VirginiaLaborLaw.com
What Government Contractors
Need to Know About Executive Order 13494
“Economy in Government Contracting”
Raymond L. Hogge, Jr.
Hogge Law
Attorneys and Counselors at Law
500 E. Plume Street, Suite 800
Norfolk, Virginia, 23510
(757) 961-5400
rayhogge@virginialaborlaw.com
This presentation is intended solely for informational purposes
and is not offered as legal advice
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Federal Acquisition Regulations
Part 31:
Determines allowable costs under contracts
with
• General Services Administration
• Department of Defense
• NASA
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Federal Acquisition Regulations
Subpart 31.2:
Governs contracts with
commercial organizations
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Federal Acquisition Regulations
Subpart 31.205-21:
Governs costs allowable as
labor relations costs
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Federal Acquisition Regulations
Subpart 31.205-21
before Executive Order 13494:
“Costs incurred in maintaining satisfactory
relations between the contractor
and its employees” are allowable
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Federal Acquisition Regulations
Subpart 31.205-21
before Executive Order 13494:
Allowable labor relations costs include
• Costs of shop stewards
• Costs of labor management committees
• Costs of employee publications
• Costs of other related activity
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Executive Order 13494
“Economy in Government Contracting”
Amended Federal Acquisition Regulations
Subpart 31.205-21
Issued January 30, 2009
Amended Oct. 30, 2009 by Exec. Order 13517
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Proposed regulations issued April 14, 2010
Final regulations issued Nov. 2, 2011
and effective December 2, 2011
48 CFR 31.205-21
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Under Executive Order 13494
costs incurred in maintaining satisfactory
relations between the contractor and its
employees include
• Costs of shop stewards
• Costs of labor management committees
• Costs of employee publications
• Costs of other related activities
(same as before Executive Order 13494)
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Executive Order 13494
allows costs of
“Costs incurred in maintaining satisfactory
relations between the contractor and its
employees”
other than the costs of persuader activities
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Executive Order 13494
disallows costs of “persuader activities”
“Any activities to persuade undertaken to
persuade employees to exercise or not to
exercise, or concerning the manner of
exercising, the right to organize and bargain
collectively through representatives of the
employees’ own choosing”
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31.205-21 After Exec. Order 13494:
Specifically disallows persuader activity costs of
“preparing and distributing materials”
31.-205-21(b)(1)
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31.205-21 After Exec. Order 13494:
Specifically disallows persuader activity costs of
“hiring or consulting
legal counsel or consultants”
31.-205-21(b)(2)
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31.205-21 After Exec. Order 13494:
Specifically disallows persuader activity costs of
“meetings (including paying the salaries of the
attendees at meetings held for this purpose)”
31.-205-21(b)(3)
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31.205-21 After Exec. Order 13494:
Specifically disallows persuader activity costs of
“planning or conducting activities by
managers, supervisors, or union
representatives during work hours”
31.-205-21(b)(4)
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Costs associated with
development, implementing, and enforcement
of neutrality agreements
Allowable provided the activity is not
a persuader activity
and is not “otherwise unlawful”
(Preamble to Final Regulations)
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Costs associated with
negotiating collective bargaining agreements
Allowable provided the negotiation
is not “otherwise unlawful”
(Preamble to Final Regulations)
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Costs associated with
encouraging employees to ratify a collective
bargaining agreement
Allowable provided the activity
is not “otherwise unlawful”
(Preamble to Final Regulations)
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Costs associated with
“administering collective bargaining
agreements”
Allowable provided the activity
is not “otherwise unlawful”
(Preamble to Final Regulations)
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Costs associated with
any activity found unlawful by the
National Labor Relations Board
Not allowable
(Preamble to Final Regulations)
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Public Comment:
The rule favors unions
and penalizes contractors
Response in Final Rule Preamble:
The rule only applies to persuade activities
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Public Comment:
The rule infringes on the rights of employers
to engage in speech which is lawful under the
National Labor Relations Act
Response in Final Rule Preamble:
The rule does not prohibit speech; it only
disallows the contractor’s cost of engaging in
that persuader activities
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Public Comment:
The rule is unclear as to
what costs are disallowed
Response in Final Rule Preamble:
The rule identifies the costs that are allowed
and the costs that are disallowed
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Public Comment:
The rule defines “persuader activity”
more broadly than the Labor Management
Relations Reporting and Disclosure Act
Response in Final Rule Preamble:
The rule does not alter the reporting
obligations of employers under the LMRDA
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Public Comment:
The rule imposes significant compliance
burdens and accounting costs to segregate
disallowed costs
Response in Final Rule Preamble:
FAR 31.201-6 requires contractors to have
accounting system to segregate allowable costs
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Employee handbook of non-union employer
expressing preference to remain non-union
A persuader activity?
Cost disallowed for only the policy or
for the entire handbook?
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Employee satisfaction surveys
A persuader activity?
Or maintaining satisfactory labor relations?
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Employer wage and benefit surveys
A persuader activity?
Or maintaining satisfactory labor relations?
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Workplace “town hall” meetings conducted by
employer to discuss employee concerns
A persuader activity?
Or maintaining satisfactory labor relations?
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Use by employer of management consultants
to improve workforce satisfaction
A persuader activity?
Or maintaining satisfactory labor relations?
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Use by employer of legal counsel
for advice on labor relations issues
A persuader activity?
Or maintaining satisfactory labor relations?
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To obtain a complementary copy of this
presentation, or for assistance in complying
with Executive Order 13494,
please contact Ray Hogge
at (757) 961-5400
or at rayhogge@virginialaborlaw.com