Transparency and Fairness in Civil Administrative Enforcement Actions

The President issued three executive orders recently that will have some impact on Government contractors and Government contracting in general. On Tuesday, we reported on a new Executive Order (EO) rescinding a previous EO that gave incumbent employees the right of first refusal when a successor contractor takes over on a service contract (see New Executive Order Rescinds Rules on Offering Incumbent Employees Right of First Refusal). Yesterday, we reported on one designed to ensure that agencies don't circumvent the regulatory process by issuing guidance that have the effect of law or regulation (see Improving Agency Guidance Documents). Today we intend to cover the essence of the third EO entitled "Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication".

What is this all about?

The rule of law requires transparency. Regulated parties must know in advance the rules by which the Federal Government will judge their actions. The Freedom of Information Act generally prohibits an agency from adversely affecting a person with a rule or policy that is not correctly promulgated - to avoid the inherently arbitrary nature of unpublished ad hoc determinations.

The EO points out that "Unfortunately, departments and agencies in the executive branch have not always complied with these requirements. In addition, some agency practices with respect to enforcement actions and adjudications undermine the APA's (The Administrative Procedure Act) goals of promoting accountability and ensuring fairness."

Under the new EO, no person should be subjected to a civil administrative enforcement action or adjudication absent prior public notice of both the enforcing agency's jurisdiction over particular conduct and the legal standards applicable to that conduct. Moreover, the Federal Government must foster greater private-sector cooperation in enforcement, promote information sharing with the private sector, and establish predictable outcomes for private conduct.

There are a number of definitions included in the EO. One that caught our attention was "unfair surprise" meaning a lack of reasonable certainty or fair warning of what a legal standard administered by an agency requires.

There are many more requirements placed upon Executive Agencies in this EO. For example, guidance documents (discussed yesterday) cannot be used to impose new standards of conduct on persons and any agency seeking to collect information from a person about the compliance of that person must ensure that such collections of information comply with the provisions of the Paperwork Reduction Act.

The full EO can be accessed here.

Improving Agency Guidance Documents

Yesterday we reported on a new Executive Order (EO) rescinding a previous EO that gave incumbent employees the right of first refusal when a successor contractor takes over on a service contract (see New Executive Order Rescinds Rules on Offering Incumbent Employees Right of First Refusal). There have also been two other recent EOs that will be of interest to Government contractors. Both are aimed at reigning in executive agency regulatory powers. We will discuss one today and the other tomorrow.

Agencies adopt regulations that impose legally binding requirements on the public. The Administrative Procedure Act (APA) generally requires agencies, in exercising their responsibility, to engage in notice-and-comment rule-making to provide public notice of proposed regulations. This allows interested parties to have their concerns and comments considered prior to final regulations.

Agencies may clarify existing obligations through non-binding guidance documents, which the APA exempts from notice-and-comment requirements. Yet agencies have sometimes used this authority inappropriately in attempts to regulate the public without following the rule-making procedures of the APA. The new EO notes that even when accompanied by a disclaimer that it is non-binding, a guidance document issued by an agency may carry the implicit threat of enforcement action if the regulated public does not comply. Sometimes the public has insufficient notice of guidance documents, which are not always published in the Federal Register or distributed to all regulated parties.

Under this new EO, agencies must develop processes and procedures for issuing guidance documents. These policies and procedures must, at a minimum, (i) clearly state on each guidance, that it does not bind the public (except as authorized by law or incorporated into a contract), (ii) provide for the public to petition for withdrawal or modification, and (iii) provide for a period of public notice and comment if the guidance is considered significant. Note, the term "significant guidance is defined in the EO).

DoD contractors are probably aware of the "DOD Procedures, Guidance and Information document; 400 pages of guidance to supplement the FAR and the DOD FAR Supplement. This document would presumably be an example of the type of guidance called out under this EO.

The full EO can be accessed here.

New Executive Order Rescinds Rules on Offering Incumbent Employees Right of First Refusal

Last week, the President issued an Executive Order (EO) that revoked one of President Obama's first Executive Orders; Nondisplacement of Qualified Workers Under Service Contracts.

This EO is called "Improving Federal Contractor Operations by Revoking Executive Order 13495.

The now rescinded EO required that successor Federal contractors in certain circumstances offer a right of first refusal of employment to employees employed under the predecessor contract.

