With President-elect Trump’s victory, what is the future of President Barack Obama’s executive orders? As President Obama’s administration winds down, the Department of Labor has finalized regulations implementing several executive orders impacting government contractors. In a two-part series, we will review what several of those orders require and consider the impact a change in the Office of the President may have on the newly issued regulations affecting government contractors. Part One provides a brief synopsis of how executive orders have been handled in prior transitions. Part One also addresses two regulations affecting government contractors – the Fair Pay and Safe Workplace guidelines and the updated Sex Discrimination guidelines. Part Two will address the Paid Sick Time regulation for government contractors. Several weeks ago, a court intervened and enjoined part of the Fair Pay and Safe Workplace regulations. We explain this development below and highlight the Paycheck Transparency provisions of those regulations, which were not enjoined.

Brief History of Executive Orders on Labor and Employment

Presidents of both parties have long used executive orders to implement policies affecting government contractors’ labor and employment policies. Executive orders do not terminate or cease upon the end of a presidential administration. But a new president may rescind with the stroke of a pen the executive orders of a prior administration. Over the last 25 years that has occurred with some regularity. Other executive orders have had some staying power. Notably, Executive Order 11246, requiring government contractors not to discriminate and to develop affirmative action plans, has remained in place since 1965 when President Lyndon Johnson issued it.

When the transition of the presidency involves a transition in the governing party, some executive orders have been rescinded almost immediately. For example, on January 30, 2009, President Obama rescinded three of his predecessor’s executive orders regarding labor issues for government contractors. But President Obama is not alone in his use of the pen to rewrite policy. Presidents George W. Bush and Bill Clinton both took similar actions. In perhaps the most widely cited example of a change in administration meaning a change in labor policy, President Clinton rescinded President George H. W. Bush’s executive order on the Beck notice that required government contractors to advise employees they could object and decline to pay the portion of union dues spent on political activities. President George W. Bush returned the favor in 2001 reinstating the Beck notice requirement upon his election. Ultimately, President Obama rescinded the Beck notice requirement in January 2009, opting for an order that required government contractors to advise employees of their right to join a union and not to join a union.

What does this history tell us? President-elect Trump will have the power to rescind the below executive orders, but President Trump’s views on particular labor and employment issues are not clear. We suspect some of the executive orders, such as the Fair Pay and Safe Workplaces, may not survive long, particularly given the judicial hostility to their provisions, but, for a candidate who campaigned on other themes, whether these orders make the list of priorities to rescind is difficult to predict. A key clue to anticipating the future is who will have responsibility on the transition team for establishing priorities on Department of Labor issues. With that, we turn to two of the recently issued regulations implementing President Obama’s orders affecting government contractors.

Fair Pay and Safe Workplace

The Department of Labor’s final regulations implementing Executive Order 13673, titled Fair Pay and Safe Workplace, have been very controversial. Those regulations would implement new recordkeeping and disclosure obligations on government contractors.^[1] On October 24, 2016, a federal district court in Texas blocked parts of the Final Rules from taking effect, ruling it likely exceeds executive authority and is preempted by other federal labor laws.^[2] While the court’s action ensures at least temporary relief or delay from the effect of these rules, not all provisions of the rule were enjoined.

Absent further intervention from courts, the Paycheck Transparency provisions of Executive Order 13673 will take effect on January 1, 2017. Contractors with contracts valued at $500,000 or more will be required to provide their employees with “a document with information concerning that individual’s hours worked, overtime hours, pay, and any additions made to or deductions made from pay.” This provision also requires contractors to inform the individual in writing if they are being treated as an independent contractor and not an employee. The employer must provide the notice at the time the independent contractor relationship is established or before the contractor begins to work on the government contract. The latter provision continues an effort to ferret out and reduce the number of independent contractors hired by government contractors.

Last month’s ruling enjoined the enforcement of the other material aspects of the new rules. As the future of those aspects remains in doubt, we will highlight their provisions here. These are significant and far-reaching rule changes, and, if they become effective, they will impact not only what government contractors must disclose to the government but also are likely to affect how awards are made and how employers defend future federal agency investigations. The provisions of the new rules that could come into effect include:

1. • Disclosures: Federal contractors will be required to disclose violations of 14 federal labor laws and their state law equivalents that occurred in the past three years.^[3] Most controversial has been what the Department of Labor deems to be a merits determination.
   • o Disclosure of Determinations: Administrative merits determinations include complaints filed by EEOC or the Department of Labor agencies alleging the employer violated the law. A contractor could rightly quarrel that in many cases those complaints, while filed in court, represent only unproven allegations. Indeed, the nature of the investigations leading to agency litigation varies by agency, office and investigator. But the scope of merits determinations goes far beyond filed complaints. It includes:
   • - EEOC Reasonable Cause Determinations;
   • - Complaints issued by Regional Directors of the NLRB;
   • - OSHA citations issued following inspection; and
   • - OFCCP Show Cause Notices.

