Apr 01, 1992 Labor Relations

Federal Contractors Ordered to Post Notice of Beck Rights

Many collective bargaining agreements contain provisions which purport to require all covered employees to become “members” of the union. Notwithstanding the language of such provisions, federal law does not permit an employer and union to agree to require actual union membership. Rather, employees may only be required to either join the union or, without becoming a member, to pay the union a so-called “agency fee” – an amount equal to the periodic dues and assessments uniformly required of union members. Moreover, in a 1988 decision, Beck v. Communications Workers, 487 U.S. 735 (1988), the U.S. Supreme Court ruled that while agency fee payers may be required to pay for “core” collective bargaining costs, including grievance adjustment and contract administration, non-members are entitled to a refund of that portion of their agency fees spent on non-core items such as contributions to political campaigns or charities.

On April 13, 1992, President Bush signed Executive Order 12800, requiring federal contractors to post notices advising employees of their right to refrain from joining a labor union and to demand that use of agency fees paid by non-members be limited solely to “core” collective bargaining functions. The President stated that the purpose of the Executive Order was to “foster union democracy” by advising employees of their rights under Beck.

Executive Order 12800 directs the Secretary of Labor to adopt rules and regulations necessary to effectuate the Order, but does not impose a time limit by which such regulations must be published. The Department of Labor is granted a limited power to cancel the contracts of contractors who fail to comply with the Order and to institute proceedings to disqualify non-complying companies from obtaining federal contracts in the future. The order goes into effect on May 13, 1992.

Scope of Executive Order 12800. The Order states that, with certain exceptions, “all Government contracting departments and agencies shall” include “in every Government contract” a Beck clause. The Beck clause states:

“During the term of this contract, the contractor agrees to post a notice, of such size and in such form as the Secretary of Labor may prescribe, in conspicuous places in and about its plants and offices, including all places where notices to employees are customarily posted.”

The Beck clause also includes a commitment by the contractor to comply with Executive Order 12800, including putting a Beck clause in all subcontracts, and a provision that failure to comply may result in cancellation of the contract, disqualification from future contracts, and such other sanctions as may be authorized by the Secretary of Labor. Notices must be posted at all facilities of the contractor or subcontractor, whether or not the facility is involved in the particular government contract, unless an exemption is granted by the Secretary of Labor.

Subcontractors and Vendors. A contractor must include the Beck clause regarding the posting of notices, agreement to comply, and possible sanctions for non-compliance in any subcontract or purchase order entered into in connection with the Government contract, unless exempted by rule or regulation, “so that such provisions will be binding upon each subcontractor or vendor.” The Order authorizes the Secretary of Labor to take the same actions against a subcontractor as may be taken against a contractor for non-compliance.

Order applies only to future contracts. On its face, the Order applies only to future contracts, which shall contain the requirement that the contractor post the required notice. There does not appear to be any obligation on contractors to post such notices at facilities currently working on contracts entered into before May 13, 1992, which do not contain the Beck clause. Nothing in the Order prohibits a contractor from voluntarily posting the required Beck notice at any current job site.

Exceptions to notice requirements. The Secretary of Labor has the discretion to grant exemptions “in the national interest” to a Government contracting department or agency with respect to particular contracts or purchase orders. The Secretary of Labor may also grant exemptions to classes of contracts that involve: 1) work outside the United States and that do not involve recruitment of employees from within the United States; 2) work in jurisdictions where state right-to-work laws forbid enforcement of union security agreements; 3) work on non-union work sites, where the notices would be unnecessary; 4) a small number of employees, the threshold for which is to be set by the Secretary; or 5) subcontracts “below an appropriate tier set by the Secretary.” The Secretary may also grant an exemption for certain facilities of a contractor that are “in all respects separate and distinct from activities related to the performance of the contract.” Absent such an exemption, all facilities of a contractor must post the required notice.

Enforcement Provisions. The Secretary of Labor is empowered to enforce the Executive Order. The Secretary may investigate contractors, subcontractors and vendors regarding notice posting compliance. The Secretary is authorized to receive complaints from individual employees. The Secretary may also hold hearings to determine compliance. A hearing is required prior to debarment or the inclusion of a contractor on a published list of non-complying contractors.

After consulting with the contracting department or agency, and subject to the consent of the contracting department, the Secretary may impose the following sanctions for non-compliance: 1) cancellation or suspension of any contract or portion thereof, including conditioning continuance of contracts upon future compliance; 2) ordering specific contracting agencies or departments to refrain from entering into further contracts, or extensions or modifications of existing contracts with any noncomplying contractor until the contractor has satisfied the Secretary that it is complying with the Order; and 3) publishing the names of contractors that have failed to comply with the Order or related rules and regulations.

Significance of new rule disputed. Labor leaders decried the President’s issuance of the Executive Order as election-year politics, claiming that unions have been informing employees of their rights for years and that only a tiny portion of agency fee payers have requested refunds under Beck. The Executive Order was characterized as “a solution in search of a problem” by Lane Kirkland, President of the AFL-CIO. On the other hand, the White House estimates that as much as $2.4 billion could be reclaimed by workers who exercise their Beck rights, representing about $400 per year per worker.

Form of Required Notice. The Executive Order states that the Secretary of Labor shall promulgate a form of notice that meets the requirements of the Order. The approved text of the notice is contained in the Executive Order itself and will be contained in future federal contracts. The following sample form of notice, which tracks the language of the Order, should suffice as compliance with the Order until the Department of Labor issues an official form of notice: