Effective June 21, 2010, federal government agencies are required to include provisions in their contracts specifically obligating contractors and subcontractors to notify employees of their rights under the National Labor Relations Act (NLRA). The regulations at 29 CFR Part 471 implement Executive Order 13496, issued by President Obama on February 4, 2009.Which Federal Contractors and Subcontractors Are Covered?
Federal contracts that involve purchases above the simplified acquisition threshold set by Congress under the Office of Federal Procurement Policy Act (OFPPA) currently require the posting of the NLRA notice. Currently, this threshold is $100,000. Further, the notice requirement applies whether the employer has a “union” or “non-union” workforce.
Agencies and contractors are not permitted to procure supplies or services in a manner to avoid the notice requirement. In addition, government contracts for indefinite quantities (such as indefinite delivery/indefinite quantity (ID/IQ) contracts) must include the requirement “unless the contracting agency or contractor has reason to believe that the amount to be ordered in any year under such contract will be less than the simplified acquisition threshold.”
All subcontracts relating to a non-exempt contract are covered unless their value is $10,000 or less. Contracts and subcontracts for work performed exclusively outside the territorial United States are not covered.Are Existing Contracts and Subcontracts Covered?
No. The posting requirement does not apply to existing contracts, but requires federal agencies to include it in any contracts or contract amendments on or after June 21, 2010, unless an exemption applies.What Are Covered Employers Required To Do?
Covered contractors and subcontractors must:
- Post the required notice conspicuously in and around plants and offices where it can readily be seen by employees covered by the NLRA and are engaged in “contract-related activity”.
- Post the required notice electronically if the employer communicates similar notifications to employees electronically, and post a link to the Director of Labor’s Office of Labor Management Standards (OLMS) website containing the employee notice, if and where the employer customarily places other electronic notices to employees about the terms and conditions of employment.
- Insert provisions in subcontracts and purchase orders that require covered subcontractors to comply with the same posting requirements.
The notice informs employees of their rights under the NLRA, including the rights to organize, join or assist a union, bargain collectively for labor contracts, discuss terms and conditions of employment or union organizing with co-workers, engage in concerted activity with one or more co-workers to improve working conditions, raise work-related complaints, strike and picket, or choose not to do any of these activities. The notice gives specific examples of illegal activities by employers and by unions and informs employees how to seek advice and assistance from the National Labor Relations Board (NLRB).
The official full size, color notice can be downloaded from the OLMS website, www.dol.gov/olms/regs/compliance/EO13496.htm, or obtained from OFCCP or OLMS field offices or from federal contracting agencies. It may also be purchased from commercial vendors. An informal copy is attached to this article for reference (click here), but the full-size 11×17 color version must be posted, as discussed below.
If a significant number of employees are not proficient in English, the notice must also be posted in the language with which they are proficient. OLMS will provide translated versions of the required notice (current versions of which include notices in Spanish and Mandarin Chinese).Where Must the Notice Be Physically Posted?
The notice must be placed “in conspicuous places in and about the contractor’s plants and offices so that the notice is prominent and readily seen by employees” engaged in contract-related activity. The regulation defines this as “areas in which the contractor posts notices to employees about employees’ terms and conditions of employment” and where employees covered by the NLRA are engaged in activities relating to the performance of the contract. The notice does not have to be posted in areas where it will only be seen by employees who are not engaged in activities relating to performance of a covered contract or subcontract.Which Employees Are Engaged in Contract-Related Work?
Employees are “engaged in activities relating to the performance of the contract” if:
- Their duties include work that fulfills a contractual obligation;
- Their duties include work that is necessary to or that facilitates performance of the contract or a provision of the contract; or
- The cost of or a portion of the cost of the employee’s position is allowed as a cost of the contract under the principles set forth in the Federal Acquisition Regulation (FAR) at 48 CFR Chapter 1 Part 31.
Such duties includes “indirect or auxiliary work without which the contract could not be effectuated, such as maintenance, repair, personnel and payroll work.” The Comments to the regulation state that “a contract for production and sale of goods to the government requires work not only of the production employees assembling the goods, but also those engaged in functions such as repairing the machinery used in producing the goods; maintaining the plant; assuring quality control and security; storing the goods after production; delivering them to the government; hiring, paying, and providing personnel services for the employees engaged in contract-related work; keeping financial and accounting records; performing related office and clerical tasks; and supervising and managing the employees engaged in such tasks.” Thus, according to the Comments, “the question is whether the duties of the employees’ position include work that contributes to or furthers the performance of the contract, or work whose omission would impede the contract’s performance.”Must the Notice Be Posted Separately From Other Notices?
The notice must be posted where other similar notices to employees are posted. The notice must have the required form and content, be in color and the prescribed size (11 x 17). However, contractors may want to consider acquiring commercially available combined-notice posters, such as those available from “All-in-one Posters” (www.allinoneposters.com).When Is Electronic Posting Required?
An employer that customarily posts employee notices both physically and electronically must post the NLRA rights notice both physically and electronically. “[A] contractor must post this notice electronically in those places they customarily post electronically other messages to employees about the terms and conditions of their employment.”
