On Friday, Target agreed to pay $3.74 million and review its policies for screening job applicants to settle Carnella Times et al. v. Target Corp., a class action in the Southern District of New York challenging the company’s use of background checks. The suit claimed that Target’s use of criminal background checks violated Title VII by disproportionally excluding Black and Hispanic applicants from obtaining employment.

Data demonstrates that certain minority populations—principally, Black and Hispanic males—are arrested and convicted at higher rates than their representation in society. The EEOC’s Enforcement Guidance on the issue states that an employer’s facially neutral policy or practice excluding applicants from employment that adversely affects a disproportionate number of members of a protected class, without a substantial business justification may give rise to a disparate impact discrimination claim under Title VII.

Target has been praised over recent years as being one of the largest national employers to take a proactive approach to “Ban the Box,” a legislative movement designed to provide greater employment opportunities to job applicants with criminal histories by delaying inquiries into an employee’s criminal history until later in the hiring process. In 2013 Target removed questions about applicant criminal history from all of its employment applications.

However, it seems that simply removing criminal history inquiries from its job applications was not enough to insulate Target’s hiring process from a disparate impact claim. The complaint alleged that after Target extends a conditional offer of employment to an applicant a third-party vendor conducts a criminal background check on the applicant. The results of the criminal background check are then compared to Target’s hiring guidelines, which screen out applicants who have been convicted of certain crimes involving violence, theft, or controlled substances in the seven years prior to the application.  Although Target followed several best practices, such as conducting a background check after a conditional offer of employment and utilizing a neutral third-party vendor, the Complaint alleged that Target’s hiring guidelines are not job-related or consistent with business necessity for hourly, entry level jobs such as food service workers, stockers, cashiers, and cart attendants.

Under the settlement agreement, Target will provide class members with hourly, entry level jobs at Target stores through a priority hiring process. Class members not eligible for priority hiring may be eligible to receive a monetary award in lieu of employment. Second, Target will engage independent consultants to revise and validate Target’s hiring guidelines to remedy the hiring practices at issue in the suit. Finally, Target also agreed to make a financial contribution to nonprofits that provide re-entry support to individuals with criminal history records.

Target’s settlement illustrates that removing criminal history inquiries from applications may not be enough to protect employers from litigation. The settlement is a reminder to all employers to reevaluate hiring practices to stay in line with the EEOC’s guidance. Although the EEOC does not prohibit consideration of criminal history, employers who have a policy that excludes applicants based on criminal history should evaluate whether the exclusion is appropriate for all job positions. According to the EEOC, in order for an employer to demonstrate that its criminal history exclusion is job related and consistent with business necessity, the employer must “show that the policy operates to effectively link specific criminal conduct, and its dangers, with the risks inherent in the duties of a particular position.”

Accordingly, employers should look at each position’s job duties, work environment, and potential exposure to certain types of customers to determine whether the applicant’s criminal history is really an issue.  A simple evaluation of job positions can ensure compliance with Title VII and EEOC guidance and keep the focus on hiring good employees, not fighting unnecessary litigation.

In a recent decision handed down by the 6th Circuit Court of Appeals, Mosby-Meachem v. Memphis Light, Gas & Water Division, No. 17-5483 (6th Cir. 2018), the Court held that in certain circumstances telecommuting may constitute a reasonable accommodation.

Andrea Mosby-Meachem was hired by Memphis Light in 2005 as an in-house labor, employment and workers’ compensation attorney. In 2011, the General Counsel for Memphis Light issued a written policy, which stated her expectations that her staff members were to work in the office. The Company, however, did not have a formal, written policy regarding telecommuting, some employees often telecommuted, and in 2012 Mosby-Meachem was allowed to work from home for two weeks while recovering from neck surgery.

