Doing business with the federal government comes with strings attached. In recent months, Congress and the Obama administration have imposed a number of new requirements on federal contractors. Additional proposals are on the horizon, as well as speculation as to how new political appointees will run certain government organizations. Those who do business with the federal government may wish to consider the following.

Immigration Compliance

• E-Verify. The Federal Acquisition Regulations (FAR) have been amended to require many federal contractors and subcontractors to use the government’s E-Verify system. E-Verify is a government database that allows employers to electronically verify the employment eligibility of their employees. While E-Verify is voluntary for most employers, those that have a contract with the federal government containing the E-Verify clause must confirm the work authorization of all new hires and existing employees assigned to work on federal contracts. The E-Verify rule contains a provision allowing for the verification of all employees, so contractors can avoid the cost and uncertainty of tracking who is assigned to federal contracts. Contractors that have an agreement with the federal government that contains the E-verify clause may be required to include the E-Verify clause in subcontracts for services or construction, depending on the value of the subcontract. The federal government began inserting the E-Verify clause in government contracts awarded on or after September 8, 2009.
  
  
• I-9 Audit Initiative. In April 2009, U.S. Immigrations and Customs Enforcement (ICE) announced a new worksite enforcement policy to crack down on the employment of illegal immigrants. In July 2009, ICE sent I-9 audit notices to more than 650 companies. ICE has stated that in addition to civil fines and criminal sanctions, it may pursue debarment proceedings against federal contractors that have hired illegal workers. If debarred, the company is precluded from working on federal contracts.

In light of the E-Verify and the ICE worksite enforcement initiative, prudent employers will implement a complete immigration compliance program that includes:

• Preparing an immigration compliance policy;
• Implementing I-9 verification procedures;
• Training employees responsible for the I-9 and E-Verify processes; and
• Auditing existing I-9s.

Affirmative Action Compliance Enforcement by the OFCCP

There are a number of developments affecting the Office of Federal Contract Compliance Programs (OFCCP), the agency within the Department of Labor charged with enforcing federal contractors’ obligations under affirmative action laws.

• Audits of Stimulus Fund Recipients. OFCCP has announced that it will focus on auditing recipients of federal stimulus monies. This will likely include an automatic “onsite audit” of contractors receiving stimulus funds. The onsite audit will be mandatory, regardless of whether the preliminary materials submitted by the company as part of the audit indicate problem areas. Additionally, OFCCP will conduct a “pre-award review” of all contractors entering into a contract with the government of $10 million or more. The audit will be conducted immediately after the announcement of the award of the contract and will also include an onsite component.
  
  
• Employee Rights Advocate Appointed to Head OFCCP. President Barack Obama has appointed Patricia Shiu to head OFCCP. Shiu has been described as a tireless advocate for employee rights. She previously worked at the San Francisco Legal Aid Society, where she handled employment law issues on behalf of employees.
  
  
• Expansion of OFCCP. OFCCP has requested a 25 percent increase in its budget, which would allow it to almost double the number of compliance officers in the organization. Compliance officers are the employees within OFCCP who are responsible for directly interacting with federal contractors on audits.
  
  
• Other OFCCP Initiatives. Toward the end of the Bush administration, OFCCP began focusing more heavily on veterans rights, no doubt in response to the increasing number of veterans returning from active duty. The Obama OFCCP will likely continue this trend. Additionally, the Obama OFCCP will likely feel pressured to meet or exceed the unprecedented damages collected by the Bush administration OFCCP on behalf of applicants and employees of federal contractors. The Bush administration OFCCP focused on a high volume of federal contractor audits and obtained record pay and other damages on behalf of employees who allegedly suffered discrimination. Expect more of the same.

In light of the announced and expected developments at OFCCP, federal contractors should:

• Make sure their affirmative action plans are up to date and carefully analyze potential discrimination with regard to hires, promotions, terminations and compensation;
• If receiving stimulus package monies, be prepared for an onsite audit by OFCCP; and
• Watch for final regulations and employment postings required under the new executive orders, including the posting notifying employees of their rights to organize and join a union (see below).

Pro-Union Executive Orders

During his first two months in office, President Obama signed four executive orders favoring organized labor in the federal contractor context. They are:

• Notification of Employee Rights under Federal Labor Laws. This order mandates that all covered government contracts and subcontracts include a clause requiring contractors to conspicuously post a notice informing employees of their rights under federal labor laws. The posting would inform employees of their right to organize, form, or join a union; select a union to collectively bargain the employees’ wages, benefits, hours, and other working conditions; join other workers in raising work-related complaints, including seeking and receiving help from a union; take actions to improve working conditions, including attending rallies and leafleting; and strike and picket. This order revokes the Beck notice promulgated by the Bush administration, requiring government contractors to post a notice informing employees of their right not to join a union.
  
  
• Economy in Government Contracting. This executive order prohibits federal contractors from receiving reimbursement for costs relating to persuading employees to exercise or not to exercise their rights to organize and bargain collectively. The types of costs that are not reimbursable include: “preparing and distributing materials”; “hiring or consulting legal counsel or consultants”; “paying the salaries of the attendees at meetings” held for the purpose of dissuading employees to join a union; and “planning or conducting activities by managers, supervisors or union representatives during work hours.”
  
  
• Non-Displacement of Qualified Workers under Service Contracts. Under this executive order, federal contractors performing “the same service” and “at the same location” must offer employment first to qualified employees of the predecessor federal contractor. This executive order also reverses an executive order issued by the Bush administration.
  
  
• Use of Project Labor Agreement for Federal Construction Projects. This executive order encourages (but does not require) the use of “project labor agreements” for federally funded large-scale construction projects. A “project labor agreement” is essentially a pre-hire collective bargaining agreement with a union.

Federal contractors should watch for language in their federal contracts relating to these executive orders. With regard to the Notification of Employee Rights, the federal government is in the process of finalizing the employment posting that federal contractors must display notifying employees of their rights to organize and be represented by a union.

Janilyn Brouwer Daub is a partner with Barnes & Thornburg LLP and serves as the labor department administrator for the firm’s South Bend office. She regularly advises organizations on government contracting issues, including affirmative action compliance and defending audits before the OFCCP. She can be reached at jdaub@btlaw.com.