Apparently as part of a complete overhaul of its acquisition regulations, the United States Department of Agriculture (USDA) proposed to resuscitate the contractor blacklist rule, which was struck down by Congress under the Congressional Review Act in 2017. The proposed rule would broadly exclude any any contractor, subcontractor, or supplier who violates any labor laws, including (but not limited to) 15 specific federal labor laws and their state equivalents. In addition, the proposed rule would require bidding contractors to 1) provide a list of all their and their subcontractors’ prior labor law violations (for an indefinite period), to be updated every six months , and 2) to certify, on their behalf and on behalf of their subcontractors, that they are now in compliance with all corrective actions resulting from such violations.
Comments on the proposed rule are expected March 21, 2022. Contractors under contract with the USDA should prepare for the final release of this clause by reviewing and cataloging industry-wide labor law violations. company so that appropriate certification can be carried out.
The rule may serve as a test for the Biden administration to see if it can evade the Congressional Review Act by implementing the agency-by-agency blacklist rule.
Proposed rule details
The proposed rule follows a failed effort by the Obama administration to introduce a government-wide blacklist rule at the end of its term. This effort was ultimately thwarted by a Texas court and then by Congress under the Congressional Review Act.
The USDA’s proposed rule contains two key clauses. First, contractors must certify that they and, “to the best of their knowledge”, their subcontractors and suppliers, comply with all labor laws:
By accepting this contract award, the Contractor certifies that it complies with all applicable labor laws and that, to the best of its knowledge, its subcontractors of all levels and its suppliers also comply with all applicable labor laws.
In other words, the USDA cannot contract with an entity that is currently violating any labor law of any kind.
Applicable labor laws “include” (therefore are not limited to):
- fair labor standards act
- Occupational Safety and Health Act
- the law on the protection of migrant and seasonal agricultural workers
- national labor relations law
- the Davis-Bacon law
- the McNamara-O’Hara Service Contract Act
- Executive Order 11246 (Equal Employment Opportunity)
- Section 503 of the Rehabilitation Act 1973
- the Vietnam Era Veterans Readjustment Assistance Act
- the law on family and medical leave
- Title VII of the Civil Rights Act of 1964
- the Americans with Disabilities Act of 1990
- the Age Discrimination in Employment Act 1967
- Executive Order 13658 of February 12, 2014 (establishing a minimum wage for contractors)
- Equivalent state laws, as defined by the Secretary of Labor in the guidelines
- Executive Order 13627 (Strengthening Human Trafficking Protections in Federal Contracts)
Further, the “Department of Agriculture considers certification under this clause to be certification for the purposes of the Misrepresentation Act.” This means contractors can face False Claims Act liability for false certification.
A second clause (AGAR 452.222-70) requires contractors to “provide a list” of all “deemed labor violations”. Contractors must certify that they are in compliance with any corrective action for past labor law violations found. Contractors also have the option of pleading their case with the contracting officer:
Prior to receiving an award, a contractor must provide a list of specific violations of the legal requirements listed above, if any, and be given the opportunity to disclose any steps taken to correct the violations or improve compliance with those legal requirements. . The Procurement Officer, in coordination with his/her Mission Area Senior Procurement Officer, will review any information provided and determine if a contractor is a responsible source who has a satisfactory record of integrity and business ethics. .
The proposed rule contains many problematic ambiguities:
- The proposed rule does not define what is a “deemed” breach of labor law. With respect to the Service Contract Act (now known as the Service Contract Labor Standards), is it when an investigator finds a violation? Or when an administrative law judge decides next? What if a contractor disagrees with an investigator’s violation finding, but in the interest of time and money, accepts it and reimburses wages? What if an employment law case is on appeal? Or if an employee wins an arbitration award? Or if the arbitration award includes a non-disclosure agreement?
- Is there a monetary floor for a reportable violation?
- The second clause of the proposed rule requires disclosure only of “deemed labor violations”, while the first requires “compliance with all applicable labor laws”. Those are two different things.
- The proposed rule lists 15 sets of laws, but these are apparently only illustrative. What other labor laws could be included? In particular, what about whistleblower protection laws found in non-labour laws, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act or the misrepresentation law?
This rule, if finalized as proposed, could be very vulnerable to challenge under the Administrative Procedure Act and other laws. The rule’s preamble contains no discussion of its blacklisting provisions or economic analysis, and the agency asserted that the rule “is not a significant regulatory measure.” Legal challenges are expected if these (and potentially other) agency-level blacklist rules go into effect.
The USDA’s proposed rule represents a significant departure from labor law requirements across government. USDA contractors and potential contractors should begin to prepare for this requirement by gathering information and noting the corrective actions taken for each. Holland & Knight will continue to monitor this rule and provide additional information as it develops. If you have any questions, please contact the authors.