Labor and Employment

Starting on Jan. 30, 2009, President Obama signed a series of Executive Orders that revoked actions taken by his predecessor. Executive Order No. 13494: Economy In Government Contracting provides that agencies shall disallow claims by contractors and subcontractors for any costs attributable to activities undertaken to persuade employees of any recipient of Federal disbursements or of any other entity to exercise or not exercise their right to organize and bargain collectively.

The unallowable costs include the expenses associated with: 1) preparing and distributing materials; 2) hiring or conferring with legal counsel or consultants; 3) holding meetings; and 4) planning or conducting activities by managers, supervisors, or union representatives during work hours. The costs of maintaining satisfactory relations between the contractor and its employees, including labor-management committees, are allowable. Section 1 of the Executive Order insists that it is consistent with the Federal Government's policy of remaining impartial concerning any labor-management disputes involving government contractors. The restriction on allowable expenses, however, obviously favors unions, which remain free to spend whatever they choose in furthering their interests in conjunction with such disputes. Indeed, government contractors will probably find it impossible to show that the source of their expenditures was not at least indirectly income derived from their Federal contracts. As a consequence, the Federal Government's assertion of impartiality is at least somewhat disingenuous.

Executive Order No. 13495: Nondisplacement of Qualified Workers Under Service Contracts requires all employers who obtain contracts to provide services to the Federal Government to offer employment to the non-supervisory personnel who have worked at least three months for the company which previously performed those services. According to the Executive Order, that requirement is being imposed in the interests of economy and efficiency by ensuring that the Federal Government obtains the benefit of an experienced and trained work force which is already familiar with its personnel, facilities, and requirements. In that regard, the Executive Order does not require employers to offer jobs to employees who are reasonably believed based on past performance to have failed to perform suitably.

That stated rationale for the Executive Order, however, is suspect and the real reason for it is much more likely to be the protection of unions that may represent the incumbent employers' workers. For example, the Executive Order does not cover the supervisory personnel who would also be familiar with the Federal Government and the services being provided. Those individuals, of course, almost always would be excluded from groups represented by unions.

In addition, the incumbent employer may have lost the contract in part because its employees were inefficient or incompetent. The mandate to offer them employment will only serve to perpetuate such a situation and deprive the Federal Government of the cost savings which would be realized by hiring a better group of employees.

Thus, this Executive Order will prevent an employer from being free from the obligation to bargain with a union or even comply with an existing collective bargaining agreement by ensuring the event that less than a majority of the employees hired to work under service contract had worked for the predecessor contractor. In fact, that situation has led to litigation before the National Labor Relations Board, such as NLRB v. Burns International Security Services, 406 U.S. 272 (1972) and Howard Johnson Co. v. Hotel & Restaurant Employees Detroit Local Joint Executive Bd., 417 U.S. 249 (1974), which eventually worked its way up to the U.S. Supreme Court.

Executive Order No. 13496: Notification of Employee Rights Under Federal Labor Laws, represents another effort to assist unions by expressly revoking Executive Order No. 13201 issued by President Bush in 1991. That Executive Order required employers with government contracts to notify all employees of their right to refrain from joining unions and to withhold from their union dues amounts which would be used for purposes other than collective bargaining, such as supporting political candidates.

Under Executive Order No. 13496, employers must post notices in conspicuous places in their facilities and electronically, e.g., on Web sites used to provide information to employees, which described their rights under the National Labor Relations Act and other unspecified “Federal labor laws.” For instance, the notices, which the Department of Labor will prepare, must inform employees about their right to unionize and participate in other protected concerted activities, including strikes, from intimidation by employers.

The Executive Order states that such notices are being required purportedly because the Federal Government wants to ensure that contracts are performed without interruption and industrial peace and higher worker productivity are achieved if workers know about those statutory rights. The Executive Order does not mention any empirical data which supports a linkage between industrial peace and productivity and notifying employees about their right to unionize and, indeed, experience has shown that such a nexus does not necessarily exist.

