Labor Relations Costs - Revised Cost Principle

The FAR Councils recently amended FAR 31.205-21, Labor Relations Costs, making the costs of certain activities unallowable.

Until now, FAR 31.205-21 was very succinct. It read, "Costs incurred in maintaining satisfactory relations between the contractor and its employees, including costs of shop stewards, labor management committees, employee publications, and other related activities, are allowable."

The revised cost principle adds a prohibition on certain activities as follows.

As required by Executive Order 13494, Economy in Government Contracting, costs of any activities undertaken to persuade employees, of any entity, to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the employees' own choosing are unallowable. Examples of unallowable costs under this paragraph include, but are not limited to, the costs of
   (1) Preparing and distributing materials;
   (2) Hiring or consulting legal counsel or consultants;
   (3) Meetings (including paying the salaries of the attendees at meetings held for this purpose); and
   (4) Planning or conducting activities by managers, supervisors, or union representatives during work hours.

This new rule addresses "persuader" activities - either for or against collective bargaining. It seems unlikely to us that a contractor is going to try to "persuade" its employees to unionize so this change effectively amounts to a prohibition against contractors resisting workforce unionization.