Obama administration officials are preparing to implement a controversial two-year-old executive order that will give agencies greater ability to deny federal contracts to companies with labor-law violations.
Any requirement Uncle Sam places on federal contractors is far reaching because the government does a lot of business with a lot of businesses. Government contractors employ 26 million workers, about 22 percent of the nation’s workforce, according to a 2013 Senate report.
“Our tax dollars shouldn’t go to companies that violate workplace laws,” President Obama said at the order’s signing ceremony in July 2014. “If a company is going to receive taxpayer money, it should have safe workplaces.”
The 2013 report by Democrats on the Senate Health, Education, Labor and Pensions Committee shows how much tax money has gone to workplace violators. It said “58 of the 200 largest penalties for violations of the health and safety standards, or the largest back pay awards, were assessed against large government contractors …
“Forty-nine federal contractors amassed a startling 1,776 separate enforcement actions in six years,” the report continued. “These 49 companies, which received $81 billion in federal contracts in fiscal year 2012 alone, were assessed a total of $196 million in penalties for neglecting to pay workers earned wages or failing to uphold safe working conditions.”
It has taken more than two years since the signing ceremony to ready regulations needed to implement the order. That included a comment period, which generated lots of reaction pro and con, including objections from Republicans and companies. At the time the order was signed, House Republicans were livid with Obama over executive orders they considered beyond his authority.
Yet, only 30 of 7,924 comments opposed the policy Obama outlined, according to the Labor Department. That seems very low, given the strong opposition of Republicans and companies.
Jeff Belkin, a partner in the Alston and Bird law firm that represents federal contractors, compared the new regulations with a “blacklisting rule” shutting out “many highly capable, ethical and responsible government contractors.”
“The contracting community has legitimate concerns that contracting officers may overreact to reported labor issues and penalize companies with any violation at all — especially when the rule is new,” he said by email. “While placing more information in the decision-makers’ hands is a laudable effort in theory, in practice the fear is that contracting officers will simply write off any [potential contractor] who lists any past labor issue, regardless of the time, location, specific facts, context, or remedial efforts or mitigation. That would be wrong, and unfair, and cause more harm than good.”
Nevertheless, the order is scheduled to take effect in October, with preparatory “pre-assessment process” for contractors that will begin in two weeks. This process will allow companies to review their labor law compliance history without it being associated with any government contracting opportunity.
The Senate report drew attention to the need for increased regulations with examples of corporate misconduct that were not included in a database available at the time. Among the examples was “the death of two employees of a Mississippi shipbuilding and ship repair company owned by ST Engineering Limited, who were killed when highly flammable materials being used to prepare a tugboat for painting ignited, leading to an explosion and fire. Findings of the investigation included failure to properly ventilate a confined space and lack of a rescue service available for a confined space. ST Engineering received $1.9 million in federal contracts in fiscal year 2012.”
The new regulations are meant to ensure accidents like this are taken into account when agencies consider which companies will get government business.
“The Fair Pay Safe Workplaces final rule and guidance is critically important to the millions of American workers whose rights at work are violated every year,” Labor Secretary Thomas E. Perez told the Federal Insider. “It’s about making sure that tax dollars do not support low-road contractors who discriminate in hiring and pay, treat veterans unfairly, withhold overtime, subject their employees to physical danger, or otherwise deny some basic workplace protections.”
Obama’s order also requires contractors to provide employees with statements detailing the number of hours worked, overtime pay and deductions. “It also ensures that workers who may have been sexually assaulted or had their civil rights violated get their day in court, putting an end to mandatory pre-dispute arbitration agreements covering these claims at large federal contractors,” according to the Labor Department.
“Simply put,” Perez said, “workers should be able to make sure that they are getting paid what they are owed. Employers are already required to have this information, now they just have to share it.”