Finally, Executive Order No. 13502: Use of Project Labor Agreements for Federal Construction Projects, “encourages” Federal administrative agencies to require companies to sign project agreements with unions in connection with all “large scale construction projects.” The Executive Order defines such projects as including all construction, rehabilitation, alteration, conversion, extension, repair, or improvement of buildings, highways, or other real property which will cost more than $25 million.

The project agreements would set the employees terms and conditions of employment for a specific construction project. The Executive Order would allow employers to sign those agreements, which would undoubtedly require employees to pay union dues, before hiring any workers and affording them the opportunity to vote on whether they want to be represented by a union. In light of the leanings of the Obama Administration as evidenced by the Executive Orders discussed above, employers should expect all Federal agencies to require project agreements, despite the fact that this Executive Order says that they are merely encouraged to do so.

Legislation

The Employee Free Choice Act and the Lilly Ledbetter Fair Pay Act have received a tremendous amount of media attention, as well they should, but Democrats in Congress have also introduced other bills, some of which had been submitted during the Bush Administration, to expand employment discrimination laws and modify laws pertaining to unionization. That proposed legislation further demonstrates the change in the political climate, at least on Capitol Hill.

The Arbitration Fairness Act would invalidate all contracts, except collective bargaining agreements, which mandate that employees submit discrimination claims or any other employment disputes to binding arbitration. The bill's preamble states: 1) many companies force employees to forfeit their right to jury trials by signing such contracts; 2) arbitration is a poor system for protecting civil rights; and 3) that procedure undermines the development of civil rights law because arbitrators' decisions are not subject to meaningful judicial review.

That assessment is directly at odds with the U.S. Supreme Court's majority opinion in 14 Penn Plaza LLC v. Pyett issued on April 1, 2009, which held that employees must submit age discrimination claims to mandatory arbitration if a collective bargaining agreements specifies that they must use that procedure. The Court's decision correctly points out that, for decades, arbitration has been used successfully to resolve claims that employees were unfairly terminated, including for reasons prohibited by civil rights laws. Moreover, most labor attorneys will confirm the adequacy of arbitration to deal with such claims quickly, fairly, and inexpensively.

Other legislation that was considered and faced a veto if passed last year will probably be introduced during this session of Congress. For example, the Protecting America's Workers Act would expand the whistleblower protection afforded to employees who report an injury, illness, or unsafe condition to their employer.

The Re-Empowerment of Skilled and Professional Employees and Construction Trades Act would amend the National Labor Relations Act's definition of “employee” in such a way that would enable workers previously classified as supervisors or professional employees to unionize. Passage of that change as it pertains to supervisors would seriously impact employers who frequently use supervisors to work during strikes and as their most effective weapon during union campaigns.

The Employment Non-Discrimination Act would amend the Title VII of Civil Rights Act of 1964 to prohibit employment discrimination based on sexual orientation. As drafted, the legislation exempts organizations which are exempt from the religious discrimination provisions of Title VII.

Conclusion

During the next four years, employers should anticipate seeing more Executive Orders, bills introduced into Congress, and aggressive enforcement of existing statutes and regulations which swing the pendulum in the direction of increasing employees' rights and facilitating unionization.

R. Michael Smith is a member of the Employment Law Practice Group of Gordon Feinblatt Rothman Hoffberger & Hollander, LLC in Baltimore. He focuses his practice on matters pertaining to employment discrimination, wrongful termination, wage-hour disputes, workplace safety, collective bargaining, union representation elections, unfair labor practices, labor arbitrations, and employee benefits. Smith may be reached at [email protected].

Many observers expected the Obama Administration, with the support of Democratic majorities in both houses of Congress, to advocate new legislation and Executive Orders that favored unions and expanded the scope of employment discrimination laws. This article examines Executive Orders that have been signed and proposed legislation that has been introduced since President Obama's inauguration.

