Jenner & Block

Trade Associations File Suit Challenging the “Fair Pay and Safe Workplaces” Regulatory Scheme as Unlawful and Unconstitutional

Bandza Sigel
scattered paper photo

By Alexander J. Bandza and Gabrielle Sigel

As we previously reported here, the Department of Labor (DOL) and the Federal Acquisition Regulatory Council (FAR Council) issued the Final Rule and Final Guidance implementing President Obama’s Fair Pay and Safe Workplaces Executive Order (E.O. 13673), signed on July 31, 2014. Despite strenuous objections, including from groups representing defense contractors, on August 25, 2016, DOL and FAR Council finalized the rules (the “Fair Pay Regulations”) by which those who seek to contract with the government (contracts over $500,000) must disclose alleged and final wage and labor law “violations,” including non-final agency allegations of labor law violations and determinations subject to appeal.  Certain portions of the Fair Pay Regulations take effect as early as October 25, 2016.

In Associated Builders and Contractors of Southeast Texas v. Fed. Acquisition Regulatory Council, Case No. 1:16-cv-00425, E.D. Tex. (filed Oct. 7, 2016), Associated Builders and Contractors of Southeast Texas (“ABC-Texas”), Associated Builders and Contractors, Inc. (“ABC”), and the National Association of Security Companies (”NASCO”) filed suit in federal district court against members of the DOL and FAR Council challenging E.O. 13673 and the Fair Pay Regulations.  ABC and ABC-Texas represent nearly 21,000 member construction contractors and related firms in Texas and throughout the country.  NASCO represents companies that employ more than 400,000 trained security officers.

Plaintiffs’ Complaint alleges six counts of legal violations:

  1. The Fair Pay Regulations are unlawful under the Administrative Procedures Act because they stem from the President’s actions in excess of his rulemaking authority under the Federal Property and Administrative Services Act.
  2. The Fair Pay Regulations should be precluded as a matter of law because the fourteen existing labor and employment laws addressed in the Fair Pay Regulations, such as the Occupational Safety and Health Act, already contain “comprehensive, carefully balanced remedial scheme[s],” which evidences Congress’s original intent to preclude additional remedies under other laws, such as those under the Fair Pay Regulations.
  3. The Fair Pay Regulations unlawfully compel speech in violation of the First Amendment because government contractors would be required to disclose an “unprecedented list” of non-final court actions, arbitrations, and “administrative merits determinations,” which is in effect a requirement to “publicly condemn themselves on a highly controversial issue…even in the absence of any final adjudication of the merits regarding the alleged violation in the courts.”
  4. The Fair Pay Regulations violate the U.S. Constitution’s Fifth Amendment due process clause because they compel disclosure of non-final court and administrative actions, and injure the contractors’ “right to be free from stigmatizing governmental defamation,” without due process of law.
  5. The Fair Pay Regulations are arbitrary and capricious government action because they impose “drastic new requirements” without adequate explanation and without recognizing the reliance interests of the regulated community.
  6. The Fair Pay Regulations violate the Federal Arbitration Act (“FAA”) because the Regulations forbid mandatory pre-dispute arbitration agreements for certain contracts, which contravenes the FAA and its policy favoring arbitration agreements.

Plaintiffs are seeking a preliminary injunction enjoining the government from implementing the Fair Pay Regulations, a declaratory judgment that the Regulations are invalid, and a final order vacating the Regulations and enjoining the government from implementing them.  On October 13, 2016, Plaintiffs moved for a temporary restraining order and preliminary injunction against the government to immediately stop implementation of the Regulations.

A copy of the complaint is available here.


PEOPLE: Gabrielle Sigel