The new EO requires the Labor Department, the FAR Councils and heads of all executive departments and agencies to promptly move to rescind any orders, rules, regulations, guielines, programs, or policies implementing or enforcing the old EO. Also, the Labor Department must terminate, effective immediately, any investigations or compliance actions based on the old EO.

The 'right of first refusal' has been criticized by some contractors for being unnecessary. As a matter of practice, successor contractors would naturally want to hire qualified employees of the incumbent contractor. However, the rule also discouraged contractors from hiring workers that might be better suited for a particular job. Additionally, successor contractors felt compelled to offer employment to unsuitable candidates just to avoid a Labor Department investigation.  That concern was born out by some extreme Labor Department enforcement actions.

Since this EO has immediate application, it is likely that there are solicitations on the street that contain the old EO provisions and FAR provisions implementing that EO. The now rescinded rules might have an impact on what offerors are willing to bid.

Call for Public Input on Regulations that Need to be Repealed, Replaced, or Modified

In accordance with Executive Order (EO) 13777, Enforcing the Regulatory Reform Agenda, the Department of Defense (DoD) Regulatory Reform Task Force is seeking input on DFARS (the DoD FAR Supplement) solicitation provisions and contract clauses that may be appropriate for repeal, replacement, or modification. Interested parties have 60 days in which to submit written recommendations or comments.

Here's your chance to be heard and to be taken seriously.

EO 13777 directs Federal agencies to establish regulatory reform task forces. One of the duties of these task forces is to evaluate existing regulations and make recommendations to the agency heads regarding their repeal, replacement, or modification. The EO further requests that each Taxk Force attempt to identify regulations that

1. Eliminate jobs, or inhibit job creation
2. are outdated, unnecessary, or ineffective
3. impose costs that exceed benefits
4. create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies
5. are inconsistent with "other" requirements
6. derive from or implement EOs or other Presidential directives that have been subsequently rescinded or substantially modified.

An example of No. 6 would be the recent repeal of the Fair Pay and Safe Workplaces rules that were based on an EO from the previous administration but have now been rescinded. Keep this list in mind as you contemplate needed changes.

EO 13777 also requires the task forces to seek input and other assistance from entities significantly affected by Federal regulations including State, local, and tribal governments, small businesses, consumers, non-governmental organizations, and trade associations. Hence, this Federal Register call for input.

DoD has promised to consider all input it receives.

Click here for further information and directions for submitting your ideas.

Buy American - Hire American

Yesterday, the President issued an Executive Order stating that "It shall be the policy of the executive branch to buy American and hire American". The focus of this EO is on the American steel industry and the H1-B visa program.

Buy American Laws. In order to promote economic and national security and to help stimulate economic growth, create good jobs at decent wages, strengthen our middle class, and support the American manufacturing and defense industrial bases, it shall be the policy of the executive branch to maximize ... the use of goods, products, and materials produced in the United States.

Hire American. In order to create higher wages and employment rates for workers in the United States, and to protect their economic interests, it shall be the policy of the executive branch to rigorously enforce and administer the laws governing entry into the United States of workers from abroad.

 The EO requires that every executive agency "scrupulously monitor, enforce, and comply with Buy American Laws" and minimize the use of waivers. The EO includes requirements for goals, studies and related deadlines designed to show how well executive agencies are meeting the Buy American laws. It also tightens up the approval process for granting waivers to the Buy American Act.

Concerning the "Hire American" features, the EO requires the Secretary of State, the Attorney General, the Secretary of Labor, and the Secretary of Homeland Security to develop new guidance related to administering the immigration system, including methods to prevent fraud and abuse. The H-1B visa program was specifically called out for reform. The Administration desires to ensure that H-1B visas are awarded to the most skilled or highest-paid petition beneficiaries.

So what does this new EO mean for Government contractors and Government contracting, in particular. Perhaps not much in the near term. There have been many expressed concerns that the EO will make infrastructure more expensive. Some believe that it will be more difficult for federal contractors to use cheaper imported products - notably steel - when building infrastructure projects. Limiting competition, they contend, will result in increased costs.

The corruption associated with the H1-B program is well documented. Many related to fake letters promising jobs, a necessary prerequisite to obtaining the visa. And there is a perception that many foreigners coming into the U.S. under the H1-B program do not have the skills (e.g. hi-tech) envisioned by the program. Perhaps new policies for administering the program will reduce fraud in the system. However, no one really knows the extent to which foreigners on H1-B visas are working under contracts with the U.S. Government or whether they are taking away jobs from highly qualified Americans.

