Judge Blocks Fair Pay and Safe Workplaces Rules - What's Next?
By: Laura A. Mitchell - Shareholder, Affirmative Action & OFCCP Practice Group
Jackson Lewis P.C.
The night before the Fair Pay and Safe Workplaces executive order and its final rules and guidance (the "rules") were to go into effect, a U.S. District Court Judge ordered a nationwide preliminary injunction blocking most aspects of the rules. The court's decision was in response to a lawsuit brought by several large construction and security industry groups challenging the rules. The only surviving provision – the paycheck transparency requirement – takes effect on January 1, 2017.
The heavily-criticized rules implementing the Executive Order, which were set to take effect on October 25, 2016, require contractors to report certain preliminary labor law decisions as "violations" during the procurement contract bidding process. The purpose of the reporting is to allow the contracting agency to assess the reported violations to determine whether a contractor should be awarded or retain a contract. The other provisions address pay transparency and prohibit mandatory pre-dispute arbitration agreements covering Title VII or sexual assault/harassment claims.
In the recently issued decision the court found the plaintiffs established the four factors required to support a preliminary injunction: (1) a substantial likelihood of success on the merits; (2) irreparable harm in the absence of immediate relief; (3) the balance of harms favors the plaintiffs; and (4) the public interest supports the issuance of the injunction to maintain the status quo. The first factor is generally a high bar for plaintiffs to meet, but the court found that the plaintiffs were likely to succeed on all claims alleged because the rules (1) exceed the Executive Branch's authority and are preempted by other federal labor laws; (2) violate the First Amendment; (3) violate the due process rights of government contractors; (4) are arbitrary and capricious; and (5) violate the Federal Arbitration Act. The court was particularly concerned with the fact that the rules would require contractors to disclose violations that are not final and may be appealed or reversed for which they could risk losing contracts.
For now, contractors and subcontractors bidding on covered contracts of $500,000 or more (other than subcontracts for commercially available off-the-shelf items) after January 1, 2017 must comply only with the paycheck transparency and independent contractor notice requirements. Under these requirements, contractors must provide employees with wage statements that report hours worked, overtime hours, pay, and any additions to or deductions from their pay; and inform independent contractors of their status in writing.
While it is likely that the federal government will appeal the injunction, which they have until December 23, 2016 to do, there are several other options for how the government could proceed. These include continuing to litigate the case before the district court or even revising the rules to address some of the court's and plaintiffs' concerns. It is also likely that political considerations and the election will play a part in how the government moves forward. Accordingly, contractors and subcontracts that expected to be covered by the rules should continue to monitor further developments and prepare as if they will have to comply with all aspects of the rules in the future.