Hours before the Fair Pay and Safe Workplaces final regulations were to take effect, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction to block most of the regulations, including the contentious disclosure provisions.  In a 32-page order, Judge Marcia Crone enjoined two key sections of the regulations: (1) the requirement that federal contractors and subcontractors monitor and disclose violations of 14 federal labor laws and certain state laws; and (2) the prohibition on mandatory arbitration of claims arising under Title VII or involving claims of sexual assault or harassment.  The court left in place the “paycheck transparency” section of the regulations, which will take effect on January 1, 2017.  Relying on recent Fifth Circuit precedent that enjoined the Administration’s immigration policy nationwide, the court stated that this injunction also applied on a nationwide basis.

The court needed just a few pages to dispense with the mandatory arbitration provisions, holding that those regulations impermissibly conflicted with the pro-arbitration policy articulated in the Federal Arbitration Act (“FAA”).  The court noted that Congress may—by statute—prohibit mandatory arbitration in certain instances, as it did with respect to contractors dealing with the Department of Defense through the so-called Franken Amendment.  The Executive Branch, however, does not have the same prerogative as the legislature to countermand the FAA.

The disclosure obligations fared much worse.  In sharp language, the court criticized the breadth of the reporting obligations and the disconnect between the vast authority vested in agency labor compliance advisors and their limited experience with labor law.  Since the President issued the underlying Executive Order in 2014, commentators have challenged the decision to require contractors and subcontractors to disclose a wide range of “administrative merits determinations” relating to the covered labor laws.  That term had not been defined in prior laws, and the Labor Department’s guidance swept in a wide array of administrative actions, including some actions that bear more resemblance to a complaint than to a final judgment.  The court characterized these as “merely alleged violations” and “mere non-adjudicated, unresolved allegations of labor law,” and held that the obligation to disclose them exceeded the Executive Branch’s legal authority, represented arbitrary and capricious agency action, violated the First Amendment by unconstitutionally forcing contractors to engage in compelled speech, and violated contractors’ constitutional rights to due process.

Despite this temporary relief, federal contractors and subcontractors should still continue planning for potential future implementation of Fair Pay and Safe Workplaces rules.  The court’s analysis was focused heavily on the breadth of the definition of “administrative merits determinations,” so a more narrowly tailored disclosure regime—perhaps limited to final, adjudicated labor law violations—might survive.  The final regulations establish October 25, 2015 as the baseline date for the look-back period during which contractors and subcontractors must initially report labor law violations.  Although the baseline could shift later if litigation is lengthy, that structure suggests that eventual implementation will not simply be prospective.  In other words, contractors should plan for some amount of look-back analysis whenever the regulations take effect.

Litigation in federal court is complex, and could take months or years to reach final resolution.  Contractors and subcontractors should use this additional time to ensure that they have procedures in place to track and monitor labor law issues, and should be prepared to shift back to implementation mode once this litigation is resolved.

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Jeff Bozman Jeff Bozman

Jeff Bozman practices with the Public Policy & Government Affairs and Government Contracts practice groups in Washington, DC.  He focuses on the defense and aerospace industry, and on the labor and employment laws that apply to government contractors.

Photo of Jennifer Plitsch Jennifer Plitsch

Jennifer Plitsch leads the firm’s Government Contracts Practice Group, where she works with clients on a broad range of issues arising from both defense and civilian contracts including contract proposal, performance, and compliance questions as well as litigation, transactional, and legislative issues.

She…

Jennifer Plitsch leads the firm’s Government Contracts Practice Group, where she works with clients on a broad range of issues arising from both defense and civilian contracts including contract proposal, performance, and compliance questions as well as litigation, transactional, and legislative issues.

She has particular expertise in advising clients on intellectual property and data rights issues under the Federal Acquisition Regulations (FAR) and obligations imposed by the Bayh-Dole Act, including march-in and substantial domestic manufacturing. Jen also has significant experience in negotiation and compliance under non-traditional government agreements including Other Transaction Authority agreements (OTAs), Cooperative Research and Development Agreements (CRADAs), Cooperative Agreements, Grants, and Small Business Innovation Research agreements.

For over 20 years, Jen’s practice has focused on advising clients in the pharmaceutical, biologics and medical device industry on all aspects of both commercial and non-commercial agreements with various government agencies including:

  • the Department of Veterans Affairs (VA);
  • the Department of Health and Human Services (HHS), including the Biomedical Advanced Research and Development Authority (BARDA), the National Institutes of Health (NIH), and the Centers for Disease Control (CDC);
  • the Department of Defense (DoD), including the Defense Threat Reduction Agency (DTRA), the Defense Advanced Research Projects Agency (DARPA), and the Joint Program Executive Office for Chemical Biological Defense (JPEO-CBRN); and
    the U.S. Agency for International Development (USAID).

She regularly advises on the development, production, and supply to the government of vaccines and other medical countermeasures addressing threats such as COVID-19, Ebola, Zika, MERS-CoV, Smallpox, seasonal and pandemic influenza, tropical diseases, botulinum toxin, nerve agents, and radiation events. In addition, for commercial drugs, biologics, and medical devices, Jen advises on Federal Supply Schedule contracts, including the complex pricing requirements imposed on products under the Veterans Health Care Act, as well as on the obligations imposed by participation in the 340B Drug Pricing program.

Jen also has significant experience in domestic sourcing compliance under the Buy American Act (BAA) and the Trade Agreements Act (TAA), including regulatory analysis and comments, certifications, investigations, and disclosures (including under the Acetris decision and Biden Administration Executive Orders). She also advises on prevailing wage requirements, including those imposed through the Davis-Bacon Act and the Service Contract Labor Standards.