Executive Order on Cutting Federal Waste - Will Offer Public Input

The President issued an Executive Order yesterday that requires every executive agency to conduct an internal review of how their funds are being wasted or abused and to recommend changes they can pursue to operate more efficiently. According to the President, "There is duplication and redundancy everywhere. Billions and billions of dollars are being wasted on activities that are not delivering results."

Sound familiar? It should. Back in 2011, President Obama issued an EO (No. 13589) to Promote Efficient Spending, citing the Administration's commitment to cutting waste in Federal Government Spending and identifying opportunities to promote efficient and effective spending. At the time, each Executive Agency was required to establish a plan for reducing the costs of travel, information technology, printing, motor vehicle fleets, and promotional items. No word on how that exercise went.

This latest audit or review is a little bit different from earlier reviews however. This will be spearheaded by the OMB (Office of Management and Budget) and will invite public input. We don't ever recall such a study that utilized public input but we're sure that there will be many. For starters, three Senators; Lankford from Oklahoma, McCain from Arizona, and Flake, also from Airizona, have published books on Government waste (see Federal Fumbles, America's Most Wasted (which doesn't refer to drug addictions), and PORKemon Go). It is unknown how and at what point in the process, public input will be solicited.

On a related note, the President's budget proposal expected this week will seek significant reductions in the Federal workforce (source) with housing, foreign assistance, environmental programs, public broadcasting, and research expected to take the most significant hits. The Energy Department cuts could impact many contractors as the department that funds research on LED light bulbs, electric trucks, advanced batteries and bio-fuels, is looking at a 30% cut.

Hang on. This could be Mr. Toad's Wild Ride.

Executive Order on Enforcing Regulatory Reform

The President issued an Executive Order (EO) last Friday designed to add teeth to his regulatory reform agenda. The EO requires agencies to dedicate an individual and a task force infrastructure to enforce his previous EO concerning two for one offsets for any new regulations at zero cost.

To implement the new EO, every agency must designate an agency official as its Regulatory Reform Officer (RRO). They must also set up a task force to assist the RRO in implementing the EO.

Each RRO will oversee the implementation of regulatory reform initiatives and policies to ensure that agencies effectively carry out regulatory reforms consistent with applicable laws. These initiatives and policies include:

• Executive Order 13771 (under President Trump) regarding offsetting the number and cost of new regulations (eliminating two existing regulations for every new regulation and at zero increased cost.
• Executive Order 12866 (under President Clinton) regarding regulatory planning and review
• Executive Order 13563 (under President Obama) regarding retrospective review
• The termination of programs and activities that derive from or implement Executive Orders, guidance documents, policy memoranda, rule interpretations, and similar documents, or relevant portions thereof that have been rescinded (such as the Fair Pay and Safe Workplaces rules).

Each agency RRO must periodically report to the agency head and regularly consult with agency leadership. The definition of "periodically" and "regularly" is left up to the agencies.

The RRO, along with the Regulatory Reform Tax Force (RRTF), will be evaluating existing regulations and make recommendations to the agency head regarding their repeal, replacement, or modification, At a minimum, the Task Force must identify regulations that

• eliminate jobs, or inhibit job creation
• are outdated, unnecessary, or ineffective,
• impose costs that exceed benefits
• create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies
• derive from or implement Executive Orders or other Presidential directives that have been subsequently rescinded or substantially modified.

Although not part of the EO, it would seem beneficial for the RRO and the RRTF to solicit public input on what regulations should be repealed, replaced, or modified. Perhaps the RRTF could begin with provisions in the Federal Acquisition Regulations (FAR) that are ignored or not enforced that have no consequences for noncompliance. 

Groups File Lawsuit Challenging the President's Two-for-One Order

On January 30th, the President signed an Executive Order (EO) that requires Agencies to cut two existing regulations for every new rule introduced. Yesterday, three public advocacy groups - The Natural Resources Defense Council (NRDC), the Communications Workers of America, and Public Citizen - joined together to file a lawsuit in the U.S. District Court for the District of Columbia alleging that Executive agencies cannot lawfully comply with the President's two for one order because doing so would violate the statutes under which agencies operate. The suit asks the court to issue a declaration that the order cannot be lawfully implemented and to bar Agencies from implementing the order.

