General Publications March 28, 2017

“'Blacklisting' Rule Rejection May Begin Pro-Employer Trend,” Law360, March 28, 2017.

Extracted from Law360

With all of the recent focus on immigration, health care and Russia, the Trump administration has not yet focused much attention on employment issues. When on March 27, 2017, the president signed a congressional resolution disapproving the regulations implementing President Obama’s so-called “blacklisting executive order,” that trend changed, and it may signal a move by the administration toward the pro-employer policies that businesses have been anticipating since Election Day. 

History of the Executive Order 

On July 31, 2014, President Obama signed Executive Order 13673, titled the “Fair Pay and Safe Workplaces” executive order. The EO required (1) prospective federal contractors to disclose prior labor law violations for federal agencies to consider when awarding contracts; (2) federal contractors and subcontractors to provide each employee performing work under the contract with a document each pay period indicating the employee’s hours worked, overtime hours, pay and any additions or deductions from pay (the “paycheck transparency requirement”); (3) federal contractors to provide, for any individual performing work under a federal contract as an independent contractor, documentation to the individual indicating that status; and (4) that contractors on contracts where the estimated value of the supplies acquired and services required exceeds $1 million agree not to require any employees or independent contractors to enter into a pre-dispute arbitration agreement that covers claims arising under Title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment. 

The EO — commonly referred to as the “blacklisting order” — has been criticized by Republican lawmakers, business groups and employers for imposing additional and unnecessary financial burdens on covered government contractors. The reporting requirements, in particular, have been a source of significant opposition. 

On Aug. 25, 2016, the Federal Acquisition Regulatory Council published its final rule implementing the EO.[1] On the same day, the U.S. Department of Labor also announced its own guidance on implementing the EO.[2] The rule was set to go into effect on Oct. 25, 2016. 

On Oct. 7, 2016, several business groups filed a lawsuit in the U.S. District Court for the Eastern District of Texas and asked the court to enter a preliminary injunction halting implementation of the regulations. The court issued a preliminary injunction on Oct. 24, 2016, enjoining the implementation of “any portion of the FAR Rule or DOL Guidance relating to the new reporting and disclosure requirements regarding labor law violations as described in Executive Order 13673 and implemented in the FAR Rule and DOL Guidance,” as well as the implementation of “the restriction on arbitration agreements.”[3] 

The court found that the public disclosure and disqualification requirements directly conflicted with existing statutes that already specified debarment procedures and also violated the First Amendment and the due process rights of federal contractors. The court further held that the pre-dispute arbitration prohibition conflicted with the Federal Arbitration Act. The court did not, however, enjoin the implementation of the paycheck transparency requirements or the independent contractor notification requirement. These provisions of the EO and the implementing regulations became effective on Jan. 1, 2017. 

The Current Legislative Action 

In late January and early February 2017, the Senate and the House of Representatives both passed a joint resolution of disapproval under the Congressional Review Act to block implementation of the FAR rule. The CRA is an oversight tool that permits Congress to repeal or prevent regulations issued under an executive order from going into effect. Unlike the preliminary injunction issued by the Eastern District of Texas — which only invalidated certain parts of the implementing regulations — the congressional resolution disapproved the FAR rule in its entirety. President Donald Trump signed the joint disapproval resolution into law on Monday. 

To date, the underlying EO remains in place, as does the DOL guidance implementing the EO. The president has the authority to rescind the EO, and the DOL could withdraw the guidance, but neither has happened yet. As a practical matter, however, both are unlikely to be enforced by the Trump administration. Moreover, the CRA precludes any future attempt to promulgate regulations “substantially in the same form” as the rejected rule unless specifically authorized by Congress. 

Impact on Employers 

The disapproval resolution’s short-term, practical impact on employers will be relatively small. Given that the most onerous and controversial elements of the EO were already on hold due to court intervention, the resolution’s most concrete effect is to eliminate the paycheck transparency and independent contractor notification requirements. The resolution also moots the need for the court that enjoined part of the implementing regulations to continue proceedings to determine whether to make its injunction permanent. Because the CRA prohibits the implementation of substantially similar regulations without congressional approval, the resolution could also prove to be a roadblock to efforts by future Democratic administrations to implement similar requirements on federal contractors. 

Looking more broadly, though, the resolution may be an initial step by the current administration and the Republican-controlled Congress to dismantle many of the employment-related requirements that the Obama administration placed on federal contractors, including heightened minimum wage and paid sick leave requirements. In the face of his administration’s inability to pass broader employment legislation through a Republican-controlled Congress, President Obama relied on executive orders to impose his employment agenda on federal contractors. The full extent to which the Trump administration will back away from these requirements remains to be seen, but Trump’s signature on this CRA resolution should give contractors hope of a more favorable regulatory environment, at least for the remainder of the current administration. 

The resolution may also indicate the Trump administration’s overall direction on employment issues. Trump’s campaign-trail promises to support American workers have stood in sharp contrast to the administration’s overall pro-business bent, as evidenced in the employment arena by Trump’s initial pick for secretary of labor, now former Hardee’s and Carl’s Jr. CEO Andrew Puzder. Much uncertainty remains regarding how the Trump administration — which is still without a secretary of labor — will address a number of outstanding and controversial rules created by the Obama administration. These include the DOL’s overtime rule that essentially doubled the minimum salary required for most of the white collar exemptions, as well as the DOL’s fiduciary rule changing the rules that govern broker-dealers, retirement investment advisers and others, both of which remain in limbo. 

We are also waiting for the current administration to weigh in on a number of other controversial issues that were a focus for the Obama administration, such as expanding the definition of joint employment in a number of different contexts, attacking the enforceability of class action waivers in arbitration provisions and expanding LGBT rights in the workplace in the absence of congressional action. 

While only time will tell where the Trump administration will land on these important issues for employers and workers alike, it may very well be that President Trump’s signature on the current disapproval resolution represents the first in a collection of pro-employer actions yet to come. 

—By Brett Coburn and Anna Saraie, Alston & Bird LLP 

Brett Coburn is a partner and Anna Saraie is an associate in Alston & Bird's labor and employment group in Atlanta. 

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice. 

[1] See Federal Acquisition Regulation, “Fair Pay and Safe Workplaces,” 81 Fed. Reg. 58562 (Aug. 25, 2016). 

[2] See Guidance for Executive Order 13673, “Fair Pay and Safe Workplaces,” 81 Fed. Reg. 58654 (Aug. 25, 2016). 

[3] Associated Builders & Contrs. of Se. Tex. v. Rung, No. 1:16-cv-00425, 2016 U.S. Dist. LEXIS 155232 (E.D. Tex. Oct. 24, 2016).
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