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Employment Standards Administration

ESA Final Rule

Obligations of Federal Contractors and Subcontractors; Notice of Employee Rights Concerning Payment of Union Dues or Fees; Final Rule [03/29/2004]

[PDF Version]

Volume 69, Number 60, Page 16375-16390


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Part IV





Department of Labor





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Office of Labor-Management Standards



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29 CFR Part 470



Obligations of Federal Contractors and Subcontractors; Notice of 
Employee Rights Concerning Payment of Union Dues or Fees; Final Rule


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DEPARTMENT OF LABOR

Office of Labor-Management Standards

29 CFR Part 470

RIN 1215-AB33

 
Obligations of Federal Contractors and Subcontractors; Notice of 
Employee Rights Concerning Payment of Union Dues or Fees

AGENCY: Office of Labor-Management Standards, Employment Standards 
Administration, Labor.

ACTION: Final rule.

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SUMMARY: The Office of Labor-Management Standards (``OLMS'') is 
publishing this final rule to implement Executive Order 13201, which 
was signed by President George W. Bush on February 17, 2001. The final 
rule contains minor changes made as a result of comments received 
regarding the notice of proposed rule-making (``proposed rule'' or 
``NPRM'') published on October 1, 2001. See 66 FR 50010.
    Executive Order 13201 (``the Executive Order,'' ``the Order,'' or 
``EO 13201'') requires non-exempt government contractors and 
subcontractors to post notices informing their employees that under 
Federal law, those employees have certain rights related to union 
membership and use of union dues and fees. The Order also provides the 
text of contractual provisions that Federal Government contracting 
departments and agencies must include in every government contract, 
except for collective bargaining agreements and contracts for purchases 
under the Simplified Acquisition Threshold. These provisions include 
the language of the required notices, and explain the sanctions, 
penalties, and remedies that may be imposed if the contractor or 
subcontractor fails to comply with its obligations under the Order. 
Covered government contractors and subcontractors must include these 
same provisions in their nonexempt subcontracts and purchase orders, so 
that the provisions will be binding upon each subcontractor or vendor.
    The final rule provides the text of the required contractual 
provisions, explains exemptions, and sets forth procedures for ensuring 
compliance with the Order; it also contains other related requirements.

EFFECTIVE DATE: April 28, 2004.

FOR FURTHER INFORMATION CONTACT: Don Todd, Deputy Assistant Secretary 
for Labor-Management Programs, Office of Labor-Management Standards, 
Employment Standards Administration, U.S. Department of Labor, 200 
Constitution Avenue, NW., Room N-5605, Washington, DC 20210, 202-693-
0122 (voice) (this is not a toll-free number) or 800-877-8339 (TTY/
TDD). Copies of this final rule, including copies in alternative 
formats, may be obtained by calling OLMS at 202-693-0123 (voice) or 
800-877-8339 (TTY/TDD).

SUPPLEMENTARY INFORMATION: The preamble to the final rule is organized 
as follows:

I. Background--provides a brief description of the development of 
the final rule, including a list of documents connected to the rule 
that OLMS has published
II. Authority--cites the legal authority supporting the final rule, 
Departmental redelegation authority, and interagency coordination 
authority

III. Overview of the Rule--summarizes pertinent aspects of the 
regulatory text, including a section-by-section analysis that 
discusses any comments received about each section and explains any 
changes made to the text as a result of those comments.
IV. Regulatory Procedure--sets forth the applicable regulatory 
requirements.

I. Background

    As described in detail in the preamble to the NPRM, Executive Order 
13201 (66 FR 11221, February 22, 2001) is designed to promote economy 
and efficiency in government procurement by requiring government 
contractors to inform their workers that Federal labor laws give those 
workers certain rights related to union membership and use of union 
dues and fees. The Order provides the text of a contract clause that 
government contracting departments and agencies must include in all 
nonexempt government contracts and subcontracts. That clause requires 
contractors to post a notice, the exact language of which is included 
in the clause. The clause also requires contractors to include the same 
clause in their nonexempt subcontracts and purchase orders, and 
describes generally the sanctions, penalties, and remedies that may be 
imposed if the contractor fails to satisfy its obligations under the 
Order and the clause.
    The text of the notice informs employees that they cannot be 
required to join, or maintain membership in, a union in order to keep 
their jobs; that under certain conditions, the law permits a union and 
an employer to enter into a union-security agreement requiring 
employees to pay dues and fees to the union; and that, even where such 
union-security agreements exist, employees who are not union members 
can only be required to pay their share of union costs relating to 
certain specific activities. The notice also provides a general 
description of the remedies to which employees may be entitled if these 
rights have been violated, and provides contact information for further 
information about those rights and remedies.
    In April 2001, the Department of Labor (``DOL'' or ``the 
Department'') issued an Interim Procedural Notice (``IPN'') to provide 
guidance to contractors and subcontractors about how to comply with 
Executive Order 13201 pending the publication of a final rule 
implementing the Order. 66 FR 19988 (April 18, 2001). The IPN 
authorized covered contractors to fulfill their posting obligations 
under the Order by replicating the text of the notice set forth in the 
Order and posting it in conspicuous places in and about their plants 
and offices, including all places where notices to employees are 
customarily posted.
    As noted above, OLMS published an NPRM on October 1, 2001, 
proposing regulations to implement Executive Order 13201. See 66 FR 
50010. The NPRM set a deadline of November 30, 2001, for receipt of 
public comments about the proposed rule. However, because of anthrax-
related problems with mail delivery, OLMS published a notice in the 
Federal Register on December 18, 2001, listing the six commenters from 
whom comments had been received by the deadline, and asking any other 
commenters who might have submitted comments via U.S. mail before the 
deadline to supply duplicate copies of such comments. 66 FR 65163. The 
notice set a deadline of January 2, 2002, for receipt of such duplicate 
copies. Two additional sets of comments were received. However, neither 
set appeared to be a duplicate copy of comments submitted before the 
original deadline; rather, both sets appeared to be new comments. As a 
result, the Department determined that these comments would not be 
analyzed and considered in the development of this final rule. The six 
timely comments that were analyzed and considered came from various 
nonprofit, public policy, and trade association groups, as well as a 
group of Members of Congress. No comments were received from labor 
unions.
    As described in detail in the NPRM, Executive Order 13201 contains 
requirements similar, but not identical, to those included in Executive 
Order 12800, issued on April 13, 1992, by then-President George H. W. 
Bush. See 57 FR 12985 (April 14, 1992); 57 FR 13413 (April 16, 1992). 
Executive Order

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12800 was revoked on February 1, 1993, by Executive Order 12836. 58 FR 
7045 (published February 3, 1993). Both Executive Orders were, and the 
provisions of this final rule are, intended to inform employees of 
their rights under the decisions of the United States Supreme Court in 
Communications Workers of America v. Beck, 487 U.S. 735 (1988), and 
related cases. As a result, the final rule is sometimes referred to as 
the Beck rule, and the rights articulated in the decision are referred 
to as Beck rights.
    In Beck, the Court held that a union may not use fees and dues that 
it collects from bargaining unit employees who have not joined the 
union to finance activities that are not ``germane'' to the union's 
representational purposes over the objection of such employees. 
Examples of activities the Court considered ``germane'' include 
collective bargaining, contract administration, and grievance 
adjustment. Beck, 487 U.S. at 745, 760.
    Soon after it was signed into law, Executive Order 13201 was 
challenged in court on two grounds: first, that it was preempted by the 
National Labor Relations Act, and second, that the President lacked 
sufficient authority to issue the Order. See UAW-Labor Employment and 
Training Corp., et. al. v. Chao, 2002 WL 21720, 145 Lab. Cas. P. 11,166 
(D. D.C. 2002). Although the U.S. District Court for the District of 
Columbia found that the Order was preempted by the National Labor 
Relations Act and issued a permanent injunction barring enforcement of 
the Order, that decision was appealed to the U.S. Court of Appeals for 
the District of Columbia, which reversed the District Court. See UAW-
Labor Employment and Training Corp., et. al. v. Chao, 325 F. 3d 360 
(D.C. Cir. 2003), reh'g denied, No. 02-5080 (Sept. 11, 2003).

II. Authority

A. Legal Authority

    The legal authority for this final rule is Executive Order 13201, 
issued pursuant to the Constitution and laws of the United States, 
including the Federal Property and Administrative Services Act, 40 
U.S.C. 471 et seq., now codified as amended at 40 U.S.C. 101 et seq.

B. Departmental Authorization

    Section 1(b) of Executive Order 13201 delegates responsibility for 
the administration and enforcement of the Order to the Secretary of 
Labor, and directs the Secretary to adopt rules and regulations and 
issue such orders as are deemed necessary and appropriate to achieve 
the purposes of the Order. Section 9 of the Order authorizes the 
Secretary to delegate any function or duty under the Order to any 
officer in the Department of Labor 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.
    Pursuant to that delegation authority, Secretary's Order 4-2001, 
effective May 24, 2001, and published in the Federal Register on May 
31, 2001 (66 FR 29656), delegates and assigns responsibility for the 
administration and enforcement of E.O. 13201 to the Assistant Secretary 
for Employment Standards. The Assistant Secretary, in turn, has 
delegated general responsibility for the administration and enforcement 
of the Executive Order to the Deputy Assistant Secretary for Labor-
Management Programs. Under this delegation, the Deputy Assistant 
Secretary for Labor-Management Programs has specific responsibility for 
granting and withdrawing exemptions and waivers under this part, and 
for referring for administrative enforcement cases against contractors 
that have been found to have violated the provisions of the Order or 
this part.
    The Assistant Secretary has conveyed responsibility for conducting 
compliance evaluations and complaint investigations under the Order and 
this part to the Deputy Assistant Secretary for Federal Contract 
Compliance.

C. Interagency Coordination

    DOL is coordinating with the Civilian Agency Acquisition Council 
regarding the amendment of the Federal Acquisition Regulation (FAR) at 
48 CFR parts 22 and 55 to include language implementing the Executive 
Order.

III. Overview of the Rule

    The final rule is divided into three subparts. Subpart A, 
``Preliminary Matters,'' contains definitions, the employee notice 
clause, and exemptions. Subpart B, ``Compliance Evaluations, Complaint 
Investigations, and Enforcement Procedures,'' addresses the three 
topics listed in the subpart's title. Subpart C, ``Ancillary Matters,'' 
addresses miscellaneous matters, such as which authority the Secretary 
of Labor is able to delegate under the Order and the rule, and which 
official will make rulings and interpretations under the rule.
    All six commenters who submitted timely comments regarding the NPRM 
expressed general support for the Executive Order and the rule. One 
commenter called the rule ``an important and necessary step in 
rectifying unlawful practices and advising employees of their rights 
under Supreme Court decisions.''
    The following section discusses the timely comments received 
regarding the NPRM, and explains the differences between the NPRM and 
this final rule.

