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U.S. Contractors Scramble After Court Halts Biden’s Shot Mandate

Dec. 9, 2021, 9:45 AM

A nationwide block on the Biden administration’s Covid-19 vaccine mandate for millions of federal contractor workers sparked confusion for their employers and signals a threat to future executive orders aimed at businesses with government pacts.

A Georgia federal judge issued a preliminary injunction on Tuesday against the measure for contractors, which employ roughly a quarter of the U.S. workforce. The judge said a state coalition’s challenge to it had a strong chance of succeeding and that the Biden administration mandate amounted to overreach.

“We were in vaccination purgatory and we’re still there. Whether you like the ruling or you don’t, there’s more uncertainty,” said Leigh Nason, a shareholder with Ogletree Deakins who represents federal contractors in compliance matters. “It’s a real dilemma for people who are covered by the executive order on what to do now. It would be nice to have an answer but it will take a while.”

The decision came as companies were already implementing the shot mandate, including top contractors Leidos Inc., Alphabet Inc.'s Google, Boeing Co., Raytheon Co., and Lockheed Martin Corp. A recent report based on data from the end of November found that about 28% of federal contractors out of 154 companies surveyed required the shot. Many companies have been more hesitant.

The contractor mandate was part of a suite of Biden administration moves to boost vaccination rates, including an Occupational Safety and Health Administration emergency shot-or-test rule for companies with more than 100 employees and a regulation for healthcare workers. Those have also been frozen as court challenges continue.

Health officials have said as efforts to require the U.S. workforce to be vaccinated are delayed, the more likely the Covid-19 pandemic will have the chance to thrive and spike anew as variants emerge.

“This isn’t about the effectiveness of vaccines or the courts weighing in on whether people should be vaccinated in this country,” said Liza Craig, counsel at Reed Smith LLP, who focuses on government contracting. “This is about the president’s authority to require certain conduct of contractors.”

Appeal Likely

The U.S. government already asked for an emergency stay of a similar, but narrower injunction issued by a Kentucky court, in a suit involving that state, Tennessee, and Ohio. An appeal is also likely in the Georgia-led seven-state case, which would be considered by the U.S. Court of Appeals for the Eleventh Circuit.

Those challenges were part of a string of lawsuits filed around the country that said Biden overreached his executive power in demanding that U.S. contractors vaccinate their workers. Employment lawyers previously expressed skepticism about the suits, arguing that businesses that take federal money may likely face compliance.

“This is one judge’s opinion and it obviously will be appealed,” Karla Grossenbacher, a labor and employment partner at Seyfarth Shaw LLP, said of the Georgia order. “I see what the judge is saying, but I don’t think you can rule out entirely that the mandate doesn’t service ‘economy and efficiency’ in the context of a pandemic to ensure the health of a workforce.”

She said she has clients in the manufacturing industry that had to close down operations because of Covid-19 outbreaks, which clearly affected their operations.

With the federal mandate temporarily blocked, companies that were scrambling to come into compliance will now have to consider policies in at least 12 conservative-led states that have additional requirements for companies with vaccine requirements, Grossenbacher said.

Ogletree Deakins’ Nason said the delay could last for weeks to months. She said this leaves contractors making decisions about whether they will move forward with compliance plans.

“They no longer can say ‘The government made me do it,’” Nason said. “We’re faced with a lot of judges who aren’t a big fan of nationwide vaccination initiatives. These arguments clearly have some traction.”

Contractor Requirements

Both the Kentucky and Georgia courts said that the effectiveness of the vaccine wasn’t in question, but rather the method in which Biden used his procurement power over federal contracts. Executive orders have been issued to set more stringent workplace rules for federal contractors for decades.

These include tougher non-discrimination requirements, affirmative action compliance programs, stricter sexual harassment prevention, and orders to have a human trafficking plan in place. Others include paid leave and minimum wage requirements.

Some previous executive orders issued for federal contractors have had “tenuous” procurement authority, but courts have largely upheld that power to make proclamations, said Alissa Horvitz, an attorney with Roffman Horvitz PLC who specializes in federal contractor compliance.

“States are asserting that the president doesn’t have the procurement power from Congress to issue this order, but if he doesn’t have the power to keep government contractor businesses economically viable and minimize contractor performance delays arising out of an ill workforce in a public health pandemic, a lot of other executive actions will be in question in the future,” Horvitz said.

The general wisdom typically is that the federal government has a lot of discretion when it’s telling contractors what it can and cannot do, said Cornell University employment law professor Stewart Schwab.

He said the question remains how far the Georgia order would reach to other requirements the federal government enforces against contractors. Schwab said he was surprised the federal government was being asked to justify its action in considerable detail.

“This doesn’t strike me as a different kind of compliance than the requirements of the affirmative action rules, for example,” he said. “Those requirements have been accepted for 60 years.”

Procurement law clearly has been interpreted to give fairly broad deference to the White House, for the president to operate in the name of economy and efficiency, said Mike Eastman, an NT Lakis partner and assistant general counsel for the Center for Workplace Compliance.

“Every one of these executive orders that imposes the contractor mandate emphasizes economy and efficiency,” Eastman said. “We also know that the president doesn’t have a blank check to do whatever he wants. And the question though, is what’s in between there? Where are the limits of that authority?”

Companies in Limbo

Reed Smith’s Craig said that Biden has made it clear that his top priority is to get Americans vaccinated, and companies should be aware that there could be other attempts by the administration to raise inoculation rates.

“The confusion is more along the lines of—there’s a lot happening and things are changing rapidly,” she said. “There is the anxiety of what do we do, if a week from now, the courts determine things can move forward. Have we lost time?”

Companies, divided on whether to preemptively issue mandates, have said they fear resignations in an already shrinking labor market.

“We do think it’s smart for contractors to be ready in the case the injunction is overturned, and they have to comply quickly,” Eastman said. “All the law on this is going to be settled at a higher level. So, you know, I’m definitely taking a bit of a wait and see approach.”

To contact the reporters on this story: Erin Mulvaney in Washington at emulvaney@bloomberglaw.com; Shira Stein in Washington at sstein@bloomberglaw.com

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