In a move that likely was welcomed by Federal contractors, earlier this month, the House of Representatives passed a joint resolution under the Congressional Review Act (CRA) disapproving the Fair Pay and Safe Workplaces Final Rule (the Rule) that unless overturned will, among other things, institute new disclosure requirements and standards for reporting labor law violations. The Rule has been particularly controversial from the start – earning the title of the “blacklisting” rule – as it had the potential to prevent Federal contractors from receiving government contracts based on allegations of labor law violations that had not been finally resolved. The Senate is considering a similar resolution to invalidate the Rule, though there are certain procedural hurdles that may prevent it from passing its version of the joint resolution. Importantly, if the joint resolution passes the Senate and is signed into law, it will not only invalidate the previous Rule, but it will inhibit agencies from reissuing rules that are “substantially the same form” in the future.
The Rule was promulgated in accordance with President Obama’s Executive Order (E.O.) 13673. Under the Rule, beginning April 24, 2017, companies seeking a Federal contract greater than $500,000 are required to disclose violations, including pending violations, of 14 Federal and state labor laws. The Rule requires contracting officers to take these disclosures into account in a contractor’s “responsibility determination,” which assesses a prospective contractor’s record of integrity and business ethics. As explained in the Rule, the presence of prior labor violations does not automatically render contractors non-responsible. However, depending on the severity and number of violations, the disclosures could preclude a contractor from being awarded a contract. The Rule also implements “paycheck transparency” provisions that require Federal contractors to inform their employees of the number of hours worked by the employee, overtime calculations, rates of pay, gross pay, and require employee notice of independent contractor classifications.
The Rule was scheduled to take effect in October 2016, but after various business groups filed lawsuits challenging the Rule, a U.S. District Court issued a nationwide preliminary injunction blocking the majority of the Rule.1 The Court found that requiring contractors to publicly disclose allegations of labor law violations, and then requiring them to enter into labor compliance programs to retain Federal contracts, “departed from Congress’s explicit instructions dictating how violations of labor law statutes are to be addressed.”2 Pending a final decision on the merits, the Court enjoined all portions of the E.O. and the Rule that imposed the new reporting requirements. However, the Court did not block the paycheck transparency requirements that went into effect on January 1, 2017.
Under the CRA, Congress has 60 legislative days from the beginning of the session to pass the joint resolution. While the Senate is expected to have the votes to pass the resolution, its passage is not guaranteed because each joint resolution under the CRA is subject to up to 10 hours of debate in the Senate prior to a vote. Given the current political climate, the numerous other joint resolutions passed by the House of Representatives, and the required confirmation hearings, finding the necessary time may be a challenge. Passage will require the Senate to prioritize the resolution.
If the Rule is invalidated by a joint resolution, the labor reporting and pay transparency requirements will effectively be quashed.
For more information about the E.O., the Rule, or the joint resolution, please contact one of the Hogan Lovells attorneys listed in this post or any other Hogan Lovells attorney with whom you work.
*Associates Ryan Harrigan, Ogechi Achuko, and Annie Vanselow also contributed to this post
1Associated Builders & Contractors of Se. Texas v. Rung, No. 1:16-CV-425, 2016 WL 8188655 (E.D. Tex. Oct. 24, 2016) (order granting preliminary injunction).