Section-by-Section Analysis of Comments and Revisions

Subpart A--Preliminary Matters

Section 470.1 What Definitions Apply to This Part?

    One commenter suggested that to improve clarity, each of the 
definitions within this section should have an identifying letter. We 
concur that each definition should be identified. Accordingly, we are 
accepting this comment, and designating each definition in this section 
by letter.
    Definition of ``collective bargaining agreement'': Section 470.2(a) 
states that only certain contracts, including certain collective 
bargaining agreements as defined in section 470.1, are exempt from the 
requirements of the final rule. Section 2(a) of Executive Order 13201 
refers to the specific statutory definition of collective bargaining 
agreement as found in the Federal Labor Management Relations Act, 5 
U.S.C. 7101 et seq. (see, e.g., 5 U.S.C. 7103(a)(8): ``collective 
bargaining agreement means an agreement entered into as a result of 
collective bargaining pursuant to this chapter''). The proposal 
attempted to list the key elements of the collective bargaining process 
by summarizing the relevant provisions of the Federal Labor Management 
Relations Act, specifically those found in 5 U.S.C. 7114, 
Representative Rights and Duties. While this summary provides a general 
framework for this process, it is not all-inclusive. Therefore, in 
order to avoid any possible confusion which may result from only a 
partial listing of the steps involved in the development of a 
collective bargaining agreement, and in order to maintain consistency 
with section 2(a) of the Executive Order, we are striking the 
definition of the term in Sec.  470.1 and amending Sec.  470.2(a) so 
that it references the same definition cited in the Executive Order. 
Accordingly, the definition of ``collective bargaining agreement'' in 
Sec.  470.1 has been deleted, and Sec.  470.2(a) has been amended to 
reference the definition of ``collective bargaining agreement'' in 5 
U.S.C. 7103(a)(8) rather than Sec.  470.1.
    Definition of ``subcontractor'': No change has been made to this 
definition. This note is intended to clarify that in the Department's 
view, the term includes the ``vendors'' referred to in section 4 of the 
employee notice clause set forth in section 470.2.

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    Definition of ``union-security agreement'': Two commenters 
submitted comments regarding this definition. One commenter suggested 
that, to avoid any unnecessary confusion, the phrase ``and/or fees'' be 
added to the definition following the phrase ``uniform periodic dues.'' 
We agree that the suggested addition would clarify the definition, and 
have added the suggested phrase.
    Another commenter suggested that the definition be revised to 
define the term as ``an agreement entered into between a contractor and 
a labor organization, whether written, oral, or understood, which 
requires certain employees of the contractor to acquire union 
membership or any incident of union membership, or to provide any union 
any financial support, as a condition of employment.'' However, the 
definition of the term that was included in the proposed rule more 
closely tracks the description of union security agreements in section 
2(a) of the Executive Order. We therefore decline to adopt the 
suggested revision.
    Definition of ``United States'': One commenter suggested that this 
definition be broadened by adding the clause ``and all other 
territories or possessions belonging to the United States of America.'' 
Such a definition would be inconsistent with the definition of the term 
used in other Department regulations. See, e.g., Department of Labor, 
Office of Federal Contract Compliance Programs, Obligations of 
Contractors and Subcontractors, 41 CFR 60-1.3 (August 19, 1997) 
(definition of ``United States''). We have retained the definition used 
in the NPRM.

Section 470.2 Under the Executive Order, What Employee Notice Clause 
Must Be Included in Government Contracts?

    Paragraph 470.2(a), required employee notice poster: One commenter 
suggested that DOL add a pull-off pamphlet to the bottom of the 
required poster, and that both the poster and the pamphlet should 
contain the Internet address of a new Web page that DOL should create. 
According to the commenter, both the pamphlet and the Web page should 
contain basic legal advice to help employees navigate their way through 
the Beck rights-related procedures of unions and the National Labor 
Relations Board (NLRB). The commenter further suggested that the new 
DOL Web page should include form letters, requests, and similar 
documents that could be downloaded and used by employees seeking to 
enforce their Beck rights, and that the required employee notice poster 
should be downloadable in Adobe Acrobat ``PDF'' format from the page.
    We agree that a special Web page, devoted to Executive Order 13201 
and the rights of employees under the Order and the final rule, is a 
good idea. We intend to create such a page on the Office of Labor-
Management Standards Web site at http://www.olms.dol.gov, and will provide 

downloadable versions of the employee notice poster on the page. 
However, the addition of a pull-off pamphlet to the poster, which will 
be printed and distributed by DOL, would greatly add to the cost and 
difficulty of production of the poster. In addition, the purpose of the 
Executive Order is not to encourage or assist workers in exercising 
rights they have under the Supreme Court's decision in Beck, but to 
inform them of the existence of such rights. The employee notice poster 
will provide the headquarters and Web site address for the National 
Labor Relations Board, the agency entrusted with the enforcement of 
these rights, for the benefit of workers who need such assistance. The 
employee notice poster will also include a toll-free general 
information number recently announced by the General Counsel of the 
National Labor Relations Board.
    Paragraph 470.2(a), language of poster and of required contract 
clause: The same commenter suggested a number of changes to the 
language of the required employee notice poster and contract clause. In 
our view, however, the wording of both the poster and the contract 
clause, as specified in the Executive Order itself, adequately reflect 
the President's intentions in issuing the Order. Therefore, we decline 
to make the changes requested by the commenter.
    Paragraph 470.2(a), pass-through requirement: One commenter opposed 
the requirement that contractors pass on to their subcontractors the 
requirement of including the employee notice clause in subcontracts and 
purchase orders. This commenter was concerned about the expense a 
contractor will allegedly be required to incur in making changes to 
forms for supplier agreements, purchase orders, and other contracts, 
and suggested that section 3 of the Executive Order authorizes the 
Secretary of Labor to issue regulations exempting contractors from the 
pass-through requirement.
    We disagree with the commenter's interpretation of the language of 
section 3. The intent of the Order was clearly that the clause be 
passed to subcontractors below the first tier; otherwise, there would 
be no reason for the provision in section 3(b)(v) of the Order that 
authorizes the Secretary to exempt from the provisions of section 2 
``subcontracts below an appropriate tier set by the Secretary.'' 
Further, such a blanket exemption would be inconsistent with procedures 
of Executive Order 11246, upon which these regulations are based. Like 
E.O. 13201, E.O. 11246 authorizes exemption for contractors below a 
specified tier; however, that authority has not been incorporated in 
regulations. The Department's experience with this regulatory framework 
has demonstrated the absence of a tier-based exemption is not unduly 
burdensome and best achieves the purpose of the Executive Order. In 
addition, a contractor need not incur the expenses cited by the 
commenter; nothing in the Order or the regulations precludes a 
contractor from simply adding a page that contains the required 
contract clause to supplier agreements, purchase orders, and other 
similar documents. The expense of adding such a page would be nominal. 
We therefore decline to adopt the commenter's suggestion.

Section 470.3 What Contracts Are Exempt From the Employee Notice Clause 
Requirement?

    Paragraph 470.3(c), exemption of specific contracts when special 
circumstances in the national interest so require: One commenter 
suggested that a sentence be added to this paragraph specifying that 
``[r]equests for such exemptions are strongly discouraged, and there is 
a high burden on the requester to demonstrate that such special 
circumstances exist.'' The same commenter suggested that the phrase 
``special circumstances in the national interest so require'' is overly 
vague, and suggested that a ``narrow definition'' of the phrase or an 
example of its operation be added to the paragraph. We believe that the 
language from the proposed rule provides the Deputy Assistant Secretary 
with the necessary flexibility to make case-by-case determinations 
regarding whether such an exemption should be granted in a particular 
instance, and therefore decline to adopt the suggested amendment.

Section 470.4 What Contractors or Facilities Are Exempt From the 
Posting Requirements?

    Paragraph 470.4(a), number of employees: One commenter suggested 
that the exemption in this paragraph of the proposed regulations for 
contractors with fewer than fifteen (15) employees be eliminated. 
Another commenter suggested that the exemption be limited to 
contractors with two (2) employees,

[[Page 16379]]

