The bell has sounded. The return of the Clinton Administration’s hoped-for (but never passed into law) government contracts “Blacklisting” regulations is seemingly soon to be upon us. U.S. Department of Labor Secretary Tom Perez in late March collected comments from all of the many agencies within the US DOL potentially affected by the Blacklisting regulations—including OFCCP– and sent the Department’s collective comments to The White House. The Office of Management and Budget (OMB), the arm of The White House which controls the review, coordination and authority for all federal agencies to publish regulations, now has DOL’s comments and is consolidating them with the FAR Council’s draft “Blacklisting” Rules awaiting public release.
(When people speak of “The White House” taking an action, they really mean that OMB did something. OMB is “The White House.”. While it is a small civilian agency employing only about 500 employees, OMB is the most powerful federal agency in Washington D.C. since it controls the policy making of all federal “Executive agencies” subject to the power of The President. Google OMB and The White House logo WILL appear and provides an address at 1600 Pennsylvania Avenue (The White House address). Nonetheless, many OMBers office in the many quaint buildings adjacent to or surrounding The White House and around Farragut Square and in its main offices in a horrible red brick building at 725 17th Street. For those of you who know Washington, you know that French born Pierre “Peter” Charles L’Enfant laid out Washington on a grid and named the main streets by number and the cross streets (starting at The Potomac) in alphabetical order. So, 725 17th Street is between the 7th and 8th streets up from the Potomac and corresponds with the 7th letter of the alphabet=”F”…so the horrible red brick building is at 17th and F streets).
The FAR Council is the group of federal agencies most heavily involved in signing federal contracts to procure goods and services for the United States government, including the Department of Defense (DoD), the Government Services Administration (GSA) and the National Aeronautical and Space Administration (NASA).
The Blacklisting Rules, “in a nutshell” must address at least the following to be faithful to President Obama’s July 31, 2014 Executive Order 13673 titled: “Fair Pay and Safe Workplaces” directing the FAR Council to issue Final Rules implementing EO 13673 by 2016 (presumably to then take legal effect with new contracts signed beginning in federal contracting year FY 2017, which begins October 1, 2016):
-each federal Executive Agency procuring
-contracts for “goods and services” “exceeding $500,000”
-must require bidders to their “knowledge and belief” to report each
-“administrative merits determination” (undefined as of yet)
-“arbitral award or decision” (despite any confidentiality provisions), or
-“civil judgment”
-“within the preceding 3 year period” violations of:
-Executive Order 11246
-Section 503 of the Rehabilitation Act of 1973
-38 U.S.C. 4214 (sic), AKA VEVRAA
-and 11 other US DOL-enforced statutes (FLSA; OSHA; etc.)
AND, THERE ARE “FLOW-DOWN” (“Brothers’ Keeper”) PROVISIONS:
-“For any subcontract” > $500,000
-not a commercially available off-the-shelf item
-that the successful contractor “represent to the contracting agency” that:
-It will require the sub to disclose to the agency:
-“administrative merits determination” (undefined as of yet)
-“arbitral award or decision,” or
-“civil judgment”
-“within the preceding 3 year period” violations of:
-Executive Order 11246
-Section 503 of the Rehabilitation Act of 1973
-38 U.S.C. 4214 (sic), AKA VEVRAA
-and 11 other US DOL-enforced statutes
-update those disclosures every 6 months
-Contract officers will be required to:
-“consider the information submitted by the subcontractor…in determining whether a subcontractor is a responsible source”
-“require that a contractor incorporate into subcontracts a requirement that subcontractors disclose to the contractor any:
-administrative merits determination,
-arbitral award or decision, or
-civil judgment rendered against the subcontractor…”
-The statute would create “Labor Compliance Advisors” within the government to assist in evaluating the information on labor compliance submitted by subcontractors.
OMB could approve for release in the Federal Register the Obama Administration’s “Blacklisting” proposed Rule (expected to take the form of a Notice of Proposed Rulemaking: “NPRM”) at any time. I predict OMB will publish when the President feels like he has the political stamina to fight back against the strong opposition which will come from Democrats and Republicans alike on Capitol Hill. Senators and Congressmen on both sides of the aisle will fight hard to protect their federal contractor constituents worried about the federal government denying them future federal contracts.
While the value of federal contracting goes up and down in the annual budget wars in Washington D.C. over the one Trillionish Dollar annual budget, federal contracting (not “Federal Financial Assistance,” aka “grants”), its total dollar value typically hovers between $460 Billion to $500 Billion per year (essentially half a Trillion Dollars). But what’s 50 Billion dollars here or there when the “T” word is now always in the discussion and it is now a foregone conclusion that The President and The Congress will again and again raise the federal debt ceiling to allow for more borrowing and more government budget and more federal contracting? It’s not Thomas Jefferson’s small government anymore.
