|March 4, 2009|
Schiff Hardin Labor and Employment Alert
In the last several weeks, President Obama issued four new executive orders that will have an impact on federal contractors and subcontractors. The orders relate to the required notification to employees about labor rights; non-displacement of workers due to a prior employer's loss of a government contract; the allocation of costs related to persuading employees to exercise or not to exercise their right to organize or bargain collectively; and project labor agreements.
Executive Order 13496: Notification of Employee Labor Rights. This order was issued on January 30, 2009. It requires that federal contractors post workplace notices informing employees of their rights under federal labor laws; authorizes the Department of Labor to administer and enforce the order; and permits the imposition of sanctions for non-compliance, including suspension or termination of contracts. Additionally, federal contractors will be required to add language from the order to agreements with subcontractors. This order will apply to all federal contractors except where specifically exempted by the Department of Labor ("DOL") because requiring compliance would not "serve the purposes" of the order, it would impair the ability of the government to procure goods and services, or an exemption would serve the "national interest." This order also replaces Executive Order 13201, previously issued by President Bush, which required posting of a notice concerning an employee's right not to join a union and right not to pay union dues. This new order requires that federal contractors comply with it after the DOL issues regulations specifying the form and content of the notices. The issuance of regulations should be initiated within 120 days from the date of the order.
Executive Order 13495: Non-displacement of Workers under Service Contracts. This order was issued on January 30, 2009. By its own words, it is designed to reduce disruption and displacement of workers when a new contractor is hired to replace another. Although there are five possible exceptions to this order, it applies to most contractors that replace prior contractors who performed the same work in the same location. The order gives a right of first refusal to qualified employees whose employment will be terminated due to the government's decision to award a contract to a new contractor. Indeed, it requires that new contractors offer jobs to qualified employees who had been previously employed by the predecessor contractor, and prohibits them from opening positions to new candidates before the predecessor employee has turned down or failed to accept the job opportunity. Notably, the successor contractor is not required to hire employees who it "reasonably" believes failed to perform suitably for the predecessor. The order will be enforced by the DOL and it provides for the imposition of sanctions for non-compliance, including hiring the employee as well as lost wages, temporary lost eligibility and/or debarment.
This order will apply to contractors once the DOL has promulgated new regulations for its enforcement. Those regulations are expected to be issued within 180 days from the date of the order.
Executive Order 13494: Costs of Persuading Employees to Exercise or Not to Exercise Their Right to Organize or Bargain Collectively. This order was issued on January 30, 2009. It prevents federal agencies from reimbursing any federal contractors for expenses related to activities designed to persuade employees to exercise, not to exercise, or concerning the manner of exercising, their right to organize and/or the right to bargain collectively. Specifically, the order requires that such costs be excluded from any "billing, claim proposal or disbursement" applicable to a federal contract. Such costs may include those related to preparing and distributing materials, hiring or consulting legal counsel or consultants, holding meetings (including compensating attendees of the meetings), or "planning or conducting activities by managers, supervisors, or union representatives during work hours." On the other hand, the order provides, consistent with existing federal regulations, that certain costs incurred in maintaining satisfactory relations with employees may be reimbursed. Reimbursable costs include those related to labor-management committees, employee publications and related activities. The order, which contains limited detail concerning how it will be enforced and about what standards should be used to demonstrate how costs have been allocated, will be enforced by the Federal Acquisition Regulatory Council ("FAR Council"). Regulations concerning the order are expected to be promulgated within 150 days of its issuance date.
Executive Order 13502: Project Labor Agreements. This order was issued on February 6, 2009. It permits and encourages federal agencies, on a project-by-project basis, to require that federal contractors enter into pre-hire collective bargaining agreements, otherwise known as project labor agreements, for construction projects valued at $25 million or more. The order indicates that each project labor agreement made pursuant to its terms must: bind all contractors and subcontractors on the construction project; allow contractors and subcontractors to compete for contracts without regard to whether they are a party to collective bargaining agreements; contain guarantees against lockouts, strikes and similar disruptions; set forth "effective, prompt and mutually binding" procedures for resolving labor disputes; and provide mechanisms concerning matters of productivity, quality of work, safety, health and other matters of "mutual interest and concern." The order does not mandate the use of these project labor agreements by federal agencies; nor does it require that such agreements be entered into with any particular labor organization.
The FAR Council will enforce the order and it is authorized to take "whatever action is required" to amend its regulations to implement it within 120 days of the date the order was issued. The order and any new regulations will apply to contracts after the FAR Council has taken action. Additionally, the order mandates that within the next 180 days, the Office of Management Budget and the Department of Labor will make recommendations to President Obama about whether the broader use of project labor agreements would help promote "economical, efficient and timely completion" of projects. This order replaces the prior executive orders issued by President Bush which prohibited the use of project labor agreements.
Conclusion. These orders will have an impact on: each employer's worksite postings; the manner in which contractors and subcontractors must hire new employees; how contractors bill and/or invoice work and allocate costs related to doing business; how employers' determine which employees to hire when replacing existing contractors on a project and; what agreements, if any, must be made with labor unions before beginning a construction project. The full impact of these orders, however, cannot be fully understood until the regulations implementing them have been issued. As such, Schiff Hardin LLP will provide updates on those new regulations. Until then, if you have questions concerning these orders and how they apply to your company, please contact Schiff Hardin.
ABOUT SCHIFF HARDIN LLP
Schiff Hardin represents management in labor matters and employment-related litigation, and provides counsel to employers with respect to all legal aspects of employer-employee relations. Our firm's labor law practice encompasses both the private sector and the public sector for large and small employers in a broad range of markets and industries.
Schiff Hardin provides clients with management and supervisory training programs covering current employment-related legal issues, including complex layoffs and reductions in force (RIFs). We regularly counsel clients in helping them comply with federal and state WARN Acts and associated notice requirements. We offer both standardized training modules and training programs that are individually tailored to the client's needs and requests.
For more information, please feel free to contact us.
RECENT LABOR AND EMPLOYMENT PUBLICATIONS
"New Federal Government Program: COBRA Subsidies," Labor and Employment Update (February 20, 2009)