Executive Orders

Executive Orders provide a quick means for Presidents to implement significant changes in the way the Federal Government procures goods and services from the private sector without going through the lengthy and often unsuccessful legislative process. For example, Executive Order No. 11246 requires affirmative action and Executive Order No. 11478 prohibits sexual orientation discrimination by certain government contractors and subcontractors.

Starting on Jan. 30, 2009, President Obama signed a series of Executive Orders that revoked actions taken by his predecessor. Executive Order No. 13494: Economy In Government Contracting provides that agencies shall disallow claims by contractors and subcontractors for any costs attributable to activities undertaken to persuade employees of any recipient of Federal disbursements or of any other entity to exercise or not exercise their right to organize and bargain collectively.

The unallowable costs include the expenses associated with: 1) preparing and distributing materials; 2) hiring or conferring with legal counsel or consultants; 3) holding meetings; and 4) planning or conducting activities by managers, supervisors, or union representatives during work hours. The costs of maintaining satisfactory relations between the contractor and its employees, including labor-management committees, are allowable. Section 1 of the Executive Order insists that it is consistent with the Federal Government's policy of remaining impartial concerning any labor-management disputes involving government contractors. The restriction on allowable expenses, however, obviously favors unions, which remain free to spend whatever they choose in furthering their interests in conjunction with such disputes. Indeed, government contractors will probably find it impossible to show that the source of their expenditures was not at least indirectly income derived from their Federal contracts. As a consequence, the Federal Government's assertion of impartiality is at least somewhat disingenuous.

Executive Order No. 13495: Nondisplacement of Qualified Workers Under Service Contracts requires all employers who obtain contracts to provide services to the Federal Government to offer employment to the non-supervisory personnel who have worked at least three months for the company which previously performed those services. According to the Executive Order, that requirement is being imposed in the interests of economy and efficiency by ensuring that the Federal Government obtains the benefit of an experienced and trained work force which is already familiar with its personnel, facilities, and requirements. In that regard, the Executive Order does not require employers to offer jobs to employees who are reasonably believed based on past performance to have failed to perform suitably.

That stated rationale for the Executive Order, however, is suspect and the real reason for it is much more likely to be the protection of unions that may represent the incumbent employers' workers. For example, the Executive Order does not cover the supervisory personnel who would also be familiar with the Federal Government and the services being provided. Those individuals, of course, almost always would be excluded from groups represented by unions.

In addition, the incumbent employer may have lost the contract in part because its employees were inefficient or incompetent. The mandate to offer them employment will only serve to perpetuate such a situation and deprive the Federal Government of the cost savings which would be realized by hiring a better group of employees.

Thus, this Executive Order will prevent an employer from being free from the obligation to bargain with a union or even comply with an existing collective bargaining agreement by ensuring the event that less than a majority of the employees hired to work under service contract had worked for the predecessor contractor. In fact, that situation has led to litigation before the National Labor Relations Board, such as NLRB v. Burns International Security Services , 406 U.S. 272 (1972) and Howard Johnson Co. v. Hotel & Restaurant Employees Detroit Local Joint Executive Bd. , 417 U.S. 249 (1974), which eventually worked its way up to the U.S. Supreme Court.

Executive Order No. 13496: Notification of Employee Rights Under Federal Labor Laws, represents another effort to assist unions by expressly revoking Executive Order No. 13201 issued by President Bush in 1991. That Executive Order required employers with government contracts to notify all employees of their right to refrain from joining unions and to withhold from their union dues amounts which would be used for purposes other than collective bargaining, such as supporting political candidates.

Under Executive Order No. 13496, employers must post notices in conspicuous places in their facilities and electronically, e.g., on Web sites used to provide information to employees, which described their rights under the National Labor Relations Act and other unspecified “Federal labor laws.” For instance, the notices, which the Department of Labor will prepare, must inform employees about their right to unionize and participate in other protected concerted activities, including strikes, from intimidation by employers.

