Legal Sieges on President’s Power Threaten Contractor Watchdog

Lawsuits attacking rules tied to the president’s power over government purchases are sketching a blueprint for weakening the US Labor Department subagency tasked with enforcing federal contractors’ civil rights responsibilities.

Business groups have sued to block agency rules implementing President Joe Biden’s executive orders requiring a $15 minimum wage for federal contractors or project labor agreements for large federal contracts, arguing with some success that Biden didn’t have the legal authority to issue those mandates.

As federal courts take a more skeptical look at the executive branch’s power, some attorneys say legal arguments raised in those cases could be used to threaten the DOL’s Office of Federal Contract Compliance Programs. The agency was established decades ago via executive orders to enforce anti-discrimination and affirmative action obligations for federal contractors.

It accused big companies like Google LLC, Oracle America Inc., and JPMorgan Chase & Co. of pay discrimination against women during the Obama administration, though it didn’t always win. The Trump-era OFCCP used its authority over contractors to ban “anti-American” workplace diversity trainings—a move later overturned by Biden.

“What we are seeing, within the last really decade or so, is a steady drumbeat around what is essentially a separation of powers argument that the administrative state, as overseen by the chief executive or the president, has grown so massive, and is essentially legislating,” said Matthew Camardella, a management-side attorney with Jackson Lewis P.C. on Long Island, N.Y.

“So, could this pattern continue? And could there be a challenge to the OFCCP’s authority?” He asked. “Absolutely.”

Procurement Power

Both of Biden’s challenged directives on PLAs and the contractor wage cited the president’s powers under the Federal Property and Administrative Services Act or the Procurement Act, a 1949 law that centralized the federal government’s practices for purchasing goods and services.

The federal government and worker advocates have argued that language in the law gives the president broad discretion to issue policies he considers “necessary to carry out” the act’s objective of promoting “economy and efficiency” in the federal procurement process.

That same power arguably underlies the executive orders that led to the OFCCP, attorneys for the government and worker advocates have said in legal filings defending the agency.

The office ensures compliance with former President Lyndon Johnson’s Executive Order 11246, which prohibits companies with government contracts worth more than $10,000 annually from discriminating based on race, color, sex, religion, national origin, sexual orientation, and gender identity.

The agency also enforces Section 503 of the Rehabilitation Act of 1973, which bars discrimination based on disability, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974, which applies to bias against veterans.

The executive order and both statutes also carry various affirmative action obligations.

Legal Challenges

Republican attorneys general for Texas, Louisiana, and Mississippi convinced a federal judge in Texas last year to block the $15 contractor wage rule issued by the DOL’s Wage and Hour Division.

The judge found that Section 101 of the Procurement Act “does not confer authority for the President to decree broad employment rules” and that his authority “is limited to the supervisory role of buying and selling of goods.”

The agency has appealed that ruling, arguing in that case and others that the rule is permitted under the Act because a higher wage for contractors would lead to an “increase in the quality of contractors’ employees and of the services that they provide,” which would benefit not just “government contractors but of the government itself.”

Two separate challenges filed by a recreational company and another coalition of GOP states seeking to overturn the pay raise were initially unsuccessful in district courts and are also currently pending in federal appeals courts.

Construction industry groups have also mounted litigation against a General Services Administration rule requiring contractors to enter into a project labor agreement on federal construction projects valued at over $35 million.

The lawsuit argues the requirement will increase costs and reduce efficiency on federal projects and “makes a mockery” of federal procurement laws “under the guise of increasing ‘economy and efficiency.’”

The case is pending in a Florida federal court. When it finalized the rule, the Biden administration said PLAs can include provisions to resolve labor disputes, which will help ensure projects are completed on time.

OFCCP Risk

Groups opposed to the OFCCP’s enforcement regime like the conservative Cato Institute and the New Civil Liberties Alliance have made similar Procurement Act claims in comments on its regulations and in a past lawsuit against the agency.

In 2019, Oracle sued the agency after it accused the tech company of pay discrimination. Oracle argued that the OFCCP was unconstitutional and lacked clear authorization from Congress to create an entire administrative system to adjudicate claims of employment discrimination involving federal contractors.

Oracle ultimately dropped the case after the agency agreed not to appeal its separate administrative loss to the company in the discrimination case.

The US Supreme Court has been skeptical of the source of congressional authority for the OFCCP, both Oracle and business groups including the Chamber of Commerce and the National Federation of Independent Business said in legal filings in the case. They pointed to a footnote in the high court’s 1979 ruling in Chrysler Corp. v. Brown stating that “nowhere” in the Procurement Act “is there a specific reference to employment discrimination.”

“What you’re seeing now is that administrations in recent years have sort of hung a lot on the Procurement Act,” said Kara Rollins, litigation counsel at the NCLA, which raised constitutionality questions regarding the agency in comments on a 2021 OFCCP rule on religious exemptions to discrimination liability and in the Oracle case.

“I think that the reason that you’re seeing very similar challenges in this like group of cases is because the Procurement Act just can’t bear the weight of what the executive is trying to do with it,” she added.

But that’s a relatively new authority being cited by the government, Rollins said, that only started to appear on executive orders during the George W. Bush administration.

But advocacy group Democracy Forward countered that the courts have long recognized the president to have the authority to issue non-discrimination protections under procurement law.

“Attacks on the Procurement Act are part of a trend of radical attacks on basic agency functioning and their abilities to help in the development of modern, nondiscriminatory workplaces, and that is bad for workers everywhere in America,” said Robin Thurston, legal director at Democracy Forward.

For example, in its defense against Oracle, government attorneys pointed to the US Court of Appeals for the Third Circuit’s 1971 decision in Contractors Ass’n v. Secretary. The court recognized that EO 11246 was authorized by the Procurement Act because “it is in the interest of” the US government “to see that its suppliers are not over the long run increasing its costs and delaying its programs by excluding from the labor pool available minority workmen.”

The Labor Department declined to comment.

Agency Impact

For a challenge against OFCCP to be successful under the Procurement Act, opponents would have to prove that EO 11246, the agency’s core authority, doesn’t have a significant enough nexus to “efficiency and economy” in federal contracting, attorneys said.

A case that challenged Biden’s Covid-19 vaccine mandate for federal contractors could provide support, attorneys said.

Opponents of the mandate were able to convince the Sixth Circuit that there wasn’t a strong enough link between Biden’s order and the goals of the Procurement Act, said Leigh Nason, an attorney at Ogletree Deakins representing federal contractors.

“The way they got rid of the vaccine is they said, ‘Look, you don’t have the authority to regulate contractors. Your obligation is to promote efficiency and economy in contracting and a vaccination doesn’t do that,’” she explained.

The Eleventh and Fifth circuits also ruled that Biden overstepped his authority with the vaccine requirement for contractors, but the Ninth Circuit upheld the mandate.

The policies the OFCCP enforces under EO 11246 are most vulnerable to those legal arguments, Camardella predicts.

“Where the OFCCP actually is implementing a statute that was passed by Congress, those are are on firm ground I believe,” Camardella said, referring to the laws protecting veterans and workers with disabilities.

Nason noted that there’s also the potential for Congress to look to Title VII of the 1964 Civil Rights Act—which bars employment discrimination based on the same characteristics as EO 11246—to preserve some of the agency’s ability to oversee federal contractors.

“Congress can just say all the regulations that OFCCP promulgated—regulations, not sub-regulatory stuff—is really a Title VII thing,” Nason explained. “So, unless you can say that the agency is doing something beyond Title VII, or that conflicts with Title VII, you lose implicitly.”