In early January 2013, Mosby-Meachem was in her 23rd week of pregnancy when her doctor ordered her on 10-weeks of bed rest. She requested to work from home, but approximately three weeks later an ADA committee formed by Memphis Light denied her request on the basis that her physical presence in the office was an essential job function, and because of concerns regarding the confidentiality of her work. Significantly, Mosby-Meachem worked from home while her request was being considered and until it was denied, as no one from Memphis Light told her to stop working.

Mosby-Meachem brought claims of pregnancy discrimination under Tennessee law, and failure to accommodate and retaliation under the Americans with Disabilities Act. Memphis Light’s motion for summary judgment was denied and a jury subsequently awarded Mosby-Mecheam $92,000 in compensatory damages for disability discrimination, but it denied her claims of pregnancy discrimination and retaliation. The trial court also awarded her $18,184.32 in back pay.

On appeal, the 6th Circuit noted that determining essential job functions was highly fact specific, and that while Memphis Light had produced several pieces of evidence to support the need for in-person attendance, Mosby-Meachem had demonstrated that she could and had performed the essential functions of her job remotely, that Memphis Light’s job description was 20-years old and did not reflect changes in technology, and that Memphis Light had not engaged in the interactive process regarding Mosby-Meachem’s accommodation request. The 6th Circuit accordingly affirmed the jury’s verdict. In upholding the verdict, the 6th Circuit found that the case was distinguishable from prior precedent (Williams v. AT&T Mobility Services, LLC, No. 16-6078 (6th Cir. 2017) and EEOC v. Ford Motor Company, No. 12-2484 (6th Cir. 2014), where plaintiffs either had requested to telecommute indefinitely, they had not previously telecommuted, or being in the workplace truly was an essential job function given the plaintiff’s performance issues or the need to be logged into a computer at the work place in order to receive customer telephone calls.

Some takeaways from this decision are that an employer needs to:

  • Review every accommodation request on an individualized, case-by-case basis;
  • Engage in the interactive process with the employee making the request;
  • Analyze the essential functions of the position in issue to determine if they can be (or have been) performed with the requested accommodation; and
  • Review and update job descriptions on a regular basis.

On March 7, 2018, the U.S. Court of Appeals for the Sixth Circuit determined in a landmark ruling that federal law protects transgender individuals from employment discrimination. The Sixth Circuit also determined that private employers cannot use their religious beliefs to justify discrimination against transgender individuals.

The Sixth Circuit’s decision case in the case of EEOC v. R.G. &. G.R. Harris Funeral Homes involved Aimee Stephens, who was born biologically male, and who was working as a funeral director. After working for some time, Aimee told the company’s owner of plans to transition to female and to begin dressing as a woman at work due to a gender identity disorder. The owner then fired Aimee on the basis that “he was no longer going to represent himself as a man.” The owner further explained that he disapproved of gender transition as part of his sincerely held religious beliefs because it “violat[es] God’s commands.”

Aimee filed a complaint with the U.S. Equal Employment Opportunity Commission (EEOC) to challenge the termination on the basis that it amounted to unlawful sex discrimination under Title VII of the Civil Rights Act of 1964 (Title VII). The EEOC sued the company, and a district court in Michigan ruled that the company had engaged in sex discrimination against Aimee because the termination was based on unlawful sex stereotypes.  The district court further ruled that the company nonetheless legally terminated Aimee because a federal law called the Religious Freedom Restoration Act (RFRA) permits private employers to discriminate against workers when their personal religious beliefs compel them to do so.

The case went to the Sixth Circuit on appeal, where the Court held unequivocally that Title VII does protect transgender individuals from employment discrimination. As a result, the company’s decision to terminate Aimee due to Aimee’s transgender status and plans to transition did amount to illegal sex discrimination. The court explained that discrimination based on transgender status improperly punishes an employee based on sex stereotyping, or failing to confirm to gender norms. The court rejected the company’s argument that transgender discrimination is not sex-based discrimination and explained that it is analytically impossible to fire an employee based on transgender status without taking the employee’s sex into account.

