On October 24, 2016, District Judge Marcia A. Crone of the United States District Court for the Eastern District of Texas issued a preliminary injunction in Associate Builders and Contractors of Southeast Texas v. Rung, Case No. 1:16-CV-425, halting implementation of the Fair Pay and Safe Workplaces Executive Order.
The Fair Pay and Safe Workplaces Executive Order (EO), No. 13673, was signed by President Obama on July 31, 2014. Its purpose is to create more transparency between federal contractors, government agencies, and the workers employed by federal contractors. It requires companies bidding on a federal contract to disclose any violations of labor, discrimination, wage and hour, or safety laws to the contracting government agency, and requires further periodic disclosures from contractors that are awarded a contract.
The EO also requires contractors and subcontractors to provide their workers with accurate information about hours worked, overtime paid, and other paycheck details, as well as requiring employers to give any workers who are designated as independent contractors (rather than employees) written notice of this status. Finally, it prohibits certain contractors and subcontractors from forcing their workers to sign mandatory arbitration agreements that would require the workers to arbitrate any claims under Title VII, the federal anti-discrimination law, or state claims related to sexual harassment or sexual assault.
The Department of Labor’s final rule implementing the EO was scheduled to take effect on October 25, 2016. However, Judge Crone enjoined its implementation, concluding that the plaintiffs are likely to prevail on the following claims they have asserted in their lawsuit:
- The EO conflicts with federal statutes. The Court reasoned, “the Executive Branch appears to have departed from Congress’s explicit instructions dictating how violations of the labor law statutes are to be addressed.”
- The EO infringes potential contractors’ First Amendment rights by requiring that they disclose violations, including “administrative merit determinations” that do not constitute final agency action.
- The EO deprives potential contractors of liberty without due process “by compelling them to report and defend against non-final agency allegations of labor law violations without being entitled to a hearing at which to contest such allegations.”
- The rules and guidance implementing the EO are arbitrary and capricious because they will not “promote economy and efficiency in government contracting.”
- The EO violates the Federal Arbitration Act (FAA) by barring federal contractors from imposing pre-dispute arbitration agreements on their employees.
For those reasons, the Court ordered:
Defendants are enjoined for implementing any portion of the FAR Rule or DOL Guidance relating to the new reporting and disclosure requirements regarding labor law violations as described in Executive Order 13673 and implemented in the FAR Rule and DOL Guidance. Further, Defendants are enjoined from enforcing the restriction on arbitration agreements.