In one of his first acts in office, President Obama started the process of payback to the Unions for their support financially and otherwise during the campaign. The President signed three Executive Orders affecting government contractors and reversing policies of the Bush administration.

The first Executive Order reverses the policy where government contractors were able to get reimbursed for costs of consultants, legal counsel, cost of holding meetings, including paying the salaries of attendees at meetings, preparing distributed materials, and planning or conducting activities by managers, supervisors, etc. in trying to persuade employees to exercise or not exercise their rights provided by the National Labor Relations Act during union campaigns. The new Executive Order prohibits all such payments and provides that within one hundred fifty (150) days of January 30, 2009 the Federal Acquisition Regulatory Council will adopt rules and regulations consistent with this Executive Order.

In the second Executive Order, Executive Order 13201 (February 17, 2001) was reversed that obligated federal contractors to post a notice called a “Beck Notice” that notified employees that Union members can object to the use of their Union dues for political purposes and to have their dues allocated only to pay their share of such costs relating to collective bargaining, contract administration, and grievance settlement. The new Executive Order signed by President Obama reverses that posting policy and in lieu thereof requires each federal contractor to post a broad notice that is designated by the Secretary of Labor in place of the Beck Notice. The new notice notifies employees of their right to join the Union and other rights under federal labor laws. The Secretary of Labor is to develop the content of the notice and has the authority to update the content of the notice based upon decisions of the National Labor Relations Board, court decisions, other case precedents or rule making. The contractor will have to post the notice, comply with all the provisions of the Secretary’s notice and related rules, regulations and orders of the Secretary of Labor and bind any and all subcontractors. However, the substance of the Beck Notice is still the law and cannot be changed by Executive Order.

The third Executive Order also applies to workers under Service Contract Act, and it reverses prior Executive Order 13204 (February 17, 2001). The new Executive Order requires the government contractor and subcontractors to include in a successor contract relating to the same or similar services at the same location, affirmative obligations to offer the predecessor employees who are qualified (except management and supervisors) a right of first refusal of employment under the successor contract. The successor contractor may not hire any employees until the right of first refusal has been provided. However, it is unclear whether this would apply in a situation where a contractor is terminated for cause, although there is language in the Order that could be broadly interpreted.

Failure to comply with any of these Executive Orders can result in suspension, cancellation, termination of the contracts and debarment from further government contracts.

To learn more about how these Executive Orders may impact your business, please be sure to contact your employment counsel at Smith, Gambrell & Russell, LLP.