According to these groups, the President's order "...would deny Americans the b asic protections they rightly expect. New efforts to stop pollution don't automatically make old ones unnecessary. When you make policy by tweet, it yields irrational rules. This order imposes a false choice between clean air, clean water, safe food and other environmental safeguards."

Another spokesperson stated: "It is unbelievable that the ... administration is demanding that workers trade off one set of job health and safety protections in order to get protection from another equally dangerous condition. This order means that the asbestos workplace standard, for example, could be discarded in order to adopt safeguards for nurses from infectious diseases in their workplaces. This violates the mission of the Occupational Safety and Health administration to protect workers' safety and health. It also violates common sense."

One of the attorneys representing these groups stated: "When presidents overreach, it is up to the courts to remind them no one is above the law and hold them to the U.S. Constitution. This is one of those times."

Fun times.

New Executive Order Coming on Sick Leave for Federal Contractor Employees

The New York Times reported yesterday that the President is preparing an Executive Order (EO) on paid sick leave for federal contractors.

See online source.

According to the article, the EO would set a minimum of 56 hours a year of paid sick leave (seven days) for not only employee illnesses but also caring for a child, parent, spouse, domestic partner "or any other individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship."

The EO would apply to absences from work resulting from domestic violence, sexual assault or stalking, if that time was used to seek medical attention, obtain counseling, seek relocation assistance from victim services organizations or prepare civil or criminal proceedings.

One other feature of the EO would allow federal contractor employees to carry over their unused sick leave indefinitely.

The EO is unlikely to impact major contractors like Boeing or Lockheed or Raytheon who already have sick leave policies in place that exceed 56 hours per year, but we don't know whether those policies allow unlimited carryover of unused sick leave. The EO, according to the article, will likely hurt the small contractors who will need to increase the sick leave benefits it offers its employees.

When the President used the EO mechanism to require Federal contractors to pay a $10 minimum wage, 300 thousand contractors were impacted.

California implemented its own sick leave law in July. Under California law, employees who work in California for 30 or more days within a year from the beginning of employment is entitled to paid sick leave. Sick leave accrues at the rate of one hour for every 30 hours worked. That will net the employee 69 hours per year - a little more than the EO plan of 56 hours. However, under California law there is a cap to the amount of sick leave that can be carried over. Unused sick leave carries forward to the following year and may be capped at 48 hours.

Fair Pay and Safe Workplaces - First Steps to Implementation

Last July, the President signed Executive Order 13673, Fair Pay and Safe Workplaces intending to improve contractor compliance with Federal labor laws bu helping those contractors with serious, willful, repeated, or pervasive violations come into compliance. We reported on this Executive Order (EO) a couple of time previously (see here and here). Basically, it requires contractors to self disclose recent violations of labor related laws and requires Federal agencies to "consider" the violations when deciding on who gets contracts.

Last week, the Department of Labor (DOL) and the Office of Management and Budget (OMB) issued a joint memorandum directing agencies to hire within 90 days, labor compliance advisors (LCAs). LCAs are the one primarily responsible for implementing the EO within agencies. Specifically, the LCAs role is to promote awareness of and respect for the importance of labor law compliance through their interactions with senior agency officials, contracting officers, and contractors, while also meeting regularly with the DOL and LCAs from other executive departments and agencies to formulate effective and consistent practices government-wide.

LCAs must be career civil servants with sufficient authority to bring issues to the Deputy Secretary, Deputy Administrator, or equivalent official, the General Counsel, and other appropriate agency leadership as needed. Smaller agencies can share LCAs.

Among their various duties will be to develop guidance explaining when violations should be considered serious, willful, repeated, or pervasive. The FAR councils must also develop regulations that identify considerations for determining whether the serious, repeated, willful, or pervasive nature of the violations demonstrate a lack of responsibility.

The EO promises a measured level of assistance to contractors. Contractors (or prospective contractors) with labor violations will be offered the opportunity to receive early guidance from DOL and other enforcement agencies on whether those violations are potentially problematic, as well as the opportunity to remedy any problems. Agencies will be required to give appropriate consideration to any information offerors choose to provide regarding remedial measures or mitigating factors, including any agreements by contractors or other corrective action taken to address violations.

