The Department of Labor’s Office of Labor Management Standards (“Department”) has published its Final Rule on “Notification of Employee Rights Under Federal Labor Law.” The Rule, issued to implement the provisions of Executive Order 13496 signed by President Barack Obama on January 30, 2009, requires covered federal contractors and subcontractors to post a notice informing employees of the right to unionize and to engage in certain protected activities under the National Labor Relations Act (“NLRA”). This Executive Order, one of several pro-labor Executive Orders signed by the President shortly after taking office, will likely result in more organizing activity. (For more information on the Executive Order, see President Signs Three Pro-Union Executive Orders and DOL Proposes Regulations Clarifying Contractors' Obligation to Notify Employees of Right to Organize.) While the Rule is effective June 19, 2010, an otherwise covered entity is not bound to post the notice until the entity signs a new Federal contract, subcontract or modification mandating compliance with the Executive Order.
Public Comments to Proposed Rules
Proposed rules were released on August 3, 2009. Scores of public comments were submitted regarding the proposed rules, including detailed comments from Jackson Lewis. (See Jackson Lewis Submits Detailed Comments to Proposed Federal Contractor Posting Rules for more information regarding the Jackson Lewis submission.) In its summary of the Final Rule, the Department addressed many public comments. Significantly, it rejected the assertion that the Executive Order is preempted by the NLRA to the extent it seeks to impose obligations and penalties on contractors and subcontractors beyond those already established by the NLRA. The Department explained, “[T]he activity regulated by the Executive Order – the posting of an accurate, noncoercive notice of employee rights – is not conduct that is either protected by Section 7 or prohibited by Section 8 of the NLRA.”
Provisions of the Final Rule
There are significant differences between the proposed and Final Rule.
Scope of Rule – While the Final Rule requires primary contractors to place in subcontracts language requiring their subcontractors to post the required notice (as did the proposal), responding to the concerns of Jackson Lewis and others the Department now has exempted “de minimis” subcontracts of less than $10,000. Also in response to these concerns, the Department clarified that while prime contractors are required to police subcontractors and “cannot turn a blind eye toward noncompliance of its subcontractors, ... [i]f a prime contractor diligently seeks subcontractor compliance following an order [by the Department], but a subcontractor’s compliance is not forthcoming, the prime contractor will not be liable for the subcontractor’s compliance.” This is a critical clarification, as failure to comply with the Final Rule can result in debarment.
Inclusion by Reference – Consistent with Jackson Lewis’ suggestion, the Final Rule allows the notice clause to be incorporated by reference instead of requiring the full notice clause to be contained in all subcontracts. In many instances, the clause could dominate the subcontract.
A More Reasonable Notice Posting – Commenting on the proposed rule, Jackson Lewis urged the Department to adopt a shorter, more balanced posting that allows employees to make informed choices regarding the right to unionize or not unionize. In response, the Department revised the final notice to be more neutral. The proposed notice contained only one example of unlawful union conduct, but the final version contains five. Additionally, the Department added a provision stating that a union owes a duty of fair representation to its members.
Scope of Posting Obligation – The proposed rule’s broad and ambiguous mandate that employers post the notice wherever employees perform work “related to the performance of the contract” aroused the concern of Jackson Lewis and other commentators. While the Department clarified this directive, it did not narrow it. The Final Rule requires posting at all locations where employees “perform work that contributes to or furthers the performance of the contract, or work whose omission would impede the contract’s performance.” The Department’s examples of this work include employees who “assur[e] quality control and security; stor[e] the goods after production; deliver[] them to the government; hir[e], pay[], and provid[e] personnel services for the employees engaged in contract-related work; keep[] financial and accounting records; perform[] related office and clerical tasks; and supervis[e] or manag[e] the employees engaged in such tasks.” To determine whether work is “related to” the contract, the Department clarified it will use the disjunctive test established in connection with the implementation of Section 503 of the Rehabilitation Act. This broad standard is met if “work [is performed] that is necessary to or that facilitates contract performance, even if not directly required by an express contract term, [which] is intended to reflect the practical reality that performance of a contract generally requires the cooperation of a variety of individuals engaged in auxiliary and related functions beyond direct production of the goods or provision of the services that are the object of the contract.” Under the Department's interpretations, included in contract-related activity is indirect or auxiliary work without which the contract could not be effectuated, such as maintenance, repair, personnel and payroll work.
As with the proposed rule, the Final Rule requires employers that typically post employee notices both physically and electronically to post the notice in both ways also. The Department rejected suggestions that the electronic-posting requirement is overly broad and would effectively require posting for the entire workforce rather than only at locations where employees do work “related to” the performance of the contract.
Exemption for Employees Working on Contracts Outside the United States – The proposed rule did not exempt covered employers from providing notice to employees who worked on contracts outside the United States and would thus be beyond the jurisdiction of the NLRA. Jackson Lewis suggested an exemption to this effect. It would be modeled on a similar exclusion made by the Office of Federal Contract Compliance Programs (OFCCP) in the affirmative action context. The Department agreed. The Final Rule, therefore, does “not apply to government contracts for work performed exclusively by employees of U.S. firms operating outside the United States.”
Adjudication of Unfair Labor Practices – Jackson Lewis recommended the Final Rule state expressly that the National Labor Relations Board has exclusive jurisdiction to adjudicate disputes arising from alleged violations of the substantive notice. The Department adopted this suggestion. The Final Rule provides, “[I]f a contractor is failing or refusing to comply with [the substantive provisions of the notice], the contractor may be in violation of the NLRA, and in that case charges may be lodged solely with and adjudicated solely by the NLRB.”
Guidance to Reinstatement – The proposed rule omitted explicit guidance on how a debarred contractor can request reinstatement. To promote transparency, Jackson Lewis suggested the Department incorporate the reinstatement guidelines found in other laws regulating federal contracts. Under the Final Rule, debarred contactors seeking reinstatement must “show that they have established and will carry out policies and practices in compliance with the Executive Order and implementing regulations.” The Director of the Department then has the authority to request a compliance evaluation which may lead to a contractor’s reinstatement. The Director’s decision must be supported by a written decision.
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This is a summary of the 152-page Final Rule and its preamble. Jackson Lewis is preparing a more detailed analysis for clients, including covered entities’ obligations and strategies for compliance. We also will hold a complimentary webinar available to the public on Thursday, May 27, 2010, hosted by Projections, Inc. Employers wishing to attend the webinar may register at http://www.projectionsinc.com/cal_exec_13496.html. Should you have any questions in the meantime, please contact the Jackson Lewis attorney with whom you regularly work.