the minimum number of employees that the National Labor Relations Board 
would certify as a bargaining unit to be represented by a labor 
organization.
    As indicated in the preamble to the NPRM implementing Executive 
Order 13201, the proposed and final rules implementing the predecessor 
order, Executive Order 12800, provided an exemption for contractors 
with fewer than fifteen (15) employees. See 57 FR 33406 (July 24, 
1992), 57 FR 49596 (November 2, 1992). The preamble to the 1992 NPRM 
explained that the exemption threshold of fifteen employees was 
``consistent with that under Title VII of the Civil Rights Act of 1964, 
as amended, and the eventual threshold under Title I of the Americans 
with Disabilities Act.'' See 57 FR 33404.
    Section 3(b) of Executive Order 13201 authorizes the same exemption 
for ``numbers of workers below appropriate thresholds set by the 
Secretary'' as did section 3(b) of Executive Order 12800. In the 
absence of any indication to the contrary in Executive Order 13201, or 
any significant change in the law since 1992, we believe that it is 
consistent with the intention of Executive Order 13201 to provide the 
same exemption as was provided by the final rule implementing Executive 
Order 12800. In addition, as noted in the preamble to the 1992 NPRM, 
the fifteen-employee threshold is consistent with that of other 
significant Federal laws governing the workplace. Therefore, we have 
decided to retain the exemption for contractors with fewer than fifteen 
(15) employees.
    Paragraph 470.4(b), union representation: One commenter noted that 
in situations (particularly construction projects) involving a prime 
contractor and a number of subcontractors, ``the prime contractor 
typically posts the notices to employees required by law on 
construction sites at a central location, rather [than] have each 
subcontractor establish its own [posting] system.'' The same commenter 
noted that ``mixed'' worksites are also common in the construction 
industry. On these sites, both union shop and open shop contractors 
perform work at the same time; such situations arise, according to the 
commenter, when the prime contract is awarded to an open shop prime 
contractor that then subcontracts to union shop firms, or vice versa. 
The commenter suggested that the language of this paragraph be amended 
to clarify the responsibilities of prime contractors and subcontractors 
in such situations, as follows: ``The posting requirement does not 
apply to contractor establishments or construction work sites where no 
union has been formally recognized by the prime contractor or certified 
as the exclusive bargaining representative of the prime contractor's 
employees.'' We agree with the commenter's concerns and have adopted 
this suggestion.
    Paragraph 470.4(c), State law: This paragraph provides that the 
posting requirement does not apply to contractor establishments or 
construction work sites in jurisdictions where State law forbids 
enforcement of union-security agreements. One commenter suggested that 
the paragraph be amended to clarify whether this exemption applies in 
facilities located in areas considered to be Federal enclaves. Upon 
consideration, we have concluded that amending the regulatory language 
to discuss each of the various types of Federal enclaves is not 
appropriate because the critical question here is not whether or not an 
entity is a Federal enclave, but whether or not State law applies to 
that entity. We note that we do not intend the exemption in this 
paragraph to apply to facilities located in Federal enclaves, or 
portions thereof, that fall entirely under Federal jurisdiction. By 
contrast, the exemption will apply to any facilities located in Federal 
enclaves, or portions thereof, that fall under concurrent Federal and 
State jurisdiction in States that have prohibited union-security 
agreements. Whether or not State law applies to a particular Federal 
enclave depends on a number of factors, including the extent of 
authority ceded by the State to the Federal government over that 
jurisdiction, and therefore is a question to be considered on a case-
by-case basis. See, e.g., Department of Labor and Industries of the 
State of Washington v. Dirt & Aggregate, Inc., 837 P.2d 1018, 1020-21 
(Wash. 1992) (scope of Federal jurisdiction over land ceded by State to 
Federal government is governed by terms of cession agreement); cf. 
Goodyear Atomic Corp. v. Miller, 108 S. Ct. 1704 (1988) (application of 
State law to government owned, contractor operated facility not 
permitted unless Congress has clearly authorized such regulation).
    Another commenter suggested that the same paragraph should be 
expanded to include non-State jurisdictions such as Guam, which 
recently enacted a right-to-work law. This commenter proposed that the 
phrase ``or local'' be inserted in the regulatory language after the 
word ``State.'' The proposed revision, however, would exempt a far 
broader spectrum of employers than the commenter apparently intends, 
including those located in municipal jurisdictions that preclude 
enforcement of union-security agreements. As a result, we have 
addressed the issue by adding a clarification of the meaning of the 
term ``State,'' as applied in this paragraph, to the end of the 
paragraph.
    Paragraph 470.4(d), work not performed under government contracts: 
Two commenters asked that the exemption in this paragraph for work not 
performed under a government contract be eliminated. One of these 
commenters argued that ``[s]uch discrimination against employees is 
unconscionable.'' It is important to understand, however, that the 
employee notice does not confer Beck rights on employees; all employees 
subject to the National Labor Relations Act who are covered by a union 
security agreement have such rights. The notice is merely intended to 
ensure that employees of government contractors are informed about 
those rights.
    The other commenter advocating for elimination of the exemption 
contended that the Department had underestimated the cost of requesting 
an exemption in writing for work not performed under a government 
contract, and that the economic impact of the proposed waiver provision 
would increase the cost burden on employers and the public so much that 
the costs of the provision would greatly exceed the benefits. A third 
commenter also believed that the Department had underestimated the cost 
of preparing a written request for an exemption, but asked only that 
the requirement of the written request be removed, so that the 
provision would be self-executing. This commenter noted that the 
preamble to the NPRM contained no explanation of the rationale for 
imposing the requirement.
    In response to these comments, we have recalculated the cost of 
preparing such written requests. The results of this recalculation are 
described below in the ``Paperwork Reduction Act'' discussion in 
section IV. Despite this recalculation, we have concluded that the 
exemption should be retained. Government contractors are already 
required, under at least three other Federal laws administered by the 
Deputy Assistant Secretary for Federal Contract Compliance, to submit 
written requests for exemptions from the application of such laws for 
facilities that are separate and distinct from activities of the 
contractor related to the performance of a contract. See 41 CFR 60-
1.7(b)(2) (applying the same exemption under Executive Order 11246); 41 
CFR 60-741.4(b)(3) (applying the same exemption under section 503 of 
the Rehabilitation Act of 1973, as amended, 29 U.S.C. 793); 41 CFR 60-
250.4(b)(3) (applying the same exemption under the Vietnam Era 
Veterans' Readjustment

[[Page 16380]]

Assistance Act, 38 U.S.C. 4212). Eliminating the requirement of a 
written request for an exemption would result in inconsistent 
obligations for government contractors, and inconsistent enforcement of 
laws applying to government contractors.
Subpart B--Compliance Evaluations, Complaint Investigations, and 
Enforcement Procedures

Section 470.10 How Will the Department Determine Whether a Contractor 
Is In Compliance With the Executive Order and This Part?

    Paragraph 470.10(a), compliance evaluations: This paragraph 
provides that the Deputy Assistant Secretary for Federal Contract 
Compliance may conduct a compliance evaluation to determine whether a 
contractor holding a nonexempt contract is in compliance with the 
requirements of part 470. One commenter asked that the language of this 
paragraph be amended to replace ``may'' with ``will,'' in effect 
requiring the Deputy Assistant Secretary to conduct a compliance 
evaluation of all covered contractors and subcontractors in all cases. 
Section 4 of the Order, however, provides that the Secretary ``may 
investigate'' any government contractor, subcontractor, or vendor to 
determine whether the Order has been violated. Thus, the Executive 
Order confers discretion on the Secretary to make the determination 
whether a particular investigation is the best course of action under 
all the circumstances. The Department seeks to retain this discretion 
in the regulations and as such, we decline to adopt this suggested 
change.
    Paragraph 470.10(b), contents of compliance evaluations: This 
paragraph describes the determinations that the Office of Federal 
Contract Compliance Programs (``OFCCP'') will make during compliance 
evaluations. The same commenter who asked for the change to the 
previous paragraph proposed that the language of subparagraph (b)(1) of 
this paragraph be amended. The proposed amendment would require OFCCP 
to determine that the contractor has posted ``accurate, correct, and 
unmarred'' employee notices in ``many'' conspicuous places. This 
comment addresses the notices contractors must post and the locations 
where they must be posted; those matters are governed not by this 
subparagraph, but by the mandatory contract clause set forth in section 
470.2(a). The purpose of a compliance evaluation is simply to determine 
whether a contractor or subcontractor is complying with its legal 
obligations, not to impose additional obligations. Moreover, even 
assuming that this subparagraph were the appropriate place to make the 
suggested amendments, those amendments would impose requirements 
regarding the employee notice poster that extend well beyond the 
requirements imposed by laws enforced by DOL regarding other mandatory 
posters. We therefore decline to adopt the suggested amendment.
    The same commenter suggested that, for clarity, the phrase ``under 
470.2(a)'' be added to the same subparagraph, following the word 
``notice.'' We concur with the commenter's suggestion that additional 
language referring to 470.2(a) would clarify the subparagraph, and have 
added such language.
    Finally, the same commenter suggested that the subparagraph be 
amended to require that the notice be posted in ``all'' of the 
contractor's establishments and/or worksites. We decline to adopt this 
change, for the reasons set forth in the above discussion of section 
470.4(d) regarding the elimination of the requirement to request an 
exemption in writing for work not performed under government contracts. 
Under other laws enforced by DOL, government contractors are not 
required to post notices in facilities that are exempt from the 
application of the law because the work performed at the facility is 
not related to the performance of a Federal contract. Therefore, 
adopting the suggested amendment for this rule would result in 
inconsistent obligations for government contractors, and inconsistent 
enforcement of laws applying to government contractors.
    Paragraph 470.10(c), results of compliance evaluation: This 
subparagraph lists the required contents of the evaluation record. The 
same commenter suggested that, for clarity, the phrase ``under Section 
470.13'' be added at the end of the subparagraph, following the phrase 
``enforcement recommended.'' We agree that the suggested phrase would 
improve the clarity of the sentence, and have adopted the suggestion.

Section 470.11 What Are the Procedures for Filing and Processing a 
Complaint?

    Paragraph 470.11(a), filing complaints: This paragraph explains who 
is entitled to file complaints alleging violations of the Executive 
Order and/or part 470, and where such complaints should be filed. One 
commenter suggested that the word ``complainant'' be added in 
parentheses after the word ``employee'' in the paragraph. We agree with 
the commenter that the regulatory language should be amended to clarify 
that an employee who files a complaint is called a ``complainant,'' but 
we have elected to make that clarification by amending the language of 
paragraph 470.11(b) instead of this paragraph.
    Paragraph 470.11(c), referrals: This paragraph as drafted in the 
Notice of Proposed Rulemaking carried over a Departmental practice from 
the 1992 ``Beck final rule'' to refer complaints alleging use of union 
dues or fees for purposes unrelated to a collective bargaining 
agreement, and/or seeking a refund or future adjustment of such dues or 
fees, to the National Labor Relations Board or other appropriate 
agency. See 57 FR 49588, 49594 (Nov. 2, 1992). We are striking this 
section in its entirety to ensure that unfair labor practice charges 
will reach the NLRB in a timely manner.
    The National Labor Relations Board requires complainants to file 
unfair labor practice charges with it directly and within 6 months of 
the alleged unfair labor practice. The referral of information 
regarding an alleged misuse of union dues from the Department of Labor, 
however, does not fulfill the NLRB's filing requirements. In order to 
avoid potential confusion regarding the proper procedures for filing 
unfair labor practice charges, and to ensure that complainants are able 
to file such charges in advance of the expiration of the statute of 
limitations, we are striking any reference to referrals by the 
Department of Labor to the NLRB.
    One commenter suggested that in addition to making such referrals, 
DOL should use a special E.O. 13201-related Web page, referred to above 
in the discussion of paragraph 470.2(a), to provide employees with 
detailed step-by-step information about how to obtain refunds of union 
dues and/or fees under Beck. The purpose of the Executive Order is not 
to encourage or assist workers in exercising rights they have under the 
Supreme Court's decision in Beck, but to inform them of the existence 
of such rights. Accordingly, the employee notice poster will provide 
the headquarters and Web site address for the National Labor Relations 
Board, the agency entrusted with the enforcement of these rights, for 
the benefit of workers who need such assistance. Paragraph 470.11(d) 
has been redesignated as paragraph 470.11(c).

Sec. 470.12 What Are the Procedures To Be Followed When a Violation Is 
Found During a Complaint Investigation or Compliance Evaluation?

    One commenter suggested that both this section and the following 
section be amended to require that the time period

[[Page 16381]]

for the Department's efforts to seek compliance with E.O. 13201 and 
part 470 through conciliation be limited to ten days, not including 
weekends and Federal holidays. We decline to adopt the proposed 
amendments. The length of time devoted to conciliation should be based 
on the facts of each case and the likelihood that a voluntary agreement 
may be achieved. Conciliation efforts that last for ten days may 
nevertheless result in compliance through continued efforts. The 
Department does not want to impose an artificial deadline that would 
preclude successful conciliation. Further, a mandatory deadline is not 
necessary to ensure expeditious resolution of violations. The 
Department is authorized to suspend unproductive conciliation efforts 
at any time and institute enforcement proceedings. The Department 
declines to impose a mandatory deadline for termination of conciliation 
efforts but will, however, attempt to resolve violations as 
expeditiously as possible.

