[Federal Register Volume 60, Number 101 (Thursday, May 25, 1995)]
[Rules and Regulations]
[Pages 27856-27862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12960]




[[Page 27855]]

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Part V





Department of Labor





_______________________________________________________________________



Office of Labor-Management Programs



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29 CFR Ch. II and Part 270



Permanent Replacement of Lawfully Striking Employees by Federal 
Contractors; Final Rule

  Federal Register / Vol. 60, No. 101 / Thursday, May 25, 1995 / Rules 
and Regulations   
[[Page 27856]] 

DEPARTMENT OF LABOR

Office of Labor-Management Programs

29 CFR Chapter II and Part 270

RIN 1294-AA13


Permanent Replacement of Lawfully Striking Employees by Federal 
Contractors

AGENCY: Office of Labor-Management Programs, Office of the American 
Workplace, Labor.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule implements Executive Order 12954, which was 
signed by President Clinton on March 8, 1995 and became effective on 
that date. Executive Order 12954 provides that in procuring goods and 
services, in order to ensure the economical and efficient 
administration and completion of contracts, federal contracting 
agencies shall not contract with employers that permanently replace 
lawfully striking employees. This final rule also makes a technical 
amendment to Chapter II of the Department's regulations, changing the 
heading of that chapter to reflect the earlier establishment of the 
Office of the American Workplace and its component offices, including 
the Office of Labor-Management Programs.

DATES: Effective June 26, 1995.

FOR FURTHER INFORMATION CONTACT: Charles L. Smith, Special Assistant to 
the Deputy Secretary, Office of the American Workplace, U.S. Department 
of Labor, 200 Constitution Avenue, NW., Room S-2203, Washington, DC 
20210, (202) 219-6045. This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

I. Background

    On March 8, 1995, President Clinton signed Executive Order 12954, 
``Ensuring the Economical and Efficient Administration and Completion 
of Federal Government Contracts.'' The Order became effective on March 
8, 1995, the date it was signed, and was published in the Federal 
Register on March 10, 1995, 60 FR 13023.
    In the Order, the President sets forth the finding that economy and 
efficiency in procurement are generally advanced by contracting with 
employers that do not permanently replace lawfully striking employees. 
That is, the permanent replacement of strikers can adversely affect a 
contractor's ability to reliably provide high quality goods and 
services, thereby adversely affecting the Federal Government's economy, 
efficiency, and cost of operations. The Order then states that ``[i]t 
is the policy of the executive branch in procuring goods and services 
that, to ensure the economical and efficient administration and 
completion of Federal Government contracts, contracting agencies shall 
not contract with employers that permanently replace lawfully striking 
employees.'' The Order further states that all discretion under the 
Order is to be exercised in accordance with this policy.
    The Order then establishes a flexible mechanism, based on case-by-
case determinations, designed to ensure economy and efficiency in 
government procurement involving contractors that have permanently 
replaced lawfully striking employees. Under the Order, the Secretary of 
Labor is authorized to conduct investigations, either on the basis of a 
complaint or on his or her own initiative, and to hold hearings as he 
or she deems advisable in order to determine whether an organizational 
unit of a federal contractor has permanently replaced lawfully striking 
employees.
    When the Secretary finds that an organizational unit of a federal 
contractor has permanently replaced lawfully striking employees, he or 
she may exercise either or both of two options. First, he or she may 
find that it is appropriate to terminate existing contracts for 
convenience; the head of the contracting agency may object to that 
finding in writing and the termination for convenience shall not be 
issued.
    Second, the Secretary may find that it is appropriate to debar the 
contractor from future contracts and renewal of existing contracts 
until the labor dispute is resolved. However, a contracting agency may 
enter into a contract with the employer if there is a compelling reason 
to do so.
    The Secretary has delegated his authority under the Order to the 
Assistant Secretary for the American Workplace in Secretary's Order No. 
2-95, which was signed on March 8, 1995 and published in the Federal 
Register on March 13, 1995, 60 FR 13602.
    On March 29, 1995, the Department published a notice of proposed 
rulemaking, 60 FR 16354, setting forth proposed regulations 
implementing the Order. The notice also invited comments from the 
public, with the comment period ending April 28, 1995.

II. Summary and Discussion of the Comments

    Fifty comments were submitted and considered. (Two additional 
comments were not considered. One was postmarked after the next 
business day after the expiration of the comment period, and the other 
was dated after the expiration of the comment period.)
    Thirty-four officials from the following employers and employer 
associations submitted comments:

--Phoenix Cement,
--RC Cement Company, Inc. (4 officials),
--Hercules Cement Company (2 officials),
--Kaiser Cement Corporation,
--Heartland Cement Company (2 officials),
--National Association of Hosiery Manufacturers,
--Roanoke Cement Company,
--Signal Mountain Cement Company,
--National Electrical Contractors Association, Puget Sound Chapter,
--National Association of Plumbing-Heating-Cooling Contractors,
--Medusa Cement Company (2 officials),
--Holnam, Inc.,
--National Cement Company of Alabama, Inc.,
--Medusa Aggregates Company (2 officials),
--American Portland Cement Alliance,
--Citadel Cement Company,
--Associated Builders and Contractors, Inc.,
--The Associated General Contractors of America,
--National Mining Association,
--National Private Truck Council,
--Can Manufacturers Institute,
--American Health Care Association,
--Textile Rental Services Association of America,
--National Grocers Association,
--River Cement Company, Selma Plant,
--American Movers Conference,
--Painting and Decorating Contractors of America.

