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Federal Contractors Unfazed by Trump Move to Shield U.S. Workers

Aug. 10, 2020, 10:06 AM

With fewer than 100 days until he stands for reelection, the impact of President Donald Trump’s recent executive order directing federal agencies to review contracts for the displacement of American workers with H-1B visa holders may be more of a political move than an impetus for immediate change.

Trump’s Aug. 3 decree directed that within the next 120 days, the head of each executive department and federal agency review and report on contracts and subcontracts awarded by the agency in fiscal years 2018 and 2019, assessing whether foreign workers participated in the contract and if so, whether “opportunities for United States workers were affected by such hiring.”

The executive order is the latest in a series of measures Trump has taken to protect jobs for U.S. workers in the wake of the economic fallout from the coronavirus pandemic, and throughout his tenure in the White House. In 2017, he signed a “Buy American and Hire American” executive order directing agencies to issue rules and guidance to better protect U.S. workers, and a June 22 proclamation suspended holders of certain temporary work visa categories from entering the U.S. through the rest of the year.

Attorneys who consult contractors on compliance matters don’t immediately view the order as an indicator of more regulatory hoops for companies to jump through. It’s instead seen as a mandate agency heads will first have to tackle. They’re also aware that presidents often view federal contractors as a testing ground for policies.

“You don’t always know everything that you’re going to be subject to at the time of contract,” said Guy Brenner, a partner with Proskauer Rose LLP who handles contractor compliance matters. “This isn’t a unique circumstance.”

President Barack Obama, for example, prohibited federal contractors from discriminating against workers on the basis of sexual orientation or gender identity in 2014, years before the U.S. Supreme Court ruled that federal legal protections extend to LGBT workers.

An October Bloomberg Law analysis of U.S. Labor Department data shows more than 2,000 H-1B workers approved by the agency in the first nine months of FY 2019 were meant to be placed by staffing companies in U.S. government jobs. Popular destinations among federal agencies for the high-skilled guest workers were Fannie Mae and Freddie Mac, which are directed by the Federal Housing Finance Agency under a conservatorship, the Health and Human Services Department, Amtrak, and the Commerce Department.

Wait and See

Trump’s executive order increases scrutiny of federal contractor hiring practices, but that shouldn’t affect, at least immediately, the mission of the Labor Department’s Office of Federal Contractor Compliance Programs—or OFCCP—the agency that enforces equal employment opportunity laws among contractors.

“At face value, the new EO places the onus on government agency heads and does not have much of a role for OFCCP. Further, it neither sets standards for how agency heads will conduct the review nor lays out a role for DOL to set the standards,” said Chris Wilkinson, a Washington, D.C.-based partner with Orrick Herrington & Sutcliffe, in an email. He was previously a civil rights attorney within the Labor Department. The OFCCP regularly and randomly audits federal contractors to ensure compliance with federal anti-discrimination laws.

One agency directive from the order with a likelihood of short-term action is an order for the Labor Secretary to take initiative to “protect United States workers from any adverse effects on wages and working conditions caused by the employment of H-1B visa holders” within 45 days.

The executive order specifically asks DOL to review for broader applicability provisions in the Immigration and Nationality Act that govern H-1B workers’ wages and other terms of employment.

“OFCCP may follow-up with guidance and contractors may want to wait until that guidance before making any significant changes in business practices,” Wilkinson said.

Fisher Phillips partner Cheryl Behymer agreed with Wilkinson, saying agency heads, not the contractors themselves, must take action in response to the order. Many contracts, especially those that are defense-related, already include strict regulations that govern what kinds of workers have access to weapons or weaponry manufacturing processes.

“Contractors subject to those requirements are generally very well aware of the security restrictions associated with their hiring requirements so I am not sure how much practical impact the EO may have,” she said.

The OFCCP has cited federal contractors at least twice for allegedly favoring immigrant visa holders in hiring, including in a high-profile pay discrimination lawsuit against Oracle.

In that case, the agency alleged the company utilized a program for recent college graduates to hire Asian H-1B visa holders and then pay them less than their American, non-visa-holding counterparts. The hiring bias claims included in the lawsuit have since been settled, and the company continues to defend against the systemic pay bias allegations.

Labor Certification Changes

Many of the foreign workers at government agencies are contracted through consulting firms, which will sponsor H-1B workers and then place them at the third-party work sites.

That arrangement, in general, “has been a target of this administration,” said immigration attorney Emily Neumann, a partner at Reddy & Neumann in Houston.

Many of these IT staffing firms are H-1B dependent employers, and they already pay a higher fee to petition for those workers, Neumann said. The administration has sought to “price these companies out of the market and limit their business opportunities to keep them from contracting on these government jobs.”

DOL Secretary Eugene Scalia has already signaled his willingness to ramp up enforcement in the H-1B specialty occupation visa program. The Labor and Homeland Security departments announced July 31 a new agreement to share data and records on guest workers so that DOL can initiate “more robust examinations” of employers’ use of H-1B workers.

“Most employers are compliant, and most audits reveal that people are working where they say they’re working. The number of complaints dealt with by the Department of Labor are small compared to the total H-1B workforce,” said William Stock, an attorney with Klasko Immigration Law Partners in Philadelphia.

Of more than 23,000 site visits conducted in fiscal year 2018, U.S. Citizenship and Immigration Services only referred 1,117 cases to Immigration and Customs Enforcement for benefit fraud, according to data provided exclusively to Bloomberg Law at that time. Another 11,886 cases were referred for public safety concerns.

To contact the reporters on this story: Genevieve Douglas in Washington at gdouglas@bloomberglaw.com; Paige Smith in Washington at psmith@bloomberglaw.com

To contact the editors responsible for this story: Andrew Harris at aharris@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com

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