It is no secret that deregulation is a top priority for the Trump Administration and the Republican-led Congress. In the early weeks of governing together, President Trump and House Speaker Paul Ryan have dusted off the Congressional Review Act (“CRA”) as the tool of choice for undoing federal rules and regulatory initiatives implemented by the Obama Administration. The little-known but important law, enacted by President Clinton in 1996, provides Congress with the ability to enact legislation overturning certain federal agency rules. In the more than two decades on the books, the CRA has only been used to overturn a federal rule on one occasion when, in 2001, President George W. Bush signed a resolution overturning an ergonomics rule issued by the preceding administration. However, despite its past obscurity, the CRA is now more important than ever.
President Trump has already signed into law three “resolutions of disapproval,” or “CRAs,” the legislative vehicle under the Congressional Review Act used to override an agency rule. Included on the chopping block for Republican lawmakers are regulations impacting government contractors. Indeed, most recently, Congress passed a resolution disapproving the Obama Administration’s Fair Play and Safe Workplaces Final Rule (“the Workplace Rule”), colloquially referred to as the “blacklisting” rule by many in the procurement industry. In effect, the Workplace Rule would impose new disclosure requirements on government contractors related to more than a dozen federal and state labor laws. However, if signed by President Trump, the CRA resolution would permanently block implementation of the Rule and retroactively negate its effectiveness.
As discussed below, contractors should be aware of the CRA, its potential utility, as well as the impact it will likely have on the regulatory landscape given the political objectives of the Trump Administration and the 115th Congress.
How does the Congressional Review Act work?
Under the Congressional Review Act, federal agencies are required to submit reports to Congress before a rule promulgated by an agency can take effect. The CRA provides Congress with the ability to issue a joint resolution disapproving the rule; which, if signed by the President, would overturn that rule and retroactively negate any effect it had. After that, agencies are prohibited from issuing a rule that is “substantially the same” without authorization from a subsequent law passed by Congress and signed by the President.
What’s the catch? Once presented with a rule from an agency, Congress has 60 legislative days to issue a joint resolution disapproving the rule (i.e., 60 “days-of-continuous-session”). However, when Congress adjourns before 60 legislative days pass, the time period resets in the next session of Congress.
Why is this important now? In the closing months of the Obama Administration, federal agencies prioritized the finalization of many rules important to the administration. As this coincided with the end of the 114th Congress, it created a legislative eclipse of sorts; presenting the opportunity for President Trump and congressional Republicans to reset the clock and question or curtail many of the regulatory initiatives they campaigned against.
Adding to this, there is growing talk of the scope of rules currently exposed to CRA scrutiny. The traditional view of the CRA would expose only those rules promulgated in the final months of the Obama Administration (i.e., those falling within the 60-day window). However, there is a growing view that any federal “rule” promulgated by an agency since the enactment of the Congressional Review Act is fair game if the agency failed to publish or report the rule to Congress as contemplated by the CRA. Because there are rules on the books that have not been properly reported to Congress in accordance with the guidelines of the CRA, proponents of this expansive approach argue that if the President were to instruct the agencies to now issue reports, those rules could be on the congressional chopping block, too.
How will congressional Republicans and the Trump Administration use the CRA?
The 115th Congress has already considered dozens of CRAs, with President Trump signing off on three overrides within his first 100 days as the country’s chief executive. And this is not a strategy either branch of government is shying away from: House Speaker Paul Ryan considers using the CRA as “the quickest, most sure-fire way” to undo President Obama’s legacy, noting that congressional Republicans have “made CRAs the first priority of the 115th Congress.” Making this known, the House passed the Midnight Rules Relief Act of 2017, which would greatly accelerate CRAs by allowing Congress to disapprove of more than one rule at a time.
Thus, observers—and particularly those in regulated industries like government contracting—should expect the trickle of CRAs to only increase in the near future.
What is the impact on government contractors?
To date, Congress and the Trump Administration have repealed rules related to stream protections, resource extraction, and Social Security background check databanking. However, as noted, the House and Senate passed and sent President Trump a joint-disapproval of President Obama’s Fair Play and Safe Workplaces Rule. The Workplace Rule, promulgating the 2014 directive of President Obama’s Executive Order 13673, requires federal government contractors to make disclosures related to violations—as well as alleged violations—of 14 federal and state labor laws when pursuing federal contracts or subcontracts valued above $500,000. Of particular concern to the industry, if implemented, the Rule would require federal contracting officers to consider even unproven allegations of labor law violations of offerors or proposed subcontractors as part of their responsibility determination in federal procurements. In addition, the Workplace Rule restricts arbitration provisions in employment contracts and imposes paycheck transparency requirements on federal contractors.
While an October 2016 federal court ruling halted the reporting requirements and arbitration restrictions from taking effect, the paycheck transparency provisions became effective on January 1, 2017. Under the transparency requirements, contractors must provide employees more-detailed wage statements on covered contracts and provide notice regarding independent contractor relationships with any covered workers. If President Trump signs the CRA disapproving the Workplace Rule—which he is expected to do any day now—the entire Rule (the reporting mandate, arbitration restrictions, and transparency requirements) will be rescinded and retroactively negated.
In light of the pending doom of the Fair Play and Safe Workplaces Rule, contractors should review their recent and upcoming contracts and subcontracts to ensure clauses related to the Rule and Executive Order 13673 are not included or removed, such as FAR 52.522-57 (Representation Regarding Compliance with Labor Laws), FAR 52.522-58 (Subcontractor Responsibility Matters Regarding Compliance with Labor Laws), FAR 52.522-59 (Compliance with Labor Laws), and FAR 52.522-61 (Arbitration of Contractor Employee Claims).
There are a number of other recent regulations impacting government contractors that could be exposed to the CRA. For example, the final rule establishing new paid sick leave requirements on federal contractors took effect January 1, 2017. Under the Paid Sick Leave Rule published by the Department of Labor last September, covered federal contractors are currently required to provide employees with up to seven days of paid sick leave annually. Also vulnerable to CRA override is the September 20, 2016 final rule increasing the minimum wage on covered contracts to $10.20 per hour effective January 1, 2017.
We will continue to monitor the CRA and the changing regulatory landscape for government contractors as it shapes out. For more information about this, including the Congressional Review Act and its impact on government contractors, please contact Justin Chiarodo or Philip Beshara.