Contractors Group Files Suit Against 'Fair Pay and Safe Workplaces'

Labor Department regulation blasted for “blacklisting” companies based on allegations; agencies called “not ready.”

President Obama’s long-controversial Fair Pay and Safe Workplaces rule—set to take effect Oct. 25—is being challenged in district court by the Associated Builders and Contractors, one of several contractors associations that oppose the rule as costly and burdensome.

In a suit filed Oct. 7 in the U.S. District Court for the Eastern District of Texas, the associated builders and its Southeast Texas Chapter argued that the Labor Department rule finalized in August and intended to protect low-wage workers from abuses such as wage theft is a “blacklisting” rule that forces contractors to report “alleged violations,” thus harming their prospects for winning government work. 

“The Obama administration has exceeded its authority by forcing government contractors and prospective government contractors to publicly disclose mere accusations that they have violated labor and employment laws,” said Associated Builders and Contractors Vice President of Regulatory, Labor and State Affairs Ben Brubeck. “ABC supports policies that provide value to taxpayers by ensuring that federal contractors compete on a level playing field, but this rule will require contractors to report alleged violations that have not been fully adjudicated and are being contested, which violates their first amendment and due process rights and is likely to harm fair and open competition in the federal marketplace.” 

The costs of compliance “will discourage qualified firms, particularly small businesses, from pursuing federal contracts, and will drive up costs to taxpayers,” said Brubeck, whose colleagues met with Office of Management and Budget staff in June to protest the coming rule. “In addition, it will cause litigation and delays that will disrupt the federal procurement process for critical goods and services purchased by the government.”  

The group spoke out against the proposed rule as far back as October 2014 at a “listening session” hosted by Labor Secretary Thomas Perez.  The administration did soften the rule in response to complaints, phasing in required disclosure of past violations of state laws, for example, and relieving the reporting burden on prime contractors by allowing subcontractors to negotiate directly with the Labor Department.

The lawsuit was denounced by the workers’ rights group Good Jobs Nation, which has filed 30 back-pay and damages complaints against federal agencies using contract workers in areas such as food services. “It’s criminal that federal contractors are attempting to undermine the president’s legal authority to deny taxpayer dollars to companies that routinely break U.S. laws,” said Joseph Geevarghese, director of the group and an attorney. “Federal contractors filed this lawsuit simply to escape accountability for violating the legal rights of low-wage workers.”

Others in the contracting industry have taken a different approach to the rule they also have long opposed. Seven major groups on Sept. 27 signed a letter to the General Services Administration urging the administration to delay the Fair Pay and Safe Workplaces rule, warning that “government agencies are not ready.”

The seven groups were: the Professional Services Council, the National Defense Industrial Association, the Council of Defense and Space Industry Associations, the IT Alliance for Public Sector, the Aerospace Industries Association, the American Council of Engineering Companies and the U.S. Chamber of Commerce.

The alliance “supports balanced policy efforts to ensure that only responsible contractors receive federal contracts,” the letter stated. However, “the government is not prepared to implement this rule; for example, the new portal for reporting ‘violations’ has neither been designed nor established.”

The major contractors also raised concerns that the rule is being implemented before final passage of the 2017 National Defense Authorization Act, current House and Senate versions of which would limit the application of the rule at the Defense Department. The Federal Acquisition Regulatory Council “should have delayed issuing this final rule at least until Congress either completed these actions or adjourned,” the letter said.