    Four comments were received from the following associations:

--Labor Policy Association, Inc.,
--Alliance to Keep Americans Working,
--American Bar Association,
--Society for Human Resource Management.

    Two comments were received from the following law firms:

--Wessels & Pautsch (on behalf of unnamed clients),
--Jones, Day, Reavis & Pogue (on behalf of the Chamber of Commerce of 
the United States of America, the National Association of 
Manufacturers, Bridgestone/Firestone, Inc., and Mosler Inc.).

    Six comments were received from the following labor organizations:

--United Automobile, Aerospace & Agricultural Implement Workers of 
America, [[Page 27857]] 
--International Union of Operating Engineers,
--International Brotherhood of Teamsters,
--Air Line Pilots Association,
--American Association of University Professors,
--United Steelworkers of America.

    Two comments were received from the following U.S. government 
agencies:

--Department of Health and Human Services,
--General Services Administration.

    Finally, two comments were received from individuals.
    The Department has carefully reviewed and considered all statements 
made in the comments in developing this final rule. The following is a 
summary of the comments and the Department's response.

A. Comments on the Definition of ``Lawfully Striking Employee''

    Several comments objected to the element of the definition in the 
proposed regulations which provides that a strike is considered to be 
lawful until it has been finally adjudicated to be unlawful. These 
comments stated that final adjudication could take years, thereby 
keeping the contractor in limbo unfairly. One comment also stated that 
in the case of clearly unlawful strikes such as ``wildcat'' strikes or 
strikes in violation of a ``no strike'' contract clause, there should 
be discretion to deny strikers protection from replacement employees 
prior to final adjudication.
    The proposed regulations do provide discretion, on a case-by-case 
basis, for the Assistant Secretary to determine that neither debarment 
nor termination of a contract is appropriate based on the entire 
record, and the nature of the strike as well as the status of related 
litigation may certainly be issues for development in the record. 
However, whether a strike is unlawful under federal, state or local law 
is generally a complex matter which is most suitably resolved in 
accordance with the standards and procedures set in those laws. OAW 
should not as a rule substitute its judgement for that of the relevant 
agencies and the courts. Accordingly, OAW believes that it is not 
necessary or appropriate to change the definition of ``lawfully 
striking employee'' or otherwise modify the regulations to specifically 
deal with ``clearly unlawful strikes'' since the Assistant Secretary 
already has sufficient discretion under the proposed regulations.
    One comment objected to the reference to ``state or local law'' in 
the proposed definition because the lawfulness of a strike by employees 
covered by the National Labor Relations Act (NLRA) cannot be 
adjudicated under state or local law. Another comment stated that state 
law characterization of a dispute as a lockout for purposes of 
unemployment compensation should not affect the determination of 
whether a dispute is a strike or a lockout under federal law.
    The inclusion of the phrase ``state or local law'' in the proposed 
definition is intended to deal with the situation where an entity of 
state or local government has a federal contract. State or local law 
would be pertinent in such cases in determining the lawfulness of a 
strike. However, state or local law would not affect the 
characterization or lawfulness of a strike by employees covered by the 
NLRA or the Railway Labor Act.
    Finally, one comment expressed concern over the definition of 
``employee,'' which excludes ``supervisors.'' This comment suggested 
that only those persons with full managerial or supervisory authority 
should be considered as supervisors excluded from the definition of 
employee, as recommended in the report of the Commission on the Future 
of Worker-Management Relations (also referred to as the Dunlop 
Commission), issued in December 1994. The comment noted that the 
Supreme Court has interpreted the similar definition of the term 
``employee'' in the NLRA as excluding as supervisors persons who 
incidentally direct other employees' work.
    Despite the similarity of the definition of ``employee'' in the 
proposed regulations to the definition in the NLRA (and perhaps other 
statutes), and the guidance that may be provided by court or 
administrative rulings issued pursuant to other statutes or executive 
orders, the Assistant Secretary is not necessarily bound by those 
rulings. The Assistant Secretary has the discretion and authority to 
make decisions on debarment and contract termination on the basis of 
the entire record in each case so as to effectuate the purposes of the 
Order.