After resolving the first issue, the Sixth Circuit turned to the issue of whether the company could justify its discrimination against Aimee by pointing to the owner’s religious beliefs. This was significant because the Sixth Circuit was the first federal court of appeals to address the religious defense in a case of this nature. The Sixth Circuit evaluated all of the issues and ruled that the owner’s religious beliefs did not provide a defense and therefore did not excuse Aimee’s discriminatory termination. The Sixth Circuit rejected the company’s argument that Aimee’s presence as a transgender individual would create a distraction for the company’s customers and explained that this argument was based on assumptions about the customers’ “presumed biases” and it was therefore inadequate. The Sixth Circuit also rejected the company’s argument that employing Aimee would substantially burden the owner’s religious practices, since merely employing Aimee was not tantamount to supporting Aimee’s sex or gender identity.

These issues are sure to spark further debate and litigation, especially in light of statements made by Attorney General Jeff Sessions and others in the administration and the legislature. We will continue to monitor the developments.

In Cristina Barbuto v. Advantage Sales & Marketing LLC and Joanne Meredith Villaruz, Massachusetts Supreme Judicial Court Case No. SJC-12226, the Massachusetts Supreme Court held on July 17, 2017, that an employee in Massachusetts can bring a claim of disability discrimination after being fired for using medical marijuana.

Medical marijuana was approved by Massachusetts voters in 2012, and the law provides that individuals who qualify for the use of medical marijuana cannot be punished for using it.  Barbuto suffers from Crohn’s disease and was using medical marijuana two to three times per week, although never during the work day, when she began working for Advantage Sales in 2014. After failing a mandatory drug test, Barbuto was terminated by Advantage Sales on the basis that Advantage follows federal law and not state law, and of course the use of marijuana is illegal under federal law.

In upholding Barbuto’s right to bring a disability discrimination claim under State law, the Massachusetts’ high court stated that although an employee’s possession of medical marijuana may violate federal law, that fact does not make it a per se unreasonable accommodation. The court further stated that even if allowing the use of medical marijuana was unreasonable, Advantage should have still engaged in the interactive process with Barbuto to determine if there was another potential, reasonable accommodation, such as using another drug that did not violate the company’s drug policy. Advantage will have the opportunity to demonstrate the unreasonableness of medical marijuana as an accommodation on remand.

While the court allowed Barbuto’s disability claim to stand, it did state that employers do not have to tolerate the use of medical marijuana during work time, nor allow medical marijuana for individuals in safety-sensitive jobs or those covered by the federal drug-free workplace laws. The court additionally stated that there is no implied statutory cause of action for individuals alleging a violation of the state’s medical marijuana law.

As reported in prior postings, Ohio’s medical marijuana law is much more protective of employers than the law passed in Massachusetts, but it is of course difficult to prevent determined courts from finding ways around what would otherwise be clear provisions of the law.

Yes, federal law prohibits employers from discriminating against employees and applicants based on their sexual orientation. Yes, employers who allow discrimination or harassment based on sexual orientation can be forced to pay a full range of damages, including punitive damages.

Employment and civil rights lawyers have struggled to find clear answers to these questions for years, and until last week, no federal court of appeals had ever answered them in the affirmative. That all changed, however, when the U.S Court of Appeals for the Seventh Circuit issued its decision on April 4 in Hively v. Ivy Tech Community College of Indiana.

Although the Hively decision is 69 pages long and discusses a number of important legal issues, the key holding is a simple one – Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on sexual orientation. The decision is being lauded as a “gamechanger” by civil rights and LGBT advocates, and is being characterized as judicial overreach by others. Regardless of which side is correct, the underlying issue will almost certainly end up before the U.S Supreme Court sometime in the foreseeable future due to the fact that two other federal appeals courts have ruled against Title VII coverage for sexual orientation discrimination.

