President Barack Obama signed three executive orders on January 30 and a fourth one on February 6, 2009, significantly reforming the federal government’s regulation of the labor policies of federal contractors.

Executive Order 13495 - The Non-Displacement of Qualified Workers Under Service Contracts Executive Order. 

When a federal contractor succeeds on a contract for performance of the same or similar services at the same location, this EO mandates that the successor and its subcontractors must offer jobs to qualified employees (other than managerial and supervisory employees) who worked under the predecessor’s contract. The EO dictates that no employment openings under the contract may be filled until the right of first refusal has been provided to predecessor employees. Successor contractors may assign employees from their existing workforce to a new federal contract only if they have been employed at least for three months and would otherwise be laid off. Also, contractors are excused from offering jobs to poor performers of the predecessor contractor, but how successors can discover or evaluate quality of performance is not explained. Application of these exemptions is certain to produce significant challenges and costly litigation.  

The EO asserts that a carryover workforce reduces disruption and provides an experienced workforce familiar with the personnel, facilities, and requirements involved in performing the contract. This EO goes beyond the requirements of the Service Contract Act, renewing and expanding upon a Clinton-era executive order ? EO 12933 ? that President Bush had revoked in EO 13204. President Clinton had limited his EO to preserving the jobs of building service workers.

One effect of the EO will be to preclude contractors from staffing contracts with their regular non-supervisory personnel, whose performance, skills, and training they know.  Another inevitable result is that when a federal agency terminates a contractor due to unsatisfactory performance, the Government may be unable to escape the poor performance of the prior workers, who will have first claim on all jobs on the successor contract.

Executive Order 13494 - Economy in Government Contracting Executive Order. 

This EO directs federal agencies to treat as unallowable the costs of any activities intended to persuade employees how to exercise their right to join or refuse to join a union, and requires contractors to exclude unallowable costs from any billing, claim, proposal, or disbursement. The examples of unallowable costs identified in the EO are: preparing and distributing materials; hiring or consulting legal counsel or consultants; holding meetings (including paying the salaries of the attendees at meetings held for this purpose); and planning or conducting activities by managers, supervisors, or union representatives during work hours. The major issue for federal contractors that continue to exercise their right to engage in “persuader activities” ? but do not request reimbursement ? is whether the EO will be used to challenge payment of any federal funds to such contractors, and what burden will be placed on contractors to demonstrate that federal payments have not funded a response to union organizing.

Executive Order 13496  - Notification of Employee Rights Under Federal Labor Laws Executive Order. 

This EO declares that its purpose is to ensure that employees of federal contractors are well informed of their rights under federal labor laws, including the National Labor Relations Act. It requires contractors to post a sign (to be prescribed by the Secretary of Labor) notifying employees of their rights to support unions. Significantly, in addition to requiring the poster, the EO announces that failure to comply with all provisions of the Notice and related rules, regulations, and orders of the Secretary of Labor may result in contract cancellation, termination, or suspension, as well as debarment from future Government contracts. The EO revokes an executive order signed by President Bush that had required employers to post signs informing workers of their rights to limit financial support of unions.

Executive Order 13502 - Use of Project Labor Agreements For Federal Construction Projects Executive Order. 

This EO allows federal agencies to require the use of “project labor agreements” (PLAs) on federal construction projects valued over $25 million. PLAs limit contractors eligible to work on a specific project to those that have signed collective bargaining agreements. This revokes an executive order issued by President Bush that prohibited union-only PLAs on federal contracts.

AFL-CIO President John Sweeney and other union leaders attended the White House ceremony at which President Obama signed these executive orders. At the ceremony, President Obama declared, “I don’t view the labor movement as part of the problem. To me, it’s part of the solution. We cannot have a strong middle class without strong labor unions.”   

The executive orders are effective immediately, though implementing regulations have not yet been announced. The full texts of the executive orders are available here.

The Arent Fox Labor & Employment Law Group has substantial experience in advising federal contractors on labor standards, union organizing, affirmative action, and similar requirements and in representing them during compliance audits and enforcement actions. Please do not hesitate to contact us if you have any questions regarding any of these issues.