B. Comments on the Definition of ``Permanently Replaced''

    One comment objected to the definition of permanently replaced 
because it lacks any temporal element and therefore may include any 
strikers without an unconditional right to reinstatement. That is, an 
employer that contemplates permanently replacing strikers in the future 
could be determined to have actually permanently replaced strikers 
since their reinstatement may be conditional upon return to work at a 
future time. The comment argues that an employer should not have to 
declare that striking employees have an unconditional right to 
reinstatement at any time in order to prevent the Assistant Secretary 
from concluding that it has permanently replaced its striking 
employees. The comment concludes by stating that an employer should not 
be considered to have permanently replaced its lawfully striking 
employees unless it refuses to reinstate them or declares or evidences 
that its replacement workers may affect the reinstatement rights of the 
striking employees.
    We do not believe that these concerns are well-founded. Whether or 
not lawfully striking employees have been permanently replaced at a 
particular point in time is a factual question to be resolved on the 
basis of the entire situation at that time, including (as the commenter 
appears to note with approval) the employer's declarations and other 
evidence from the employer's actions that its replacement workers may 
affect the reinstatement rights of the striking employees.
    Another comment suggested that the definition of ``permanently 
replaced'' be revised to include situations where a contractor has 
entered into a contract with another entity to provide the goods or 
services required by the contract as well as the situation where a 
contractor permanently replaces its striking employees with replacement 
employees. However, OAW does not believe it is necessary or appropriate 
to revise the language of the definition. Under the proposed 
definition, the Assistant Secretary has the authority and discretion to 
determine on a case-by-case basis whether the Order is applicable where 
employees are permanently replaced by subcontracting as well as 
replaced by hiring new employees.

C. Comments on the Definitions of ``Organizational Unit'' and 
``Affiliate''

    The largest number of specific comments concerned the definitions 
of the terms ``organizational unit of a federal contractor'' and 
``affiliate.'' Several comments simply asked questions concerning the 
scope of the application of the Order and the regulations. For example, 
these questions included whether the Order applies to a federal 
contractor whose sister company permanently replaces lawfully striking 
employees, whether it applies to a contractor as a whole or just the 
organizational element that is doing the work on a federal contract, 
and [[Page 27858]] whether it applies only to situations in which 
workers on a federal contract are replaced.
    Many comments suggested that the proposed regulations be revised so 
as to limit the scope of the Order's application. For example, one 
comment suggested generally that affiliates or sister companies of a 
federal contractor should not be subject to the Order; another comment 
suggested that, for nursing home chains, the Order's application should 
be limited to the specific facility that permanently replaced lawfully 
striking employees.
    On the other hand, several comments suggested that the proposed 
regulations be revised to expand the scope of the Order's application. 
For example, one comment suggested that the Order should apply to 
sister companies to which work in connection with a federal contract is 
transferred when the primary contractor has permanently replaced 
lawfully striking employees; another comment suggested that, for 
institutions of higher learning, the Order should apply to the entire 
university and not to just the Department which has the federal 
contract.
    The number and variety of the particular situations described in 
the comments underscore the rationale for making determinations on the 
Order's application on a case-by-case basis rather than attempting to 
establish general rules to cover all situations. Further, in a 
rulemaking action it is not appropriate to make determinations about 
specific situations or particular industries described in the comments.
    Nevertheless, the following general comments can be made on the 
questions and situations raised in the comments regarding the 
definitions of organizational unit of a federal contractor and 
affiliate.
    In the case where (1) Corporation XYZ is a prime contractor holding 
a contract with a contracting agency, (2) Division A of Corporation XYZ 
is responsible for performing the contract, and (3) Division B of 
Corporation XYZ performs no work on the contract but could provide the 
goods or services required to be provided under the contract, then 
Corporation XYZ, Division A, and Division B (and any other affiliates 
of Corporation XYZ that could provide the goods or services required by 
the contract) form an ``organizational unit of a federal contractor'' 
under the regulations. If any part of the organizational unit 
permanently replaces lawfully striking employees (including, for 
example, employees of Division B who are not performing work on the 
federal contract), then the entire organizational unit would be subject 
to debarment if appropriate, and any contracts over $100,000 which any 
part of the organizational unit has with a contracting agency would be 
subject to a finding of whether termination for convenience is 
appropriate.
    With regard to questions and comments concerning subcontractors, 
the Order is directed only to prime or first tier contractors. Thus, 
Sec. 270.1(e) defines ``contractor'' as a ``prime contractor,'' which 
is defined at Sec. 270.1(p) as any person holding a contract with a 
contracting agency. One comment noted that the regulations implementing 
Executive Order 11246, which deals with nondiscrimination in employment 
by government contractors, explicitly covers subcontractors as well as 
federal contractors. However, Executive Order 11246, unlike Executive 
Order 12954, specifically includes subcontractors within its coverage. 
There is no basis for revising the proposed regulations to include 
subcontractors.
    In addition to these general questions and comments, there were two 
narrower issues raised in the comments. One comment suggested that the 
second part of the proposed definition of ``organizational unit of a 
federal contractor,'' relating to affiliates, be revised to include 
only affiliates that actually provide or will provide the goods or 
services required by the contract rather than affiliates that could 
provide those goods or services. However, OAW believes that the 
proposed definition is more consistent with the findings and purposes 
of the Order.
    Finally, one comment suggested that the definition of ``affiliate'' 
in the Federal Acquisition Regulation (FAR) be used. However, the 
definition in the proposed regulations closely follows the FAR 
definition in all material respects.