Although some media commentators have been quick to attack the Seventh Circuit’s decision because its author, Chief Circuit Judge Diane Wood, was appointed by President Clinton, the decision was supported by strongly worded concurring opinions written by Circuit Judge Richard Posner and Circuit Judge Joel Flaum, both President Reagan appointees. In fact, Judge Posner went so far as to write that “The position of a woman discriminated against on account of being a lesbian is thus analogous to a woman’s being discriminated against on account of being a woman. That woman didn’t choose to be a woman; the lesbian didn’t choose to be a lesbian.”

The Hively decision technically only applies to employers within the Seventh Circuit, which covers Indiana, Illinois and Wisconsin. Nonetheless, employers elsewhere will be wise to take steps to protect their employees from discrimination on the basis of sexual orientation because the EEOC has made it clear that it will use the Hively decision to support its long-standing position that sexual orientation discrimination is a form of sex discrimination and is therefore illegal. Employers in many jurisdictions are also covered by state and local laws that already prohibit sexual orientation discrimination.

The Hively decision provides a good reminder to employers that they should review and update their anti-discrimination and anti-harassment policies with the employment counsel on a regular basis.

imagesBefore the expiration of the extended deadline last week, the U.S. Equal Employment Opportunity Commission received over 100 comments to its proposed Enforcement Guidance (“Proposed Guidance”) on workplace harassment. The revised guidance is the first revision to the EEOC’s workplace harassment guidance since the 1990s and the result of the July 2016 report by the EEOC’s Select Task Force, which notes that “During the course of fiscal year 2015, EEOC received approximately 28,000 charges alleging harassment from employees … This is almost a full third of the approximately 90,000 charges of employment discrimination the EEOC received that year.” See report here.

In addition to other aspects of the Proposed Guidance, certain commentators such as The Employment Law Alliance (“ELA”), the U.S. Chamber of Commerce (“The Chamber”), and The Society for Human Resources Management (“SHRM”) were particularly critical of the EEOC’s position on sexual orientation bias and harassment as inconsistent with existing law and outside the scope of the legislative intent of the statute.

The Proposed Guidance confirms the EEOC’s position that harassment based on gender identity and sexual orientation is prohibited under Title VII, and defines the two terms as follows:

Gender identity: Sex-based harassment includes harassment based on gender identity. This includes harassment based on an individuals’ transgender status or the individual’s intent to transition. It also includes using a name or pronoun inconsistent with the individuals’ gender identity in a persistent or offensive manner.

Sexual orientation: Sex-based harassment includes harassment because an individual is lesbian, gay, bisexual, or heterosexual.

Each of these definitions is accompanied in the Proposed Guidance by a footnote. As The Chamber noted in its comment, however, the single case referenced by the EEOC in its gender identity footnote is a case issued by the EEOC itself, not a Court. The EEOC’s footnote to its sexual orientation definition also highlights one of its own cases and contains an arguably one-sided and misleading representation of support for its own position.  As The Chamber notes, the Proposed Guidance fails to include several Court-issued rulings that explicitly reject the EEOC’s position. SHRM’s comment to the Proposed Guidance also expressed concern that the EEOC failed to clearly communicate in the body of the Proposed Guidance that its position is opposed to established law, as the EEOC did in other areas of the Proposed Guidance. The ELA similarly observed that the EEOC’s inclusion of “gender identity,” “transgender status,” an “individual’s intent to transition” and “sexual orientation” is beyond the plain language of Title VII and “reflects the commission’s impermissible trespassing into legislative rulemaking.”

While the EEOC has been similarly chastised by multiple other sources during the recent past for “legislating” and not regulating, the EEOC has continued to actively pursue its position on LBGT and gender identity issues and it is unlikely to take steps to substantially revise its position or the final Guidance.

President Donald Trump has nominated Tenth Circuit Court of Appeals Judge Neil Gorsuch to fill the U.S. Supreme Court vacancy caused by the death of Justice Antonin Scalia nearly one year ago. Known for his classical constructionist approach, Gorsuch is expected to restore the ideological balance that existed before Justice Scalia’s passing, with four conservatives, four liberals and Justice Anthony Kennedy (for whom Judge Gorsuch worked as a law clerk) serving as a swing vote.