Sec.  470.13 Under What Circumstances, and How, Will Enforcement 
Proceedings Under the Executive Order Be Conducted?

    Paragraph 470.13(a), general provisions: One commenter asked that 
subparagraph (1) of this paragraph, which provides that ``[v]iolations 
of the Executive Order may result in administrative proceedings to 
enforce the Order,'' be amended to require that such violations 
``will'' result in such proceedings. Enforcement agencies are generally 
vested with broad prosecutorial discretion in determining which matters 
are litigation worthy. Such determinations are based on a complicated 
balancing of a number of factors, including considerations of available 
resources, likelihood of success on the merits, whether violations are 
technical or substantial, the number, and the merits of, cases with 
similar or more egregious violations, overall agency policies, and 
competing Department-wide priorities. Although the Department will 
vigorously enforce the Executive Order,the proposed amendment would 
inappropriately eliminate the Department's prosecutorial discretion to 
determine whether administrative proceedings are suitable in a given 
case. We therefore decline to adopt the proposed amendment.
    Paragraph 470.13(b)(2), administrative enforcement proceedings: 
This subparagraph as written in the NPRM provided that proceedings 
would be conducted in accordance with the rules for expedited 
proceedings at 29 CFR 18.42 unless otherwise provided by the Office of 
the Solicitor in its complaint. As a general matter, hearings in 
Departmental programs are not automatically subjected to expedited 
proceedings. Accordingly, we are amending this procedural rule to 
eliminate this ``presumption'' of expedited proceedings. See, e.g., 
procedures for administrative proceedings to enforce Executive Order 
11246 at 41 CFR part 60-30. We are deleting paragraph (b)(2), the 
effect being that non-expedited hearing procedures will be followed 
unless otherwise elected in accordance with the rules for expedited 
proceedings at 29 CFR 18.42.
    As a result of this action, paragraph (b)(3) is redesignated as 
paragraph (b)(2); paragraph (b)(4) is redesignated as paragraph (b)(3); 
and paragraph (b)(5) is redesignated as paragraph (b)(4).
    Paragraph 470.13(b)(4), administrative enforcement proceedings: 
This subparagraph explains the circumstances under which the Assistant 
Secretary for Employment Standards will issue a final administrative 
order in proceedings under section 470.13, and provides that where the 
Assistant Secretary has found violations, the final administrative 
order ``may'' order several specific actions. The same commenter that 
suggested an amendment to paragraph 470.13(a), as discussed above, also 
proposed that the word ``may'' in this subparagraph be replaced by 
``will.'' The Department is persuaded that once it is established that 
a violation has occurred, appropriate relief should be ordered. The 
Department does not believe that it would ever be appropriate to not 
issue an order upon a finding of a violation. Further, the number and 
kinds of orders that may be imposed is sufficiently great that the 
Assistant Secretary will have the flexibility needed to ensure that 
there will be a suitable resolution for each violation, despite the 
variations in facts that may be presented in these cases. In light of 
this change, the paragraph has also been amended to phrase the list of 
appropriate orders in the disjunctive, so as to avoid the impression 
that all possible orders, sanctions, and remedies must be imposed upon 
the finding of a violation. The paragraph has also been amended to 
clarify that the Assistant Secretary may impose one or more kinds of 
orders.

Section 470.14 What Sanctions and Penalties May Be Imposed for 
Noncompliance, and What Procedures Will the Department Follow in 
Imposing Such Sanctions and Penalties?

    This paragraph requires the Department to consult with the affected 
contracting agencies. Pursuant to DOL practice, that consultation would 
take place after a decision on the merits has been issued and before 
the Department imposes sanctions or penalties. We have amended the 
regulatory text in this paragraph to clarify that procedural point.
    Paragraph 470.14(c): This paragraph lists the circumstances under 
which sanctions and penalties will not be imposed on a contractor that 
has violated the Order or part 470. The commenter suggested that the 
word ``will'' in this paragraph be replaced by ``may.'' This amendment 
would permit the Assistant Secretary to impose sanctions and penalties 
even in the listed situations. However, sections 5(b) and 6(a) and (b) 
of E.O. 13201 preclude the Department from imposing sanctions and 
penalties in these situations. The proposed amendment therefore exceeds 
our authority, and is not adopted.
    Paragraph 470.14(d): This paragraph and its subparagraphs (1) and 
(2) list possible actions that the Assistant Secretary may take in 
enforcing the Executive Order and part 470. The commenter suggested 
that the word ``may'' in the paragraph be replaced by ``will,'' in 
effect requiring the Assistant Secretary to take all of the actions 
listed in subparagraphs (1) and (2) in every case. Section 6 of the 
Executive Order vests the Secretary with discretion to impose or not 
impose a number of different sanctions, and that authority has been 
delegated to the Assistant Secretary. The commenter's suggestion would 
require the Assistant Secretary to treat willful violations the same as 
inadvertent violations, egregious violations the same as minor ones, 
and repeat offenders like first-time offenders. This inflexibility 
would not result in fair and evenhanded disposition of cases, and would 
thus not further the purposes of the Executive Order. Requiring that 
the Assistant Secretary take one or all of these actions would 
circumscribe her discretion in a manner inconsistent with the Executive 
Order. Therefore, we decline to adopt the proposed amendment.
    Subparagraph 470.14(d)(2): This subparagraph permits the Assistant 
Secretary to issue an order of debarment providing that ``one or more'' 
agencies must refrain from entering into further

[[Page 16382]]

contracts, or extensions or other modification of existing contracts, 
with any noncomplying contractor. The commenter proposed that the 
language of the subparagraph be amended to require the Assistant 
Secretary to order ``all'' contracting agencies to refrain from 
contracting with a contractor. However, the ``one or more'' language is 
taken directly from section 6(b) of the Executive Order. We therefore 
decline to adopt the proposed amendment.
    Paragraph 470.14(f): This paragraph requires the Assistant 
Secretary to publish and distribute to all executive agencies a list of 
contractors that are ineligible for future contracts and subcontracts 
because they have failed to comply with E.O. 13201 or part 470. The 
language of the paragraph requires the Assistant Secretary to publish 
and distribute the list ``[p]eriodically.'' The commenter proposed that 
the paragraph be revised to require that the list be published and 
distributed ``monthly,'' and that a new paragraph (g) be added to 
require the Assistant Secretary to publish the list in the Federal 
Register. We decline to adopt the proposed revisions. Use of the term 
``periodically'' permits the Assistant Secretary to use his or her 
discretion to publish the list as often as he or she deems necessary, 
whether weekly, monthly, or less often. Similarly, the language of 
paragraph 470.14(f) permits the Assistant Secretary to publish the list 
in the Federal Register if he or she believes that such publication is 
necessary or appropriate.
Subpart C--Ancillary Matters

Section 470.22 What Actions May the Assistant Secretary Take in the 
Case of Intimidation and Interference?

    One commenter suggested that we amend this section to ensure that 
the phrase ``no person intimidates, threatens, or coerces any 
individual'' is ``given the broadest definition possible.'' To 
accomplish this goal, the commenter suggested two changes to the 
section: first, that a ``very broad definition or example'' be added to 
explain the phrase, and second, that language be added to the section 
that would require the Department to ``give the broadest meaning 
possible to this phrase.'' We decline to adopt either of these 
suggestions. The Department intends to follow applicable caselaw in 
interpreting the relevant language; it is therefore unnecessary to 
address the matter in further detail in these regulations.
General Issues
    One commenter raised the concern that the posting requirement for 
contractors and subcontractors covered by the Railway Labor Act 
(``RLA'') appears duplicative of a posting requirement imposed by the 
National Mediation Board, which, according to the commenter, advises 
employees of their rights to join or refrain from joining a union. This 
commenter acknowledged that the Executive Order does not appear to 
exempt RLA employers from the posting requirement, even if they have 
similar posters in place. Nonetheless, the commenter urged the 
Department to ``consider the apparently duplicative posting 
requirement, especially in any compliance and enforcement 
proceedings.''
    The language of the Executive Order clearly contemplates that 
contractors and subcontractors governed by the RLA will be subject to 
the requirement of posting the employee notice poster set forth in 
section 2(a) of the Order. Given the President's clear intent to 
include such employers, the Department has no authority to exempt them, 
on the basis of RLA coverage alone, from the posting requirements, or 
from sanctions and penalties resulting from noncompliance. Moreover, 
the National Mediation Board posting referenced by the commenter is not 
duplicative of the notice at issue in these regulations. The National 
Mediation Board posting requires employers to post a notice to 
employees when an application for representation has been filed with 
the National Mediation Board. That notice to employees excerpts a 
portion of the Railway Labor Act discussing employees' right to select 
representatives without influence or interference, and includes a short 
statement concerning employees' rights to choose or not to choose union 
representation. It does not discuss, as the notice at issue here does, 
union security agreements and non-union members' rights to object to 
the use of their agency fees for certain purposes.

IV. Regulatory Procedures

Executive Order 12866

    As noted in the preamble to the NPRM, this rule constitutes an 
``other significant regulatory action'' within the meaning of Executive 
Order 12866. As such, this rule is subject to review by the Office of 
Management and Budget. However, the Department has determined that this 
rule will not have an annual effect on the economy of $100 million or 
more, or adversely affect in a material way the economy, a sector of 
the economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities. Therefore, the Department has concluded that this final 
rule is not ``economically significant'' as defined in section 3(f)(1) 
of E.O. 12866. As a result, the cost-benefit analysis called for under 
section 6(a)(3)(C) of the order is not required.
    No commenter disagreed with the Department's ultimate determination 
that the implementation of the rule would not have an annual effect on 
the economy of $100 million or more. However, two commenters disagreed 
with the cost-benefit analysis published in the NPRM. As a result, the 
Department recalculated the analysis, using the highest figures 
suggested by the commenters, to determine whether the annual effect on 
the economy could exceed $100 million if all of the commenters' 
assumptions were correct. The recalculated cost of the rule remained 
significantly below the $100 million threshold requirement for a formal 
cost-benefit analysis. Therefore, the recalculation affirms the 
Department's conclusion that this final rule is not ``economically 
significant'' as defined in section 3(f)(1) of Executive Order 12866, 
and that consequently, a formal regulatory economic analysis, as 
described under section 6(a)(3)(C) of Executive Order 12866, is 
unnecessary.
    Executive Order 12866 requires agencies to assess all costs and 
benefits of available regulatory alternatives, including the 
alternative of not regulating and, to the extent feasible, to specify 
performance objectives, rather than specifying the behavior or manner 
of compliance. Executive Order 13201 speaks with great specificity. The 
Order makes the Secretary responsible to implement the Order, and 
requires the Secretary to adopt rules and regulations deemed necessary 
and appropriate to achieve the purpose of the Order. The Order contains 
specific language that must be included in nonexempt contracts, and 
provides the Secretary with authority to exempt an agency from the 
Order if special circumstances require an exemption to serve the public 
interest. The Order provides that the Secretary may exempt certain 
classes of contracts that fall in five enumerated categories, and to 
exempt ``separate and distinct'' facilities. The Secretary is 
authorized to conduct investigations, receive complaints, hold 
hearings, and impose sanctions. Upon a finding of a violation, the 
Order permits the Secretary to direct that an agency cancel, terminate 
or suspend a contract, or continue a contract conditioned upon future 
compliance. The Secretary may provide that an agency refrain from 
entering into contracts with noncomplying contractors, and publish

[[Page 16383]]

a list of contractors that have failed to comply with the Order. In 
light of the great specificity with which the Order sets forth both 
substantive and procedural requirements, the Order affords little in 
the way of alternatives to compliance directed rulemaking.
    The Office of Management and Budget (OMB) has reviewed this final 
rule for consistency with the President's priorities and the principles 
set forth in E.O. 12866.

