On October 24, 2016, a day before the Fair Pay and Safe Workplaces final rule was set to take effect, a US district court in Texas preliminarily enjoined implementation of the Federal Acquisition Regulatory (FAR) Council rule and the Department of Labor (DOL) guidance related to the reporting requirements and restrictions on arbitration agreements, leaving only the paycheck transparency requirements to proceed.
As we discussed in our earlier Alert, the Fair Pay and Safe Workplaces final rule and guidance were issued on August 24, 2016. The final rule requires that companies bidding on federal contracts or subcontracts of at least $500,000 disclose violations of labor laws, to be taken into account by contracting officers in making their contract awards. Certain Fair Pay reporting obligations for solicitations (and prime contracts) valued at $50 million or more, were scheduled to start on October 25, and restrictions on certain pre-dispute arbitration clauses in solicitations of $1 million or more also were set to take effect on October 25.
A group of trade associations, the Associated Builders and Contractors of Southeast Texas, the Associated Builders and Contractors national organization and the National Association of Security Companies, filed suit against the FAR Council and Secretary of Labor seeking declaratory and injunctive relief. Plaintiffs argued, among other things, that the FAR Council, DOL and the President exceeded their authority in promulgating the rule; that the final rule violates due process by disqualifying contractors based on labor law violations that are not final; and that the rule runs afoul of the Administrative Procedure Act and violates the First Amendment of the Constitution.
Finding that the plaintiffs "properly demonstrated immediate and ongoing injury to their members if the rule is allowed to take effect," the court issued a preliminary injunction temporarily blocking implementation and enforcement of the reporting and pre-dispute arbitration provisions.
The court did not enjoin the paycheck transparency requirements, which require federal contractors and subcontractors to include certain information on their employees' pay stubs regarding rate of pay, overtime hours and any deductions, and to notify workers of their status as independent contractors. The paycheck transparency requirements are still scheduled to go into effect for solicitations (and resulting contracts) issued on or after January 1, 2017.
With this injunction in place, contractors should be on the lookout for certain pay clauses (e.g., FAR 52.222-57, 52.222-59 and 52.222-61) and object to their inclusion in new solicitations. We will continue to keep you informed as the litigation progresses.
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