If confirmed, Judge Gorsuch’s presence on the High Court will invariably impact the judicial landscape of labor and employment law. More than three dozen petitions are currently pending before the Court, seeking interpretation of laws such as the Fair Labor Standards Act (FLSA), the Employee Retirement Income Security Act (ERISA), Title VII of the 1964 Civil Rights Act (Title VII), the NLRA, the ADA and others.

Here are a few issues to watch:

Agency Fees

On March 29, 2016, the Supreme Court issued a 4-4 opinion in Friedrichs v. California Teachers Association, in which the Court summarily upheld the Ninth Circuit Court of Appeals’ decision allowing public sector unions to tax employees who decline union membership with “agency” or “fair share” fees similar to the cost of union dues. Justice Scalia, who engaged in lively questioning during oral argument in this case but died before the opinion was issued, was expected to cast the fifth vote in favor of the employees, who argued that the agency fees violated their First Amendment right to freedom of speech and association. But with Scalia’s absence, the Court was deadlocked. 

The Friedrichs case was expected to have critical implications on the continued viability of public sector unions. While the plaintiff’s petition for rehearing has been denied, more cases like this are bubbling up through the courts. Changes also have been made through legislative action, with “right to work” laws having been enacted in 27 states and Guam. Under the right to work laws, employees in union shops may maintain employment without having to pay union dues or other fees.

Arbitration Agreements and Class Wide Waivers of NLRB Claims

After several requests, the Supreme Court has agreed to review the ruling in D.R. Horton, Inc., 357 NLRB No. 184 (2012), in which a 3-2 majority of the National Labor Relations Board (NLRB) found that class action waivers in arbitration agreements violate Section 7 of the National Labor Relations Act. On January 13, 2017, the Supreme Court granted certiorari in three cases involving the validity of the D.R. Horton rule. One case, NLRB v. Murphy Oil USA, Inc., arises out of a Board decision finding that an employer had engaged in an unfair labor practice by entering into arbitration agreements with its employees, and the other two, Epic Systems Corp. v. Lewis and Ernst & Young LLP v. Morris, are private-party disputes in which employees invoked D.R. Horton to challenge their arbitration agreements.

The Supreme Court has historically favored arbitration agreements in other settings, and these concepts have been extended to the employment setting. With certain delineated exceptions, employers are generally able to implement arbitration agreements with class wide waivers to mitigate their litigation risk.

Now that the D.R. Horton issue has been accepted for review, Judge Gorsuch’s confirmation may provide employers with hope that the Court will extend the FAA’s footprint, honoring arbitration agreements in the union setting.

Joint Employers

Another recent NLRB ruling set for review this year is the board’s August 2015 decision in Browning-Ferris Industries of California, Inc., in which the Board found that a California waste management company (Browning-Ferris) jointly employed its staffing agency workers. The decision effectively rewrote the NLRB’s test for deciding whether two affiliated companies are joint employers that share bargaining responsibilities when workers organize and legal liability when they file suit. Before the decision, the joint employer standard rested on a business having “direct and immediate” control over terms and conditions of employment. The Browning-Ferris Board revised the standard to include “indirect control,” or even the “ability to exert” such control. When Browning-Ferris thereafter refused to recognize and bargain with the newly elected union, an unfair labor practice charge was filed, and the Board found another violation of the Act.

The Browning-Ferris cases are part of a growing body of litigation over joint employer liability that is anticipated to take a significant toll on employers in coming years. Employees have sought to apply the new joint employer standard outside of the NLRA, including in cases involving alleged violations of OSHA, the FLSA, the FMLA and other statutes.

The Browning-Ferris, currently on review before the D.C Circuit Court of Appeals, warrants close monitoring. Judge Gorsuch’s confirmation would restore hope that employers will regain some clarity into the now amorphous and overly expansive definition of joint employer liability.