D. Comments on Time Frames

    Several comments suggested the addition of time frames to the 
procedures in the regulations. One of these comments suggested that the 
regulations at Sec. 270.11, concerning investigations, be revised so 
that an agency which has a contract with a contractor that may have 
permanently replaced lawfully striking employees be formally notified 
at the beginning of the investigation. (Currently the only reference to 
notification of interested agencies is after the Assistant Secretary's 
decision that debarment and/or termination of the contract is 
appropriate.)
    OAW believes that in most if not all cases, agencies will receive 
early notification since one of the first steps in an investigation 
will very likely be to obtain information from the contracting agency 
about the existence and amount of the contract with the contractor that 
may have permanently replaced lawfully striking employees. Therefore, 
OAW does not believe that it is necessary or appropriate to put a 
formal notification requirement in the regulations inasmuch as it is 
possible in some cases that the matter will be dismissed solely on the 
basis of preliminary information obtained about whether the contractor 
has permanently replaced lawfully striking employees, thus making it 
unnecessary to involve the agency.
    One comment suggested that the contractor be notified that it is 
under investigation within three business days, or some other definite 
and limited time period, so that the contractor has time to adequately 
respond to the complaint. OAW does not believe that this is necessary 
or appropriate since the regulations at Secs. 270.12(d) and 270.13 
provide sufficient time for a contractor to present its position. In 
addition, the matter may be dismissed at an early stage based on 
information obtained relating to the contract and/or whether lawfully 
striking employees have been permanently replaced, thus obviating the 
need to notify the contractor.
    One comment suggested that contractors be provided thirty days to 
respond to a notice of proposed debarment, as in the FAR at 48 CFR 
9.406-3(c), rather than the fifteen days in proposed Sec. 270.12(d). 
OAW believes that fifteen days is sufficient time for a contractor to 
provide information that raises a genuine dispute over material facts, 
given the limited issues involved in these proceedings. If the 
contractor has raised a genuine dispute over material facts, it will 
also be provided the opportunity to present its position at the hearing 
provided in Sec. 270.13(a).
    Another comment suggested the addition of time frames throughout 
the process for conducting investigations, making findings, holding 
hearings, etc. OAW does not believe that it is appropriate to set a 
time frame for all enforcement proceedings because the nature of each 
proceeding will vary based on the complexity and scope of the issues.
    Finally, two comments noted that the regulations do not indicate 
when a debarment decision becomes effective. The final regulations have 
been revised at Sec. 270.15(b) to state that debarment is effective 
immediately upon issuance of the debarment decision. However, unlike 
the FAR at 48 CFR 9.404 and 9.405, debarment is not effective at the 
[[Page 27859]] time of the Assistant Secretary's decision to propose 
debarment (Sec. 270.12(d)) since the Order authorizes debarment only 
after a final decision. (The Assistant Secretary will only transmit the 
final decision to debar to the General Services Administration for 
inclusion on the consolidated list of debarred contractors, currently 
titled the ``List of Parties Excluded from Procurement Programs,'' not 
information pertaining to the earlier decision to propose debarment.) 
In order to avoid confusion on this point, the wording of 
Sec. 270.12(d) has been revised so as to eliminate the use of the term 
``notice of proposed debarment.''
E. Resolution of Labor Dispute

    One comment suggested certain revisions to Sec. 270.16 concerning 
the Assistant Secretary's determination that a labor dispute has been 
resolved. The comment argued that there should be two touchstones for 
such a determination: (1) whether the parties have resolved their 
differences and (2) whether the striking employees have returned to 
work. The commenter proposed that Sec. 270.16 provide that ``an 
agreement of the parties in which the strikers which have been 
permanently replaced have returned to work'' be the standard for 
determining that a labor dispute has been resolved. OAW believes that 
the current flexible standard in Sec. 270.16, which provides that the 
Assistant Secretary will consider various factors in determining 
whether a labor dispute has been resolved, is preferable to a rigid 
definition.