All of these are deemed merits determinations even if the final decisions have not been determined by a court or judge. Other provisions of the order include:

• o Contract Threshold: Initially, the disclosure requirement will only apply on solicitations valued at $50 million or more. Starting April 25, 2017, if the rules become effective, the disclosure requirement will apply to solicitations of $500,000 or more.
• o Subcontractors: Starting October 25, 2017, subcontractor disclosures will be required on contracts valued at $500,000 or more. Subcontractors will make their disclosures directly to the Department of Labor, not to the prime contractors. The Department of Labor then determines whether the violations will affect subcontractor access to work.

1. • Arbitration Agreements: If the injunction on the new rule is overturned or lifted, contractors will be prohibited from implementing pre-dispute requirements that require employees to arbitrate i) Title VII of the Civil Rights Act of 1964 disputes; and ii) torts arising out of or related to sexual harassment or sexual assault. This provision is limited to contracts worth more than $1 million. Arbitration for such disputes may be conducted only with the voluntary consent, and such consent must be obtained after the alleged incident occurs.

Sex Discrimination Update

On August 15, 2016, the Office of Federal Contract Compliance Programs’ Final Rule updating the sex discrimination rules under Executive Order 11246 became effective.^[4] The scope and sweep of the update is wide ranging. Some changes are not surprising and are in line with changes in the law and society over the last 30 years. In other ways, the sex discrimination guidelines are broader than the task originally envisioned. On the mundane side, the updated rules:

1. • Require contractors to provide workplace accommodations, e.g. bathroom breaks and light duty assignments to employees who need accommodations because of pregnancy, childbirth or related medical conditions;
2. • Prohibit contractors from paying differently because of sex and mandate equal benefits based on sex; and
3. • Prohibit sexual harassment.

In other cases, the sweep and effect of the new rules is significant and builds on Executive Order 13672 – the July 2014 order barring discrimination on the basis of sexual orientation and gender identity. The provisions of the August 2016 updated rules require government contractors to:

1. • Provide that sex discrimination includes discrimination because of an employee’s gender identity, i.e., transgender workers;
2. • Require contractors to allow workers to use bathrooms, showers and similar facilities consistent with the gender with which they identify;
3. • Prohibit express categorical exclusions^[5] in healthcare plans for all care related to gender dysphoria or gender transitions; and
4. • Prohibit sexual harassment based on gender identity – “one’s internal sense of one’s own gender” that “may or may not correspond to the sex assigned to a person at birth, and may or may not be visible to others.”

Predicting the outcome of the election may have been difficult. Now, predicting what unfolds as President-elect Trump transitions into office may prove to be equally difficult. We expect the new administration will issue a series of executive orders to unwind or rescind some of President Obama’s executive orders in late January or early February 2017. If the two discussed above are not in that initial batch for rescinding, they may prove to have staying power under the new administration.

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Notes:

^[1] See Defense Department, General Services Administration and the National Aeronautics and Space Administration, Federal Acquisition Regulation: Fair Pay and Safe Workplaces, 81 Fed. Reg. 58562-58651 (Aug. 25, 2016); see also Department of Labor, Guidance for Executive Order 13673: Fair Pay and Safe Workplaces, 81 Fed. Reg. 58653-58768 (Aug. 25, 2016). 

^[2] See Memorandum and Order Granting Preliminary Injunction, Associated Builders & Contractors v. Anne Rung, No. 1:16-CV-425 (E.D. Tx. Oct. 24, 2016).

^[3] The Final Rule identifies the following 14 federal laws as covered by the Executive Order: the Fair Labor Standards Act, the Occupational Safety and Health Act, National Labor Relations Act, Migrant and Seasonal Agricultural Worker Protection Act, Family and Medical Leave Act, Davis-Bacon Act, Service Contract Act, Title VII of the Civil Rights Act, Americans with Disabilities Act, Age Discrimination in Employment Act, Executive Order 11246 (affirmative action and equal employment opportunity), Vietnam Era Veterans’ Readjustment Assistance Act, Section 503 of the Rehabilitation Act, Executive Order 13658 (federal contractor minimum wage), and the state law equivalents of these laws and executive orders.

^[4] Office of Federal Contract Compliance Programs, Discrimination on the Basis of Sex, 81 Fed. Reg. 39107-39169 (Jun. 15, 2016).

^[5] This appears in the preamble, creating questions about its enforceability, but it is consistent with other efforts.