Discrimination Based Upon Sexual Orientation

A final issue poised for review is whether Title VII bars employers from discriminating against employees because of their sexual orientation. Courts have long held that it does not. However, the Seventh Circuit may go against the status quo following a recent en banc rehearing of Hively v. Ivy Tech Community College. In that case, the plaintiff-employee claimed that the employer violated Title VII by failing to award her a full time position because of her sexual orientation. The issue is squarely one of statutory construction, and the en banc court has been tasked with determining whether Title VII can be interpreted as recognizing a discrimination claim based upon sexual orientation as a sub-segment of prohibited gender bias. During the en banc hearing, the Court challenged the notion of strict construction, pointing to other acts, such as the Sherman Act, that are interpreted far differently now than when they first were enacted. If the Seventh Circuit rules in favor of the employee, the resulting split in circuits may signify a need for High Court intervention, provided the legislature doesn’t get there first.

Conclusion

Judge Gorsuch has a reputation as someone who would follow the general judicial philosophy of Justice Scalia, but without some of the more acerbic oral argument commentary for which Justice Scalia was known. For an enlightening insight into Judge Gorsuch’s personal views on Justice Scalia and his legacy, this 2016 Canary Lectureship article by Judge Gorsuch is well worth reading.

Assuming no surprises, it is likely that Judge Gorsuch will be confirmed over strenuous Democratic opposition and will impact the Court for many years.

Workplace AccommodationOn Monday, December 12, the Equal Employment Opportunity Commission (EEOC) issued a resource document concerning workplace rights for individuals with mental health conditions under the Americans with Disabilities Act (ADA), entitled “Depression, PTSD, & Other Mental Health Conditions in the Workplace: Your Legal Rights.” This resource document is part of a series of resource documents issued by the EEOC explaining workplace rights for individuals with disabilities. Earlier in 2016 the EEOC released resource documents addressing the rights of employees with HIV infection and employees who are pregnant.

Through the document, the EEOC aims to educate employers, job applicants, and employees that mental health conditions are no different from physical health conditions under the ADA. Moreover, EEOC charge data shows that claims of workplace discrimination based on mental health conditions are on the rise, with preliminary 2016 data estimating 5,000 mental health discrimination charges within the fiscal year.

Individuals suffering from depression, PTSD, and other mental health conditions are protected from workplace discrimination based on their mental health condition. Thus, employers must be prudent not to rely on stereotypes or jump to conclusions regarding mental health. However, employers are not required to hire or keep employees in jobs they cannot perform or employ individuals who pose a “direct threat” to safety.

The document explains that generally employees with a mental health condition are able to keep their condition private in the workplace. Employers are permitted to ask questions about mental health in only four situations:

  • When an employee with a mental health condition asks for a reasonable accommodation.
  • After the employer has made a job offer, but before employment begins, if everyone entering the same job category is asked the same questions, and the questions are job-related in some way.
  • When the employer is engaging in affirmative action for people with disabilities, in which case the employee may choose whether to respond.
  • On the job, when there is objective evidence that the employee may be unable to perform the job or that an employee may pose a safety risk because of his or her condition.

Moreover, employees with mental health conditions have a right to reasonable accommodations at work. The document provides some examples of acceptable reasonable accommodations for employees with mental health conditions:

  • Altered break and work schedules to work around therapy appointments.
  • Quiet office space or devices that create a less stressful work environment.
  • Changes in supervisory methods, such as written instructions instead of oral.
  • Specific shift assignments.
  • Permission to work from home.

Employers are not required to provide a reasonable accommodation unless an employee requests one. However, if a reasonable accommodation will enable the employee to fulfill his or her job responsibilities, employers are advised by the EEOC to provide one, unless the accommodation involves significant difficulty or expense. Employers may also choose between reasonable accommodations if more than one accommodation is feasible.

Given the complex issues with mental health issues and accommodations for individuals suffering with them, employers should act prudently and engage in the interactive process with affected employees. Experienced employment lawyers can be of great help in this effort.