F. Other Comments

    1. Several comments suggested that the regulations be revised to 
set out standards and criteria for the exercise of discretion in making 
decisions. Two comments suggested that objective contract performance 
criteria should be established to govern decisions on whether debarment 
and/or termination of a contract for convenience is appropriate. 
Another comment suggested that Sec. 270.15(a) be revised to specify 
when the scope of a debarment would go beyond the organizational unit 
which permanently replaced lawfully striking employees. However, in 
view of the fact that the Order establishes a flexible enforcement 
mechanism based on case-by-case determinations, OAW has decided that it 
would not be appropriate to circumvent that enforcement mechanism by 
unnecessarily limiting the Assistant Secretary's discretion in the 
regulations.
    2. Three comments suggested that this rulemaking procedure be 
delayed pending the outcome of current litigation challenging the 
Executive Order, and that the comment period be reopened at the 
conclusion of the litigation. It is clearly not possible to delay 
rulemaking; the Order is effective as of the date it was signed and the 
Secretary has the obligation to promulgate a final rule implementing 
the Order.
    3. One comment noted that under proposed regulations governing 
nonprocurement debarment and suspension and FAR (59 FR 65607, December 
20, 1994), issued pursuant to Sec. 2455 of the Federal Streamlining Act 
of 1994 and Executive Order 12689, reciprocal effect is to be given to 
debarment and suspension under FAR (for procurement programs) and under 
Executive Order 12549 and the implementing regulations (for 
nonprocurement activity such as grants). Thus, under these proposed 
regulations, a federal contractor which is debarred under Executive 
Order 12954 for permanently replacing lawfully striking employees would 
also be ineligible for nonprocurement activity such as grants. Because 
of this broad impact, the comment suggested that state and local 
governments be excluded from the definition of ``person'' so that they 
could not be considered to be federal contractors.
    OAW believes that any impact on state and local government 
nonprocurement activity, though possible, will at most be rare. First, 
under most state law, strikes by employees of state entities are 
unlawful so that Executive Order 12954 will not be applicable. Second, 
the Assistant Secretary has the authority and discretion to find that 
debarment in a particular case is not appropriate. Finally, a finding 
by the Assistant Secretary that termination of the specific contract 
held by a state entity is appropriate would not have any impact on 
nonprocurement activity.
    4. One comment asked whether it is correct in concluding that an 
entity is not a contractor subject to the Order solely because it 
receives Medicare and/or Medicaid reimbursements. This position is 
correct. The relationship between the federal government and a health 
care provider receiving payments under the Medicare program or 
receiving payments from states under the Medicaid program is a grantor-
grantee relationship, not a contracting agency-contractor relationship. 
(Medicaid, unlike Medicare, does not involve a relationship between an 
executive agency of the U.S. government and a participating health care 
provider; rather, Medicaid is actually a grant program to the states.) 
Therefore, a contractor is not covered by the Order by virtue of the 
receipt of Medicare and/or Medicaid reimbursements.
    However, under the proposed regulations referred to in the 
preceding comment regarding nonprocurement debarment and suspension and 
FAR, debarment under Executive Order 12954 for permanently replacing 
lawfully striking employees would also render a contractor ineligible 
for nonprocurement activity, including grants. Of course, as previously 
noted, the regulations give the Assistant Secretary the authority and 
discretion to make determinations on a case-by-case basis on whether 
debarment is appropriate, or whether termination of the specific 
contract is appropriate.
    5. One comment suggested that the regulations should require that 
the agency head take certain steps before deciding not to adopt the 
Assistant Secretary's decisions that debarment and/or contract 
termination is appropriate, including issuing a notice and allowing the 
complainant to present his or her position. However, the Order does not 
provide the authority to require such a procedure.
    6. Two comments stated that Secs. 270.12 (b) and (c) of the 
regulations are confusing because under Sec. 270.12(c) a contract can 
be terminated for convenience only if the contractor is found to have 
permanently replaced lawfully striking employees after March 8, 1995 
(the effective date of the Executive Order) while Sec. 270.12(b) 
specifies that a contractor can be debarred if the contractor is found 
to have permanently replaced lawfully striking employees and does not 
specify a time frame. However, these provisions of the proposed 
regulations reflect the effective dates for debarment and contract 
termination in the Order. That is, a contractor may be debarred if the 
contractor is found to have permanently replaced lawfully striking 
employees prior to March 8 but, pursuant to section 12(a) of the Order, 
a contract can only be terminated for convenience if the contractor is 
found to have permanently replaced lawfully striking employees after 
March 8.
    7. One comment suggested revising proposed Sec. 270.12(d) to 
include the effects of debarment in the notice to contractors advising 
of the Assistant Secretary's decision to propose debarment and/or 
termination. This change has been made.
    8. One comment suggested revising proposed Sec. 270.16(b) to state 
that the Assistant Secretary will specifically notify the General 
Services Administration of any decision to [[Page 27860]] terminate 
debarment because of the resolution of the labor dispute and publish 
the decision in the Federal Register. This suggestion has been adopted 
in this final rule.
    9. Finally, many of the comments questioned the legality and the 
rationale of the Executive Order. These issues are clearly not within 
the purview of this rulemaking action.
    In addition to promulgating regulations implementing Executive 
Order 12954, this final rule also changes the heading of Chapter II of 
Title 29 of the Code of Federal Regulations from ``Bureau of Labor-
Management Relations and Cooperative Programs, Department of Labor'' to 
``Office of Labor-Management Programs, Department of Labor.'' The 
Office of Labor-Management Programs, a unit within the Office of the 
American Workplace, was established by Secretary's Order 2-93 (58 FR 
42578) and, among other things, performs functions previously assigned 
to the Bureau of Labor-Management Relations and Cooperative Programs.

