Fair Pay rules are 'disaster waiting to happen'

Since 2008, the Obama administration has issued no fewer than five executive orders that take direct aim at the labor and personnel practices of federal contractors. Most have involved concepts with which we all agree, like ensuring that there is no workplace discrimination or that contractor employees earn a reasonable wage.

And since the issues they were designed to address were really non-issues in the contract space, they did not generate a lot of debate. Others, like the administration’s first order, which requires that companies winning contracts must give the right of first refusal to the employees of the (losing) incumbent company, have been based on questionable data and could have had really significant impacts on a company’s hiring rights and flexibilities.

In that particular case, the final implementing rules seem to have recognized the need for balance and fairness and thus the impacts are likely to be minimal.

But the latest executive order, the “Fair Pay and Safe Workplaces” directive, is of a whole different cut.

As we and others have stressed since it was issued in July 2014, the order wildly over-reaches, lacks basic concepts of fairness and due process, is of questionable legal standing, and will be incredibly expensive for both the government and industry, while also being wholly unnecessary.

Many of us have seen this movie before (it was called “The Blacklisting Rule 2000”), and made clear to the administration, and later in congressional testimony, that this new iteration, while perhaps well intended, was a disaster waiting to happen.

As a result of the uproar, the administration did something it has done far too little of. Top officials, including the secretary of Labor, the head of the Domestic Policy Council, and the OMB deputy director for management, met and spoke extensively with PSC and others.

They were eager, they told us, to not only hear our concerns but also hear our thoughts on what should be done in the rule-making process to make the order more palatable and workable.  But on May 27, when the proposed implementing rules were issued by OMB and the Labor Department, almost none of the concerns we raised were addressed.

Thus, the disaster is still pending.

For those unfamiliar with it, the Fair Pay and Safe Workplaces order will require companies to report on every proposal, whether they have had any violations of any of 14 federal labor statutes and/or scores of as yet unidentified state statutes in the preceding three years.

Government contracting officers, with the assistance of teams of “labor compliance advisors” will then use that information to determine if the company has demonstrated a pattern of pervasive and willful abuse of these statutes. If it is so determined, the company will be deemed “non-responsible” and thus ineligible for the contract at hand.

On the surface that may sound reasonable. After all, no one supports giving federal dollars to companies that routinely thumb their noses at the law.

But that is not what this order does. It equates routine administrative mistakes with nefarious intent. And it is not just about legally adjudicated cases. It also encompasses arbitral settlements, administrative settlements (which are often confidential), and even allegations of wrongdoing or violations that result from federal agency errors, as opposed to contractor mistakes.

In other words, while theoretically aimed at companies that thumb their noses at federal law, this executive order thumbs its nose at some of the most basic precepts of our system of laws, the most basic of which is due process.

As if that isn’t bad enough, consider this: subcontractors will have to submit this data to their prime contractors who will have to first make their own decisions about the severity (and thus competitive impact) of any violations and then hope the government doesn’t second guess its decision.

How crazy is that?

And considering that today's partner is often tomorrow's competitor, just imagine the downstream implications of having to share this kind of information, much of which is confidential.

There are many other troubling aspects to the order and a real fight over it lies ahead. But let me leave you with one final question: Why?

Why is this necessary? What authorities does the government not have today to deny contracts to companies with records of pervasive and willful abuse of federal law?

The answer: The government already has, can and does execute a wide range of actions when such cases arise. Even more significantly, the administration itself acknowledges this fact. Their own estimates are that only 25 percent of all government contractors have any violations of relevance, and of that 25 percent, only “a fraction” (their words) have any violations that would be reportable under the order.

So how does the administration, which claims to be so focused on the smart use of data, justify moving forward with the order? It's even more curious since the administration acknowledges that it already has most of the data; the problem is that the relevant databases don’t effectively interoperate and share the information.

To this there is a simple response: Take a portion of the massive costs the government will incur implementing the order and instead devote them to fixing the databases and information systems.

That would be a lot more logical than fomenting an unexecutable and unfair rule of dubious legal standing that itself thumbs its nose at the law.

And unlike the proposed rules, it might actually help the administration achieve its stated objectives.