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Thelen LLP
On
March 8, 1995, President Clinton issued the very controversial
Executive Order No. 12954 entitled Ensuring the Economical
and Efficient Administration of Federal Government Contracts.
In short, the Executive Order sanctions federal contractors
that hire permanent replacements for lawfully striking workers
by either (1) terminating any existing government contracts
with the offending contractor, or (2) debarring the offending
contractor from renewing its existing government contracts
or from obtaining any future contracts with federal government
agencies.
The Executive Order, which took effect immediately after
being signed by the President, ostensibly was enacted pursuant
to the Federal Property and Administrative Services Act
(FPASA), 40 U.S.C. § 471. Under the FPASA, the President
has the authority to effectuate the purpose of the FPASA,
which is to "provide for the Government an economical
and efficient system for ... procurement and supply."
Reasoning that permanent replacements lack the experience
of striking employees and as a result produce inferior quality
products, the President concluded that the federal government
can preclude the possibility that it may receive inferior
products by sanctioning its contractors who use replacements.
The Executive Order calls upon the Secretary of Labor, Robert
Reich, to establish procedures for investigating whether
a contractor's "organizational unit" has "permanently"
replaced "lawfully striking workers." Upon
making that determination, the Secretary may either call
upon the contracting federal agency to terminate its current
contract with the offending contractor or debar the contractor
from renewing its existing contract(s) and bidding on additional
federal work. Debarments would be lifted if and when the
Secretary determines that the labor dispute precipitating
the permanent replacements has been resolved.
Because the Executive Order fails to define "permanent
replacements," "lawful strikes," and "organizational
units," many coverage questions regarding the scope
of the Order will persist until the Secretary of Labor issues
accompanying administrative regulations. For example,
it is unclear whether a contractor is subject to sanction
where (1) a related entity, i.e., a subsidiary or parent
company, employs permanent replacements, but the contracting
company does not; (2) the permanent replacements hired by
the contractor have no connection with the production or
delivery of the goods or services supplied to the government
under the contract; and (3) the contractor hired permanent
replacements in the past, e.g., ten years ago, and those
replacements are still employed with the contractor.
Although the Executive Order was assailed by the Republican
majority in Congress as a blatant attempt to circumvent
congressional authority over federal labor laws, Congress
has been unable to enact legislation that would override
the Executive Order.
Similarly, litigation efforts to stop enforcement of the
order have yet to meet success. On March 15, 1995, Bridgestone/Firestone,
a contractor most likely debarred as a consequence of the
order, joined the U.S. Chamber of Commerce and other employer
associations in filing a lawsuit in federal court which
seeks to enjoin the enforcement of the order. As of
the drafting of this report, the complaint has not been
acted upon by the federal district court of the District
of Columbia .
Given the uncertainty of the scope of the Executive Order,
all federal contractors should seek legal advice from labor
counsel before engaging in the use of permanent replacements
or risk the loss of their existing federal contracts and
debarment from bidding on future government projects.
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For more information about the issues covered in this report, please contact Linda S. Husar in our Los Angeles office at 213-576-8017 or at lshusar@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©1995 Thelen LLP
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