On March 27, 2017, President Trump signed a joint resolution of disapproval (H.J. Res. 37) to block the rule implementing Executive Order 13,673, Fair Pay and Safe Workplaces, otherwise known as the "blacklisting" rule.  The resolution narrowly cleared the Senate on March 6 in a 49-48 vote, a month after the House similarly approved its passage. The order and its implementing regulations would have required federal contractors to disclose adverse findings and decisions related to their compliance with federal and state labor and employment laws, and empowered federal agencies to deny contracts to employers deemed to lack a satisfactory record of integrity and business ethics based on such disclosures. The order also included pay disclosure requirements and a prohibition on pre-dispute arbitration agreements.

The rule's disclosure and disqualification requirements, as well as the arbitration restrictions, had already been blocked following a Texas federal district court's grant of a preliminary injunction in October 2016. Associated Builders and Contractors of S.E. Tex. v. Rung, No. 1:16-CV-425 (E.D. Tex. Oct. 24, 2016).¹ The enactment of H.J. Res. 37 effectively nullifies the entire rule, including the paycheck disclosures and arbitration provisions.

Resolutions of disapproval are authorized under the Congressional Review Act (CRA), a law enacted in 1996 that provides Congress with a means to overturn a rule issued by a federal agency, including rules issued in a previous session of Congress and by a previous presidential administration. When a disapproval resolution passes both chambers of Congress, it is presented to the president for signing.  Any rule undone through the CRA is “treated as though [it] had never taken effect.” Notably, section 801(b)(2) of the CRA prohibits a rule undone through the CRA from being “reissued in substantially the same form.”

The entirety of H.J. Res. 37 is as follows:

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That Congress disapproves the rule submitted by the Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration relating to the Federal Acquisition Regulation (published at 81 Fed. Reg. 58562 (August 25, 2016)), and such rule shall have no force or effect.

This resolution's approval marks only the second time since the CRA's enactment that an employment-related rule has been nullified. The first time was in 2001, when former President George W. Bush signed a resolution blocking the Occupational Safety and Health Administration's controversial ergonomics rule issued during the Clinton administration.

What Does This Mean for Federal Contractors?

The rule's nullification is being hailed by the contractor community. Both federal prime- and sub-contractors have been alarmed about the blacklisting rule for several years.  Its broad terms and requirements would have imposed significant new and onerous compliance challenges. The cost to the federal government would also have been substantial, as the order called for the hiring of labor compliance advisors whose job it would have been to assist procurement officers in their determinations to award or extend contracts.

Further, the rule posed due process concerns. It was widely anticipated that unions and other advocacy groups would have used the rule to leverage contractors' disclosures of allegations that were never fully litigated to force higher settlements and/or to obtain other benefits. 

Perhaps most important, since the CRA forbids the government from proposing the same or a "substantially similar" rule, H.J. Res. 37 may dissuade a future administration from attempting to revisit this rule. 

Paycheck Provisions

As noted above, in addition to requiring reporting and assessment of labor law violations and limiting the use of arbitration agreements, the executive order and its implementing rule also required contractors to provide workers with notices indicating when they were being treated as exempt under the federal Fair Labor Standards Act or as independent contractors.  Contractors were further required to include certain information on each paycheck regarding hours worked, rates of pay, and overtime, and to provide this information in languages other than English.

As these requirements were not enjoined by the court’s decision in Associated Builders and Contractors of S.E. Tex. v. Rung, many contractors have been complying with these paycheck provisions since the beginning of the year.

With H.J. Res. 37 now nullifying the paycheck provisions, contractors are free to return to prior practices.  This is true even if a contractor has entered into a contract that purports to incorporate the paycheck requirements.