Blacklisting and The Offer You Can’t Refuse
Don Vito Corleone famously suggested the way you get a guy to do what you want is to, “make him an offer he can’t refuse.” This week the Department of Labor finally issued its rules for enforcing the “blacklisting” regulation. And unions are ready to use the new regulation to take a page out of the Corleone playbook. The Obama administration is heading into the home stretch and pushing to get as many labor rulings and regulations out the door as possible. If your company is a government contractor, the blacklisting rule is probably the most significant one of the year. Originally proposed by Executive Order in 2014, the rule gives the DOL the power to discourage and even bar a federal agency from contracting with a company that has a record of serious labor and employment problems. On its face that doesn’t sound like a big deal. Of course the devil is in the details and this thing has some pretty devilish details. Three of the more troubling aspects of the regulation are the following: 1. Taking a page out of the NLRB’s handbook, the new regulations prohibit contractors from requiring pre-dispute arbitration for many employment law claims. This is another attack on arbitration agreements and probably impacts the vast majority of contractors. 2. The rule requires reporting of, “any administrative merits determinations, arbitral awards and decisions, or judgment,” under 14 different statutes, including the NLRA. The NLRB General Counsel has already made clear that once the NLRB issues a complaint (which happens before any fact finding by a neutral decision-maker) they will report that to the DOL. This is a huge weapon for unions, who can count on the NLRB to issue complaints on flimsy cases. 3. The “helpful citizen” provision opens up a complaint process where so-called helpful citizens (read: unions) can alert the DOL and federal agencies about supposed bad actors. Companies are used to unions complaining about them, but this potential threat to the contracting relationship is much more serious than some Astro-Turf protest. 
A federal contractor with a horrible safety record or a series of unlawful terminations deserves punishment. That’s what the labor laws are supposed to do in the first place. But here is the problem. This rule is not about barring companies proven to have serious labor issues. It allows companies to be debarred because of agency-level complaints. Wait till you see what unions – hand in hand with the NLRB General Counsel’s office – will do with this new toy. As mentioned earlier, the GC has already said once the NLRB issues a complaint, it will be reported to the DOL. These cases can stay open for years. Therefore they remain on your record for years (the new regulation ends up with a 3-year “look back” period). And unions rarely just file one unfair labor practice charge. So you’ll have a pile of charges on your record. The General Counsel gets to decide whether to issue complaint. They can issue a complaint based on very little evidence. That is fine. It is how these cases get in front of a fact-finder. But the fact that a complaint has issued is in no way proof that an employer actually did anything wrong. So for literally years an employer is faced with the prospect of having a black mark (or a bunch of black marks) on its record with no chance to prove they didn’t do anything wrong. And under this new rule that can be the difference between getting a contract or not. Another problem with the rule is it encourages the agencies to drag their feet. One of the main justifications for this rule is that the current laws don’t have strong enough penalties. You hear story after story about how long it takes to get anything through the DOL or NLRB. Well, that is very much in control of the agencies. This regulation basically rewards the agencies for stalling serious cases. Which brings us back to the offer you can’t refuse. An employer faced with this situation is between the rock and hard place. They either settle out the charges (that gets them off the naughty list) or make some deal with the union to withdraw them. And unions like this situation just fine. It gives them a lot of leverage, even in cases that are completely fabricated. The risk to an employer is huge. In addition to the risk of losing a contract it’s also another pseudo-official way to trash a company’s brand. Many companies will end up settling cases that should go to trial, just encouraging unions to file more baseless charges. There will inevitably be a legal challenge to this rule and there should be. It is one thing to debar a company who has lost a trial or faced a final judgment of violating labor laws. It is another thing entirely to do it based on nothing more than a bunch of (often flimsy) allegations. This rule isn’t just bad for companies. It is terrible for workers (who, after all, are the ones who lose their job if their company loses a government contract). It is also terrible for taxpayers, who will end up footing the bill for all this additional red tape and increased costs. The only ones who win? Unions and the plaintiff’s bar. But judging from the steady stream of regulations and decisions lately it’s easy to see they’ve already mastered the art of making offers that can’t be refused
