A considerable change

President Obama continually has strived to fulfill his many promises to labor organizations. Only days after his inauguration, Obama issued three employee-friendly Executive Orders, including Executive Order 13496, also known as the "Notification of Employee Rights Under Federal Labor Laws." The order requires all nonexempt federal government contractors and subcontractors to post a lengthy new notice advising employees of their rights under the National Labor Relations Act (NLRA) and to include the obligation to post this notice in the terms of their federal contracts, subcontracts and purchase orders.

In accordance with Obama's pro-labor agenda, the U.S. Department of Labor (DOL) issued its final regulations implementing the order. The regulations went into effect June 21 and apply to any covered government contract, subcontract or purchase order solicited or renewed after that date. Most important, the regulations make clear the Obama administration intends to encourage employee unionization.

Although DOL's final regulations are lengthy and can be daunting to review, there are key provisions to keep in mind when doing so.

Affected employers

All nonexempt federal government contractors and subcontractors must comply with the Executive Order and its regulations. Accordingly, all covered employers must post the requisite notice. Additionally, subject to certain limited exceptions, the notice-posting requirements must be included in all federal contracts solicited after June 21 that exceed $100,000 and all subcontracts necessary to the performance of federal contracts that exceed $10,000.

Content of the notice

In addition to issuing regulations, DOL has created an official notice containing all the information the Executive Order requires. The notice contains a general list of employee rights under NLRA to, among other things, organize and join unions, discuss employment terms and conditions with co-workers, and engage in collective action to improve work conditions.

Significantly, the notice also contains a statement of employees' rights not to support or join a union and be free from unlawful threats by union representatives and supporters.

Posting the notice

Covered contractors and subcontractors must display the notice "in conspicuous places in and about the contractor's plants and offices" where it can be readily seen by employees engaged in activities related to the performance of the contract. This includes, at a minimum, all places where notices to employees are customarily posted.

DOL has explained "activities related to the performance of the contract" commonly include incidental and back office functions such as building security, transportation, human resources, financial and accounting duties, and related office and clerical tasks.

If you customarily provide information to employees electronically, you also must post the notice electronically (in addition to physically posting it). The electronic posting requirement is satisfied by "displaying prominently" a link to DOL's website containing the notice's full text. The link must read: "Important Notice about Employee Rights to Organize and Bargain Collectively with Their Employers." Further, the physical and electronic notices must be provided in the language spoken by a majority of your work force.

The employee notice clause

Federal contractors and subcontractors must include certain prescribed language in every covered contract, subcontract or purchase order. The requisite language, known as the "employee notice clause," specifically commits a contractor or subcontractor to post the notice and comply with its requirements. The prescribed language need not be quoted verbatim in the document and can be incorporated by reference to "29 CFR Part 471, Appendix A to Subpart A."

Enforcement procedures

The director of DOL's Office of Federal Contract Compliance Programs (OFCCP) is authorized to conduct compliance evaluations to determine whether employers are complying with the order's requirements. Employees also may file complaints alleging their employers have failed to post the notice or include the employee notice clause in contracts, subcontracts or purchase orders.

If a complaint investigation or compliance evaluation reveals a violation, the OFCCP director will attempt to resolve the matter through conciliation in which the contractor or subcontractor will be required to agree to correct the violation and commit, in writing, not to repeat the violation. If conciliation efforts fail, the matter will be referred to the director of DOL's Office of Labor-Management Standards (OLMS) for enforcement consideration and possible referral to the solicitor of labor to commence administrative enforcement proceedings.

Sanctions and penalties

The regulations authorize the OLMS director to tell a contracting agency to cancel, terminate or suspend any contract, either absolutely or conditioned upon future compliance, for violating the order's requirements. But before doing so, the contracting agency will be given an opportunity to object to the sanction based on the importance of completing the contract to the agency's mission.

In cases of serious violations, the director may issue an order of debarment and include the contractor's name on a published list of contractors who have failed to comply with the Executive Order and, as a result, have been declared ineligible for future contracts. DOL has indicated contractors and subcontractors will not face severe sanctions for inadvertent violations.

Best practices

Although the Executive Order and its regulations represent the first time you will be required to notify employees of their substantive rights under NLRA, its requirements do not appear to be overly burdensome (particularly in light of state and federal notice posting requirements imposed on all employers). However, if you do business with the federal government, you must ensure your contracts, subcontracts and purchase orders comply with the new order and regulations and that the requisite notice is properly posted.

Perhaps the most meaningful effect of the new order and its regulations will be to encourage employees to more closely scrutinize employer practices or engage in other protected activities. Accordingly, consider reviewing your employment policies to ensure they adhere to current labor laws. Be particularly careful to review any employment policies and work rules that regulate employees' communications with one another, such as rules relating to the use of your company's electronic communication systems.

And as with all labor and employment laws, supervisors and managers should be briefed on the posting requirement, types of questions that may result from the posting, and how to lawfully respond to such questions. Most important, stay informed of this and other changes to labor and employment laws because, as the Obama administration has made clear, change is here to stay.

Jason C. Kim is a partner and Gray I. Mateo-Harris is an associate in the labor and employment practice group of the Chicago-based law firm Neal, Gerber & Eisenberg LLP.