*Associate Ryan Harrigan also contributed to this post
Earlier this week, on March 6, 2017, the Senate passed a joint resolution disapproving the Fair Pay and Safe Workplaces Final Rule (the “Rule”), which mandated contractor reporting of labor law violations, and had earned the title of the “blacklisting” rule—as those disclosures could negatively impact a company’s ability to obtain U.S. government contracts. H.R.J. Res. 37, 115th Cong. (2017). The joint resolution was passed by the House of Representatives in early February, and now awaits President Trump’s signature, which would invalidate the Rule entirely.
The Rule has been controversial since it was promulgated to implement President Obama’s Executive Order (E.O.) 13673 in July 2014. Under the Rule, companies seeking a Federal contract greater than $500,000 were required to disclose violations, including unadjudicated violations, of 14 Federal and state labor laws. The contracting officer would then consider the disclosures as part of the company’s “responsibility determination,” and depending on the severity of violations, could withhold award to a prospective contractor. Other provisions of the Rule instituted new paycheck transparency protections and limited the use of pre-dispute arbitration clauses in employment agreements on covered Federal contracts. While the Rule was expected to go into effect last year, on October 24, 2016, a U.S. District Court in Texas issued a nationwide injunction staving off the majority of the Rule until its ramifications could be further addressed.1
It is expected that President Trump will sign the joint resolution. Nullification of the rule will come as a relief to many Federal contractors, as industry has been anxiously awaiting a final ruling from the Federal district court and was troubled by the reporting requirements that included the reporting of unadjudicated labor violations. In contrast, the development is a disappointment to those who, like President Obama’s administration, thought that the reporting requirements might provide an incentive for companies to place greater emphasis on compliance with the underlying labor and employment laws.
Notably, the long-term impact of the invalidation through the Congressional Review Act (CRA), 5 U.S.C. §§ 801 et seq., on future regulations remains unclear. As stated in our previous post, if a joint resolution disapproving a regulation is passed under the CRA, federal agencies are prohibited from reissuing rules that are in “substantially the same form” in the future, absent explicit authorization from Congress. However, the CRA has only been used once prior to the current Congress. Accordingly, we do not have a standard for how similar a future rule (presumably issued by a Democratic administration) would have to be to fall within the CRA’s limitations.
For more information about the E.O., the Rule, or the joint resolution, please contact one of the Hogan Lovells attorneys listed in this post or any other Hogan Lovells attorney with whom you work.
1 Associated Builders & Contractors of Se. Texas v. Rung, No. 1:16-CV-425, 2016 WL 8188655 (E.D. Tex. Oct. 24, 2016) (order granting preliminary injunction).