Federal contractors with labor violations will soon find it harder to get contracts due to the final version of a rule being submitted Thursday.
The Fair Pay and Safe Workplaces rule is designed to limit labor violations committed by federal contractors. It requires contractors to disclose their violations before they will be granted or allowed to renew a contract. The new rule applies specifically to 14 different laws that govern workplace safety and worker rights.
President Barack Obama first proposed the rule change July 2014 through an executive order. The Department of Labor (DOL) and the Federal Acquisition Regulatory Council soon after began drafting the proposed regulation. They released the final rules August 25 after an extensive review process.
What Contractors Should Be Doing Now
Federal contractors face a limited time frame for when they will be legally required to comply. The new rule will go into effect Oct. 25 for projects that cost over $50 million. Contractors that have smaller projects will have longer until they have to comply. Crowell & Moring Partner Steve McBrady warns contractors should already be preparing for the new rule.
“Some companies have, for several months, been trying to implement a system so that they can be ready to comply,” McBrady told InsideSources. “And other companies who have not done so yet should look at the final rule as a siren in the night to begin implementing a robust client program.”
What Changed Since The Proposal
Federal regulations often go through an extensive drafting process before they get implemented. Federal officials use the time to fix any issues within the proposed rule while receiving comments and addressing concerns from interested parties. McBrady notes the final rule included very few changes from the proposal.
“The first is that subcontractors will now report violations directly to the Department of Labor.” McBrady noted. “That point was addressed in the changes. Another critical area, that was only partially addressed in the changes, is the issue of the low dollar threshold.”
Federal regulators raised the dollar threshold so low-cost projects don’t face a huge burden. Contractors with projects costing less than $500,000 will not have to comply with the disclosure requirements. Jackson Lewis Principal Leslie Stout-Tabackman adds that most of the changes involved clarifying language within the rule.
Challenges Going Forward
The new contracting rule is expansive which means there are still some loose ends. Federal regulators and contractors will have to watch the changes the rules put forth to make sure it does what its supposed to. The rule could pose minor unexpected challenges but it could also create huge problems as well.
“I think there is reason to be wary as this moves forward,” Stout-Tabackman told InsideSources. “One of the biggest concerns that many within the contracting community share is the ability of the Department of labor, contracting officers and labor compliance advisers to handle the load of data that will be coming their way.”
McBrady adds that some sections of the rule lack necessary details that will have to be fleshed out when the rule is being implemented.
Regulatory Abuse And Misinterpretations
Federal regulations are often prone to misinterpretation and sometimes even abuse. New regulations that are vague are even more at risk because it grants federal regulators a lot of liberty in how they choose to interpret it. Stout-Tabackman notes the contracting rule includes a lot of problematic vague language.
“I think its both vague and very subjective,” Stout-Tabackman also noted. “Imagine a situation, which I think could occur, where you got one contracting entity that has multiple contracts reporting, potentially, the same violation but having different outcomes.”
The Likelihood Of Lawsuits
Industry groups and some lawmakers have not been happy with the new rule. Throughout its drafting process they have fought the rule but only managed to accomplish very few changes. They could turn to the courts as another avenue for trying to defeat the rule.
“I think time will tell,” Stout-Tabackman stated. “We’ll see very shortly whether there is litigation filed. There is reason to believe that there will be litigation filed.”
Labor Unions And Other Supporters
Labor unions argue the new rule will help promote worker safety and fair compensation. They argue federal contractors are often allowed to ignore labor law because the rules governing their conduct are not strict enough. The AFL-CIO, the Teamsters and Communications Workers of America among others have all noted support for the new rule.
The Economic Policy Institute (EPI) is among several policy centers that have spoken positively about the new rule. EPI notes the rule will add accountability to the federal contracting sector.
How To Measure Success
Federal regulations must have a clear process for determining if a new rule is doing what its supposed to. By including measurable goals regulators can determine if the rule was successful and also if its still necessary. Mercatus Center Research Fellow Sherzod Abdukadirov warns the contracting rule doesn’t define its goals well enough.
“The benefits and risks are mostly these vague and generic terms,” Abdukadirov told InsideSources. “But there’s absolutely no specific numbers in terms of what does the situation look like now and what kind of improvements are the agencies expecting to see once this rule is implemented.”
An Upcoming Tidal Wave Of Information
The new contractor rule will require contractors to report labor violations through new procedures. It will also require them to analyze the information and package it all in new ways. McBrady notes concern federal regulators don’t have the resources to handle the upcoming surge of new information.
“You’re not reporting anything the government doesn’t already know,” McBrady said. “What you’re doing is requiring companies, oftentimes big companies, to compile in one place an analysis of all sorts of data and provide it when they submit a bid to the federal government for a contract.”
Problems Of Redundancy
The new rule builds upon layers of older regulations that have been implemented over the decades. McBrady contests that many of the changes the new rule implements don’t actually improve anything because there were already similar regulations in place.
“Each of these labor laws have their own punishment in the statute and often times the government has access to this information about violations of these labor laws,” McBrady also noted. “So what you’re doing is requiring duplicative reporting in the federal contracting process.”