Federal Contractor Vaccine Mandate Enjoined in Kentucky, Ohio, and Tennessee: The Implications

McCarter & English Blog: Government Contracts & Export Controls

The Government’s enforcement of contract provisions implementing the COVID-19 vaccine mandate with regard to federal contractors and subcontractors required by President Biden’s Executive Order 14042 (the EO) was preliminarily enjoined by a federal court in Kentucky in a case brought by the states of Kentucky, Ohio, and Tennessee (and two Ohio sheriffs). In his Opinion and Order of November 30, 2021 (the Order), Judge Gregory F. Van Tatenhove of the US District Court for the Eastern District of Kentucky (the Kentucky court) concluded, among other findings, that it was likely that the President exceeded his authority under laws delegating to the President management of federal procurement and requiring federal agencies to engage in “full and open competition” procurements. The court also raised concerns about whether the President’s actions violated the Tenth Amendment of the Constitution and the “nondelegation doctrine,” a constitutional principle recognized by the US Supreme Court that Congress does not have unlimited discretion in delegating to the President the power to make laws.

Since the issuance of the EO and its endorsement by the Office of Management and Budget (OMB) (which recently revised and expanded its revised economy and efficiency analysis), federal agencies and authorities have implemented the EO by requiring the inclusion in a variety of contracts and other instruments of a contract clause (the Clause) that obligates federal contracting entities and certain of their subcontractors to follow guidance on vaccination of covered employees and workplace restrictions published by the Safer Federal Workforce Task Force (recently amended on November 10) (Task Force Guidance). As we have written here, here, here, and here, the Clause, when included in particular contracts, could mandate that a broad swath of employees be “fully vaccinated” (unless covered by a medical or religious exception) by January 18, 2022 (last shot in the arm by January 4). The Clause also imposes masking and social distancing requirements in covered workforces and requires the appointment of a designated person(s) to ensure compliance.

The injunction, effective immediately, is merely a preliminary injunction and is subject to change or revocation upon a final adjudication of the merits by the Kentucky court. That could take months or even a year or more. The Kentucky court sits in the district covered by the US Court of Appeals for the Sixth Circuit, which is the appellate court selected at random on November 16 to hear the consolidated challenges to the COVID-19 emergency temporary standard issued by the Occupational Safety and Health Administration. The appeal of Judge Van Tatenhove’s final decision will be heard by the same appellate court.

The injunction does not apply to all federal contracts—the court elected to apply the injunction only to those in the states that filed the Complaint— Kentucky, Ohio, and Tennessee (we acknowledge Kentucky is a Commonwealth)—and are parties before the court. There is broad confusion about how this limitation applies. The court, expressing some animus to nationwide injunctions, stated that if a permanent injunction is issued, it shall apply to “Kentucky, Ohio, and Tennessee” (and certain additional sheriff plaintiffs within those states). In its Order setting out the parameters of the preliminary injunction, the Kentucky court stated: “The Government is ENJOINED from enforcing the vaccine mandate for federal contractors and subcontractors in all covered contracts in Kentucky, Ohio, and Tennessee.” What might this mean, and how should a contractor subject to the vaccine mandate and workplace restrictions in the Clause respond if it has a nexus to one or more of these states?

