United States: Federal Contractors, Subcontractors Must Tell Employees About Collective Bargaining Rights

Certain federal contractors and subcontractors must soon inform employees about their rights under the National Labor Relations Act ("NLRA"), the primary law governing relations between unions and employers in the private sector. The directive, issued by the Department of Labor's Office of Labor-Management Standards as a final rule to implement Executive Order 13496, becomes effective June 21.

Although the regulation takes effect June 21, a contractor may not be required to post the notice, which must be at least 11 inches by 17 inches, in color, and conspicuously placed, until a later time. Under the rule, federal contracting agencies must incorporate the notification requirement into solicitations issued on or after June 21 and into any modifications of federal contracts made on or after that date. Thus, the posting obligation attaches only upon the effective date of a federal contract that includes the NLRA notice provision.

The new rule has created confusion both in the financial services industry and in the Department of Labor ("DOL"). During a recent webinar about the new rule, attendees peppered DOL representatives about how the rule applies to the industry. The DOL considers financial institutions to be federal contractors under any of the following situations: (1) the financial institution serves as a depository of government funds in any amount; (2) the financial institution is an issuing and paying agent for U.S. savings bonds, or (3) the financial institution's deposits are federally insured.

Thus, nearly all financial services concerns satisfy the criteria. Yet, as webinar attendees noted, there are no written contracts between the government and the financial institution under the three scenarios. The DOL'S webinar presenters acknowledged that the situation is a "tricky one for us," and promised that more guidance for banks would be issued, perhaps in the form of "Frequently Asked Questions." Until then, financial institutions should consult their counsel about how to proceed.

There are exceptions to the posting obligation. Contracts in an amount below the "Simplified Acquisition" threshold – which currently is $100,000 – will not contain the posting provision. The regulation covers only employers subject to the NLRA. Thus, public employers are not affected by the final rule.

The posting obligation also flows down to subcontracts awarded under a covered prime contract. Under the final rule, contractors must include the notice provision in any subcontract of $10,000 or more. As a result, covered federal subcontractors also must post the notice of rights in their workplaces if: (1) their work is "necessary" for the prime contractor's performance of the federal contract or (2) the subcontractor performs or assumes a portion of the prime contractor's obligations.

The Office of Labor-Management Standards final rule, published on May 20, 2010, implements Executive Order 13496. E.O. 13496 signed by President Obama on January 30, 2009, and rescinds a previous Executive Order signed by President Bush that required contractors to post a notice informing employees that they did not have to join a union in order to keep their jobs. President Obama rescinded the Bush-era rule shortly after his inauguration.

The Office of Labor-Management Standards issued a proposed rule in August 2009 and considered public comments before issuing the final rule. The final rule covers a broad range of federal contracts, including contracts for supplies, services, real property, utilities, construction, transportation, research, insurance and fund depository. Exemptions are narrow. The contracting agency may request an exemption from the Office of Labor-Management Standards if posting the notice would not serve the purposes of the rule, would impair the government's ability to efficiently procure goods or services, or if special circumstances require an exemption in order to serve the national interest.

Required Content

The required notice lists employees' rights under the NLRA to form, join and support a union and to bargain collectively with their employer. It provides examples of unlawful employer and union conduct that interferes with those rights, and indicates how employees may contact the National Labor Relations Board, the federal agency that enforces those rights, with questions or to file complaints. Companies may download the poster at http://www.dol.gov/olms/regs/compliance/EO13496.htm. Employers may not edit the content of the notice, and the size of the poster must be at least 11 inches by 17 inches. Because contractors may not alter the poster, it must be in color. The words "EMPLOYEE RIGHTS" headline the poster in capital letters and bold red type.

Location of Posting

The notice must be posted conspicuously in a prominent location on contractors' premises – that is, where it posts other notices to employees about terms and conditions of employment. The notices must be posted at all locations where employees "engage in activities relating to the performance of the contract." In comments accompanying the final rule, the DOL's Office of Labor-Management Standards acknowledged that it needed to advise contractors regarding the meaning of this phrase. However, the DOL noted that a contract for the production and sale of goods involved not only the production workers assembling the goods, but also included employees in repairing the machinery; maintaining the plant; assuring quality control and security; storing the goods after production; delivering them to the government; hiring, paying and providing human resource services for the employees engaged in contract-related work; keeping financial and accounting records; performing related office and clerical tasks; and supervising or managing the employees engaged in such tasks. Thus, any further guidance likely will take an expansive approach to which employees "engage in activities relating to the performance of the contract."

Employers that normally post notices to employees electronically also must post the NLRA notice electronically. They may satisfy the electronic posting requirement by displaying prominently a link to the Department of Labor's website containing the full text of the poster. The link must read: "Important Notice About Employee Rights To Organize and Bargain Collectively With Their Employer."

In addition, where a significant portion of a covered employer's workforce is not proficient in English, the employer must provide the notice in languages spoken by employees. The DOL will provide translations of the required notice.

Enforcement and Sanctions

The Office of Federal Contract Compliance Programs ("OFCCP") will enforce the Executive Order. The agency may conduct an evaluation to determine compliance with the posting requirement. The ultimate penalty for failure to post the notice is cancellation of an existing federal contract or debarment from future contract opportunities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.