September 2010 BDC Newsletter

Solicitations issued on or after June 21, 2010 will include a requirement for prime contractors and subcontractors to post notices informing their employees of their rights under Federal labor laws. On January 30, 2009, President Barack Obama signed Executive Order 13496, which requires nonexempt Federal departments and agencies to include this new contract clause in government prime contracts. In support of the Executive Order, President Obama noted that when contracting for goods or services, the Federal government "has a proprietary interest in ensuring that those contracts will be performed by contractors whose work will not be interrupted by labor unrest." By informing employees of their rights under Federal labor laws, such as the National Labor Relations Act ("NLRA"), "industrial peace is most easily achieved and workers' productivity is enhanced." [1] On May 20, 2010, the Department of Labor ("DOL") issued regulations implementing Executive Order 13496. This article will summarize the Executive Order and the implementing regulations, explain what you need to do to comply, and the potential sanctions for non-compliance.

Summary of the Executive Order and Implementing Regulations

The Executive Order and implementing regulations require all Federal departments and agencies to include the new contract clause in all Federal government prime contracts and subcontracts, except for: (i) collective bargaining agreements; (ii) contracts for purchases below the simplified acquisition threshold, which is currently $100,000; (iii) contracts resulting from solicitations issued prior to June 21, 2010; (iv) subcontracts of $10,000 or less; and (v) contracts and subcontracts for work performed exclusively outside the territorial United States. Prime contractors and higher-tiered subcontractors must include the clause in all non-exempt subcontracts. Note that FAR Part 12 commercial item prime contracts and subcontracts are not exempt from this requirement. The contract clause can be included in lower-tiered subcontracts either in full text or by a citation to 29 CFR Part 471, Appendix A.

The contract clause required by the new regulations, which will soon become a FAR clause, requires prime contractors and subcontractors to post a notice that informs employees about their rights under the NLRA. Generally, the notice lists employees' rights to organize, form, join or assist a union and bargain collectively with the employer. The notice also includes a list of employer and union actions that are illegal under the NLRA. Further, the notice contains contact information for the National Labor Relations Board, the agency that enforces the NLRA, so that employees can ask questions or file complaints.

How to Comply

Prime contractors and subcontractors must post the employee notice conspicuously in and around their plants and offices so that it is prominent and readily seen by employees. Specifically, the notice must be posted where other notices to employees about the terms and conditions of their employment are posted. The notice must also be placed where employees covered by the NLRA engage in activities relating to the performance of the contract. Employees are engaged in such activities if the employee's duties fulfill a contractual obligation or performs work that is necessary to the performance of the contract. An employee is also engaged in such activities if a portion of the cost of the employee's position is allowable under FAR Part 31 and allocable to the contract as a direct cost, or at least 2% of the cost of the position was allocable to the contract as an indirect cost.

Additionally, if the employer typically posts notices to employees electronically, the employer must electronically post the notice, either externally or internally, by prominently displaying a link to the notice on the Office of Labor-Management Standards ("OLMS") website at www.olms.dol.gov, where the employer customarily places other electronic notices to employees about their jobs. The link to the OLMS website can be no less prominent than other employee notices. The electronic posting requirement is in addition to, and not a substitute for, the manual posting requirement.

If a significant portion of a contractor's or subcontractor's workforce is not proficient in English, employers must post a version of the notice, manually and electronically, in the languages spoken by employees. Employers can obtain copies of the poster translated in different languages from OLMS.

In addition to obtaining the poster from the OLMS website, contractors can obtain the poster from the contracting federal agency or request posters from OLMS or the Office of Federal Contract Compliance ("OFCCP").

Potential Sanctions for Non-Compliance

Employees may file complaints with OLMS or OFCCP about a contractor's failure to comply with these posting requirements or failure to include the new contract clause in lower-tiered subcontracts. Further, the OFCCP may conduct compliance evaluations to assess a contractor's compliance with the clause. The evaluations can be conducted independently or, more likely, in conjunction with the evaluation of the contractor's compliance with other laws and regulations enforced by DOL and audited by OFCCP.

If a contractor has failed to post the notice or include in its subcontracts the new clause, OFCCP will first attempt to obtain the contractor's compliance. If the contractor refuses to comply with the rules, refuses to allow a compliance evaluation or a complaint investigation to be conducted, or refuses to cooperate with the compliance evaluation or complaint investigation (including the failure to provide information), the contractor will be found to be in violation of the rule. If a contractor refuses to comply with the rule, OFCCP will refer the matter to OLMS, who may take enforcement action. Administrative enforcement proceedings will be conducted under the control and supervision of the Solicitor of Labor. Sanctions and penalties for noncompliance include, but are not limited to, suspension or cancellation of the contract or suspension or debarment from federal contracting. Once the contractor has come into compliance with the clause and shown it will comply in the future, any contractor or subcontractor suspended or debarred from federal contracting may be reinstated. Keep in mind, however, that once a contractor has been suspended or debarred, even if the contractor is later reinstated, the contractor will permanently be listed on the Excluded Parties List System (www.epls.gov).

To avoid these serious penalties, it is important for all federal prime contractors and subcontractors to be aware of, and comply with, this new rule.