As we recently reported, the Federal Acquisition Regulatory (FAR) Council has published a final rule, effective October 25, 2016, implementing the Fair Pay and Safe Workplaces Executive Order (also known as the “blacklisting” Executive Order). Not surprisingly, the final rule – which allows private citizens to report alleged labor violations by federal contractors and requires federal prime contractors and subcontractors under covered procurements (i.e., ones where the estimated value exceeds $500,000) to disclose to the government certain labor violations – has caused much consternation in the government contracts community. Predictably, the final rule and the Executive Order have been met with their first court challenge.
On October 7, 2016, the Associated Builders and Contractors (ABC) filed a lawsuit in the U.S. District Court for the Eastern District of Texas, seeking to “have declared unlawful and set aside” the Executive Order, as implemented by the final rule and Department of Labor (DOL) guidance. According to the complaint – which was filed against the Administrator of the Office of Federal Procurement Policy and the FAR Council, among others – “[t]he Executive Order, FAR Rule, and DOL Guidance are unprecedented in their exercise of authority over matters previously controlled by Congress.” More specifically, the complaint asserts that “the Executive Order, FAR Rule and DOL Guidance compel prospective and existing contractors to publicly disclose and declare whether they have been found to have violated any of fourteen federal labor laws, even though such ‘violations’ have not been finally adjudicated by any court and even if the claimed violations are still being contested or have been settled without a hearing and without any finding of an actual violation of any law.” According to the complaint, “[t]he potential consequences of such compelled speech are severe,” and this particular component of the Executive Order and the final rule “violate the First Amendment to the United States Constitution . . . .” Moreover, according to the complaint, “[t]he new regulatory regime” “violates the due process rights of such government contractors by exposing them to disqualification from government contracts without a hearing for alleged violations of labor and employment laws that have not been finally adjudicated by administrative agencies and the courts, contrary to the intent of Congress and in an arbitrary and capricious manner.” As a final matter, the complaint asserts that “[t]he Executive Order and the FAR Rule also for the first time prohibit government contractors from entering into lawful arbitration agreements with their employees,” “thereby violat[ing] the Federal Arbitration Act . . . .”
In light of the foregoing allegations, ABC has requested that the Court enter a preliminary – and permanent – injunction, “enjoining Defendants from implementing the challenged Executive Order, [Final] Rule, and [DOL] Guidance in all jurisdictions where Plaintiffs’ members and the U.S. government do business, i.e., nationwide.” ABC, of course, also requested “that the Court enter a declaratory judgment as to each of the Counts set forth” in the complaint.
According to the Court’s docket, oral argument on ABC’s request for a preliminary injunction was held on October 22, 2016. As of the publication of this article, it does not appear that the Court has ruled on ABC’s preliminary injunction request. However, the Court’s ruling on ABC’s preliminary injunction request will likely be issued in short order, given that the final rule contains an effective date of October 25, 2016. We will continue to monitor this noteworthy development.