But, the new element is this, and it is a trend no OFCCP Compliance Manager can afford to ignore as the Obama Administration’s coming Blacklisting regulations vividly remind us: compliance with labor laws—including OFCCP compliance– is “going to count,” it appears. This is true for at least two reasons external to the company: First, labor law compliance may well make a determinative difference to obtain federal contracts in the future. Second, equally as important, consumers, shareholders and private companies buying goods and services in the marketplace are increasingly demanding various forms of “good citizenship,” including purity of employment law practices.
I remember it like it was yesterday. It was late 1991 when print media reports began to circulate that NIKE was operating sweatshops in Indonesia by paying its employees making its famous (and expensive) running shoes only 14 cents an hour—which was below even Indonesia’s minimum wage requirements. Protesters began to follow NIKE everywhere, even eventually to the Barcelona Summer Olympics where athletes, of course, wore NIKE footwear. Consumer boycotts followed. Seven years after the crisis erupted, NIKE “got it.” Phil Knight, Nike’s Founder and CEO gave a major speech and acknowledged that: “I truly believe the American consumer doesn’t want to buy products made under abusive conditions.” NIKE then began a sincere and concerted multi-decade effort to turn its labor practices around and has successfully done so by all accounts. The customer spoke and the seller listened. Progress occurred.
I also remember suave, polished, charming and adorable Kathie Lee Gifford on television crying and looking dazed, like a deer caught in the headlights, when the news broke that 13 and 14 year girls in Honduras were sewing her “Kathie Lee” line of women’s clothing in high volume sweatshops paying the girls less than the minimum wage in HONDURAS! Sales of the Kathie Lee line reportedly dropped like stones from the sky. Thereafter, Kathie Lee became an activist in support of fair treatment of garment workers. Again, the customer spoke and the seller listened. Progress occurred.
However, I also remember a searing experience I had on a business trip to Mexico City in December of 1978. This experience revealed to me that sometimes profit motive drives decision-making to the exclusion of proper regard for people and the environment. It was really the first time that I remember thinking that some form of regulation, however, modest, might be thinkable or even necessary in our limited form of government.
I represented a large manufacturer headquartered in the United States and was flying down to Mexico City to review some labor issues gripping a small manufacturing plant of a glass supplier vital to my client producing its product. Oddly—and important to the story—the vendor’s plant was located in a poor residential neighborhood on the outskirts of Mexico City. My client was concerned whether increasingly tense labor relations at this plant would either cause (a) a drop in the quality of the glass the plant was manufacturing for my client, or (b) interrupt or shut down production entirely as a result of a strike or other labor action.
The morning after I landed in Mexico City, I took a taxi to the vendor’s plant. The cabbie got lost as we entered a residential maze of tightly wound streets wrapping around houses which almost touched each other. Children on every 3rd block, or so, burned worn out rubber car tires in the middle of the streets for warmth. (It was chilly in Mexico City in December). I tried to help my cabbie navigate by rolling down my window to get a better idea of where we were through the soot of the burning tires and otherwise foul air.
And then I smelled it. It was the unmistakable smell which was always associated with the manufacturing process of the kind of glass manufacturing plant I was seeking to visit…but I had never smelled this distinct sulfuric odor out-of-doors, let alone blocks away from a glass plant. I had seen other such plants in the United States outfitted with environmental dust collectors, air filters and what we would today think of as very crude lime-based “air scrubbers” corralling the air inside plants through the use of specially designed ceiling fans housed in uniquely styled roofs. So, I started to give my cabbie driving directions based on the smell in my nose. When we turned the wrong way on one occasion, I quickly knew we turned incorrectly as the stench lessened. We turned around and went back to again catch the trail. I can recall even today thinking, with relief, something like: “Oh good, the smell is getting stronger.”
And then I saw it, or at least the first signs of it. The roadways and the roofs and an occasional tree shown yellow due to the sulfur powder which was a by-product of the vendor’s manufacturing process. After that, the cabbie could navigate on his own as the yellow powder got deeper, richer in color, fluffier and began to almost completely blanket entire blocks: yellow, fluffy, fleecy layered “snow” 1/16 or 1/8 inch thick. We stopped for a moment at a corner to get our bearings and a 5 or 6 year old boy came to my open taxi window to peer inside. I immediately noticed that there was a small amount of the sulfur powder in his hair. And, there was a large smear of it on his right shoulder and right hip where it looked like he had perhaps slid in some of it on the ground. As we drove on, we soon came upon the plant another block down, its garage-door sidewalls all opened up to expel the intense heat of the furnace works within and the roof ventilators blowing yellow dust into the air. Once inside, I quickly realized there were no filters in the roof…just very large high-velocity fans sucking the hot air and fumes out of the plant and expelling them through the center vents in the roof. The entire furnace works was stained yellow and the rooftops of nearby houses were shaggy yellow. Most of the men in the plant wore eye goggles or bandana masks and were covered from head to foot in yellow powder residue, often caked in the sweat and rolls of skin in their eye lids if they did not wear goggles.