  1. The Order is clear at least on one matter: a prime contractor, subject to the Clause and with covered employees in the states of Kentucky, Ohio, and Tennessee, need not impose the vaccine mandate on such employees while the injunction is pending. The Government may not enforce the vaccination requirements of the Clause on such contractors. The issue of subcontractors is addressed below.
  2. The Order does not void the Clause; it merely prevents the Government from enforcing the Clause’s vaccination requirement. This presumably means that the workforce safety restrictions and the requirement to appoint a responsible person for compliance remain enforceable in all states, and contractors are bound by them. This is one example where the Kentucky court could have been more precise. The Order neither invalidates the Clause nor addresses the non-vaccination provisions of the Clause. We do not read the Order as prohibiting contracting officers from including the Clause in new contracts or existing contracts; however, contracting officers can have no expectation that contractors covered by the Order will abide by the Clause’s vaccination requirements while the Order is pending.
  3. While the Order certainly applies to covered workplaces and employees located in the three states, it may also apply to contractors whose corporate headquarters are in one of the three states but whose workplaces may extend outside the state. The Order asks and answers the question “Can the president use congressionally delegated authority to manage the federal procurement of goods and services to impose vaccines on the employees of federal contractors and subcontractors?” And the answer is “no.” The question is pointedly directed to the contractors. The section of the Order addressing standing revolves around contractors—and not covered contracts. Moreover, in the section addressing the Competition in Contracting Act, the court concludes that the vaccine mandate may preclude the statutorily required “full and open competition” because “contractors who ‘represent[] the best value to the government’ but choose not to follow the vaccine mandate would be precluded from effectively competing for government contracts.”Based on this language, a reasonable argument could be made that contractors based in Kentucky, Ohio, or Tennessee should benefit from the Order so they can compete for Government contracts without being subject to the vaccine mandate as it applies to all their employees, not just employees located within the three states. However, any contractor seeking to rely on the Order to avoid or delay imposing vaccination requirements for employees outside the three states covered by the Order does so at its peril—and should likely only do so after consultation with counsel and with the contracting officer for the contract at issue.
  4. Employees at home or in covered workplaces of subcontractors in the three states fall within the Order. The Order enjoins the Government from enforcing the vaccine mandate in covered contracts in Kentucky, Ohio, and Tennessee. More specifically, the Order enjoins the Government from enforcing the vaccine mandate “for federal contractors and subcontractors ….” Subcontractors have no privity with the Government. The vaccination requirements in subcontracts are as a result of prime or upper-tier subcontractors including the Clause in the subcontract. Although not specifically stated, any reasonable reading of the Order must extend the injunction to prime contractors enforcing the vaccination requirements in the Clause against noncompliant subcontractors.And as is the case with prime contractors, a case could be made that subcontractors whose corporate headquarters are in Kentucky, Ohio, or Tennessee are not subject to the vaccine mandate even though their covered workforce may extend beyond those states. Again, for workplaces and employees outside the three states, any subcontractor acts at its peril without some express agreement with its contracting party (and a nod by the Government contracting officer).
  5. The jury is out on covered employees who escape to Kentucky, Ohio, or Tennessee to work remotely and avoid vaccination. The Order enjoins the Government from enforcing the vaccine mandate “in all covered contracts in Kentucky, Ohio, or Tennessee.” The Task Force Guidance requires that employees directly working on a covered contract or whose performance is necessary for the performance of the covered contract be fully vaccinated, even if they are working remotely. If an employee working on a covered contract is working remotely in one of these states, is the covered contract “in” the state? Perhaps, but caution should be observed in looking the other way when an employee moves to one of the states to avoid the mandate, or in encouraging an employee to do so. Decisions affecting that employee require careful consultation with human resources staff and counsel.
  6. The Order does not address the thorny problem of states that in some manner restrict employers from imposing vaccine mandates for employees who refuse to get vaccinated without a valid medical or religious exemption. The question presented in the Order is expressly stated as “narrow”: can the President use congressionally delegated authority to impose vaccines on the employees of federal contractors and subcontractors? On November 12, 2021, the Governor of Tennessee (one of the three states enjoined by the Order) signed a law prohibiting, among other things, a business from compelling a person to provide proof of vaccination “if the person objects to receiving a COVID-19 vaccine for any reason.” The law also prohibits any “adverse action” against such an employee. While not outlawing vaccine mandates per se, the law directly challenges the requirement in the Task Force Guidance (which the Clause requires covered federal contractors to follow) that covered employees provide proof of vaccination.

What happens next? This is truly a dynamic situation. There are cases challenging the federal contractor mandates percolating throughout the courts in many jurisdictions. (Moreover, many states continue to adopt or consider prohibitions on vaccine mandates imposed by employers in their states.) Given the wide discretion afforded the executive branch in attaching socioeconomic requirements to federal contracts (e.g., affirmative action plans and minimum wage requirements), it may prove to be the case that Judge Van Tatenhove’s order could be the exception and not the rule. However, as it stands now, employees in covered workplaces of contractors and subcontractors subject to the Federal Acquisition Regulation and Defense Federal Acquisition Regulation Supplement clauses in Kentucky, Ohio, and Tennessee may not be subject to federal enforcement. Nonetheless, contractors should continue to address their respective reasonable interpretation of the clauses to which they are subject to ensure that when or if the injunction is lifted, they are able to respond accordingly.

[View source.]

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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