Federal contractors hail Congress’s decision to kill ‘blacklisting’ rule

March 08, 2017 - by: Kate McGovern Tornone 0 COMMENTS

On March 6, Congress voted to repeal a regulation requiring federal contractors to report employment law violations to agencies that award contracts. President Donald Trump is expected to approve the resolution.

The move was expected but is still a great relief to all federal contractors, according to Burton J. Fishman, senior counsel with Fortney & Scott and a contributor to Federal Employment Law Insider. Even the most compliant contractors had negative reactions to the rule. “They were all opposed to this[,] and that tells you something,” Fishman said. “This was really exceedingly burdensome with very little upside and had the trappings of political—not practical—purpose involved.”

The so-called blacklisting rule was issued to implement President Barack Obama’s Fair Pay and Safe Workplaces Executive Order. In addition to requiring employers to report violations, it required agencies to consider the reports when awarding contracts. The rule, according to then-Secretary of Labor Thomas E. Perez, was aimed at ensuring that employers that illegally cut corners at employees’ expense do not benefit from taxpayer-funded contracts.

The regulation was scheduled to take effect October 25, 2016, but a federal district court temporarily halted certain provisions the evening before. Associated Builders and Contractors of Southeast Texas, et al. v. Rung, No. 1:16-cv-00425 (E.D. Texas, Oct. 24, 2016).

The judge took issue with the reporting requirements, which she said were not authorized by federal law or the Executive Order. Moreover, none of the laws involved (e.g., the Fair Labor Standards Act (FLSA), Title VII of the Civil Rights Act of 1964, and the Americans with Disabilities Act (ADA)) provide for debarment or disqualification of contractors for violations of the provisions, Judge Marcia A. Crone said.

Crone left intact, however, the rule’s paycheck transparency requirement, which took effect in January. That part requires federal contractors to provide wage statements detailing employees’ hours worked, overtime hours, pay, and any additions to or deductions from pay. It also requires contractors to inform an individual in writing if she is being treated as an independent contractor rather than an employee.

Shortly after Trump’s inauguration, the House passed a resolution (H.J. Res. 37) to permanently reverse the regulation, including the paycheck transparency requirements. The Congressional Review Act (CRA) allows Congress to undo rules in the 60-day period after they are issued, leaving an outgoing administration’s final actions vulnerable. Before Trump, the law was successfully used only once before: to void Occupational Safety and Health Administration (OSHA) ergonomics rules issued during the final days of the Clinton administration.

The Senate adopted the resolution 49-48. Fishman says he expects Trump to sign it, citing a February 1 statement from the administration expressing its support. “The rule would bog down federal procurement with unnecessary and burdensome processes that would result in delays . . . and decreased competition for federal government contracts,” the White House said. “Rolling back this rule will also help to reduce costs in federal procurement.”

“The Administration is committed to reducing onerous regulatory burdens on America’s businesses and using existing authorities to continue enforcing the nation’s workplace laws. If these bills were presented to the president in their current form, his advisors would recommend that he sign them into law,” the statement said.

And if Trump signs off on the resolution as expected, contractors might not see anything like the blacklisting rule anytime soon. When Congress uses the CRA to void a regulation, it prevents the agency from issuing the same rule or similar rules until Congress passes a new law permitting it to do so.

About Kate McGovern Tornone:
Kate Tornone is an editor at BLR. She has almost 10 years’ experience covering a variety of employment law topics. Before coming to BLR, she served as editor of Thompson Information Services’ ADA and FLSA publications, coauthored the Guide to the ADA Amendments Act, and published several special reports. She graduated from The Catholic University of America in Washington, D.C., with a bachelor of arts in media studies. Kate can be reached at ktornone@blr.com.
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