Regulatory Flexibility Act

    This final rule will not substantially change existing obligations 
for Federal contractors; it will merely require certain contractors to 
post notices informing their employees of certain rights those 
employees already hold under Federal law, and to include clauses in 
contracts with subcontractors and vendors, requiring those 
subcontractors and vendors to post the same employee notices. 
Accordingly, we conclude that the final rule will not have a 
significant economic impact on a substantial number of small business 
entities. The Secretary of Labor has certified this conclusion to the 
Chief Counsel for Advocacy at the Small Business Administration. 
Therefore, under the Regulatory Flexibility Act, 5 U.S.C. 605(b), a 
regulatory flexibility analysis is not required.

Unfunded Mandates Reform

    For purposes of the Unfunded Mandates Reform Act of 1995, as well 
as Executive Order 12875, Enhancing the Intergovernmental Partnership, 
this final rule does not include any Federal mandate that will result 
in increased expenditures by State, local, and tribal governments, or 
in increased expenditures by the private sector of more than $100 
million in any one year.

Paperwork Reduction Act

    Certain sections of this final rule, including Sec. Sec.  470.2(b), 
470.4(d), and 470.11(a) and (b), contain information collection 
requirements. As required by the Paperwork Reduction Act (PRA), the 
Department has submitted a copy of these sections to OMB for its 
review.
    The final rule also requires contractors and subcontractors to post 
notices, investigate complaints, and, where appropriate, file requests 
for waivers. The application of the PRA to those requirements is 
discussed below.
    The final rule imposes certain minimal burdens associated with the 
posting of the employee notice poster required by the Executive Order 
and Sec.  470.2(a) of the rule. As noted in section 470.2(d), the 
Department will supply the poster, and contractors will be permitted to 
make and post exact duplicate copies thereof. Under the regulations 
implementing the PRA, ``[t]he public disclosure of information 
originally supplied by the Federal government to [a] recipient for the 
purpose of disclosure to the public'' is not considered a ``collection 
of information'' under the Act. 5 CFR 1320.3(c)(2). Therefore, the 
posting requirement is not subject to the PRA.
    The final rule also imposes certain burdens associated with the 
filing and processing of a complaint on both the complainant and the 
contractor. We estimate, based on OFCCP's experience administering 
other laws applicable to Federal contractors, that it will take an 
average of 1.28 hours for a complainant to compose a complaint 
containing the necessary information, and to send that complaint to 
DOL. No comments were received that challenged this estimate of 1.28 
hours in the Paperwork Package submitted to the Office of Management 
and Budget in 2001. We have used data from the Bureau of Labor 
Statistics National Compensation Survey: Occupation Wages in the United 
States (NCS), 2001 (Summary 02-05), the most recent survey available, 
to calculate the cost of these burden hours. The NCS Summary indicates 
that the average hourly wage for union workers during 2001 was $19.50 
per hour. We therefore estimate that the cost to a complainant of 
filing a complaint under EO 13201 and this final rule will be $25.36, 
or $24.96 ($19.50 x 1.28) + .40 postage and envelope. We further 
estimate that 1,046 individual complaints will be filed each year under 
the Executive Order and this final rule. No comments were received that 
challenged this estimate of 1,046 complaints in the Paperwork Package 
submitted to the Office of Management and Budget in 2001. Therefore, we 
project that this collection of information will impose on employees 
who file complaints a total cost burden of $26,526.56 ($25.36 per 
complaint x 1,046 complaints).
    With regard to the burdens for the contractor, the regulations 
implementing the PRA exempt from the requirements of the Act any 
information collection requirements imposed by an administrative agency 
during the conduct of an administrative action against specific 
individuals or entities. See 5 CFR 1320.4(a)(2). Once the agency opens 
a case file or equivalent about a particular party, this exception 
applies during the entire course of the investigation, before or after 
formal charges or complaints are filed or formal administrative action 
is initiated. 5 CFR 1320.4(c). Therefore, this exemption will apply to 
the Department's investigation of complaints alleging violations of the 
Order or this final rule.
    Finally, Sec.  470.4(d) of this final rule will permit a contractor 
to apply in writing for a waiver from the requirement to post the 
employee notice contained in Sec.  470.2(a). Our analysis of the 
burdens that will be imposed on contractors as a result of this 
requirement is based upon several factors discussed in the cost-benefit 
analysis in the preamble to the NPRM. Various commenters submitted 
comments regarding each of these factors. The following is a review of 
each of the factors, the comments submitted on each factor, and the 
Department's reconsideration of that factor.
    (a) The first factor considered in the analysis was the estimated 
number of yearly requests that OFCCP would receive from contractors 
seeking waivers from the obligations of E.O. 13201 for facilities not 
involved in performing work on a Federal contract. The Department 
developed its estimates for the NPRM based on estimates regarding the 
number of waiver requests received by OFCCP under Executive Order 
11246, section 503 of the Rehabilitation Act of 1973, and section 4212 
of the Vietnam Era Veterans' Readjustment Assistance Act. These laws 
were selected because they apply to the same Federal contractors and 
subcontractors as does E.O. 13201, and because the regulations 
implementing these laws require the same written requests for exemption 
under the same circumstances as were provided in Sec.  470.4(d) of the 
NPRM. 41 CFR 60-1.5(b)(2), 60-741.4(b)(3), 60-250.4(b)(3); see 
discussion above regarding paragraph 470.4(d).
    In the NPRM, the Department estimated that one-tenth of one percent 
(.1%) of Federal contractors annually would be likely to submit 
requests for waivers under E.O. 13201. Based on an estimate that 
200,000 supply, service, and construction contractors would be subject 
to the proposed rule, the Department estimated that 200 contractors per 
year (.1% of 200,000) would be likely to request a waiver under the 
rule. Two commenters objected to these estimates. Both commenters 
suggested that a far higher percentage of contractors and 
subcontractors would request waivers under E.O. 13201 than under the 
other laws administered by OFCCP, because labor organizations would be 
likely to pressure the contractors and subcontractors to submit such 
requests. One commenter estimated that at least nine percent of Federal 
contractors ``operate some facilities where union

[[Page 16384]]

organizations are present,'' and, based on that estimate, suggested 
that 18,000 contractors would submit requests in the first year of 
implementation of the Order.
    Based on the concerns expressed by these commenters, the Department 
reviewed the statistics used in the preamble to the NPRM and the data 
underlying those statistics. Review of that data, including data 
obtained from E.E.O. 1 reports filed with the Equal Employment 
Opportunity Commission, indicated that the figure of 200,000 actually 
represents the number of separate contractor establishments, not the 
number of contractors and that there are approximately 16,000 separate 
supply-and-service contractors and 10,000 construction contractors that 
hold Federal contracts. No reliable records are available that indicate 
how many, or what percentage, of those contractors have formally 
recognized a union or have had a union certified as the exclusive 
bargaining representative of its employees.
    The Department also reviewed the requests for separate-facility 
waivers OFCCP received from Federal contractors and subcontractors, 
under the three laws listed above, from January 1999 through December 
2001. OFCCP's records indicate that during that period, the agency 
received only 16 individual letters from contractors requesting 
separate-facility waivers, or an average of 5.3 requests per year. Even 
if that number were increased tenfold as a result of pressure from 
labor organizations, the number of requests received per year would 
total only 53, approximately a quarter of the number estimated by the 
Department in the NPRM. Moreover, the estimate of 18,000 requests per 
year, suggested by the commenter mentioned above, is based not only on 
the incorrect estimate of the number of Federal contractors provided in 
the preamble to the NPRM, but also on the assumption that every Federal 
contractor and subcontractor that operates ``some facilities where 
labor organizations are present'' would submit a waiver request. We 
view the latter assumption as unreasonable. As a result, we believe 
that the Department's estimate that 200 contractors a year will request 
separate-facility waivers is reasonable, and decline to adopt the 
commenter's estimates.
    (b) The second factor in the analysis was the estimated time that 
would be required for a contractor to develop a letter requesting a 
waiver from the obligations of E.O. 13201 for facilities not involved 
in performing work on a Federal contract. In the NPRM, the Department 
estimated that it would take an average of one hour to prepare and mail 
each waiver request, using 12 minutes of managerial time and 48 minutes 
of administrative time. Two commenters objected, contending that this 
estimate was too low. One commenter noted that applying for a waiver is 
likely to involve the use of in-house or outside counsel, and that some 
labor organizations are likely to demand to bargain over whether the 
employer should apply for such a waiver. The other commenter surveyed 
contractors that submitted waiver requests between 1990 and 1992, and 
estimated that those contractors expended an average of 15 hours per 
request, 90 percent of which was managerial/professional time and 10 
percent of which was administrative/clerical time.
    As a result of the concerns expressed by these commenters, the 
Department reviewed the records of those contractors that requested 
separate-facility waivers from OFCCP between 1999 and 2001. We also 
reviewed guidance developed by OFCCP on the criteria that would be 
considered by the Deputy Assistant Secretary in deciding whether to 
grant separate facility exemptions/waivers from the requirements of 
Executive Order 11246 (E.O. 11246) and the affirmative action 
provisions of the Vietnam Era Veterans' Readjustment Assistance Act of 
1974 (VEVRAA). Guidance provided with respect to the appropriateness of 
an exemption under those provisions is also relevant here. That 
guidance is contained in OFCCP ADM Notice 260, dated September 13, 2002 
(``Directive''). Based on this review, we have accepted the second 
commenter's estimate of 15 hours as the average amount of time 
contractors will need to complete a waiver request. We have also 
accepted the commenter's estimate that 90 percent of this time will be 
managerial/professional and 10 percent administrative/clerical.
    The test that a contractor must meet for obtaining a separate 
facility exemption under E.O. 11246 and the affirmative action 
provisions of VEVRAA is identical to the test for obtaining an 
exemption under this regulation. This test requires a two-part showing: 
(1) The facility for which an exemption is sought is in all respects 
separate and distinct from activities of the contractor related to the 
performance of a government contract; and (2) such an exemption will 
not interfere with or impede the effectuation of the relevant statutory 
or regulatory requirements, Directive p.2. The Directive explains how 
these standards are met by requiring that a showing be made under the 
following factors:
Separate and Distinct
    (i) Whether any work at the facility directly or indirectly 
supports or contributes to the satisfaction of the work performed on a 
government contract;
    (ii) The extent to which the contractor derives benefits from a 
government contract, directly or indirectly, at the facility to be 
exempted;
    (iii) Whether any costs associated with operating the facility are 
charged to a government contract;
    (iv) Whether working at the facility for which an exemption/waiver 
is sought is a prerequisite for advancement in job responsibility or 
pay at facilities connected to a government contract; and whether 
working at facilities connected to a government contract is a 
prerequisite for advancement in job responsibility or pay at the 
facility for which an exemption/waiver is sought;
    (v) Whether employees who normally work at the facility are 
required to perform work related to a government contract at another 
facility;
    (vi) Whether the facility regularly or substantially transfers 
employees to or from facilities at which a government contract is 
performed;
    (vii) Such other factors that the Deputy Assistant Secretary deems 
are necessary or appropriate for considering whether the facility is in 
all respects separate and distinct from the activities of the 
contractor related to the performance of a contract.
    Other factors could include the number of facilities connected to 
the contractor's government contracts and the nature of the 
contractor's contractual relationship with the government.
Interfere With or Impede
    (i) Whether the waiver will be used as a subterfuge to circumvent 
the contractor's obligations under Federal, State, or local equal 
employment opportunity laws;
    (ii) The contractor's record of compliance with Federal, State or 
local equal employment opportunity laws; and
    (iii) Such other factors that the Deputy Assistant Secretary deems 
are necessary or appropriate for considering whether the granting of 
the exemption/waiver would interfere with or impede the effectuation of 
either the Executive Order or the affirmative action provisions of 
VEVRAA.
    A contractor must submit proof under these criteria sufficient to 
demonstrate that its facility is separate and distinct and that the 
waiver will not be used to interfere with or impede the contractor's 
compliance with this Executive Order.

