New Executive Order Lays the Groundwork for Restrictions on the Use of Foreign Labor in Performing Federal Contracts

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On August 3, 2020, President Trump issued an Executive Order titled “Aligning Federal Contracting and Hiring Practices with the Interests of American Workers,” signaling that the administration may seek to limit the ability of federal government contractors and subcontractors to use H-1B visa holders and other temporary foreign laborers on federal government contracts.

The Executive Order requires the head of each federal government agency and executive department to study the contractors’ use of temporary foreign labor on the contract as well as the “offshoring” of services previously performed in the U.S. to foreign countries.  Through this study, the agency and department heads must review the performance of contracts and subcontracts awarded in fiscal years 2018 and 2019 to assess:

(i)   whether contractors (including subcontractors)  used temporary foreign labor for contracts performed in the United States, and, if so, the nature of the work performed by temporary foreign labor on such contracts; whether opportunities for United States workers were affected by such hiring; and any potential effects on the national security caused by such hiring; and

(ii)  whether contractors (including subcontractors) performed in foreign countries services previously performed in the United States, and, if so, whether opportunities for United States workers were affected by such offshoring; whether affected United States workers were eligible for assistance under the Trade Adjustment Assistance program authorized by the Trade Act of 1974; and any potential effects on the national security caused by such offshoring.

As part of this study, agency and department heads must assess the impact of contractors’ foreign labor hiring and offshoring practices on (1) the economy; (2) the efficiency of federal procurement; and (3) national security.  The agencies must report back to the Office of Management and Budget within 120 days if they have recommendations for corrective action.

Separately, the Executive Order launches the Trump administration’s latest attack on the H-1B visa program for specialized foreign professionals.  It directs the Department of Labor and Department of Homeland Security, within 45 days of the Executive Order, to take action to protect U.S. workers from adverse effects caused H-1B visa holders:

Within 45 days of the date of this order, the Secretaries of Labor and Homeland Security shall take action, as appropriate and consistent with applicable law, to protect United States workers from any adverse effects on wages and working conditions caused by the employment of H-1B visa holders at job sites (including third-party job sites), including measures to ensure that all employers of H-1B visa holders, including secondary employers, adhere to the requirements of section 212(n)(1) of the Immigration and Nationality Act (8 U.S.C. 1182(n)(1)).

Although both of the initiatives in the Executive Order are preliminary in nature, they suggest that the administration intends to prohibit or substantially limit the use of non-American labor on federal contracts, whether through prohibitions on foreign labor sources or by favoring American labor sources in the procurement process.  Contractors and subcontractors should closely follow any developments as the federal agencies with which they contract complete their studies.  Contractors should also make certain that their subcontractors are prepared to comply with any resulting prohibitions on the use of foreign labor, whether through offshored services or H-1B and other temporary labor providers.

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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