Thursday, October 27, 2016

Fair Pay and Safe Workplaces Regulations Injunction - Part 2

Yesterday, we wrote about the federal judge in Texas that issued a temporary injunction halting the implementation of the new Fair Pay and Safe Workplaces (FPSW) regulations (see Federal Court Issues Preliminary Injunction Blocking Most of Fair Pay and Safe Workplace Provisions). Indeed this was a great victory for Government contractors but already, contractors (and prospective contractors) are being cautioned that its too early to take a victory lap. There is a strong potential for an appeal or perhaps amended regulations that address the Judge's concerns. A Justice Department spokesperson was quoted as saying that lawyers are studying the decision and "considering their options". Additionally, a spokesperson from the Labor Department defended the rules and said that the administration is confident they will be upheld in the courts.

The cost of regulations is not free and the cost for the FPSW regulations is huge. The Regulatory Impact Analysis (RIA) calculated costs of $458 million imposed on contractors and subcontractors and nearly $16 million imposed on the Government during the first year of implementation. The cost for the second year of implementation was almost as bad - $414 million for contractors and $10 million for the Government. Even the Judge was taken back by these amounts and ruled that there was insufficient data to accurately assess whether the benefits derived from the new regulations were commensurate with the costs to the contractors. In fact, there is anecdotal evidence that some contractors might withdraw from Government contracting which will reduce competition in the Federal marketplace.

One aspect of the decision that we didn't discuss yesterday concerned the FPSW's "paycheck transparency requirement" allowing employees to chat about their paychecks with one another. The court declined to enjoin enforcement of the paycheck provisions. Most employers have no issue with these provisions so the Court's declination is not viewed as very significant. But, appeals work both ways and perhaps this will be appealed somewhere down the road.

Because there is a strong potential for appeal or amended rules, contractors and subcontractors should continue planning for eventual compliance.

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