Finally, GSA (General Services Administration) is developing a website for federal contractors to use for reporting serious, willful, repeated, or pervasive labor violations.

No specifics yet on how serious, willful, repeated, or pervasive labor violations will affect the source selection process.

You can read the complete DOL/OMB guidance here.

Executive Order - Fair Pay and Safe Workplaces - An Update

Last July 31st, the President signed an Executive Order (EO) entitled Fair Pay and Safe Workplaces. Briefly, this EO will require prospective contractors bidding on contracts greater than $500 thousand (a relatively low threshold) to self-disclose any violations of labor-related laws such as the Fair Labor Standards Act, OSHA, Davis-Bacon, Service Contracts Act, EEO, ADA, Age Discrimination, and more. The EO also prevents contractors from forcing employees to agree to arbitration in lieu of going to court. You can read a fuller synopsis by clicking here.

Although the full impact of this new EO will not be known until the corresponding regulations have been issued, there has been a number of public comments and articles that are expressing grave concern with the entire concept. First of all, it affects many many companies. The White House estimates that it will affect 24,000 companies and 28 million workers. That's almost 20 percent of the U.S. workforce. That percentage would be much higher if public sector employees were removed.

Some concerns were expressed in an article appearing in the Government Executive and authored by the Vice President of the Associated Builders and Contractors trade organization, Granted, this would not be considered an objective source but it does raise many valid concerns. Here are a few of the points the author made (parenthetical comments are ours).

• It will discourage small businesses from pursuing federal contracts (possible, it will probably add a few hundred more pages to the regulations)
• Threaten the livelihood of millions of Americans (doubtful, someone will do the work)
• Increase costs to taxpayers (undoubtedly)
• Many members fear that some of the best firms will be arbitrarily blacklisted from winning future federal contracts for committing even minor violations or a rapidly growing and constantly changing labyrinth of complex workplace laws and regulations.
• By seeking to impose new penalties on contractors beyond those specified by Congress, the president is exceeding his office's constitutional authority and undermining the carefully balanced contracting provisions that already exist.
• There is great concern that the livelihoods of federal contractors and their employees could be jeopardized or even destroyed based on the subjective decisions of a team of newly selected, unelected bureaucrats, who will be charged with picking winners and losers in federal contracting.
• The EO could be used to reward political allies with contracts while blacklisting political foes (recall the IRS oversight of conservative organizations)

Although this EO became effective on the date of signing (July 31, 2014), it will apply to solicitations for contracts as set forth in any final rule issued by the FAR Councils. Since the FAR Councils have not issued their final ruling, it is not yet in effect. That process will take some time.

New Executive Order - Fair Pay and Safe Workplaces

Yesterday, July 31st, the President signed an executive order (EO) that will require companies interested in doing business with the Government to disclose recent violations of a panoply of labor related laws. Additionally, the EO prevents contractors from forcing employees to agree to arbitration in lieu of going to court. Although not stated, these disclosures will probably be incorporated into SAM (System for Award Management) where many representations and certifications already reside.

The disclosure requirement applies to contracts in excess of $500 thousand while the forced arbitration prohibition applies to solicitations in excess of $1 million.

Under the EO requirements, prospective contractors must make an affirmative representation that there have not been any administrative merits determinations, arbitral award or decisions, or civil judgment rendered against it within the preceding 3 years for violations of:

• The Fair Labor Standards Act
• OSHA Act of 1970
• National Labor Relations Act
• Davis-Bacon and Service Contract Acts
• EEO
• Family and Medical Leave Act
• Civil Rights
• Americans with Disabilities Act
• Age discrimination
• Executive Order requiring Government contractors to pay minimum wage.
• And more.

If there are any violations, the contracting officer, as part of the responsibility determination, will provide the offeror an opportunity to disclose the steps taken to correct the violations or improve compliance with the labor laws listed earlier including any agreements entered into with an enforcement agency. The agency's Labor Compliance Advisor will review the disclosure and advise the contracting officer as to its sufficiency and adequacy.

Many labor contracts contain provisions that employees in the case of labor disagreements, employees agree to arbitration in lieu of taking the matter to court. Under this new EO, contractors are precluded from requiring arbitration. Now, arbitration to settle disputes can only be made with the voluntary consent of the employee.

The entire Executive Order can be read by following this link. Be warned - its lengthy.