A Stimulus for Organized Labor: Four Executive Orders and the Employee Free Choice Act

Since President Obama took office nearly one month ago, the nation has been steadfastly focused on the economic stimulus package signed into law on Tuesday of this week. However, administration officials and President Obama have not lost sight of another major item on their agenda, a stimulus package for organized labor. In the first month alone, President Obama has signed four pro-labor executive orders and signaled a desire to receive the Employee Free Choice Act on his desk without delay. Because the impact of these orders will be profound, it is critical that employers fully understand their implications and review their programs accordingly.

I. The Executive Orders

At a White House ceremony on Friday, Jan. 30, the President was flanked by representatives of organized labor as he signed three executive orders that he said would “reverse many of the policies towards organized labor that we've seen these last eight years, policies with which I've sharply disagreed.” The Jan. 30 orders curtail federal contractors' free speech during union organizing drives, provide job security for employees of federal service contractors, and require federal contractors to notify employees of their right to join a union. One week later, the President signed a fourth pro-labor executive order announcing a government preference for project labor agreements on all federally funded large-scale construction projects.

Order 1: Prohibiting federal contractor reimbursement for money used to influence employees regarding unionization

The first executive order prohibits federal contractors from seeking reimbursement from the federal government for expenses incurred in persuading employees not to unionize. Specific examples of expenses that may no longer be billed to the government include “preparing and distributing materials,” “hiring or consulting legal counsel or consultants,” “holding meetings,” and “planning or conducting activities by managers, supervisors, or union representatives during work hours.”

Last year, the U.S. Supreme Court invalidated a similar state law in California, ruling that the law was preempted by the National Labor Relations Act. While a federal executive order is different than state legislation, legal challenges to this executive order are likely. Nonetheless, federal government contractors facing the prospect of union organizing drives should carefully consult legal counsel regarding their options in order to minimize the risk of forfeiture of federal reimbursements.

Order 2: Providing job security for employees of federal service contractors

The second executive order provides continued employment for employees when the federal government changes to a new service provider. Under the order, service contracts must require that an offer of continued employment be made to the predecessor service provider's employees when the government contracts with a new service provider. This provides job security for employees who may be affected by the government's decision to change service providers. If the new provider fails to offer continued employment to affected employees, the Secretary of Labor can levy sanctions, including requiring offers of employment, compelling payment of lost wages, or debarring the offending provider from federal contracts for up to three years.

This new obligation to hire the employees of a predecessor contractor benefits unions because, under federal labor law, a successor employer can be required to bargain with the union representing those newly hired employees. Any service contractor bidding on federal work currently performed by unionized workers should become familiar with these legal obligations before submitting a bid.

Order 3: Providing notification of the right to join a union

The third executive order requires federal contractors to post notices informing employees of their right to form unions and collectively bargain. This requirement must be included in every federal contract along with language giving the government the right to terminate/suspend the contract or even debar the contractor for noncompliance. This executive order also repealed an executive order signed by President George W. Bush that required contractors to notify employees of their right not to join a union and the right to “opt out” of paying any portion of union dues used for political contributions or other activity unrelated to administration of a collective bargaining agreement.

Order 4: Encouraging project labor agreements

President Obama's fourth pro-labor executive order, signed Feb. 6, is designed to encourage the use of project labor agreements (PLAs) on federally funded construction projects involving more than $25 million of federal funding. PLAs are labor contracts that typically involve labor's promise not to strike in exchange for guarantees on workplace conditions (wages, benefits, working hours, etc.) and hiring practices. PLAs often require that all contractors performing any work on the project be signatories to the PLA and perform all work using union labor.

The PLA order reversed a prior executive order by President George W. Bush that blocked the use of PLAs on federal construction projects. As a result of this new executive order, many of the projects financed by the recently signed economic stimulus bill will be subject to PLAs and performed by unionized workers.

II. The Employee Free Choice Act

While these executive orders will have a dramatic impact on federal contractors, the greatest stimulus for organized labor is yet to come: the Employee Free Choice Act (EFCA). That Act, which President Obama sponsored when he was in the Senate, would: (1) allow unions to become certified without a secret ballot election; (2) impose stiffer penalties on employers who violate the National Labor Relations Act; and (3) impose mandatory binding arbitration on employers during collective bargaining for a first-time contract. Unions predict that the EFCA will enable them to dramatically increase their membership.

Political observers have recently opined that President Obama might not push for passage of the EFCA in the current economic climate. However, at a meeting with members of the press on Feb. 12, the Detroit Free Press reported that President Obama “believes there is no economic risk to workers organizing and making a living wage.” The President further stated that he does not “buy the argument that providing workers with collective-bargaining rights somehow weakens the economy or worsens the business environment.” For this reason, President Obama stated that he “would not urge a delay in consideration of the Employee Free Choice Act.” All employers should be aware of the risks posed by the EFCA and seek labor counsel concerning their options before the bill becomes law.

For more information on the EFCA, review the full act here go to this Web page, enter your name and email address, and you will be directed to a free webinar on this topic.