President Obama at the Belmont-Paul Women's Equality National Monument

Obama Delivers Final Blow to Companies With New Executive Order

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By Diana Furchtgott-Roth | 10:23 am, October 25, 2016

Large companies that have won federal government contracts on Oct. 25 will receive one of the last blasts of the Obama administration’s regulatory agenda when the Fair Pay and Safe Workplaces executive order begins to take effect.

The order, issued on July 31, 2014, and made final with regulations announced in August, says that if a company or one of its subcontractors has allegations of violations of federal labor and employment laws, it may lose its federal contracts or the opportunity to bid on others.

The company can be tarred before allegations are proven, with no chance to defend itself. It will be pressured to settle accusations to retain the right to have contracts with the federal government.

The purpose of the order is, in President Obama’s words, “to increase efficiency and cost savings in the work performed by parties who contract with the federal government by ensuring that they understand and comply with labor laws.

Such laws include the Fair Labor Standards Act, the Occupational Safety and Health Act, the Family and Medical Leave Act and the National Labor Relations Act.

The 50,000 federal contractors and their uncounted subcontractors should, of course, follow the law, but the executive order is an open invitation to extortion and blackmail. It gives government agencies such as the National Labor Relations Board and the Occupational Safety and Health Administration the opportunity to influence the selection of contractors.

If contractors are considered to have “serious,” “repeated” or “willful” violations, they lose the opportunity to bid on contracts, or lose contracts if they have them. This is a loose standard, with possibilities for cronyism. For those with the right friends, violations may be considered less serious.

From Oct. 25, companies with contracts of more than $50 million will be required to disclose allegations of their violations over the past year to the Labor Department. When the law is fully phased in, on Oct. 25, 2017, all companies with contracts worth $500,000 or more, and potential subcontractors, will report allegations of their violations over the past two years (rising to three years in October 2018), and update this information every six months during the life of the contract.

The executive order puts pressure on companies to settle alleged violations, because a company can receive or keep a contract if it promises to reach an agreement in the future with the complaining agency. Dozens of federal offices, ranging from the Equal Employment Opportunity Commission to the Occupational Health and Safety Administration, will have input into whether companies receive federal contracts.

A company such as IBM, which has multiple subcontractors, will have to keep track of their records to ensure that their actions do not result in IBM’s disqualification.

The AFL-CIO called for this executive order in its 2008 recommendations to the Obama-Biden Transition Project. It proposed the creation of a “government-wide database, searchable by employer through a common identifier, of violations of federal law in actions brought against employers by administrative agencies.”

Coincidentally, or not, even before the final regulations were issued, the National Labor Relations Board announced the creation of such a database on July 1, 2016, in a memo from Associate General Counsel Anne Purcell. As well as labor complaints, the NLRB now collects data on companies’ ID numbers and contractor status.

Unions that want to organize workplaces recognize that they now have new powers over employers by accusing them of unfair labor practices.

Teamsters for a Democratic Union (TDU), an organization that’s trying to rebuild the Teamsters, said on Aug. 22 that “the executive order gives unions unprecedented new leverage against companies and institutions that contract with the federal government.” TDU proposed that union officials say, “Unless you settle this strike within the next few days, and the union withdraws its charges, you are likely to be marked as a ‘repeat labor law offender,’ one of the highest categories of wrongdoing under the president’s order.”

The federal government will now play the role of Santa Claus by determining who has been allegedly naughty or nice. Federal contractors such as the Clinton Foundation may not worry about how a new administration will play the role of Santa. But ordinary Americans with federal contracts have reason to be afraid.

Diana Furchtgott-Roth is a columnist for MarketWatch. Her most recent book, co-written with Jared Meyer, is “Disinherited: How Washington Is Betraying America’s Young.” She is an unpaid adviser to Donald Trump.

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