25, 2015).
  162. See id. at 10.
  163. See Federal Acquisition Regulation; Fair Pay and Safe Workplaces, 81 Fed. Reg. 58,562, 58,564–65 (Aug. 25, 2016).
  164. See supra Part II.
  165. See Associated Builders & Contractors of Se. Tex. v. Rung, No. 1:16-CV-425, slip op. at 12–14 (E.D. Tex. Oct. 24, 2016) (noting that divulging citations of possible violations exceeds the government’s authority).
  166. See Letter from Roger Waldron to Hada Flowers, supra note 161, at 5.
  167. See Stewart, supra note 159.
  168. See Press Release, U.S. Dep’t of Labor, Labor Department, FAR Council Issue Final Regulations, Guidance to Ensure Federal Contractors Better Comply with Workplace Rights, Protections (Aug. 24, 2016).
  169. See Letter from John Luddy et al. to Hada Flowers and Tiffany Jones, supra note 31, at 45–46.
  170. See, e.g., Letter from Roger Waldron to Hada Flowers, supra note 161, at 4–5 (explaining that the reporting systems highlighted in the proposed rule were redundant).
  171. See id. at 6 (stating that the government should “streamline” the reporting process).
  172. See, e.g., Letter from John Luddy et al., Council of Def. & Space Indus. Ass’ns, to Zenaida Delgado, FAR Council Regulatory Secretariat 1, 2 (Sep. 13, 2016) (supporting “balanced policy efforts”).
  173. See, e.g., Letter from John Luddy et al. to Hada Flowers and Tiffany Jones, supra note 31, at 2.
  174. See generally Associated Builders & Contractors of Se. Tex. v. Rung, No. 1:16-CV-425, slip op. at 31 (E.D. Tex. Oct. 24, 2016).
  175. See id.
  176. See H.R.J. Res. 37, 115th Cong. (2017).