Court Stays Rules Requiring Federal Contractors to Report Labor Violations

Court Stays Rules Requiring Federal Contractors to Report Labor Violations

Would have blacklisted companies only accused of violating rules of 14 different agencies.

A federal district court in Texas has blocked new rules that would have required federal contractors to report to the government any and all accusations of labor regulation violations over the past three years.

The court issued the preliminary injunction on Oct. 24, one day before the new rules were to go into effect. Promulgated by the Federal Acquisition Regulatory (FAR) Council, the rules were intended to apply to prime contractors and subcontractors for contracts with federal agencies for amounts of $500,000 or more, including commercial contracts.

In 2014 President Obama signed an executive order mandating the rules, one of a string of such orders that have piled on new administrative burdens and requirements for federal contractors, ranging from paying a new minimum wage to banning LGBT discrimination.

The rules blocked by the court mandated that contractors self-report a multitude of labor and employment administrative and civil merits decisions and charges, and file the information with a publicly available, federally-operated database.

This covers agency findings issued after an investigation that a contractor violated one of 14 federal laws or similar state laws, regardless of whether those agency findings have been adjudicated or are otherwise subject to reversal.

These include OSHA citations, complaints issued by the National Labor Relations Board and reasonable cause determinations made by the Equal Employment Opportunity Commission, whether or not the alleged violations took place while the company was performing a government contract.

Organizations in the contractor community filed suit to overturn the rules because non-final agency actions that aren’t a legal determination of liability could prevent a company from receiving a federal contract, effectively blacklisting otherwise qualified contractors.

The federal court agreed, and also blocked enforcement of a provision which required companies with contracts of more than $1 million to agree that they would not compel employees to arbitrate claims involving sexual assault or harassment prior to such disputes arising.

However, the court left in place portions of the regulations that require federal contractors to provide employees with wage statements that report hours worked, overtime hours, pay and any additions to or deductions from their pay. Also surviving the injunction is the requirement for employers to inform workers classified as independent contractors of their status in writing.

In overturning the other portions of the rules, the court noted that “the ‘violations’ that require reporting may not be final decisions or determinations, are not confined to performance of past government contracts, and/or have not been preceded by a hearing or been made subject to judicial review.”

The court also said regulations represented the government compelling speech from government contractors by making the reports, which is in violation of the First Amendment. The court held that this arises because the rules require the disclosure of administrative merits determinations, along with preliminary and final determinations in otherwise private alternative proceedings.

It also held that the rules most likely violate contractors’ due process rights by requiring “them to report and defend against non-final agency allegations of labor law violations without being entitled to a hearing at which to contest such allegations.”

The court also granted the injunction in part because of its belief that it expects the employers who filed suit will end up winning their case based on its merits.

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