Contractor Blacklisting Rule Enjoined at the Last Minute

On October 24, 2016, a Texas judge issued a preliminary injunction in a case challenging the so-called contractor blacklisting rules, which were scheduled to take effect today, October 25. The final regulations, which the U.S. Department of Labor issued two months ago to implement Executive Order No. 13673, Fair Pay and Safe Workplaces (EO 13673), would have required companies bidding on certain federal contracts to report past and pending determinations by courts, arbitrators, and federal enforcement agencies regarding violations of 14 federal labor laws, including two other executive orders. The final regulations created a scheme of “serious, willful, repeated, and pervasive” violations that would have threatened contractors’ eligibility for federal contracts, even if those “violations” consisted of no more than preliminary determinations made unilaterally by agency enforcement staff. Starting today, these requirements were set to apply to bids on solicitations valued at $50 million or more and, starting April 25, 2017, to solicitations valued at or above $500,000.

The lawsuit was filed by Texas and national trade associations.  In a 32-page order, Judge Marcia A. Crone, a federal judge for the U.S. District Court for the Eastern District of Texas, concluded that the business groups challenging the regulations “properly demonstrated immediate and ongoing injury to their members if the rule is allowed to take effect.” Judge Crone ruled as follows:

The Executive Order, FAR Rule, and DOL Guidance explicitly conflict with those labor laws that already specify debarment procedures, after full hearings and final adjudications, for contractors who violate the requirements specifically directed at government contracting, i.e., DBA, SCA, Rehabilitation Act, VEVRAA, Executive Order 11246, and Executive Order 13658. It defies reason that Congress gave explicit instructions to suspend or debar government contractors who violate these government-specific labor laws only after a full hearing and final decision, but intended to leave the door open to government agencies to disqualify contractors from individual contract awards without any of these procedural protections. The DOL Guidance does not offer any support for its overbroad claims in this regard.

Further, Judge Crone stated: “The Order and Rule appear to conflict directly with every one of the labor laws they purport to invoke by permitting disqualification based solely upon “administrative merits determinations” that are nothing more than allegations of fault asserted by agency employees and do not constitute final agency findings of any violation at all.”

Judge Crone’s ruling enjoins the final regulation’s prohibition on certain predispute arbitration agreements, but does not affect the final regulation’s pay transparency provisions, which take effect on January 1, 2017.