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FAR Council Issues Final Rules on Labor Laws Notice and on Labor Relations Costs

November 8, 2011
The Federal Acquisition Regulatory (FAR) Council has issued a final rule implementing Executive Order 13496 and a Department of Labor (DOL) regulation requiring most federal contractors to notify employees of their rights under the National Labor Relations Act (NLRA).  The final rule became effective immediately upon its Nov. 2 publication in the Federal Register and makes no changes to an interim rule issued by the FAR Council in December 2010While the DOL regulation, which took effect in June 2010, established the content of the required notice, flow-down requirements, and penalties and procedures for noncompliance, further rulemaking was needed by the FAR Council to officially notify contracting officers to insert a new clause in covered contracts to render so that contractors would be contractually required to post the notices. These FAR Council and DOL rules apply only to contracts directly with the federal government and related subcontracts.  They do not apply to federally assisted contracts made with nonfederal government entities (such as typical highway construction contracts with state departments of transportation) or to private contracts.  The rules should not be confused, however, with a final rule recently issued by the National Labor Relations Board (NLRB) requiring nearly all employers in the private sector to post a similar employee notice about NLRA rights.  The NLRB originally slated the rule to take effect on November 14 but has delayed implementation until January 31 amid legal challenges. The FAR Council issued another labor-related final rule on Nov. 2.  The second rule implements Executive Order 13494, which precludes federal contractors from being reimbursed for “persuader activity” expenses – costs incurred in trying to influence workers’ decisions about whether to form a union or to engage in collective bargaining.  The rule amends FAR 31.205-21, the cost principle addressing labor relations costs, to differentiate between costs incurred in maintaining satisfactory labor relations, which remain allowable, from those incurred for persuader activities, which are now unallowable.  Like the executive order, the rule also sets forth examples of such non-reimbursable persuader activity costs:  (1) preparing and distributing materials, (2) hiring or consulting legal counsel or consultants, (3) meetings (including paying the salaries of the attendees at meetings held for this purpose), and (4) planning or conducting activities by managers, supervisors, or union representatives during work hours. This rule also applies only to contracts directly with the federal government.  Specifically, it will apply to contracts resulting from solicitations issued on or after Dec. 2, 2011.  It should not be confused with a rule recently proposed by DOL that would broaden reporting requirements related to persuader activity.  The DOL rule, if implemented, would affect employers that are not federal contractors as well as those that are.
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