On October 24, 2016, Judge Marcia A. Crone issued a nationwide preliminary injunction in Associated Builders and Contractors of Southeast Texas v. Rung (E.D. Texas, No 1:16-CV-425) blocking the implementation of the Fair Pay and Safe Workplaces final rule. Specifically, the injunction blocks the implementation of the rule’s requirements that contractors self-disclose labor law “violations” and that they eliminate provisions in their arbitration agreements restricting lawsuits for Title VII or sexual assault allegations. The injunction does not, however, affect the Executive Order’s “paycheck transparency” requirements, which will take effect on January 1, 2017.

For federal contractors, the injunction was granted in the nick of time-just one day before the self-disclosure and arbitration requirements were scheduled to take effect.

The preliminary injunction will last until a final decision is reached in the case, although the government will likely ask the judge to reconsider her decision and ultimately appeal to the federal Court of Appeals for the Fifth Circuit and possibly the U.S. Supreme Court. If the injunction is upheld, it remains to be seen whether the government will attempt to revise and significantly reduce the rule to address the legal and constitutional shortcomings identified in the court’s ruling.

Finding that the plaintiff contractors demonstrated both a “substantial likelihood of success on the merits of their case” and risk of irreparable injury, the court heaped derision on the Executive Order, final rule, and DOL guidance as having:

• Imposed “complex, cumbersome, and costly requirements . . . which hamper efficiency without quantifiable benefits;”
• Violated contractors’ First Amendment rights by forcing them to “publicly condemn” themselves for allegations that may ultimately have no merit;
• Violated contractors’ due process rights by forcing them to report and defend against non-final agency allegations without a hearing; and
• Violated the Federal Arbitration Act.

The court repudiated the new class of reportable “administrative merits determinations” as “nothing more than allegations of fault asserted by agency employees and [which] do not constitute final agency findings of any violation at all.”

The court’s injunction is the latest by a Texas federal district court barring the implementation of a controversial labor regulation. In June, the Northern District of Texas blocked the DOL’s “persuader rule.” A challenge to the DOL’s new overtime regulations is currently pending in the Eastern District of Texas.

If you have any further questions, please contact your FortneyScott attorney, or e-mail us at info@fortneyscott.com