The inevitable has come to pass: a federal contracting association has legally challenged the Fair Pay and Safe Workplaces final rule. Opinions are divided; some experts say the lawsuit is based on solid arguments, while others think it’s an instance of contractors claiming “the sky is falling” in the face of what they believe to be another blacklisting rule.
The final regulations require companies to disclose violations for 14 labor law protections that occurred in the past three years, and go into effect Oct. 25, more than two years after President Barack Obama signed the executive order.
“This rule will require contractors to report alleged violations that have not been fully adjudicated and are being contested, which violates their First Amendment and due process rights and is likely to harm fair and open competition in the federal marketplace,” said Ben Brubeck, Associated Builders and Contractors vice president of regulatory, labor & state affairs, in a press release. “The rule creates additional costs and regulatory burdens that will discourage qualified firms, particularly small businesses, from pursuing federal contracts, and will drive up costs to taxpayers. In addition, it will cause litigation and delays that will disrupt the federal procurement process for critical goods and services purchased by the government.”
Scott McCaleb, a partner in the law firm Wiley Rein’s government contracts practice, said they have a valid point.
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“When you look at what the ABC alleges here, it’s similar to what we alleged back in 2000, and indeed ABC was one of the plaintiffs that we represented back in 2000 in the District of Columbia, challenging the blacklisting rules,” said McCaleb. “Likewise here, ABC has articulated a reasoned argument that the new regulatory regime violates the due process rights of government contractors.”
However, Scott Amey, general counsel at the Project on Government Oversight, said this is an overreaction on the part of contractors, and that this is just the government doing its job to ensure contractors are maintaining required standards.
“This isn’t a blacklisting rule; it’s attempting to level the playing field so that non-responsible contractors aren’t considered,” Amey said. “It levels the playing field for contractors that do follow the laws.”
He’s not, however, surprised by the lawsuit.
“A legal challenge to the executive order and Labor Department’s final rule was inevitable, and we’ll see how that shakes out in court,” Amey said. “Anything that tries to capture how responsible federal contractors are, they say that it’s a blacklisting rule and is going to exclude contractors. I don’t think we’re trying to exclude anyone. You’re trying to make sure that companies with good records are the ones getting taxpayer dollars.”
McCaleb predicted the litigation in August, when the final rule was published by the Labor Department and the Federal Acquisition Regulatory Council.
“It would not surprise me to see other trade organizations or similar companies file similar challenges,” McCaleb said. “Because there is a very strong backlash against the really soon-to-be-effective rule and guidelines.”
ABC filed its lawsuit on Oct. 7 in the U.S. District Court for the Eastern District of Texas. The National Association of Security Companies is also listed as a plaintiff.
“Texas courts have certainly shown an inclination to not be hesitant about second-guessing the President’s exercise of executive power,” McCaleb said.
ABC is seeking a preliminary injunction pending examination of the final merits, which McCaleb said may give a sneak peek into how the court is leaning, as ABC will have to prove whether it has a likelihood of prevailing.
“I think it will be interesting to see how it moves forward because I think, depending on how the election plays out, this lawsuit could either have a relatively long life or a relatively short life,” McCaleb said. “If Trump were to win, there’s certainly the chance that the rule could be among the many that a President Trump says he will repeal. And indeed, when President Bush was elected in 2000, the blacklisting rules were repealed. On the other hand, if there’s a President Clinton elected, then I would suspect that this case will move forward through the courts.”
Amey doesn’t think this will have that great of an effect, however.
“This may cause the government to go back and tinker a bit with the final rule, agree to disagree, and resolve some of the issues that are being raised,” he said.
Ultimately, however, he doesn’t think there’s much merit to the argument that large companies will inevitably have a history of workforce violations due to their sheer size.
“I hope companies are aware of safety or discrimination violations that they have, or paying their workers improperly,” Amey said. “They should know all those things and make sure that they’re cleaning those things up and make sure they’re not repeated.”
Amey said that’s what the government is trying to do – enforce existing regulations and ensure that the government doesn’t deal with companies that exploit its workforce.
“We wrote this in our blog: they say that this is trying to be a blacklisting rule, but we’ve said that the government is trying to prevent companies with poor labor requirement records,” Amey said. “We see it as a rule that tries to prevent low-road contractors that have tried to shortchange the govt, taxpayers, as well as endanger worker’s lives, from coming into the government marketplace.”
On Oct. 11, the International Brotherhood of Teamsters announced its opposition to the lawsuit.
“These federal contractors are only interested in being allowed to continue to exploit workers to increase their profits,” said Teamsters General President Jim Hoffa in a statement.” The Fair Pay and Safe Workplaces Executive Order will go a long way toward stopping companies that violate labor law from being rewarded with taxpayer-funded federal contracts.”
The release cites a Government Accountability Office investigation from 2010 that found contractors continued to receive government contracts despite labor law violations. It also referred to a pair of 2013 reports — one from the Senate Health, Education, Labor and Pensions committee, the other from the National Employment Law Project — that both found instances of wage theft on the part of contractors.