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Opinion: USDA’s New Proposed Labor Regs for Contractors Go Way Too Far  

The draft rules are meant to prevent companies with labor law violations from doing business with the government, but they are excessive, poorly conceived and probably illegal.   

It is always a bit jarring when ideas that have been tried and failed multiple times in the past are yet again put forward as if their weaknesses had somehow disappeared into the ether. But political posturing and “message” policy is a longstanding, bipartisan reality of government. Nonetheless, when it happens, it’s always important to step back and remember why the idea was a bad one to begin with. 

Such is the case with the Agriculture Department’s recently proposed labor law regulations, which might otherwise fairly be named “Blacklisting Redux.” According to USDA, it wants to ensure that the contractors it does business with have solid records of compliance with more than a dozen labor and labor-related statutes. To achieve that, the rule would require every contractor on every bid to certify their compliance with every statute, list every violation they have ever had (going back an unlimited number of years), and define what was done to mitigate the violation (fines paid, processes changed, etc.). 

On the surface, this seems eminently reasonable. After all, we are talking about stewardship of the public dollar and no one would disagree with the notion that only law-abiding companies should be recipients of federal funds. But beneath the surface, the proposed rule is a disaster. It is poorly conceived, places inordinate responsibility on government employees to make subjective decisions on sometimes complex matters of law, is duplicative with existing compliance processes, and is likely illegal.  

First, a quick history. The first “blacklisting” rule was one of the last regulatory acts of the Clinton administration. It was the focus of a super-charged internal debate in which I was a participant. Although originally catalyzed by a campaign promise, there was no disagreement with the intent of the rule (which covered much more than labor law). But its practical impacts and execution challenges had not been at all thought out. There was no clear, data-driven, objective process by which contracting officers could make the required “responsibility” decisions properly and fairly. Nonetheless, the rule was issued, and was then promptly withdrawn by the George W. Bush administration.  

Essentially the same rule was then proposed during the Obama administration. It was thrown out by the courts and nullified by Congress via the Congressional Review Act.  And now, in 2022, an almost identical rule is again before us, this time coming from a single agency and applicable only to that agency’s contracts. 

So why, if we all agree that we have to guard against the government doing business with companies that have a pattern of violating labor (or other) laws, is this such a big deal?  Let me offer four reasons why this was a really bad idea in the 1990s, in the 2010s, and still today. 

First, the proposed rule inappropriately places on contracting officers the responsibility for making consequential legal judgments for which they are not, cannot and should not be expected to be prepared. As was true with its predecessors, nothing in the rule provides any kind of objective standard by which a contracting officer can assess whether a pattern of violation exists, or what the relative severity of “violations” of various laws might be.  

This is particularly important because the laws covered by the proposed rule are extremely complex and unintended administrative errors are routine and often even made with the tacit or explicit approval of a contracting officer, or even the Labor Department. Yet each of those administrative errors is a technical violation of the law and would be reportable under this proposed rule. Moreover, one honest mistake in, for instance, a prevailing wage determination, could impact a large number of employees—and each of those employees represent an individual violation. As a result, without a clear and objective standard that defines a “pattern” of abuse, particularly given the complexities of the relevant laws, companies could well be unreasonably disqualified. 

Second and related, contrary to what its advocates say, the rule really is a blacklist. Imagine you are a contracting officer trying to make that responsibility determination. Before you are three bidders: one with a handful of violations of a given labor law; another with slightly more violations of a different law; and a third with even more, but again, of a different law. What is a contracting officer to do? Without a clear and objective process, he or she simply doesn’t have the time, training or resources to determine if one company’s violations were more serious than the others, which company's record is objectively “worse,” which violations were administrative errors and which were intentional, or how to weigh their relative recency or what remedial actions were taken. As a result, the contracting officer will have little choice but to default to the path with minimal optical risk, regardless of whether it is the right or fair decision. 

Third, the rule ignores the fact that we already have a robust process for determining whether a company is ethical enough to be eligible for government contracts. It is called “suspension and debarment.” The review is conducted by experts, founded in evidentiary procedures, and specifically intended to weed out the really bad actors. Some have argued that the process is not used often enough, even though the rate of suspensions and debarments has actually grown in recent years. But the answer to that concern is to address it head on, not substitute a bad imitation elsewhere.  

Finally, it’s not at all clear that USDA has the right to impose its own labor regulations in areas otherwise governed by the Labor Department. Not only is it senseless to have multiple sets of compliance regimes; Labor is the department charged by statute with the regulatory responsibility over labor law compliance and it has its own extensive regime of remedial actions and penalties it can impose, all the way up to debarring a company from future federal contracts Why USDA has seen fit to step out on its own–or be thrust into the forefront–is a mystery.  

If there is real data that confirms that the government is routinely doing business with genuinely unethical actors with established patterns of violations of law, then we ought to look at our current suspension and debarment processes to figure out why this is the case. But the proposed USDA rule is not the answer. It should be sent out to pasture. For good. 

Stan Soloway is president of Celero Strategies LLC and was deputy undersecretary of Defense during the Clinton administration.