Here We Go Again—Significant Threat of Automatic Debarment from Government Contracts Slipping in Under the Wire!

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
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Two weeks ago, the U.S. House of Representatives passed, by voice vote, a little-understood and little-noticed amendment to the Fiscal Year 2015 Energy and Water Development and Related Agencies Appropriations Act (H.R. 4923) that would debar large federal contractors that have been found to have violated the Fair Labor Standards Act (FLSA) within the past five years. “Debarment” is a sanction imposed for violations of law that prohibits cited contractors from doing business with the federal government for a length of time.

Identical versions of the amendment introduced by Rep. Keith Ellison (D-MN), H.Amdt. 826 and H.Amdt. 926, passed the House last month appended to two appropriations bills—the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act (H.R. 4745) and the Department of Defense Appropriations Act (H.R. 4870)—with virtually no debate or lobbying on the issue by the business community. Gridlock in the U.S. Senate is likely to prevent these appropriations riders from passing, and might result in a year-end omnibus funding measure that is typically stripped of riders such as the Ellison amendment. The issue of debarment and FLSA noncompliance, however, persists and bears close scrutiny.

The Ellison amendment, which bypasses established federal acquisition review and suspension procedures and jumps straight to automatic debarment, puts all jobs tied to federal contracts in jeopardy. Moreover, the ancient FLSA, enacted in 1935, is one of the most complex, confusing, and difficult workplace laws to understand and comply with, even for well-intentioned employers. (The U.S. Department of Labor (DOL) itself, which enforces the law, has even violated the law’s inscrutable distinctions between exempt and nonexempt employees, resulting in a grievance the DOL recently settled with more than 1,900 federal employees). Given these realities—the real possibility of falling afoul of the FLSA’s rules and that under the amendment a finding of fault may subject the violator to sanction—the exclusion of employers from federal contracting is a particularly harsh penalty. Nevertheless, it is foreseeable that the Ellison amendment will continue to be offered for other appropriations bills considered by the House.

Déjà vu—“High Road Government Contracting” Returns to the White House Agenda

Another issue that bears watching is “high road government contracting,” a concept introduced late in the administration of President Clinton and championed by Vice President Biden early in the first term of President Obama’s administration. “High road government contracting” would bar government contractors from bidding on federal contracts if they have violated any of the federal labor and employment laws.

During the latter stages of the Clinton administration, the government issued a final rule revising the Federal Acquisition Regulation and debarring labor and employment law violators from eligibility to bid on federal contracts. A business coalition opposing the “government contractor blacklisting regulation” (as it was then commonly termed) was joined by many of the federal contracting officers who would have been responsible for the difficult task of applying the new regulation. After much consideration, a “midnight regulation” was issued as a final rule in the closing days of the Clinton administration, only to be reversed the following year by the incoming administration of President Bush.

Look for the “high road government contracting” initiative to return in the final years of President Obama’s administration.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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