Federal contractors vow to fight Obama executive order

Business interests are vowing to fight President Obama’s executive order imposing new restrictions on companies who want to do business with the federal government.

Obama announced the action this week, ordering up new regulations that would require firms seeking federal contracts to disclose labor law violations and create new compliance advisers at agencies to oversee decisions about which firms get the work.

But contractors, already facing executive orders requiring them to pay a higher minimum wage and subjecting them to additional anti-discrimination rules, say the president went too far.

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“We are concerned these sweeping changes threaten the due process rights of federal contractors and conflict with existing federal procurement and labor law,” said Geoff Burr, vice president of government for Associated Builders and Contractors. “ABC and the federal contracting community across all industries are prepared to fight this order in the courts and in Congress.”

John Meyers, a labor and employment lawyer at the firm Barnes & Thornburg, said federal funding cuts, including those linked to sequestration, have been particularly painful for contractors.

The new requirements represent additional costs for companies vying for contracts from Uncle Sam, he said.

“Companies are really going to have to spend money to make sure they’re in compliance, because they’re fighting over fewer federal dollars and fewer contracts,” Meyer said.

Obama’s order requires companies seeking federal contracts to disclose labor law violations over the previous three years. That includes statutes covering pay, safety, health and collective bargaining, as well as past civil rights violations.

Each agency will designate a senior official as a labor compliance adviser to guide decisions on whether contractors’ past actions “rise to the level of a lack of integrity or business ethics.”

“If you want to do business with the United States of America, you got to respect our workers, you got to respect our taxpayers,” Obama said Thursday before signing the order. “The goal here is to make sure this action raises standards across the economy.” 

Workers rights advocates and unions heralded the order, which applies to roughly 24,000 businesses with federal contracts, employing about 28 million workers, according to Labor Department figures

A 2010 Government Accountability Office report concluded that the most egregious reported violations regarding pay, health and safety between fiscal 2005 and fiscal 2009 took place at firms that went on to receive new government contracts.

“The current system doesn’t do enough to ensure taxpayer dollars only go to responsible employers,” said Mary Kay Henry, president of the Service Employees International Union.

“It’s difficult to know about a company’s record of compliance with the Family and Medical Leave Act, the Fair Labor Standards Act and others laws that protect working families,” she said.

But business groups complain that the patchwork of existing laws and regulations involving labor issues is difficult to navigate.

Companies who rely on their government contracts could be “blacklisted” for minor missteps, according to the International Franchise Association.

The group’s president, Steve Caldeira, said the new requirements would require an “unreasonable standard of perfection.”

“The FLSA has many convoluted provisions that are subject to interpretation, and even the most well-intentioned companies could be forced to close their doors if they lose crucial government business,” Caldeira said.

Obama stressed that companies without violations would be able to comply with the new requirements by simply checking a box to attest that they did not have any labor law violations.

The White House added that the forthcoming regulations and guidance required by the order would undergo public comment to ensure that responsible contractors don’t get unfairly excluded from government business.

But for companies with even minor violations, the result could be a “report card” system grading companies on their compliance with rules handed down by the National Labor Relations Board, the Labor Department and other agencies, Meyers said.  

“Now you got to compete, not only on price and reputation, but now you got to compete on a scorecard basis” he said.