On February 17, 2022, the United States Department of Agriculture (USDA) proposed a rule to update its Agriculture Acquisition Regulation (AGAR), which has not had a major revision since 1996. One component of the proposed rule requires USDA contractors to maintain compliance with a broad range of labor and employment laws and regulations in order to do business with the USDA. These requirements are strikingly similar to the Obama-era Fair Pay and Safe Workplaces Executive Order (nicknamed “the blacklist rule”). Contractors should be aware that this proposed rule would give the USDA greater authority to bypass a contractor in the federal government process because of a wide range of alleged labor violations. It could also signal an agency-by-agency approach to including labor law compliance as a prerequisite to landing government contracts.
Under the proposal, USDA contracts worth more than the simplified acquisition threshold would have to include two new clauses requiring contractors to certify compliance with labor laws during the term of the contract and to disclose past violations of specified labor and employment laws. For 2022, the threshold is $250,000.
The first clause, titled Labor Law Violations, requires a contractor to certify compliance with 15 specified labor laws and to immediately notify the contracting officer of any future adjudications of noncompliance. Contractors also must certify that, to the best of their knowledge, their subcontractors and suppliers are complying with the specified laws. Contractors can be liable under the False Claims Act for any certification that is not accurate.
The second clause, titled Past Performance Labor Law Violations, requires prospective contractors to certify that they and their subcontractors, at any tier, are complying with actions that were required in the past to correct adjudicated labor law violations. They also must furnish a list of such violations before receiving an award.
The certification requirement relates to the following labor laws: Fair Labor Standards Act, Occupational Safety and Health Act, National Labor Relations Act, Service Contract Act, Davis-Bacon Act, Title VII of the Civil Rights Act, Americans with Disabilities Act, Age Discrimination in Employment Act, and Family and Medical Leave Act.
There were previous attempts to impose similar certification requirements on federal contractors. The USDA tried to put forth an almost identical rule in 2011, but it withdrew the rule after receiving criticism. In 2014, President Obama issued Executive Order 13673 (called the Fair Pay and Safe Workplaces Executive Order), which required contractors to disclose alleged labor law violations. A federal judge enjoined the implementation of the executive order in 2016. In 2017, President Trump issued Executive Order 13782 to rescind Obama’s order, and Congress repealed the implementation of the regulations.
This new proposed rule from USDA could signal an attempt by the Biden Administration to revive Fair Pay and Safe Workplaces through agency-level requirements. Based on this clause, even a single labor-law violation could result in a contractor’s exclusion from a USDA procurement, without a meaningful process through which the contractor can dispute the exclusions. These requirements also create new risks under the False Claims Act, which can carry stiff penalties, including treble damages and potential debarment from government contracts. Contractors who work with or wish to compete for work at the USDA should ensure they understand and accurately complete the disclosure requirements once the rule becomes final.