[[Page 16385]]

Because the showing required for obtaining a waiver/exemption under 
E.O. 11246 and VEVRAA is identical to that required under E.O. 13201, a 
contractor who has obtained a waiver under E.O. 11246 or VEVRAA will be 
entitled to a waiver pursuant to this regulation provided it would not 
impede the effectuation of E.O. 13201.
    If this information is reasonably accessible to the contractor, it 
may take him an average of 90 minutes to prepare a response under each 
of the stated criteria, for a total preparation time of 15 hours. 
Contractors with few facilities may require less time; contractors with 
many facilities may require more. Similarly, the preparation time may 
vary depending on the accessibility of the required documentation. 
Fifteen hours is only predictive as an average; it may be more or less 
at the extremes.
    (c) The third factor in this analysis was the estimated average 
hourly compensation rate for managerial and administrative employees. 
In the NPRM, the Department based its estimates of this compensation on 
the information contained in the 1999 version of the Bureau of Labor 
Statistics (BLS) publication ``Employer Costs for Employee 
Compensation'' (USDL 99-173). One commenter pointed out that the 
Department should have used BLS's estimated hourly compensation rates 
from 2001. We interpret this comment as requesting that the most 
current data be used, which in this case is contained in the BLS 
December 2002 edition of the Employee Compensation publication (USDL 
03-130). This edition lists the average compensation for executive, 
administrative, and managerial positions as $42.56 per hour, and for 
administrative support as $18.74 per hour.
    Total Time Expended: 200 waivers a year x 15 hours = 3000 hours.
    Executive, Administrative, and Managerial Time: .90 x 3000 hours = 
2700 hours.
    Executive, Administrative, and Managerial Cost: 2700 hours x $42.56 
= $114,912.
    Administrative Support Time: .10 x 3000 hours = 300 hours.
    Administrative Support Cost: 300 hours x $18.74 = $5,622.
    Postage and Envelope: 200 x .40 = $80.00.
    Total Annualized Cost Estimate: $120,614.
    Dividing the total annualized cost estimate of $120,614 by the 
estimated number of waivers (200), we calculate that the estimated 
average cost of separate-waiver requests per Federal contractor 
establishment will be $603.07.
    (d) One commenter pointed out that the cost-benefit analysis in the 
NPRM failed to take into consideration the time burden for contractors 
and subcontractors to familiarize themselves with the waiver 
requirement and to determine whether it is applicable to their 
circumstances. For purposes of this calculation only, we assume that 
this factor should be taken into consideration under the Paperwork 
Reduction Act of 1995, and accept the commenter's estimate that such a 
review will require approximately 40 minutes--66 percent of one hour--
of total managerial time per contractor. Based on a Federal contractor 
universe of 26,000, we have estimated the costs of such a review as 
follows:
    Executive, Administrative, and Managerial Time: .66 hour x 26,000 
contractors = 17,160 hours.
    Executive, Administrative, and Managerial Cost: 17,160 hours x 
$42.56 = $730,329.60.
    Total Annualized Estimate of Familiarization Cost: $730,329.60.
    Dividing the total annualized familiarization cost estimate of 
$730,329.60 by the estimated Federal contractor universe of 26,000, we 
calculate that the average cost for each Federal contractor to 
familiarize itself with the waiver requirement will be $28.09.
    (e) A commenter also pointed out that in the cost-benefit analysis 
in the NPRM, we failed to take into consideration the cost to the 
Federal government for processing waiver requests. However, the 
regulations implementing the PRA define the term ``burden,'' in 
pertinent part, as ``the total time, effort, or financial resources 
expended by persons to generate, maintain, retain, or disclose or 
provide information to or for a Federal agency.'' 5 CFR 1320.3(b)(1). 
The definition of the term ``person'' in the same regulations includes 
``an individual, partnership, association, corporation (including 
operations of government-owned contractor-operated facilities), 
business trust, or legal representative, an organized group of 
individuals, a State, territorial, tribal, or local government or 
branch thereof, or a political subdivision of a State, territory, 
tribal, or local government or a branch of a political subdivision.'' 5 
CFR 1320.3(k). It does not include the Federal government or any 
branch, political subdivision, or employee thereof. Therefore, the cost 
to the Federal government for processing waiver requests need not be 
taken into consideration.
    (f) Finally, one commenter contended that the cost-benefit analysis 
in the NPRM failed to take into consideration the cost associated with 
adding the employee notice clause to subcontractor contracts, 
subcontracts, purchase orders, and supplier agreements, and asserted 
that the cost of rewriting and printing all of these documents will be 
one of the most significant contractor costs associated with the 
Executive Order. However, Sec.  470.2(b) of the rule explicitly permits 
contractors and subcontractors to incorporate the employee notice 
clause by reference, rather than by quoting the text of the clause 
verbatim. This option permits contractors and subcontractors to comply 
with the regulations simply by having their staff type a single 
sentence onto already-existing form documents, rather than by 
discarding and reprinting such already-existing forms. Moreover, even 
if the contractor or subcontractor wishes to incorporate the entire 
text of the employee notice clause in its documents, such incorporation 
may be accomplished merely by appending an addendum page to each 
document and ensuring that all parties signing the document are aware 
of the addendum. Therefore, the burdens that will be imposed upon 
contractors as a result of the requirement will be minimal.

Executive Order 13132 (Federalism)

    We have reviewed this final rule in accordance with Executive Order 
13132 regarding federalism, and have determined that the rule does not 
have ``federalism implications.'' Some States do hold Federal contracts 
as defined in this rule. However, as described above in the discussion 
of other regulatory procedures, we have concluded that the impact of 
the requirements of posting notices, and requesting waivers, that the 
rule will impose on those States will be negligible. Therefore, the 
rule does not ``have substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.''

Executive Order 13175 (Consultation and Coordination With Indian Tribal 
Governments)

    The Department certifies that this final rule does not impose 
substantial direct compliance costs on Indian tribal governments.

Executive Order 13045 (Protection of Children From Environmental Health 
Risks and Safety Risks)

    In accordance with Executive Order 13045, the Department has 
evaluated the environmental safety and health effects of the final rule 
on children. The

[[Page 16386]]

Department has determined that the final rule will have no effect on 
children.

Executive Order 12630 (Governmental Actions and Interference With 
Constitutionally Protected Property Rights)

    This final rule is not subject to Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights, because it does not involve implementation of a policy 
with takings implications.

Executive Order 12988 (Civil Justice Reform)

    This final rule has been drafted and reviewed in accordance with 
Executive Order 12988, Civil Justice Reform, and will not unduly burden 
the Federal court system. The final rule has been written so as to 
minimize litigation and provide a clear legal standard for affected 
conduct, and has been reviewed carefully to eliminate drafting errors 
and ambiguities.

Environmental Impact Assessment

    The Department has reviewed the final rule in accordance with the 
requirements of the National Environmental Policy Act (NEPA) of 1969 
(42 U.S.C. 4321 et seq.), the regulations of the Council on 
Environmental Quality (40 CFR part 1500), and the Department's NEPA 
procedures (29 CFR part 11). The final rule will not have a significant 
impact on the quality of the human environment, and thus, the 
Department has not conducted an environmental assessment or prepared an 
environmental impact statement.

Executive Order 13211 (Actions Concerning Regulations that 
Significantly Affect Energy Supply, Distribution, or Use)

    This final rule is not subject to Executive Order 13211, because it 
will not have a significant adverse effect on the supply, distribution, 
or use of energy.

List of Subjects in 29 CFR Part 470

    Administrative practice and procedure, Government contracts, Union 
dues, Labor unions.

    Signed in Washington, DC this 22 day of March, 2004.
Victoria A. Lipnic,
Assistant Secretary for Employment Standards.
Don Todd,
Deputy Assistant Secretary for Labor-Management Programs.
Charles E. James, Sr.,
Deputy Assistant Secretary for Federal Contract Compliance.

