Judge Temporarily Blocks Rule Aimed at Fair Treatment of Federal Contract Workers

In a victory for industry groups, a district court judge on Monday night issued a preliminary injunction freezing the Obama administration’s Fair Pay and Safe Workplaces final rule that was to have taken effect on Tuesday.

Responding to a suit brought by a chapter of the Associated Builders and Contractors and others, judge Marcia Crone of the U.S. District Court for the Eastern District of Texas granted a temporary halt to implementation of the Federal Acquisition Regulation and Labor Department’s guidance relating to the Fair Pay rule finalized in August.

Labor’s goal was to protect workers against abuses such as wage theft and health violations by instituting additional disclosure and reporting requirements for federal contractors about their past records complying with 14 labor laws. Industry viewed the effect as a burdensome “blacklisting” of contractors whose reputations, in some cases, could suffer from unproven allegations of past worker abuse.

“Associated Builders and Contractors is pleased the court ruled that the Obama administration cannot order private businesses to publicly disclose mere accusations of labor law violations that have not been fully adjudicated,” said ABC Vice President of Regulatory, Labor & State Affairs Ben Brubeck. “By issuing this decision, the court has maintained the First Amendment rights of government contractors and protected them and taxpayers from the poorly crafted blacklisting rule.” 

By freezing the rule temporarily nationwide, the builders spokesman said, the judge will also “prevent a disruption to the federal government’s procurement process for critical goods and services that benefit the public.” 

The injunction affects all components of the final rule except for the “pay transparency” provision, due to take effect on Jan. 1, 2017.  

The builders were joined in the suit by the National Association of Security Companies.

The Labor Department issued a statement supporting the rule. “The Fair Pay and Safe Workplaces final rule and guidance promote contracting efficiency by ensuring compliance with basic labor standards during the performance of federal contracts, level the playing field so that contractors who comply with the law don't have to compete against those that don't and promote responsible stewardship of taxpayer dollars,” the statement said.

“These actions,” department officials continued, “are supported by extensive outreach and feedback from the contracting community and many others to ensure that they achieve these critical goals while minimizing burden on federal contractors. We are confident that the rule and guidance are legally sound and the Department of Justice is considering options for next steps.”

Also welcoming the court’s move was the Professional Services Council, which had recently joined with other contracting groups in asking the administration to delay the rule because, they said, agencies weren’t ready to administer it. “The court’s emergency order validates the concerns PSC has been expressing since the executive order was issued in 2014 and the rules were proposed for comment in 2015,” said David Berteau, the 400-company council’s president and CEO, in a statement. “This is a temporary action only, but it is a critical and favorable initial decision. Next will come further legal proceedings on the request for a permanent ban on implementation.”

Disappointment in the delay was expressed by the grass-roots worker advocacy group Good Jobs Nation, which used Fair Pay and Safe Workplaces’ official first day of Oct. 25 to announce a new national hotline for contract workers to report alleged violations of the law and make the new rule effective.

“Lobbyists representing federal contractors filed this lawsuit simply to allow corporations to escape accountability for cheating both workers and taxpayers alike,” said Joseph Geevarghese, an attorney and director of Good Jobs Nation. “Historically, courts have deferred to the president’s power to ensure taxpayer dollars are spent on responsible contractors who follow federal laws.  If the courts respect precedent, the lawsuit will ultimately fail. Unfortunately, every day the executive order is delayed is another day federal contractors are allowed to get away with wage theft and other illegal practices at the expense of American taxpayers.”

Good Jobs Nation also announced on Tuesday that it is working with defense contract workers on a two-day strike at the Port of Los Angeles, seeking “respect” for workers and redress for alleged misclassification of the type that Fair Pay and Safe Workplaces is intended to curb.

Eric Leonard, a partner in Wiley Rein’s Government Contracts practice group, said he now expects the government to assess its appeal options and both sides to prepare for a hearing on a permanent injunction. There is no timetable for those next steps right now, he said. “Depending on the length of the further proceedings and any appeals taken by either party, it would not be surprising if the April 2017 deadline for broader implementation of the Fair Pay rules is also pushed back by the government," he noted in an email.