The electronic posting must include a link to the OLMS website containing the notice, must be no less prominent than other employee notices, and must state “Important Notices about Employee Rights to Organize and Bargain Collectively With Their Employers.” Electronic posting is in addition to physical posting and is not a substitute for physical posting.What Employers Are Excluded From the Notice Requirement?
Employers excluded from the definition of “employer” under the NLRA and therefore not required to post a notice include:
- United States or any wholly-owned federal government corporation.
- Any federal reserve bank.
- Any state or political subdivision thereof.
- Any person subject to the Railway Labor Act.
- Any labor organization (other than when acting as an employer).
- Anyone acting in the capacity as an officer or agent of such labor organization.
What Employees Are Excluded From the Notice Requirement?
Employees excluded from the definition of “employee” under the NLRA and therefore not required to receive a notice include:
- Agricultural laborers.
- Domestic service persons employed by a family or person at his/her home.
- Employees of their parents or spouses.
- Independent contractors.
- Supervisors as defined under the NLRA.
- Employees subject to the Railway Labor Act.
- Any other person who is not an employee as defined in the NLRA.
The Office of Federal Contract Compliance Programs (OFCCP) will enforce the posting requirement, using procedures it issued on June 15, 2010. OFCCP will conduct on-site compliance evaluations to determine whether a contractor or subcontractor is in compliance. The evaluation may be limited to compliance with this requirement, or may be included in a compliance evaluation conducted under the other laws, Executive Orders and regulations enforced by OFCCP.
OFCCP’s evaluation will include whether the correct notice is properly posted physically and electronically and whether the employee notice clause is included in government contracts, subcontracts and purchase orders. If the contractor has failed to meet the requirements, conciliation efforts will be made. If the contractor refuses to take corrective action, the matter will be referred to OLMS for enforcement. OLMS may then refer the matter to the Solicitor of Labor for administrative enforcement proceedings.What Are the Sanctions for Non-Compliance?
The Director of OLMS may, unless the contracting agency objects:
- Direct the contracting agency to cancel, terminate, suspend or cause to be cancelled, terminated or suspended any contract for failure to comply with the contractual notice requirement. Contracts may be cancelled, terminated or suspended absolutely or conditioned upon compliance.
- Issue an order of debarment, providing that the contracting agency must refrain from any further contracts, extensions or modifications of existing contracts with any non-compliant contractor or subcontractor.
- Issue an order of debarment that no contracting agency may enter into a contract with any non-compliant contractor or subcontractor.
A contractor or subcontractor must be given an opportunity for a hearing before the Director of OLMS issues an order of cancellation, termination, suspension or debarment or includes it on a list of non-compliant contractors.What Should Contractors Watch For Next?
Executive Order 13494 issued on January 30, 2009 is designed to treat as unallowable on cost-reimbursement contracts the costs of communicating with employees about how to exercise their rights to unionize. To implement the Executive Order, the Department of Defense, the General Services Administration and the National Aeronautics and Space Administration published a proposed rule on April 14, 2010 (Fed. Reg. Vol. 75, No. 71 at 19345) that will amend FAR at 48 CFR 31-205.21. Specifically, the proposed amendment will treat as unallowable “costs of any activities undertaken to persuade employees to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively. . . .”
If adopted as written, contractors will not be able to treat as allowable costs under their federal contracts the costs for activities to persuade employees about the disadvantages, or advantages, of unionization. This could include such costs as (1) preparing and distributing materials; (2) hiring or consulting legal counsel or consultants; (3) meetings, including paying the salaries of attendees at meetings held for such purposes; and (4) planning or conducting activities by managers, supervisors or union representatives during work hours. Costs for maintaining “satisfactory relations between the contractor and its employees”, however, would be allowable, such as the costs of shop stewards, labor-management committees and employee publications.
The U.S. Chamber of Commerce has filed written opposition to the proposed rule, on the grounds that it improperly attempts to mandate employer neutrality and amounts to a “gag order” that will chill free speech guaranteed by the NLRA. The comment period on the new regulation closed on June 14, 2010. We will provide further analysis once the final rule is issued.What Steps Should Contractors and Subcontractors Take Now?
- Review all contracts, subcontracts and task, delivery, and purchase orders on and after June 21, 2010 for language requiring compliance with E.O. 13496 or the regulations under 29 CFR Part 471.
- Determine which, if any, facilities employ persons engaged in activities relating to performance of covered contracts, subcontracts or purchase orders and who are also covered by the NLRA.
- Obtain a copy of the required notice from the Department of Labor or a commercial vendor. If a significant number of employees are not proficient in English, obtain additional notices in the language with which they are proficient. OLMS will provide translations of the required notice.
- Identify locations for physical posting of the notice and, if employees are notified electronically about their terms and conditions of employment, where it should also be posted electronically. Also include the required language and link to the OLMS website in the electronic notice.
- Modify any subcontracts and purchase orders applicable to services or supplies necessary for performance of the covered federal contract or subcontract to include a clause that incorporates the posting obligation under E.O. 13496 and 29 CFR Part 471. This clause may be incorporated by reference by citing “29 CFR Part 471, Appendix A to Subpart A.”
For additional information or assistance in addressing any questions or concerns, please contact the author or any other member of the McGuireWoods Labor & Employment teams.