Blacklisting Rule Nullified by Executive Order

By Judd Lees and Matt Lynch

On March 27, 2017, President Trump signed a measure under the Congressional Review Act as well as an Executive Order which set aside President Obama’s Executive Order 13673 requiring federal agencies to determine whether businesses seeking to perform federal contracts were “responsible” enough to perform the contracts.  The Fair Pay and Safe Workplaces Executive Order, dubbed the “blacklisting rule,” required federal agencies to engage in a subjective review of the bidders’ compliance history with 14 federal and corollary state workplace laws, if bidding on federal contracts in excess of $500,000.  More importantly, it required bidders to self-report labor law violations filed against them, even if those violations were being contested by the employers.  Slated to go into effect on October 25, 2016, a federal district court in Texas temporarily blocked implementation of major portions of the executive order.  The injunction, however, left intact so-called transparency requirements calling for employers to report to employees their hours, paycheck deductions and 1099 status.  President Trump’s Executive Order effectively shuts the door on the blacklisting rule in its entirety.

In addition to the self-reporting and subjective review requirements, the Obama Executive Order would have proscribed the use of arbitration agreements in employment contracts.  Opponents argued that the rule stripped contractors of due process rights by requiring disclosure of any and all labor and employment allegations against employers even though the merits of the allegations had not yet been adjudicated.  This raised concerns that plaintiffs, state and federal agencies, and unions could, in essence, file or pursue such claims in order to hold contractors hostage in the hopes of extracting costly settlements.  Opponents also argued that the rule raised the cost of seeking federal work thereby barring contractors from pursuing federal contracts.  The Trump action lifts this cloud hanging over contractors and should create more predictability in federal contract awards.


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