President Obama Signs Four Pro-Labor Executive Orders Impacting Federal Contractors

04/02/2009 / Chris M. Heffelbower

President Obama signed four Executive Orders that may have a significant impact on the rights of employees of federal contractors, reversing many of the Bush administration policies.

Executive Order 13494: Economy in Government Contracting. This Order makes “unallowable for payment” certain costs by federal contractors associated with anti-unionizing activities. Examples of costs that are unallowable include the costs of certain activities when they are undertaken to persuade employees to exercise or not exercise or concern the manner of exercising the right to organize or bargain collectively, including the costs of preparing and distributing materials, hiring or consulting legal counsel, holding meetings, and planning or conducting activities by managers, supervisors or union representatives during work hours.

However, allowable costs include costs incurred in maintaining satisfactory relations between contractor and its employees, including costs of labor-management committees and employee publications, other than those undertaken to persuade employees to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively.

This Order applies to contracts resulting from solicitations issued on or after the effective date of rules and regulations issued by the Federal Acquisition Council, which will be no later than June 29, 2009.

Executive Order 13495: Non-displacement of Qualified Workers Under Service Contracts. This Order explains that when a service contract expires and a follow-on contract is awarded, the successor contractor often hires the majority of the predecessor’s employees. However, on some occasions a successor contractor hires a new work force, which displaces the predecessor’s employees, causing disruption to the delivery of federal services. President Obama says in the Order, “A carryover work force reduces disruption to the delivery of services during the period of transition between contractors and provides the Federal Government the benefits of an experienced and trained work force that is familiar with the Federal Government’s personnel, facilities, and requirements.”

With that purpose in the mind, the Order requires contractors and subcontractors with service contracts with the federal government to provide a right of first refusal to the predecessor’s employees for jobs for which they are qualified. This requirement applies only to service contracts that succeed a contract for performance of the same or similar services at the same location, and to employees (other than managerial or supervisory employees) employed under the predecessor contract whose employment will be terminated as a result of the award of the successor contract.

The Order will apply to all solicitations issued on or after the date regulations are promulgated for the Order, which will be no later than July 29, 2009.

Executive Order 13496: Notification of Employee Rights under Federal Labor Laws. This Order requires government contractors to post a notice in a “conspicuous” place informing employees of their rights under Federal labor laws during the duration of the federal contract. The Secretary of Labor will determine the specific content of the notice by June 1, 2009. If a government contractor fails to provide the notice once the Secretary issues the content of the notice, the contract may be cancelled, terminated or suspended and the contractor may be declared ineligible for further government contracts.

Executive Order 13502: Use of Project Labor Agreements for Federal Construction Projects. This Order “encourages” executive agencies to consider requiring the use of project labor agreements in connection with large-scale construction projects in order to “promote economy and efficiency in Federal procurement.” The Order applies to “large-scale construction projects,” which means a construction project where the total cost to the Federal Government is $25 million or more. A “project labor agreement” includes a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project.

Significantly, executive agencies may, on a project-by-project basis, require the use of a project labor agreement by a contractor where the agreement will (1) advance the government’s interest in achieving economy and efficiency in Federal procurement, producing labor-management stability, and ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters, and (2) be consistent with law.

However, the Order “encourages” but does not require an executive agency to use a project labor agreement on any construction project. Also, it does not require contractors and subcontractors to enter into a project labor agreement with a particular labor organization.

The Order applies to all solicitations for contracts issued on or after the effective date of the action taken by the Federal Acquisition Regulatory Council to amend regulations to implement this Order, which will be no later than June 8, 2009.

What Your Company Needs to Know: The Obama administration is quickly implementing policies designed to encourage organized labor. If your Company is a federal contractor, your Company will need to be aware of the specific changes indicated in the Executive Orders and regulations that will be issued. Even if your Company is not a federal contractor, your Company should be prepared for changes in the law in the private sector that reflect the Administration’s pro-labor policies. We will keep you updated as these changes occur.