III. Administrative Notices

A. Executive Order 12866

    The Department of Labor has determined that this rule is a 
significant regulatory action as defined in section 3(f) of Executive 
Order 12866. The Department is issuing this rule in conformance with 
that Executive Order. The Department has determined that the potential 
benefits of this regulatory action outweigh the potential costs, and 
that the rule promotes the President's priorities. This rule does not 
meet the criteria of section 3(f)(1) of Executive Order 12866 and, 
therefore, the information in section 6(a)(3)(C) of that Executive 
Order is not required. This rule has been reviewed by the Office of 
Management and Budget.

B. Regulatory Flexibility Act

    The Agency Head has certified that this rule is not expected to 
have a significant impact on a substantial number of small entities as 
defined in the Regulatory Flexibility Act. The Order and the 
regulations apply only to federal contracts in excess of $100,000.

C. Paperwork Reduction Act
    This rule contains no information collection requirements for 
purposes of the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et 
seq.).

List of Subjects in 29 CFR Part 270

    Administrative practice and procedure; Government contracts; 
Federal contractors and subcontractors.

    Accordingly, Chapter II of Title 29 is amended as set forth below.

    Signed at Washington, D.C., this 23rd day of May, 1995.
Charles L. Smith,
Special Assistant to the Deputy Secretary.
CHAPTER II--OFFICE OF LABOR-MANAGEMENT PROGRAMS, DEPARTMENT OF LABOR
    1. The heading of Chapter II, now reading ``Bureau of Labor-
Management Relations and Cooperative Programs, Department of Labor,'' 
is revised to read ``Office of Labor-Management Programs, Department of 
Labor.''
    2. A new Part 270 is added to 29 CFR Chapter II to read as follows:

PART 270--OBLIGATIONS OF FEDERAL CONTRACTING AGENCIES: PERMANENT 
REPLACEMENT OF LAWFULLY STRIKING EMPLOYEES

Subpart A--Preliminary Matters

Sec.
270.1  Definitions.
270.2  Statement of policy.

Subpart B--Enforcement

270.10  Complaints.
270.11  Investigations.
270.12  Findings by the Assistant Secretary.
270.13  Hearings.
270.14  Termination of contract for convenience.
270.15  Debarment.
270.16  Determination of resolution of labor dispute.

Subpart C--Ancillary Matters

270.20  Cooperation with the Assistant Secretary.
270.21  Rulings and interpretations.
270.22  Delegation of authority by the Secretary.
270.23  General.

    Authority: Executive Order No. 12954, 60 FR 13023; Secretary's 
Order No. 2-93, 58 FR 42578; Secretary's Order No. 2-95, 60 FR 
13602.

Subpart A--Preliminary Matters


Sec. 270.1  Definitions.

    (a) Affiliates means business concerns, organizations, or 
individuals among which, directly or indirectly, either one controls or 
has the power to control the other, or a third party controls or has 
the power to control both. Indicia of control include, but are not 
limited to, interlocking management or ownership, identity of interest 
among family members, shared facilities and equipment, common use of 
employees, or a business entity organized following the debarment, 
suspension, or proposed debarment of a contractor which has the same or 
similar management, ownership, or principal employees as the contractor 
that was debarred, suspended, or proposed for debarment.
    (b) Assistant Secretary means the Assistant Secretary of Labor for 
the American Workplace.
    (c) Contract means a mutually binding agreement between the 
Government as a buyer, represented by a contracting agency, and a 
seller, where the seller agrees to furnish supplies or services 
(including construction) and the Government agrees to pay for them. It 
includes job orders or task orders issued under basic ordering 
agreements; letter contracts; orders, such as purchase orders under 
which the contract becomes effective by written acceptance or 
performance; and bilateral modifications to a contract, which increase 
the supplies or services to be delivered under the contract. For 
purposes of this part a contract is limited to agreements in which the 
Government agrees to pay an amount in excess of the Simplified 
Acquisition Threshold of $100,000 specified in section 4(11) of the 
Office of Federal Procurement Policy Act, 41 U.S.C. 403(11). The term 
``contract'' does not include agreements in which the parties stand in 
the relationship of employer and employee.
    (d) Contracting agency means any executive department or 
independent establishment in the executive branch of the Government, 
including any wholly owned Government corporation.
    (e) Contractor means a prime contractor.
    (f) Department means the U.S. Department of Labor.
    (g) Deputy Assistant Secretary means the Deputy Assistant Secretary 
for Labor-Management Programs, Office of the American Workplace, U.S. 
Department of Labor.
    (h) Employee includes any employee of an employer, and includes any 
individual whose work has ceased as a consequence of, or in connection 
with, any current labor dispute or because of any unfair labor 
practice, but does not include any individual having the status of an 
independent contractor or any individual employed as a supervisor.
    (i) Government means the government of the United States of 
America.
    (j) Labor dispute includes any controversy concerning terms, 
tenure, or conditions of employment, or concerning the association or 
representation of persons in negotiating, fixing, maintaining, 
changing, or seeking to arrange terms or conditions of employment, 
regardless of whether the disputants stand in the proximate relation of 
employer and employee.
    (k) Lawfully striking employee means an employee who is engaged in 
a strike [[Page 27861]] that has not been finally adjudicated to be 
unlawful under any applicable federal, state, or local law.
    (l) Order means Executive Order 12954, dated March 8, 1995 (60 FR 
13023, March 10, 1995).
    (m) Organizational unit of a federal contractor includes:
    (1) A division or other organizational element of a person that is 
responsible as the prime contractor for performing a contract, and
    (2) Any other affiliate of the person that could provide the goods 
or services required to be provided under the contract.
    (n) Permanently replaced, when used in connection with a lawfully 
striking employee, means that during a lawful strike the employer has 
placed an individual in the lawfully striking employee's position, and 
the striking employee does not have an unconditional right to 
reinstatement.
    (o) Person means any natural person, corporation, partnership or 
joint venture, unincorporated association, state or local government, 
and any agency, instrumentality, or subdivision of such a government.
    (p) Prime contractor means any person holding a contract with a 
contracting agency.
    (q) Secretary means the Secretary of Labor, U.S. Department of 
Labor, or his or her designee.


