Labor to Require Government Contractors and Subcontractors to Remind Employees of Their Right to Form Unions
On August 3, 2009, the Department of Labor issued a Proposed Rule to implement Executive Order 13496, which President Obama signed on January 30, 2009. The Proposed Rule requires Government contractors and subcontractors to inform their employees of their rights to form unions and collectively bargain pursuant to the National Labor Relations Act.
While the Proposed Rule does not make substantive changes to federal labor laws, it does impose additional administrative obligations on Government contractors and subcontractors in order to emphasize the President’s national labor policy objectives. These administrative obligations will be reflected in a new Federal Acquisition Regulation (FAR) contract clause that will apply to virtually every Government contractor and subcontractor at any tier. Specifically, the Proposed Rule requires that: (1) Government contractors and subcontractors notify their employees of their rights to organize and collectively bargain by requiring contractors and subcontractors to post a specific notice entitled “Rights of Employees under the National Labor Relations Act”; and, (2) Government contractors and subcontractors must flow the FAR clause down to their subcontractors at every tier in full text. The notice must be of the size, form and substance prescribed by the Department of Labor, and must be posted in conspicuous places in plants and offices where employees covered by the National Labor Relations Act engage in activities relating to performance of the contract, including places where notices to employees are customarily posted both physically and electronically.
These new requirements should be relatively easy for many companies to manage, particularly Government contractors that are accustomed to dealing with the myriad of unique, non-commercial, non-performance-related, contract requirements normally imposed by the Government on its contractors. However, for companies that primarily operate in the commercial marketplace, especially larger commercial oriented companies, the new requirements could be rather onerous to implement.
In particular, the following issues deserve special consideration by Government contractors and subcontractors:
Limited Exceptions. The new FAR clause must be included in virtually every Government prime contract exceeding the micro-purchase threshold of $100,000. There are no exclusions for small businesses, commercial item suppliers or commercial off the shelf contracts or subcontracts. Moreover, there is no dollar threshold exemption for subcontractors. Therefore, every subcontract under a covered prime contract will contain the FAR clause, even if the subcontract is below $100,000.
Unique Definition of Subcontract.The definition of what constitutes a “subcontract” and triggers a contractor’s obligation to flow clauses down can be complicated even under the current FAR definition. However, the Proposed Rule further complicates this issue by providing a unique definition of “subcontract.” Currently, under the FAR, a subcontract “means any contract … entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract. It includes but is not limited to purchase orders, and changes and modifications to purchase orders.” (emphasis added) However, under the Proposed Rule, a subcontract is defined as “any agreement or arrangement between a contractor and any person (in which the parties do not stand in the relationship of an employer and an employee): (1) For the purchase, sale or use of personal property or non-personal services that, in whole or in part, is necessary to the performance ofany one or more contracts; or (2) Under which any portion of the contractor’s obligation under any one or more contracts is performed, undertaken or assumed.” The extent to which these definitions overlap or are inconsistent might differ significantly depending on the specific circumstances. However, it seems clear that the second part of the new definition aligns with the current FAR definition, making the first part of the new definition supplemental in nature. Therefore, it will be important for Government contractors and subcontractors to review their current policies for ascertaining which suppliers, service providers, consultants, etc., might constitute “subcontractors” and make appropriate adjustments to ensure full compliance when the Proposed Rule is finally implemented.
No Incorporation by Reference.The Proposed Rule requires that the clause be placed in prime contracts and flowed down to subcontractors in full text. Thus, pre-printed forms and systems for issuing subcontracts will need to be updated to include the full text of the new FAR clause. This requirement could be challenging for prime contractors using electronic commerce applications that normally incorporate terms by reference. Moreover, given what is potentially a broader definition of a subcontract, contractors and subcontractors may need to restrict purchases that were previously made by streamlined methods such as by credit card in order to ensure the full text of the clause is included in their purchase orders.
New Administrative Remedies. Enforcement with the new FAR clause will not be handled under the FAR contract disputes process. Rather, as with other labor related matters, the Department of Labor maintains responsibility for directly ensuring compliance with the new FAR clause, and may conduct compliance evaluations directly with any contractor holding a covered contract. The new regulations contemplate a process for receipt by the Department of Labor of employee complaints for non-compliance, investigation, and securing compliance by conciliation efforts. In addition, the Department of Labor can institute enforcement proceedings directly against a non-compliant contractor, cause a prime contractor to take action against its non-compliant subcontractors, direct contracting officers to cancel or terminate contracts for non-compliance, and ultimately gives the Department of Labor the authority to suspend or debar contractors and subcontractors subject to administrative proceedings.
Comments concerning the proposed rule are due on or before September 2, 2009. If you have questions or concerns regarding how the Proposed Rule may impact your business, or in the event you wish to prepare comments for submission in response to the Proposed Rule, you may contact Jeffrey S. Robinette of the Robinette Group PLC at 703.887.2036 or at email@example.com for assistance.