Government Contracts

On October 24, within hours of the scheduled implementation of the final regulations, guidance and contract clauses implementing the Fair Pay and Safe Workplaces Executive Order 13673 (collectively “FPSW”) on October 25, 2016, a federal court in the Eastern District of Texas issued a preliminary injunction blocking nearly all of the FPSW, including provisions that:

• impose new reporting requirements regarding labor law violations on government contractors and subcontractors and
• prohibit pre-dispute arbitration agreements regarding matters arising under Title VII of the Civil Rights Act and torts based on sexual assault or harassment.

The FPSW were discussed in previous client alerts available here (Proposed Regulations) and here (Final Regulations and Guidance).

The Court held that, on the merits, it is substantially likely that the FPSW:

• exceeds the authority delegated by statute to the relevant executive agencies, the Department of Defense (DoD) and the Department of Labor (DoL)
• conflicts with existing labor and employment laws, specifically with respect to the predicate and procedures for debarment
• violates fundamental statutory and constitutional rights by permitting disqualification based on “administrative merits determinations” that are not final and binding
• violates First Amendment rights prohibiting “compelled speech”
• violates the due process rights of contractors “by compelling them to report and defend against non-final agency allegations of labor law violations without being entitled to a hearing at which to contest such allegations”
• violates the Administrative Procedures Act (APA) as an “arbitrary and capricious” action that does not provide an adequate explanation for imposing “drastic new requirements,” a cumbersome process with the potential of “bogging down the already overloaded procurement process,” and the “significant additional costs and expenses on government contractors,” without a demonstration that the FPSW will “promote economy and efficiency in government contracting”
• violates the Federal Arbitration Act

However, the Court held that the Plaintiffs were not likely to prevail in their challenge to the Paycheck Transparency requirements of the FPSW. Contractors, therefore, should be aware of those requirements and continue working towards compliance ahead of the January 1, 2017 implementation date.

Nevertheless, this preliminary injunction is a significant roadblock to FPSW. Proceedings in the case will likely continue. But, at a minimum, it may be sometime before most of the FPSW discussed above are implemented.  

This alert was written by Eric S. Crusius, a lawyer in the Government Contracts practice group at Miles & Stockbridge in the firm’s Tysons Corner, Virginia office.

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