Sec. 270.2  Statement of Policy.

    (a) It is the policy of the Executive Branch of the Federal 
Government that in procuring goods and services, in order to ensure the 
economical and efficient administration and completion of contracts, 
contracting agencies shall not contract with employers that permanently 
replace lawfully striking employees.
    (b) All discretion under the Order and this part shall be exercised 
consistent with this policy.
    (c) The Order and this part apply only to contracts in excess of 
the Simplified Acquisition Threshold of $100,000 established in section 
4(11) of the Office of Federal Procurement Policy Act, 41 U.S.C. 
403(11).

Subpart B--Enforcement


Sec. 270.10  Complaints.

    (a) Complaints may be filed by an employee of an organizational 
unit of a federal contractor, or his or her representative, alleging 
that the organizational unit has permanently replaced lawfully striking 
employees. All complaints should be filed with the Deputy Assistant 
Secretary for Labor-Management Programs, Office of the American 
Workplace, U.S. Department of Labor, 200 Constitution Avenue, NW., Room 
S-2203, Washington, DC 20210.
    (b) The complaint must be in writing and should include the name, 
address, and telephone number of the complainant, the name and address 
of the organizational unit of the federal contractor alleged to have 
permanently replaced lawfully striking employees, an identification of 
the lawfully striking employees who were allegedly permanently 
replaced, and any other pertinent information which will assist in the 
investigation and resolution of the complaint.


Sec. 270.11  Investigations.

    The Deputy Assistant Secretary may cause an investigation to be 
conducted of an organizational unit of a federal contractor, regarding 
the permanent replacement of lawfully striking employees, on the basis 
of complaints filed with the Department, information submitted by other 
persons, or other available information. The Deputy Assistant Secretary 
shall notify the organizational unit of a federal contractor of the 
initiation of an investigation and the potential consequences under the 
Order. The Deputy Assistant Secretary may also cause a fact finding 
hearing to be conducted, either instead of or in addition to an 
investigation. The Deputy Assistant Secretary shall transmit the 
record, including a proposed finding of fact and a recommendation as to 
debarment and/or termination of a contract or contracts, to the 
Assistant Secretary.


Sec. 270.12  Findings by the Assistant Secretary.

    (a) Upon receipt of the record, the Assistant Secretary shall make 
a finding as to whether the organizational unit of the federal 
contractor has permanently replaced lawfully striking employees.
    (b) If the Assistant Secretary finds that the organizational unit 
of the federal contractor has permanently replaced lawfully striking 
employees, he or she shall determine whether it is appropriate to 
propose debarment.
    (c) If the Assistant Secretary finds that the organizational unit 
of the federal contractor has permanently replaced lawfully striking 
employees after March 8, 1995, the effective date of the Order, he or 
she shall also determine whether it is appropriate to propose 
termination for convenience of the contract or contracts of the 
organizational unit.
    (d) If the Assistant Secretary proposes debarment and/or 
termination, he or she shall notify the organizational unit of the 
proposed debarment and/or termination by certified mail, return receipt 
requested, advising the organizational unit of the effects of debarment 
and its right, within 15 days after receipt of the notice, to submit, 
in person, in writing, or through a representative, information and 
argument in opposition to debarment and/or termination.


Sec. 270.13  Hearings.

    (a) If the Assistant Secretary finds that the submission by the 
organizational unit of a federal contractor in opposition to the 
proposed debarment and/or termination raises a genuine dispute over 
facts material to the proposed debarment and/or termination, the 
Assistant Secretary shall afford the organizational unit the 
opportunity to appear at an informal hearing. The Assistant Secretary 
or his or her designee shall preside over the proceeding.
    (b) The Assistant Secretary shall make a decision on the proposed 
debarment and/or termination of a contract or contract based on the 
record.


