Bill Would Deny Contracts For Poor Labor RecordsBy David M. Nadler and Kendrick C. FongContributing WritersRecently, several controversial provisions were introduced by legislators to Congress th

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Bill Would Deny Contracts For Poor Labor Records

By David M. Nadler and Kendrick C. Fong
Contributing Writers

Recently, several controversial provisions were introduced by legislators to Congress that would allow the secretary of labor to deny federal contracts and grants to companies with a history of violating federal labor laws.

The principal piece of proposed legislation, titled the Federal Procurement and Assistance Integrity Act, has been referred to various house committees and subcommittees, including the government technology panel of the House Committee on Government Reform and Oversight.

This bill, which has been hotly contested by industry, would clarify existing law by giving the Department of Labor the authority to debar and suspend companies from receiving federal contracts or grants if they have a clear pattern or practice of violating the National Labor Relations Act (NLRA), the Occupational Safety and Health Act (OSHA), the Fair Labor Standards Act (FLSA) and various veterans' preference laws. Although federal agencies already have the authority to suspend and debar companies based on violations of law, the proposed provisions are intended to add bite to existing law and increase the Department of Labor's role in policing violators.

The Federal Procurement and Assistance Integrity Act builds upon the efforts of former Sen. Paul Simon (D-Ill.), who commissioned a General Accounting Office report in 1995 that concluded that contractors with histories of labor law violations received as much as 13 percent of federal contracts. In 1996, a second GAO report concluded that 261 contractors that were each assessed fines of at least $15,000 for health and safety violations received more than 20 percent of the $176 billion in federal contracts awarded in 1994.

In addition to the Federal Procurement and Assistance Integrity Act, the Clinton administration also has proposed regulatory changes to ensure that federal contractors have satisfactory records of compliance with labor laws, including those involving wages, benefits, equal opportunity, collective bargaining, and health and safety.

These provisions are controversial for a number of reasons.

First, the proposed laws would authorize the secretary of labor to debar or suspend "a person from [federal] procurement activities or nonprocurement activities upon a finding" that the person violated labor laws. The proposed laws, however, do not require any final administrative or judicial disposition before a "finding" can be made. In addition, industry also has complained that the proposed provisions fail to prescribe even minimal standards of due process before a "finding" is issued and suspension or debarment occurs.

Recently, an industry official gave an illustration of abuses that could result from the proposed provisions. For instance, nothing in the proposed rules would preclude a former employee who subsequently joins a union from returning to the former employer with voluminous requests for records during a "salting" campaign. In a salting campaign, unions send their agents into nonunion workplaces under the guise of seeking employment and organizing workers. In recent years, salting has become an instrument of economic destruction aimed at nonunion companies. Hiding behind the shield of the NLRA, salts often try to destroy employers through various actions that harass or disrupt company operations, including frivolous discrimination complaints.

The consequences of such "salting" can be devastating to companies, particularly small businesses. These actions often lead to increased record-keeping requirements under OSHA, and, depending on the extent of harassment, may significantly increase a contractor's chance to be found in violation of a mere paperwork requirement. Under the proposed rules, a series of mere paperwork violations can eliminate a company from federal contracting.

Another concern that has stirred industry about the proposed provisions is that federal procurement officers would be required to understand labor laws, including the NLRA, OSHA and FLSA. In addition to understanding myriad existing procurement laws, contracting officers would be required to evaluate a contractor's past performance records to eliminate from procurements any companies with "unsatisfactory" labor records. Indeed, a mere record-keeping paperwork violation may be a stigma against a contractor for participating in government work. This major change in labor law could arguably preclude any contractor who has allegedly violated NLRA, OSHA or FLSA from competing for federal work.

David M. Nadler is a partner in the Washington law firm of Dickstein Shapiro Morin & Oshinsky LLP. He can be reached at (202) 828-2281 or by e-mail at NadlerD@dsmo.com. Kendrick C. Fong is an associate with the firm.

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