0
Accordingly, a new subchapter C, consisting of part 470, is added to 29 
CFR chapter IV to read as follows:

SUBCHAPTER C--EMPLOYEE RIGHTS CONCERNING PAYMENT OF UNION DUES OR FEES

PART 470--OBLIGATIONS OF FEDERAL CONTRACTORS AND SUBCONTRACTORS; 
NOTICE OF EMPLOYEE RIGHTS CONCERNING PAYMENT OF UNION DUES OR FEES

Subpart A--Preliminary Matters
Sec.
470.1 What definitions apply to this part?
470.2 Under the Executive Order, what employee notice clause must be 
included in Government contracts?
470.3 What contracts are exempt from the employee notice clause 
requirement?
470.4 What contractors or facilities are exempt from the posting 
requirements?
Subpart B--Compliance Evaluations, Complaint Investigations, and 
Enforcement Procedures
Sec.
 470.10 How will the Department determine whether a contractor is in 
compliance with the Executive Order and this part?
470.11 What are the procedures for filing and processing a 
complaint?
470.12 What are the procedures to be followed when a violation is 
found during a complaint investigation or compliance evaluation?
470.13 Under what circumstances, and how, will enforcement 
proceedings under the Executive Order be conducted?
470.14 What sanctions and penalties may be imposed for 
noncompliance, and what procedures will the Department follow in 
imposing such sanctions and penalties?
470.15 Under what circumstances must a contractor be provided the 
opportunity for a hearing?
470.16 Under what circumstances may a contractor be reinstated?
Subpart C--Ancillary Matters
470.20 What authority under this Rule or the Executive Order may the 
Secretary delegate, and under what circumstances?
470.21 Who will make rulings and interpretations under the Executive 
Order and this part?
470.22 What actions may the Assistant Secretary take in the case of 
intimidation and interference?
470.23 What other provisions apply to this part?

    Authority: E.O. 13201, 3 CFR, 2001 Comp., p.754, (66 FR 11221), 
issued pursuant to the Constitution and laws of the United States, 
including the Federal Property and Administrative Services Act, 40 
U.S.C. 471 et seq., now codified as amended at 40 U.S.C. 101 et seq.

Subpart A--Preliminary Matters


Sec.  470.1  What definitions apply to this part?

    (a) Assistant Secretary means the Assistant Secretary for 
Employment Standards, United States Department of Labor, or his or her 
designee.
    (b) Construction means the construction, rehabilitation, 
alteration, conversion, extension, demolition, or repair of buildings, 
highways, or other changes or improvements to real property, including 
facilities providing utility services. The term construction also 
includes the supervision, inspection, and other on-site functions 
incidental to the actual construction.
    (c) Construction work site means the general physical location of 
any building, highway, or other change or improvement to real property 
which is undergoing construction, rehabilitation, alteration, 
conversion, extension, demolition, or repair, and any temporary 
location or facility at which a contractor or subcontractor meets a 
demand or performs a function relating to the contract or subcontract.
    (d) Contract means, unless otherwise indicated, any Government 
contract or subcontract.
    (e) Contracting agency means any department, agency, establishment, 
or instrumentality in the executive branch of the Government, including 
any wholly owned Government corporation, which enters into contracts.
    (f) Contractor means, unless otherwise indicated, a prime 
contractor or subcontractor, at any tier.
    (g) Department means the U.S. Department of Labor.
    (h) Employee notice clause means the contract clause that 
Government contracting departments and agencies must include in all 
nonexempt Government contracts and subcontracts pursuant to Executive 
Order 13201.
    (i) Government means the Government of the United States of 
America.
    (j) Government contract means any agreement or modification thereof 
between any contracting agency and any person for the purchase, sale, 
or use of personal property or nonpersonal services. The term 
``personal property,'' as used in this section, includes supplies, and 
contracts for the use of real property (such as lease

[[Page 16387]]

arrangements), unless the contract for the use of real property itself 
constitutes real property (such as easements). The term ``nonpersonal 
services'' as used in this section includes, but is not limited to, the 
following services: utilities, construction, transportation, research, 
insurance, and fund depository. The term Government contract does not 
include:
    (1) Agreements in which the parties stand in the relationship of 
employer and employee; and
    (2) Federally assisted contracts.
    (k) Labor organization means any organization of any kind in which 
employees participate and which exists for the purpose, in whole or in 
part, of dealing with employers concerning grievances, labor disputes, 
wages, rates of pay, hours, or other terms or conditions of employment.
    (l) Modification of a contract means any alteration in the terms 
and conditions of that contract, including amendments, renegotiations, 
and renewals.
    (m) Order or Executive Order means Executive Order 13201 (66 FR 
11221, February 22, 2001).
    (n) Person means any natural person, corporation, partnership, 
unincorporated association, State or local government, and any agency, 
instrumentality, or subdivision of such a government.
    (o) Prime contractor means any person holding a contract with a 
contracting agency, and, for the purposes of subparts B and C of this 
part, includes any person who has held a contract subject to the 
Executive Order.
    (p) Related rules, regulations, and orders of the Secretary of 
Labor, as used in section 470.2 of this part, means rules, regulations, 
and relevant orders of the Assistant Secretary for Employment 
Standards, or his or her designee, issued pursuant to the Executive 
Order or this part.
    (q) Secretary means the Secretary of Labor, U.S. Department of 
Labor, or his or her designee.
    (r) Subcontract means any agreement or arrangement between a 
contractor and any person (in which the parties do not stand in the 
relationship of an employer and an employee):
    (1) For the purchase, sale or use of personal property or 
nonpersonal services which, in whole or in part, is necessary to the 
performance of any one or more contracts; or
    (2) Under which any portion of the contractor's obligation under 
any one or more contracts is performed, undertaken or assumed.
    (s) Subcontractor means any person holding a subcontract and, for 
the purposes of subparts B and C of this part, any person who has held 
a subcontract subject to the Executive Order.
    (t) Union means a labor organization as defined in paragraph (k) of 
this section.
    (u) Union-security agreement means an agreement entered into 
between a contractor and a labor organization which requires certain 
employees of the contractor to pay uniform periodic dues and/or fees, 
initiation fees, or other payments to that labor organization as a 
condition of employment.
    (v) United States, as used herein, shall include the several 
States, the District of Columbia, the Virgin Islands, the Commonwealth 
of Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern 
Mariana Islands, and Wake Island.


Sec.  470.2  Under the Executive Order, what employee notice clause 
must be included in Government contracts?

    (a) Government contracts. Except in contracts exempted in 
accordance with Section 470.3 and collective bargaining agreements as 
defined in 5 U.S.C. 7103(a)(8), all Government contracting agencies 
must, to the extent consistent with law, include the following 
provisions in Government contracts entered into on or after April 28, 
2004, that resulted from solicitations issued on or after April 18, 
2001:
    ``1. 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 
will prescribe, in conspicuous places in and about its plants and 
offices, including all places where notices to employees are 
customarily posted. The notice must include the following information 
(except that the last two sentences must not be included in notices 
posted in the plants or offices of carriers subject to the Railway 
Labor Act, as amended (45 U.S.C. 151-188)).


``NOTICE TO EMPLOYEES

    ``Under Federal law, employees cannot be required to join a union 
or maintain membership in a union in order to retain their jobs. Under 
certain conditions, the law permits a union and an employer to enter 
into a union-security agreement requiring employees to pay uniform 
periodic dues and initiation fees. However, employees who are not union 
members can object to the use of their payments for certain purposes 
and can only be required to pay their share of union costs relating to 
collective bargaining, contract administration, and grievance 
adjustment.
    ``If you do not want to pay that portion of dues or fees used to 
support activities not related to collective bargaining, contract 
administration, or grievance adjustment, you are entitled to an 
appropriate reduction in your payment. If you believe that you have 
been required to pay dues or fees used in part to support activities 
not related to collective bargaining, contract administration, or 
grievance adjustment, you may be entitled to a refund and to an 
appropriate reduction in future payments.
    ``For further information concerning your rights, you may wish to 
contact the National Labor Relations Board (NLRB) either at one of its 
Regional offices or at the following address or toll-free number: 
National Labor Relations Board, Division of Information, 1099 14th 
Street, NW., Washington, D.C. 20570, 1-866-667-6572, 1-866-315-6572 
(TTY).
    ``To locate the nearest NLRB office, see NLRB's website at http://www.nlrb.gov.
''

    ``2. The contractor will comply with all provisions of Executive 
Order 13201 of February 17, 2001, and related rules, regulations, and 
orders of the Secretary of Labor.
    ``3. In the event that the contractor does not comply with any of 
the requirements set forth in paragraphs (1) or (2) above, this 
contract may be cancelled, terminated, or suspended in whole or in 
part, and the contractor may be declared ineligible for further 
Government contracts in accordance with procedures authorized in or 
adopted pursuant to Executive Order 13201 of February 17, 2001. Such 
other sanctions or remedies may be imposed as are provided in Executive 
Order 13201 of February 17, 2001, or by rule, regulation, or order of 
the Secretary of Labor, or as are otherwise provided by law.
    ``4. The contractor will include the provisions of paragraphs (1) 
through (4) herein in every subcontract or purchase order entered into 
in connection with this contract unless exempted by rules, regulations, 
or orders of the Secretary of Labor issued pursuant to section 3 of 
Executive Order 13201 of February 17, 2001, so that such provisions 
will be binding upon each subcontractor or vendor. The contractor will 
take such action with respect to any such subcontract or purchase order 
as may be directed by the Secretary of Labor as a means of enforcing 
such provisions, including the imposition of sanctions for 
noncompliance: However, if the contractor becomes involved in

[[Page 16388]]

litigation with a subcontractor or vendor, or is threatened with such 
involvement, as a result of such direction, the contractor may request 
the United States to enter into such litigation to protect the 
interests of the United States.''
    (b) Inclusion by reference. The employee notice clause need not be 
quoted verbatim in a contract, subcontract, or purchase order. The 
clause may be made part of the contract, subcontract, or purchase order 
by citation to 29 CFR part 470.
    (c) Adaptation of language. The Assistant Secretary may make such 
changes in the contractual provisions of the Executive Order as may be 
necessary to reflect Acts of Congress, clarifications in the law by the 
courts, or otherwise to fully and accurately inform employees of their 
rights under the Executive Order.
    (d) Obtaining employee notice poster. The required employee notice 
poster, printed by the Department, will be provided by the Federal 
contracting agency or may be obtained from the Division of 
Interpretations and Standards, Office of Labor-Management Standards, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Room N-5605, 
Washington, DC 20210, or from any field office of the Department's 
Office of Labor-Management Standards or Office of Federal Contract 
Compliance Programs. A copy of the poster may also be downloaded from 
the Office of Labor-Management Standards Web site at http://www.olms.dol.gov. 

Additionally, contractors may reproduce and use exact duplicate copies 
of the Department's official poster.


Sec.  470.3  What contracts are exempt from the employee notice clause 
requirement?

