Obama Administration Issues Rule Directing Federal Contracting Officers On Evaluating Labor Law Compliance
The Obama administration has issued its final rule, and 369 pages of guidance, telling federal contracting officers on how to evaluate labor law compliance – or lack of it – by bidders for federal work.
The rule, which implements a two-year-old presidential executive order, will have wide impact, if business groups don’t find a friendly judge to stop it. The Labor Department, in its guidance, said the government awarded $518.4 billion worth of contracts last year.
Obama’s order and the DOL rule do not outright ban labor law-breaking firms from getting federal contracts. But they do tell federal contract officers to give great weight to labor law-breaking when evaluating whether a company should win federal business or not.
The rule will be phased in over three years, starting in October, and will initially apply only to prime contractors and will only have contract officers review labor law-breaking by firms for the year before. But by October 2018, it will apply to all contractors and will cover three years of labor law-breaking. Right from the start, it covers contracts worth $500,000+. And federal labor law agencies will provide contracting officers with lists of law-breakers.
Years of studies, the rule adds, show that labor law-breakers – including wage and hour law-breakers, National Labor Relations Act violators, and job safety and health law-breakers – gained billions of dollars in federal business. So did firms that broke prevailing wage laws.
But the studies, on the state and federal levels, also show that despite corporate claims, firms that were later found to violate the law did not save government and taxpayer dollars.
The AFL-CIO had no immediate comment on the rule, which unions pushed for. The Teamsters and the National Partnership for Women and Families lauded it, as did gay-lesbian-bisexual-transgender groups. DOL said of 8,000 comments on the rule, only 30 opposed it.
“The executive order will hold companies that contract with the government accountable for violating workplace laws and prevent bad actors from receiving federal contracts,” the Teamsters said in their statement praising DOL’s rule.
The executive order and the rules and guidance “will not only protect the millions of workers that are employed by federal contractors, but it will ensure that taxpayer money is not being handed to companies that blatantly violate labor and workplace laws,” added union President Jim Hoffa.
And it addresses frequent labor law-breaking by contractors, including “wage theft, safety violations and discrimination,” the Teamsters noted.
“One in five people employed by federal contractors are paid wages that fall below the poverty level, and many are women,” said National Partnership Executive Director Debra Ness. The new rules “will help to improve conditions among the federal contracting workforce by holding companies accountable for wage, safety and other labor law violations and incentivizing appropriate and lawful employer conduct.
“Government studies show that federal contractors are some of the worst offenders when it comes to labor law violations, and many federal contract jobs pay low wages and offer few supports,” Ness added.
“Federal contractors that play by the rules have no reason to fear these new regulations. In fact, the regulations will help level the playing field for responsible employers,” she concluded.
In explaining its new rule, DOL said “strengthening procurement labor standards and contractor labor-law compliance policies can play an important role in appropriately managing competition in procurement.” It added that “when correctly managed, competition between contractors can increase accountability and the quality of services provided.
“Where compliance with legal norms is weak, price competition alone may instead result in an increase in unlawful behavior and poor contract performance. State and local responsible -contracting policies have shown contracting agencies can improve the quality of competition by encouraging bids from more-responsible contractors that might otherwise abstain out of concern about not being able to compete with less scrupulous corner-cutting companies.
“In sum, studies of state and local initiatives have shown that -- by properly managing competition -- responsible-contractor policies can deliver better quality without significant cost increases for government agencies that employ them.
“The Fair Pay and Safe Workplaces Order” – Obama’s two-year-old directive – “applies lessons learned from these developments in state and local contracting policy, and, by doing so, addresses the longstanding deficiencies highlighted” in federal reports stretching back all the way to 1995, it says.
DOL also emphasized it wants to help contractors avoid labor law-breaking, by letting them fix prior problems, rather than trying to dump them after contracts have been awarded. It was silent on what federal contract officers should do when confronted by cases of repeat offenders and frequent labor law-breakers.
DOL also warned the new rules do not mean that the government would stop throwing labor law-breaking contractors off of federal work. “However, the expectation is that its new requirements and processes will help contractors avoid the consequences of that process” of debarment and bans, DOL said.
“The department believes that focusing on the pre-award process -- in addition to a functional suspension-and-debarment regime -- is efficient for the government as well as for contractors given the opportunity to avoid suspension or debarment.”
DOL also issued examples of serious violations by companies that would cause federal contract officers to look askance at bids by law-breakers. They included:
• “The general counsel of the National Labor Relations Board (NLRB) issued a complaint alleging that a contractor fired the employee who was the lead union adherent during the union’s organizational campaign in retaliation for the employee’s participation in the organizational campaign.
“This is a serious (their emphasis) violation because a violation of any of the labor laws, except citation OSHA violations, is serious where the contractor retaliated against one or more workers for exercising any right protected by any of the laws.
“Conversely, if the NLRB’s complaint had instead alleged the contractor had, for example, denied a single employee a collectively-bargained benefit -- for example, a vacation to which the employee was entitled based on her seniority -- the violation would not be serious, assuming that none of the other criteria for seriousness listed above are met.”
• “The Wage and Hour Division issued a letter indicating that a contractor violated the DBA (Davis-Bacon Act), and that back wages were $12,000,” its example says. “The contractor had previously been investigated by WHD and, to resolve that investigation, entered into a written agreement to pay the affected workers prevailing wages as required by the DBA.
“This is a serious violation for two reasons. First, a violation of any of the labor laws, except citation OSHA violations, is serious if back wages of at least $10,000 were due. Second, a violation of any of the Labor Laws, except citation OSHA violations, is serious if the contractor breached the material terms of any agreement or settlement entered into with an enforcement agency.
“Conversely, if WHD issued a letter indicating that a contractor owed several workers a total of $8,000, and the contractor’s conduct did not constitute a breach of a prior agreement or meet any of the other criteria for seriousness listed above, the violation would not be serious.”
