Capitol Hill

The regulatory onslaught against the business community by the Obama administration continues. The latest installment in what is expected to be a virtually never-ending array of new regulations before the end of President Obama's term in office is a so-called "blacklisting" rule that could have substantial consequences for NRCA members who conduct business with the federal government.

The order

In May, the Federal Acquisition Regulatory Council issued a Notice of Proposed Rulemaking that implements an executive order issued by President Obama in 2014 entitled "Fair Pay and Safe Workplaces." When the order was first issued, the president said it was intended to "crack down on federal contractors who put workers' safety and hard-earned pay at risk."

Although this certainly is a laudable goal, the reality is the new regulation likely will increase costs and provide new risks for employers.

The proposed regulation, which must undergo the standard notice and comment process before being finalized, will impose multiple new obligations on many government contractors and subcontractors. Many of the new requirements are unprecedented in their scope and, according to some critics of the proposal, may exceed the president's statutory authority as granted by Congress.

The burdens

As proposed, companies bidding on contracts worth more than $500,000 would have to disclose violations of 14 federal labor laws and executive orders that have occurred within the past three years. The relevant time period is the three years preceding the date of the offer, contract bid or proposal. The covered federal laws include the Occupational Safety and Health Act, National Labor Relations Act, Davis-Bacon Act and several others.

Additionally, the Department of Labor will publish a list of state labor laws that will be covered under the regulation once it is finalized, as early as sometime in 2016.

The regulation also requires contractors holding contracts worth more than $500,000 to report detailed information to their employees during each pay period, such as hours worked, overtime hours, pay levels, and any additions to or subtractions from pay.

Prime contractors also must incorporate this requirement into qualifying subcontracts worth more than $500,000. Employers will be required to notify workers in writing whether they are being treated as an independent contractor rather than an employee.

Although these actions may appear rather straightforward and many employers already provide such information to employees, having the requirements written into federal regulations could provide new opportunities for litigation against employers.

To enforce the regulation, new federal compliance officers will be hired to determine whether violations of the laws will disqualify a contractor from receiving a contract. Contractors and subcontractors will be required to disclose such violations to the government every six months. Contractors also will be required to certify subcontractors meet the newly established standards and are "a responsible source that has a satisfactory record of integrity and business ethics."

Additionally, for federal contracts and subcontracts worth more than $1 million, contractors will be prohibited from arbitrating claims under Title VII of the Civil Rights Act of 1964, as well as sexual assault and sexual harassment claims, unless the complaining employee agrees to arbitration. Again, the new regulation is ripe for providing plaintiffs' attorneys with new opportunities for lawsuits aimed at employers.

The proposed regulation would enable federal agencies to reject a bid or cancel an existing government contract and initiate suspension and debarment proceedings based on violations a contractor may have already resolved or that have not been fully adjudicated.

Consequences

The new requirements likely would result in much uncertainty for contractors and the government during the procurement process. Many employers, particularly small businesses, may incur new staffing and legal expenses to identify and confirm potential subcontractor violations that may be covered in the new requirements.

In some critics' views, the proposed regulation represents a radical change in federal contracting practices that will substantially increase costs to taxpayers, contractors and subcontractors. Moreover, the process of enforcing this complex regulation could result in significant delays in government procurement decisions.

As with so many other recently proposed rules, NRCA will review the regulation and submit comments reflecting the views and concerns of NRCA members.

Duane L. Musser is NRCA's vice president of government relations.