Business & Lobbying

Business leaders mount effort to beat back contractor ‘blacklisting’ rule

Greg Nash

Business groups are calling on regulators to withdraw forthcoming labor regulations they say will “blacklist” companies from procuring federal contracts.

The proposed rule from the Department of Labor (DOL) and the Federal Acquisition Regulatory Council (FARC) would force federal contractors to disclose labor law violations they’ve had in the last three years when procuring contracts over $500,000.

The U.S. Chamber of Commerce, Littler’s Workplace Policy Institute (WPI) and Associated Builders and Contractors (ABC) contend the agencies lack statutory and constitutional authority to finalize the rule.
“There’s no good cure for this thing,” Marc Freedman, the Chamber’s executive director of labor law policy, said Wednesday, the final day for public comment on the proposal. “It has to be withdrawn.”
The FARC rule and subsequent DOL guidance, which would also require federal project winners to update disclosures every six months for the length of the contract, is a byproduct of President Obama’s July 2014 Fair Pay and Safe Workplaces Executive Order.

Freedman said the directive was born out of a request from the AFL-CIO.
“The unions want the executive order because it helps them put pressure on companies they are trying to organize,” he said.
AFL-CIO officials were not available for comment on Wednesday.
In May, after the proposed rule and guidance were released, AFL-CIO President Richard Trumka released a statement saying the rule would help ensure that businesses that contract with the federal government lift standards for their workers. 
“Companies that mistreat workers should not be rewarded with taxpayer dollars, and this rule will help weed out bad actors who profit by denying workers their right to a safe job and a decent wage,” he said.
Business groups, however, fear that the rule requirements will lead to fewer companies competing for government work. The WPI said fewer bids drive up project prices, which cost taxpayers more in the long-run.
In their comments, both the WPI and the ABC challenged the rule’s broad definition of “violations.”
According to the guidance proposed by the Labor Department, contractors will have to report any “notices or findings — whether final or subject to appeal or further review  — issued by an enforcement agency following an investigation that indicates that the contractor or subcontractor violated any provision of the labor laws.”
“This approach could cost contractors years of revenue and jobs based on non-final accusations that turned out to be without merit,” WPI Co-Chair Michael Lotito said in a news release. “By the time these matters are resolved, it could be too late for the damage to be undone.”
The ABC, which performed more than 56 percent of all federal government construction contracts exceeding $25 million from 2009 to 2014, said the rules could have a broad impact on the construction industry as a whole.
In 2014, the group estimated there was more than $962 billion worth of construction put in place, of which over $275 billion was public construction and nearly $23 billion was federal construction.
Industry groups say the rule’s full impact is unknown, since the rule says contractors are required to report violations of 14 federal labor laws and “equivalent state laws.”
The FARC said it would release a list of state laws it sees as equivalent in a future rulemaking.
“There is still a very large shoe to drop,” Freedman said.
The Labor Department would not say how many comments it had received as of Wednesday.
“The comment period is still open today, so we do not have a final comment count,” Tania Mejia, a spokeswoman for the agency’s Office of the Assistant Secretary for Policy, told The Hill. “I can say that we expect to implement this rule in 2016.”

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