Federal contractors recently scored a significant victory when a preliminary injunction blocked much of the Fair Pay and Safe Workplaces rule from taking effect. The rule, based on a 2014 executive order, was issued in August 2016 by the Federal Regulatory Council, with accompanying U.S. Department of Labor guidance, and would have required:

• Potential federal contractors and subcontractors bidding on any deal worth more than $500,000, with limited exceptions, to disclose all labor law violations going back three years; and
• Contracting officers to take into account these disclosures and determine whether the disclosures show "serious, repeated, willful, or pervasive" labor law violations in deciding whether to award or extend contracts.

Three trade associations representing construction industry employers, contractors, and companies employing security officers filed suit earlier this month, arguing that the rule unconstitutionally compels federal contract bidders to disclose alleged, but not adjudicated, labor law violations. U.S. District Judge Marcia Crone of the Eastern District of Texas agreed, finding that the executive branch exceeded its authority in enacting the rule and that the rule unconstitutionally restricts the free speech and due process rights of federal contract bidders. Specifically, the court took issue with the potential disqualification of federal contractors or subcontractors based on labor law violation allegations, still-contested administrative determinations, or matters settled by the contractor without an admission of fault. The decision results in a nationwide preliminary injunction, which halts the majority of the rule from taking effect until the issue is resolved.

The preliminary injunction, however, did not affect the requirement that federal contractors provide wage statements and notice of independent contractor status to its workers, which will go into effect on January 1, 2017. While the victory regarding the disclosure of labor law violations is significant, government contractors should continue monitoring the status of this rule because Judge Crone's ruling may be appealed, or the rule may be amended.