Sec. 270.14  Termination of contract for convenience.

    (a) Upon finding that termination of a contract or contracts for 
convenience is appropriate, the Assistant Secretary shall notify the 
organizational unit of a federal contractor by certified mail, return 
receipt requested, and shall transmit that finding to the head of any 
department or agency that contracts with the organizational unit.
    (b) The head of the department or agency shall notify the Assistant 
Secretary in writing of those contracts that have been terminated for 
convenience pursuant to the Assistant Secretary's finding.
    (c) If the head of the department or agency objects to the 
termination for convenience of a contract, he or she shall notify the 
Assistant Secretary in writing, promptly after receipt of the Assistant 
Secretary's finding, of the reasons for not terminating the contract 
and the termination for convenience shall not be issued.


Sec. 270.15  Debarment.

    (a) The scope of any debarment normally will be limited to the 
organizational unit of a federal contractor that the Assistant 
Secretary has found to have permanently replaced lawfully striking 
employees.
    (b) Upon finding that debarment is appropriate, the Assistant 
Secretary shall promptly notify the organizational unit of the federal 
contractor by certified mail, return receipt requested. The 
[[Page 27862]] notice shall advise the organizational unit of the 
federal contractor:
    (1) That debarment is effective immediately;
    (2) That the debarment will not extend beyond the date when the 
labor dispute precipitating the permanent replacement of lawfully 
striking employees has been resolved, as determined by the Assistant 
Secretary in accordance with Sec. 270.16;
    (3) That under the debarment, contracting agencies throughout the 
executive branch of the Government shall not contract or consent to 
subcontracts with the organizational unit of the federal contractor nor 
renew or otherwise extend the duration of current contracts, unless the 
head of a contracting agency or his or her designee determines that 
there is a compelling reason for such action.
    (c) The Assistant Secretary shall notify the Administrator of the 
General Services Administration of the debarment and the Administrator 
shall include the contractor on the list of debarred contractors. The 
Assistant Secretary shall publish or cause to be published in the 
Federal Register, the names of contractors that have, in the judgment 
of the Assistant Secretary, permanently replaced lawfully striking 
employees and have been the subject of debarment. Departments and 
agencies shall not renew or otherwise extend the duration of current 
contracts or solicit offers from, award contracts to, or consent to 
subcontracts with these contractors unless the head of the agency or 
his or her designee determines, in writing, that there is compelling 
reason for such action.


Sec. 270.16  Determination of resolution of labor dispute.

    (a) The Assistant Secretary may cause an investigation to be 
conducted, on his or her own initiative or upon request by any person, 
to determine whether a labor dispute that resulted in debarment has 
been resolved. Among the factors or conditions that the Assistant 
Secretary may consider are:
    (1) Whether the parties to the labor dispute have either reached a 
formal settlement or agreed on a procedure for resolving their 
differences.
    (2) Whether the parties have agreed informally to end the labor 
dispute without the signing of a written agreement.
    (3) Whether striking employees have returned to work.
    (4) Any other relevant factors tending to lead to the conclusion 
that the labor dispute has ended.
    (b) If the Assistant Secretary determines that the labor dispute 
has been resolved, he or she shall terminate the debarment and notify 
the General Services Administration of this action. Notification shall 
also be given to the public, federal agencies, federal contractors, and 
other interested persons, through publication in the Federal Register, 
of this action.

Subpart C--Ancillary Matters


Sec. 270.20  Cooperation with the Assistant Secretary.

    Consistent with section 7 of the Order, each contracting agency 
shall cooperate with the Assistant Secretary and provide such 
information and assistance as the Assistant Secretary may require in 
the performance of the Assistant Secretary's functions under the Order 
and the regulations in this part.


Sec. 270.21  Rulings and interpretations.

    Rulings under or interpretations of the Order or the regulations 
contained in this part shall be made by the Assistant Secretary or his 
or her designee.


Sec. 270.22  Delegation of authority by the Secretary.

    Consistent with section 8 of the Order, the Secretary may delegate 
any function or duty of the Secretary under this Order to any officer 
in the Department or to any other officer in the executive branch of 
the Government, with the consent of the head of the department or 
agency in which that officer serves.


Sec. 270.23  General.

    (a) The regulations in this part implement Executive Order 12954 
only and do not modify or affect the interpretation of any other 
Department of Labor regulations or policy.
    (b) Consistent with section 10 of the Order, nothing contained in 
the Order or this part, or promulgated pursuant to the Order or this 
part, is intended to confer any substantive or procedural right, 
benefit, or privilege enforceable at law by a party against the United 
States, its agencies or instrumentalities, its officers, or its 
employees.

[FR Doc. 95-12960 Filed 5-24-95; 8:45 am]
BILLING CODE 4510-86-P