The Executive Order states that such notices are being required purportedly because the Federal Government wants to ensure that contracts are performed without interruption and industrial peace and higher worker productivity are achieved if workers know about those statutory rights. The Executive Order does not mention any empirical data which supports a linkage between industrial peace and productivity and notifying employees about their right to unionize and, indeed, experience has shown that such a nexus does not necessarily exist.

Finally, Executive Order No. 13502: Use of Project Labor Agreements for Federal Construction Projects, “encourages” Federal administrative agencies to require companies to sign project agreements with unions in connection with all “large scale construction projects.” The Executive Order defines such projects as including all construction, rehabilitation, alteration, conversion, extension, repair, or improvement of buildings, highways, or other real property which will cost more than $25 million.

The project agreements would set the employees terms and conditions of employment for a specific construction project. The Executive Order would allow employers to sign those agreements, which would undoubtedly require employees to pay union dues, before hiring any workers and affording them the opportunity to vote on whether they want to be represented by a union. In light of the leanings of the Obama Administration as evidenced by the Executive Orders discussed above, employers should expect all Federal agencies to require project agreements, despite the fact that this Executive Order says that they are merely encouraged to do so.

Legislation

The Employee Free Choice Act and the Lilly Ledbetter Fair Pay Act have received a tremendous amount of media attention, as well they should, but Democrats in Congress have also introduced other bills, some of which had been submitted during the Bush Administration, to expand employment discrimination laws and modify laws pertaining to unionization. That proposed legislation further demonstrates the change in the political climate, at least on Capitol Hill.

The Arbitration Fairness Act would invalidate all contracts, except collective bargaining agreements, which mandate that employees submit discrimination claims or any other employment disputes to binding arbitration. The bill's preamble states: 1) many companies force employees to forfeit their right to jury trials by signing such contracts; 2) arbitration is a poor system for protecting civil rights; and 3) that procedure undermines the development of civil rights law because arbitrators' decisions are not subject to meaningful judicial review.

That assessment is directly at odds with the U.S. Supreme Court's majority opinion in 14 Penn Plaza LLC v. Pyett issued on April 1, 2009, which held that employees must submit age discrimination claims to mandatory arbitration if a collective bargaining agreements specifies that they must use that procedure. The Court's decision correctly points out that, for decades, arbitration has been used successfully to resolve claims that employees were unfairly terminated, including for reasons prohibited by civil rights laws. Moreover, most labor attorneys will confirm the adequacy of arbitration to deal with such claims quickly, fairly, and inexpensively.

Other legislation that was considered and faced a veto if passed last year will probably be introduced during this session of Congress. For example, the Protecting America's Workers Act would expand the whistleblower protection afforded to employees who report an injury, illness, or unsafe condition to their employer.

The Re-Empowerment of Skilled and Professional Employees and Construction Trades Act would amend the National Labor Relations Act's definition of “employee” in such a way that would enable workers previously classified as supervisors or professional employees to unionize. Passage of that change as it pertains to supervisors would seriously impact employers who frequently use supervisors to work during strikes and as their most effective weapon during union campaigns.

The Employment Non-Discrimination Act would amend the Title VII of Civil Rights Act of 1964 to prohibit employment discrimination based on sexual orientation. As drafted, the legislation exempts organizations which are exempt from the religious discrimination provisions of Title VII.

Conclusion

During the next four years, employers should anticipate seeing more Executive Orders, bills introduced into Congress, and aggressive enforcement of existing statutes and regulations which swing the pendulum in the direction of increasing employees' rights and facilitating unionization.

R. Michael Smith is a member of the Employment Law Practice Group of Gordon Feinblatt Rothman Hoffberger & Hollander, LLC in Baltimore. He focuses his practice on matters pertaining to employment discrimination, wrongful termination, wage-hour disputes, workplace safety, collective bargaining, union representation elections, unfair labor practices, labor arbitrations, and employee benefits. Smith may be reached at [email protected].