On October 28, 2016, the Supreme Court of the United States said that it would decide whether the Obama Administration’s interpretation of Title IX as requiring schools to allow students to utilize restrooms that correspond to their gender identities is proper. The case of Gloucester County School Board v. GG, involves the claims of a biologically female high school student, who identifies as a transgender boy, seeking access to the boys’ bathroom at school. While the school board initially allowed the student to use the boys’ bathroom, it later adopted a policy requiring students to use bathrooms that correspond to their biological sex or a separate single-stall restroom.

Although the Gloucester County case relates to students, the Supreme Court’s decision should also have a significant impact on employers. Recently, both the EEOC and OSHA have taken new positions with regard to LGBT rights, including restroom access. The EEOC has taken the position that Title VII’s prohibition of sex discrimination protects lesbian, gay, bisexual and transgender applicants and employees against employment bias. The EEOC has aggressively enforced its new position. Recently, the EEOC announced that it had entered into a settlement with a West Virginia hospital requiring the hospital to make same-sex spouses eligible for employer-sponsored benefits. Similarly, both the EEOC and OSHA have issued guidance indicating that all employees, including transgender employees, should have access to restrooms that correspond to their gender identity.

Presumably, the Supreme Court’s decision in the Gloucester County case will provide clarity as to whether the courts will show deference to these agencies’ interpretations of the law. Employers seeking guidance regarding LGBT issues in their own workplace should contact any of the attorneys in the Frantz Ward Labor and Employment Practice Group.

Texas courts continue to be the focus of anti-regulation filings as the next election approaches. In August, a U.S. District Court for the Northern District of Texas issued a nationwide injunction barring the enforcement of Department of Education guidance requiring schools to allow transgender students to use bathroom and changing facilities consistent with their gender identity. In September, 21 states and the U.S. Chamber of Commerce filed two lawsuits in the U.S. District Court for the Eastern District of Texas to enjoin the implementation of the new Department of Labor rules on overtime compensation and classification practices under the Fair Labor Standards Act.

Keeping pace in October, hours before the Fair Pay and Safe Workplaces rule was set to take effect last week, the Eastern District issued a preliminary injunction halting its enforcement. The rule, promulgated through a 2014 Executive Order, would require government contractors and subcontractors to disclose mere allegations of labor law violations, including alleged violations before the NLRB, EEOC, OSHA and the OFCCP, when bidding for contracts over certain dollar amounts, with a goal toward disqualifying contractors or requiring that they enter into premature labor compliance agreements in order to obtain or retain federal contracts.

The nationwide injunction—issued by Judge Marcia A. Crone—resulted from a complaint and emergency motion for a temporary restraining order and preliminary injunction filed by three national and local trade associations representing construction industry employers. Judge Crone found that the Executive Branch exceeded its rule making authority in enacting the rule, focusing primarily on the potential disqualification of federal contractors for alleged (rather than proven) violations of federal labor laws. To that issue, Judge Crone wrote:

In a majority of the labor laws cited in the Executive Order (specifically NLRA, FLSA, OSHA, Title VII, ADEA, and ADA), Congress spelled out in precise detail what agency or court would be empowered to find a violation, how such a finding would be determined, and what the penalty or remedy would be. None of these laws provides for debarment or disqualification of contractors for violations of their provisions; none of them provides for such determinations to be made by unqualified agency contracting officers (or ALCAs); and certainly none of these laws provides for any such action to occur based on non-final, unadjudicated, “administrative merits determinations.”

Judge Crone also found merit in the trade associations’ argument that the disclosure requirements will cause contract bidders to “suffer an infringement of their First Amendment rights in the form of ‘compelled speech.’”

While Judge Crone’s decision provides the beginning of what may become a reprieve for federal contractors, an appeal to the Fifth Circuit Court of Appeals is certain. In addition, the injunction does not relieve federal contractors from the requirement to provide wage statements and notice of independent contractor status, a portion of the rule that is now scheduled to go into effect on January 1, 2017.