Contractors That Saved The Federal Government Money By Offshoring Work Could Be Second-Guessed

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An executive order signed by President Trump on August 3, 2020 (“Order”) prompts federal contractors to review their hiring practices and, if they offshored federal contract work, to determine the impact on hiring U.S. workers. The Order requires department and agency heads to review the performance of contracts, and contractors should ensure that they are in compliance with all applicable regulations and guidance, including Office of Federal Contract Compliance Programs (“OFCCP”) regulations[1] and Executive Order 11246, Equal Employment Opportunity.

The Order, entitled “Aligning Federal Contracting and Hiring Practices With the Interests of American Workers,” is based on a policy of “creat[ing] opportunities for United States workers to compete for jobs, including jobs created through Federal contracts.” According to a White House Fact Sheet released with the Order, the President acted in response to the Tennessee Valley Authority’s announcement several months ago that it would outsource 20 percent of its technology jobs to companies based in foreign countries.

The Order requires each executive department and agency to review contracts awarded in fiscal years 2018 and 2019 to assess whether federal contractors and subcontractors:

  • used temporary foreign labor for contracts performed in the United States, and
  • offshored services previously performed in the United States to foreign countries.

By December 1, 2020, department and agency heads must determine whether opportunities for U.S. workers were affected by such practices, identify any potential effects on national security, assess any negative impact of these practices on Federal procurement, and propose corrective actions to address negative impacts.

The Order also targets the H-1B visa program for guest workers — the program that allows employers to temporarily hire specially qualified individuals when they cannot find U.S. workers with the necessary skills and abilities. The Order requires the Secretaries of Labor and Homeland Security to “take action” by September 17, 2020, to protect U.S. workers from “adverse effects on wages and working conditions caused by the employment of H-1B visa holders at job sites,” including by ensuring the legal standards for the program are enforced. President Trump previously suspended entry into the United States under the H-1B and other similar visa programs, and he has extended that suspension until the end of the year.

Contractors that have offshored activities should evaluate these issues. Because the reviews required by the Order could lead to audits of compliance with OFCCP regulations and the Executive Order on affirmative action, those contractors also should review the status of their compliance in those areas.

[1] The OFCCP’s Federal Contract Compliance Manual was updated in May 2020 (available here: https://www.dol.gov/agencies/ofccp/manual/fccm).

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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