Government Contracts Monitor
Jackson Kelly attorney helps CODSIA oppose and obtain withdrawal of the Department of Agriculture’s “Direct Final” and “Proposed” Rules on “Labor Law Violations.”
February 15, 2012
Jackson Kelly attorney Hopewell Darneille recently helped prepare comments submitted by the Council of Defense and Space Industry Associations (“CODSIA”) opposing the United States Department of Agriculture (“USDA”) Acquisition Regulation (“AGAR”) proposed new Clause 452.222-7001, “Labor Law Violations.” USDA’s proposal was published in the Federal Register on December 1, 2011, as both a “direct final rule” (76 Fed. Reg. 74722, 12/1/11) and a “proposed rule” (76 Fed. Reg. 74755, 12/1/11).
In view of CODSIA’s adverse comments, USDA has officially withdrawn both the “direct final rule,” which had been scheduled to take effect on February 29, 2012 (77 Fed. Reg. 5714, 2/6/12) and the “proposed rule” (77 Fed. Reg. 5750, 2/6/11). This is not necessarily the end of this matter,however, as USDA may decide to re-issue the “proposed rule” after considering the submitted comments.
The proposed new AGAR “Labor Law Violations” clause, which would have applied to all USDA contracts exceeding the simplified acquisition threshold, including all contract options, had three principal new parts:
(1) acceptance of a contract award would be deemed a new “certification” by the contractor that it is in compliance with “all applicable labor laws”, and that, to the best of its knowledge, its subcontractors at any tier, and suppliers, are also in compliance with “all applicable labor laws”; USDA stated that it “considers certification under this clause to be a certification under the False Claims Act”;
(2) a new post-award requirement for “the contractor . . . [to] promptly report[] to the contracting officer when formal allegations or formal findings of non-compliance of labor laws are determined” (emphasis added); and
(3) USDA “will vigorously pursue corrective action against the contractor and/or any tier subcontractor or supplier, in the event of a violation of labor law made in the provision of supplies and/or services under this or any other government contract” (emphasis added).
CODSIA opposed the “direct final” and “proposed” rules on both procedural and substantive grounds. CODSIA also asked USDA to reconsider the need for the proposed new clause in view of the existing enforcement mechanisms provided under the nation’s various labor laws, as well as the significant burden that the clause would impose on both contractors as well as agency personnel. CODSIA noted that, “[a]ccording to the Department of Labor (‘DOL’), there are more than 180 federal laws, as well as implementing regulations, governing the activities of more than 10 million employers and 125 million workers,” and that “[e]nforcement of this complicated web of statutes and regulations has been delegated to a number of different organizations within DOL . . . .”
Procedurally, CODSIA challenged USDA’s action in issuing this as a “direct final rule,” since direct final rulemaking authority is appropriate only for rules “believed to be noncontroversial and unlikely to result in adverse comments . . . ." (USDA Dept Reg. DR-1512, at 6). CODSIA further challenged the proposed clause as imposing a new contract certification, in violation of Section 29 of the Office of Federal Procurement Policy Act, which prohibits an agency from creating an acquisition certification requirement that is not imposed by statute or approved by the head of the agency. CODSIA further noted that the clause contravenes FAR 12.301(a), which states that “contracts for the acquisition of commercial items shall, to the maximum extent practicable, include only those clauses . . . [r]equired to implement provisions of law or executive orders applicable to the acquisition of commercial items.” See also FAR 12.301(f), limiting the ability of agencies to supplement the FAR provisions and clauses applicable to commercial items.
Substantively, CODSIA pointed out that the proposed rule contains a number of ambiguities that must be addressed and resolved. First, the proposed clause is unclear as to which labor laws are to be deemed “applicable,” including whether such includes state labor laws as well as federal. Second, what are “formal allegations” or “formal findings” of non-compliance, and what is meant by “determined” and who makes such “determination”? Although not raised by CODSIA, does such “determination” mean a final, non-appealable, decision, or is any interim “determination” sufficient to require reporting? Third, while the new certification requirements clearly extend to subcontractors and suppliers, it is not clear whether the reporting obligation likewise applies to subcontractors and suppliers, or whether the reporting obligation would be limited to non-compliance only by the contractor. Fourth, CODSIA noted that the term “supplier” is not defined in the FAR or AGAR, and could be interpreted to extend broadly to any firm providing goods or services to a USDA contractor, regardless as to whether the particular supplier has any nexus to a government contract.
Contractors, and particularly those doing business with USDA, should keep an eye on this issue and any new effort by USDA to resurrect the proposed "Labor Violations Clause," and consider submitting comments opposing any efforts to impose new certification or reporting requirements that are not very narrowly defined. At least in its current form, the proposed clause is rife with uncertainty, burdens and new risks, and, if further pursued and adopted by USDA in any form resembling the present language, might well set a precedent for other agencies.
CODSIA currently consists of six industry trade associations, and thus represents the comments and thoughts of thousands of government contractors nationwide on acquisition policy issues. The six associations are the Professional Services Council (“PSC”), the National Defense Industrial Association (“NDIA”), the U.S. Chamber of Commerce, Tech America, the American Council of Engineering Companies and the Aerospace Industries Association (“AIA”).
Hopewell Darneille is Vice-Chair of the ABA Public Contract Law Section’s “Employment Safety and Labor Committee”, and represents a wide range of clients on government contract issues, including labor and employment issues affecting government contractors including particularly the Service Contract Act.