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New Executive Orders Impose Additional Requirements on Federal Contractors

February, 05 2009

On January 30, 2009, President Obama issued three new executive orders affecting federal contractors.  The executive orders make it more difficult for a successor contractor to choose its own workers, require contractors to post notices of employees' right to organize (form or join unions) and make unallowable under certain contracts costs of the contractor devoted to persuading employees to exercise or not excercise their right to organize.

Non-displacement of Qualified Workers under Service Contracts

One of the orders signed by the president requires contractors under the Service Contract Act to offer the right of first refusal to the employees of a predecessor contractor.  The order applies where a successor contractor has bid on and won a contract held by a predecessor and where the services to be provided are the same or similar and at the same location.  Where the order applies, the new contractor cannot post any openings without first offering the job to the employees of the predecessor contractor.  The new rule will apply to subcontractors, as well, but it does not cover management employees. 

The Department of Labor is charged with enforcing the order, and the order requires the DOL and the Federal Acquisition Regulatory Council to issue regulations implementing it with 180 days.  The Executive Order becomes effective when the FAR Council issues its regulations.  A copy of the order is available here.

Disallowance of Costs Related to Persuasion Activities

In an Executive Order entitled "Economy in Government Contracting," the president has disallowed costs of contractors related to persuasion activities.  Under the order, costs related to activities "undertaken to persuade employees to exercise or not to exercise, or concern[ing] the manner of exercising, rights to organize and bargain collectively" are treated as unallowable costs that cannot be reimbursed by the government.  Such activities include preparing printed materials, hiring consultants or attorneys, holding meetings or planning activities conducted during work time.

The FAR Council has 150 days to adopt regulations implementing the new rule.  The rule is effective immediately but applies only to contracts from solicitations made on or after the FAR Council adopts regulations.  The order may be viewed here.

Notice on Employees' Rights under Labor Laws

This Executive Order reverses a Bush era order requiring federal contractors to post notices telling employees that they were not required to join unions to keep their jobs and that they could refuse to pay portions of their dues not related to collective bargaining, contract administration and grievance adjustment.  Instead contractors will be required to post notices with content to be determined by the Department of Labor, which is charged with enforcing the order.  Within 120 days the DOL is to begin rulemaking proceedings to determine the size, form and content of the notice.  The rule will apply to contracts from solicitations on or after the effective date of regulations issued by the DOL.  A copy of the order is available here.

Federal contractors who have questions about their employment obligations under federal and state laws may contact one of our attorneys.

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