I did my business, flew home to Washington D.C., where I was then headquartered, wrote a report of my visit, and then did one other thing. All of my career, I have written, free of charge and complimentary to my clients, what I call “collateral observations memos.” When I observe something during the course of my commission affecting a client’s legal responsibilities, but not within the boundaries of my assignment, I ask the client if it would like me to report on the matter. Rather than ignore the issue, or look the other way, I ask my client if it would like me to apprise it of something its payment of my fees has allowed me to observe about their business operations. If they want to hear about the issue of concern, I promptly write and deliver a short writing detailing my observation and concern about the legal compliance issue presented. In this case, the memo went forward. It raised the question whether the company was aware that its vendor was not applying safety, health and environmental controls commonplace in the United States for such plants and that it appeared to me that employee health, and the health and safety of nearby residents–including young children–was at-risk because United States manufacturing standards were not in use. I also noted that I viewed this as a “collateral observations memorandum” because none of the employees were complaining about the “yellow snow,” as I called it, and it was not an issue in the otherwise difficult labor relations story unfolding between the vendor and its production employees at this plant.
My client’s General Counsel dutifully called me a few weeks later to say that while he appreciated my memorandum, the company would take no action on the matter. This was for several reasons: since there were no employee Complaints and this was the vendor’s plant and not their plant, my client did not want to appear officious and inject itself into business issues as to which it had not been invited and had no control, at any rate. Moreover, senior management thought it was inappropriate to deploy in Mexico City expensive safety and environmental protocols the company had adopted in the United States. American safety standards were not required in Mexico, so why do it? The GC also noted that it would be a bit hypocritical for his company (my client) to insist that the vendor deploy U.S. safety standards in Mexico since my client did not do so in any of its several plants scattered throughout Mexico. When in Rome, do as the Romans do was the GC’s philosophy.
CONCLUSION: There are at least 5 different major HR and legal issues here:
- Is your company going to meet the various compliance standards federal government agencies may soon impose as a condition precedent to getting a federal contract award? and
- Is your company going to meet those standards for the requisite length of time (a three-year “clean bill of health” may be required)?;
- Who is going to ramrod this compliance program within your company since its obligations probably cut across at least the following major Departments: HR, Benefits, Labor Relations, Safety, Compensation, and Legal and probably touch managers and decision-makers in both HQ and in local plants and offices?
- If “Brothers’ Keeper” subcontractor Rules go to Final, will your Company be ready and able to operate a “supply-chain management program” for employment law, labor relations and safety compliance issues at your vendor subcontractors checking to make sure that the Department of Labor purity officers (“Labor Compliance Advisors”) do not disqualify the subcontractor your Company is relying upon to assist your company to fulfill its federal contract?
- Is your company going to file bid award challenges to any federal contract or subcontract the contracting agency denies your company BECAUSE OF a compliance failure with any or all of OFCCP’s 3 compliance programs (EO 11246/503/4212)…GIVEN THAT the Courts have held that federal contracting agencies MAY NOT debar a company (i.e. deny a contract; deny a future contract; or withhold progress payments on an existing contract) pursuant to OFCCP’s 3 statutes without a full hearing and appeal into the federal courts (which takes several years at the earliest). More on this in a future Blog when/if the Fair Play and Safe Workplaces NPRM is issued.
In the meantime, I want to get you ready and have written this piece to start or further your thinking about these difficult and budget-buster issues both as to the local compliance issues with your company and the “Brothers’ Keeper” compliance issues with your oftentimes fractious and difficult to control subcontractors. Have you thought about what self-audit programs and Brothers’ Keeper audits might look like across the 14 at-issue labor statutes and going back three years and cataloguing all reportable labor compliance violations? This is the opening dialogue….There will be more to discuss….Thanks…John
THIS COLUMN IS MEANT TO ASSIST IN A GENERAL UNDERSTANDING OF THE CURRENT LAW AND PRACTICE RELATING TO OFCCP. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. COMPANIES OR INDIVIDUALS WITH PARTICULAR QUESTIONS SHOULD SEEK ADVICE OF COUNSEL.
Reminder: If you have specific OFCCP compliance questions and/or concerns or wish to offer suggestions about future topics for the OFCCP Fox Report, please contact your membership representative at 866-268-6206 (for DE members), or send an email to Candee Chambers at candee@directemployers.org with your ideas.
