Obama Issues Labor-Friendly Executive Orders

President Obama has issued several Executive Orders concerning employees of government contractors. On January 30 th, President Obama issued Executive Order Number 13494 which governs allowable costs regarding union activity and Executive Order Number 13496, which requires notice of employee rights under the federal labor laws. On February 6 th, President Obama issued Executive Order 13502, which encourages Project Labor Agreements on federal construction projects.

Executive Order Number 13494, entitled "Economy in Government Contracting," addresses federal contractor costs for activities designed to persuade employees regarding the exercise of their labor rights. It requires that agencies treat as "unallowable" the costs of any activities "undertaken to persuade employees-whether employees of the recipient of the Federal disbursements or any other entity-to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the employees' own choosing." Unallowable costs for this purpose include preparing and distributing materials, hiring or consulting legal counsel or consultants, holding meetings (including payment of employees' wages while attending such meetings), and other related activities. It allows costs "incurred in maintaining satisfactory relations between the contractor and its employees," including joint labor-management committees, employee publications (other than those undertaken to persuade employees to exercise or not to exercise or concerning the manner of exercising, the right to organize and bargain collectively), and other related activities. The Federal Acquisition Regulatory (FAR) Council has 150 days from January 30, 2009 to revise its regulations to carry out the Executive Order.

Executive Order Number 13496, entitled "Notification of Employee Rights Under Federal Labor Laws," is intended to enhance industrial peace and worker productivity by informing employees of their rights under Federal labor laws. It requires that contractors and subcontractors post a notice to employees regarding the rights afforded by Federal labor laws. The content, size, and form of the notice will be provided by the Secretary of Labor. The contractor must comply with all provisions of the Secretary's Notice and related rules, regulations, and orders of the Secretary of Labor. The remedies for failure to comply with the notice requirements include contract termination and an order to refrain from further contracts until the contractor complies. The Secretary is allowed to grant exemptions if applying the requirements would not serve the purposes of the Order or would impair the ability of the Government to procure goods or services on an economical or efficient basis. Executive Order 13496 also revoked former President Bush's Executive Order 13201, which required notice to employees of their rights under CWA v. Beck, 487 U.S. 735 (1988), not to join a union and not to pay agency fees for nonrepresentational union expenditures.

Executive Order Number 13502, entitled " Use of Project Labor Agreements for Federal Construction Projects," was issued to encourage agencies to use Project Labor Agreements ("PLAs") in certain federal construction projects. The federal construction projects involved are those with a total cost to the government of $25 million or more. The Executive Order only encourages the use of PLAs in such large scale projects, it does not mandate them: "Executive agencies may, on a project-by-project basis, require the use of a project labor agreement by a contractor where use of such an agreement will ... advance the Federal Government's interest in achieving economy and efficiency in Federal procurement." Under the Order, the government cannot compel a contractor to enter into an agreement with any particular labor organization and the Order does not explicitly exclude non-union contractors from competition. The Order is effective immediately. However, it gives the FAR Council 120 days to take whatever action is required to implement the Order. This Order repeals President Bush's Executive Order 13202 and 13208. Those Executive Orders prevented federal agencies and other recipients of federal funding from requiring or prohibiting contractors from signing union-only PLAs as a condition of performing work on federal projects.

The Union Perspective
Unions are very supportive of these Executive Orders. When issuing the three Orders discussed above, President Obama properly explained that they are designed to "level the playing field for workers and the Unions that represent their interests." Indeed, these three Orders will do just that.

It is hard to believe that anyone has a problem with the Executive Order preventing federal contractors from being reimbursed for expenses meant to influence workers when deciding whether to form a union and engage in collective bargaining. Federal funds should not be utilized to help employers run anti-union campaigns or otherwise deter collective bargaining. The concern expressed by employers - particularly that the Order may result in inhibiting supervisory training - is baffling. The language is specifically worded, leaving no question as to what constitutes "unallowable costs." Furthermore, the language of this Order parallels language used on LM-10 and LM-20 forms which require, inter alia, employers and employer consultants to disclose funds used for the purpose of persuading employees to exercise or not exercise their right to organize and collectively bargain. This Order comes from a background of federal requirements to report persuader activity. Clearly, its intent is to discourage the scare tactics often employed by employers during organizing campaigns; it is not intended to prohibit supervisor training.

The Order requiring federal contractors to post notices in the work place informing employees of their rights under the NLRA is also significant for promoting industrial peace and efficiency. Given all of the other notices employers are required to post, it only makes sense that employers post notices informing employees of their right to organize as well. The notice is significant so that employees are aware of the fact that Union organizing is protected activity under federal law, and that promoting collective bargaining is actually national policy as stated in the National Labor Relations Act.

The Project Labor Agreement ("PLA") executive order is a huge victory for employees in the nation's building and construction trades. Despite our federal government's 70-year history of using PLAs on federal construction projects, when former President George W. Bush took office in 2001, one of the first orders he signed banned PLAs on federal and federally funded construction. The recent Order recognizes that PLAs offer stability on construction projects since they make labor costs predictable and reduce friction that may arise as a result of the different groups of employees and employers involved in any given construction project. PLAs help ensure efficiency, fair wages and benefits, and on-time completion of projects.

The Management Perspective
These Executive Orders are a marked departure from the Bush Administration's approach to government contracts and clearly reflect the interests of organized labor.

The scope of the "unallowable cost" Order entails a contractor's preparation and distribution of materials, hiring of counsel and consultants, holding meetings, and planning or conducting activities by managers and supervisors during working hours. While the Order would disallow contractor costs for these activities ostensibly only in response to union organizing, it is so broadly worded that labor organizations may claim that the Order prohibits costs related to other types of training and education. Perhaps more troubling is that labor organizations will undoubtedly claim that legal compliance training for supervisors and managers is activity to persuade employees regarding the exercise of their Section 7 rights. Accordingly, contractors will be hampered in their ability to ensure that supervisors do not coerce employees in the exercise of their right form and support unions. In this regard, the Order is self-defeating.

The requirement that contractors post notices advising employees of their rights is not controversial in and of itself. The Order, however, inevitably will interact with the "unallowable cost" Order insofar as employees ask questions about the exercise of rights under federal labor laws. The absence of Beck notice will undoubtedly lead to questions to supervisors and managers regarding the right of employees to assume fee-payer status. Thus, posting may ultimately call the question of whether a contractor is permitted to spend time responding to employee inquiries regarding their rights.

The PLA Order has been widely criticized in the business community as anti-competitive and discriminatory toward the 84% of construction workers in the United States that do not belong to a labor organization. While the Order does not compel an agency to require a PLA, most agree that the Order will lead to the imposition of PLAs, notwithstanding Mark Ayers statement that the Order will benefit union and nonunion workers alike. Given the fact that most federal agencies have no experience negotiating PLAs, the Order will likely lead to the adoption of the Building Trades' format for such agreements, effectively removing the contractor from the negotiating process. In such circumstances, it is difficult to see how the imposition of a PLA will attain the stated goal of "achieving economy and efficiency in Federal procurement."

This article was prepared by the Committee on the Development of the Law Under the National Labor Relations Act with the assistance of Angie M. Cowan who is an Associate at Allison, Slutsky & Kennedy, P.C. in Chicago where she represents Unions and individual employees in labor and employment matters and Patrick R. Scully who is a Member in the Labor & Employment Department of Sherman & Howard L.L.C. in Denver where he represents management in labor relations and employment litigation matters. He is a Chapter Editor of The Developing Labor Law.

The authors would like to thank Michelle Tyler, an associate at Sherman & Howard, for her assistance in preparing this alert.

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