    (a) Transactions below the Simplified Acquisition Threshold. The 
requirements of this part do not apply to Government contracts for 
purchases that fall below the Simplified Acquisition Threshold, as that 
threshold is defined in the Office of Federal Procurement Policy Act, 
41 U.S.C. 403. Therefore, the employee notice clause need not be 
included in contracts for purchases below that threshold, provided 
that--
    (1) No agency, contractor, or subcontractor is permitted to procure 
supplies or services in a way designed to avoid the applicability of 
the Order and this part; and
    (2) The employee notice clause must be included in contracts and 
subcontracts for indefinite quantities, unless the contracting agency 
or contractor has reason to believe that the amount to be ordered in 
any year under such a contract or subcontract will be less than the 
Simplified Acquisition Threshold.
    (b) Government contracts resulting from solicitations issued before 
April 18, 2001. Pursuant to section 14 of the Order, the requirements 
of this part do not apply to Government contracts that result from 
solicitations issued before April 18, 2001, the effective date of the 
Order.
    (c) Specific contracts. The Deputy Assistant Secretary for Labor-
Management Programs may exempt a contracting agency or any person from 
requiring the inclusion of any or all of the employee notice clause in 
any specific contract, subcontract, or purchase order when the Deputy 
Assistant Secretary deems that special circumstances in the national 
interest so require. Requests for such exemptions must be in writing, 
and must be directed to the Deputy Assistant Secretary for Labor-
Management Programs, U.S. Department of Labor, 200 Constitution Avenue, 
NW., Room N-5605, Washington, DC, 20210.
    (d) Withdrawal of exemption. When any contract or subcontract is of 
a class exempted under this section, the Deputy Assistant Secretary for 
Labor-Management Programs may withdraw the exemption for a specific 
contract or subcontract or group of contracts or subcontracts when, in 
the Deputy Assistant Secretary's judgment, such action is necessary or 
appropriate to achieve the purposes of the Order.


Sec.  470.4  What contractors or facilities are exempt from the posting 
requirements?

    (a) Number of employees. The requirement to post the employee 
notice given in Sec.  470.2(a) (hereafter, posting requirement) does 
not apply to contractors and subcontractors that employ fewer than 15 
persons.
    (b) Union representation. The posting requirement does not apply to 
contractor establishments or construction work sites where no union has 
been formally recognized by the prime contractor or certified as the 
exclusive bargaining representative of the prime contractor's 
employees.
    (c) State law. The posting requirement does not apply to contractor 
establishments or construction work sites in jurisdictions where state 
law forbids enforcement of union-security agreements. For purposes of 
this paragraph, the term ``state'' is intended to include any of the 
entities identified as comprising the United States, as defined in 
Sec.  470.1(2).
    (d) Work not performed under Government contracts. Upon the written 
request of the contractor, the Deputy Assistant Secretary for Labor-
Management Programs may waive the posting requirements with respect to 
any of a contractor's facilities if the Deputy Assistant Secretary 
finds that the contractor has demonstrated that:
    (1) The facility is in all respects separate and distinct from 
activities of the contractor related to the performance of a contract; 
and
    (2) Such a waiver will not interfere with or impede the 
effectuation of the Executive Order.
    (e) Work outside the United States. The posting requirement does 
not apply to work performed outside the United States that does not 
involve the recruitment or employment of workers within the United 
States.

Subpart B--Compliance Evaluations, Complaint Investigations and 
Enforcement Procedures


Sec.  470.10  How will the Department determine whether a contractor is 
in compliance with the Executive Order and this part?

    (a) The Deputy Assistant Secretary for Federal Contract Compliance 
may conduct a compliance evaluation to determine whether a contractor 
holding a nonexempt contract is in compliance with the requirements of 
this part. Such an evaluation may be limited to compliance with this 
part or may be included in a compliance evaluation conducted under 
other laws, Executive Orders, and/or regulations enforced by the 
Department.
    (b) During such an evaluation, a determination will be made 
whether:
    (1) The employee notice required by Section 470.2(a) is posted in 
conspicuous places in and about each of the contractor's establishments 
and/or construction work sites not exempted under section 470.4 of this 
part, including all places where notices to employees are customarily 
posted; and
    (2) The provisions of the employee notice clause are included in 
nonexempt Government contracts entered into on or after April 28, 2004, 
that resulted from solicitations issued on or after April 18, 2001.
    (c) The results of the evaluation will be documented in the 
evaluation record, which will include findings regarding the 
contractor's compliance with the requirements of the Executive Order 
and this part and, as applicable, conciliation efforts made, corrective 
action taken and/or enforcement recommended under Section 470.13.

[[Page 16389]]

Sec.  470.11  What are the procedures for filing and processing a 
complaint?

    (a) Filing complaints. An employee of a covered contractor may file 
a complaint alleging that the contractor has failed to post the 
employee notice as required by the Executive Order and this part; and/
or has failed to include the employee notice clause in nonexempt 
subcontracts or purchase orders. Complaints may be filed with the 
Office of Labor-Management Standards (OLMS) or the Office of Federal 
Contract Compliance Programs (OFCCP) at 200 Constitution Avenue, NW., 
Washington, DC 20210, or with any OLMS or OFCCP field office.
    (b) Contents of complaints. The complaint must be in writing and 
must include the name, address, and telephone number of the employee 
who filed the complaint (the complainant), the name and address of the 
contractor alleged to have violated the Executive Order, an 
identification of the alleged violation and the establishment or 
construction work site where it is alleged to have occurred, and any 
other pertinent information that will assist in the investigation and 
resolution of the complaint. The complainant must sign the complaint.
    (c) Complaint investigations. In investigating complaints filed 
with the Department under paragraph (a) of this section, the Deputy 
Assistant Secretary for Federal Contract Compliance will evaluate the 
allegations of the complaint and develop a case record. The record will 
include findings regarding the contractor's compliance with the 
requirements of the Executive Order and this part, and, as applicable, 
a description of conciliation efforts made, corrective action taken, 
and/or enforcement recommended.


Sec.  470.12  What are the procedures to be followed when a violation 
is found during a complaint investigation or compliance evaluation?

    (a) If any complaint investigation or compliance evaluation 
indicates a violation of the Executive Order or this part, the 
Department will make reasonable efforts to secure compliance through 
conciliation.
    (b) The contractor must correct the violation found by the 
Department (for example, by posting the required employee notice, and/
or by amending its subcontracts or purchase orders with nonexempt 
subcontractors and vendors to include the employee notice clause), and 
must commit, in writing, not to repeat the violation, before the 
contractor may be found to be in compliance with the Executive Order or 
this part.
    (c) If a violation cannot be resolved through conciliation efforts, 
the Deputy Assistant Secretary for Labor-Management Programs may 
proceed in accordance with Section 470.13.
    (d) For reasonable cause shown, the Deputy Assistant Secretary for 
Labor-Management Programs may reconsider, or cause to be reconsidered, 
any matter on his or her own motion or pursuant to a request.


Sec.  470.13  Under what circumstances, and how, will enforcement 
proceedings under the Executive Order be conducted?

    (a) General. (1) Violations of the Executive Order may result in 
administrative proceedings to enforce the Order. The bases for a 
finding of a violation may include, but are not limited to:
    (i) The results of a compliance evaluation;
    (ii) The results of a complaint investigation;
    (iii) A contractor's refusal to allow a compliance evaluation or 
complaint investigation to be conducted; or
    (iv) A contractor's refusal to provide information as required by 
the Executive Order and the regulations in this part.
    (2) If a determination is made that the Executive Order or the 
regulations in this part have been violated, and the violation has not 
been corrected through conciliation, the Deputy Assistant Secretary for 
Labor-Management Programs may refer the matter to the Solicitor of 
Labor for institution of administrative enforcement proceedings.
    (b) Administrative enforcement proceedings. (1) Administrative 
enforcement proceedings will be conducted under the control and 
supervision of the Solicitor of Labor, under the hearing procedures set 
forth in 29 CFR part 18, Rules of Practice and Procedure for 
Administrative Hearings Before the Office of Administrative Law Judges.
    (2) The administrative law judge will certify his or her 
recommended decision issued pursuant to 29 CFR 18.57 to the Assistant 
Secretary. The decision will be served on all parties and amici.
    (3) Within 25 days (10 days in the event that the proceeding is 
expedited) after receipt of the administrative law judge's recommended 
decision, either party may file exceptions to the decision. Exceptions 
may be responded to by the other parties within 25 days (7 days if the 
proceeding is expedited) after receipt. All exceptions and responses 
must be filed with the Assistant Secretary.
    (4) After the expiration of time for filing exceptions, the 
Assistant Secretary may issue a final administrative order, or may make 
such other disposition of the matter as he or she finds appropriate. In 
an expedited proceeding, unless the Assistant Secretary issues a final 
administrative order within 30 days after the expiration of time for 
filing exceptions, the administrative law judge's recommended decision 
will become the final administrative order. If the Assistant Secretary 
determines that the contractor has violated the Executive Order or the 
regulations in this part, the final administrative order will order the 
contractor to cease and desist from the violations, require the 
contractor to provide appropriate remedies, or, subject to the 
procedures in Section 470.14, impose appropriate sanctions and 
penalties, or any combination thereof.


Sec.  470.14  What sanctions and penalties may be imposed for 
noncompliance, and what procedures will the Department follow in 
imposing such sanctions and penalties?

    (a) After a final decision on the merits has issued and before 
imposing the sanctions and penalties described in paragraph (d) of this 
section, the Assistant Secretary will consult with the affected 
contracting agencies, and provide the heads of those agencies the 
opportunity to respond and provide written objections.
    (b) If the contracting agency provides written objections, those 
objections must include a complete statement of reasons for the 
objections, among which reasons must be a finding that, as applicable, 
the completion of the contract, or further contracts or extensions or 
modifications of existing contracts, is essential to the agency's 
mission.
    (c) The sanctions and penalties described in this section, however, 
will not be imposed if:
    (1) The head of the contracting agency continues personally to 
object to the imposition of such sanctions and penalties, or
    (2) The contractor has not been afforded an opportunity for a 
hearing.
    (d) In enforcing the Order and this part, the Assistant Secretary 
may:
    (1) Direct a contracting agency to cancel, terminate, suspend, or 
cause to be canceled, terminated or suspended, any contract or any 
portions thereof, for failure of the contractor to comply with its 
contractual provisions as required by section 2 of the Executive Order 
and the regulations in this part. Contracts may be canceled, 
terminated, or suspended absolutely, or continuance of contracts may be 
conditioned upon compliance.

[[Page 16390]]

    (2) Issue an order of debarment under section 6(b) of the Order 
providing that one or more contracting agencies must refrain from 
entering into further contracts, or extensions or other modification of 
existing contracts, with any noncomplying contractor.
    (e) Whenever the Assistant Secretary has exercised his or her 
authority pursuant to paragraph (d) of this section, the contracting 
agency must report the actions it has taken to the Assistant Secretary 
within such time as the Assistant Secretary will specify.
    (f) Periodically, the Assistant Secretary will publish and 
distribute, or cause to be published and distributed, to all executive 
agencies a list of the names of contractors that have, in the judgment 
of the Assistant Secretary under section 470.13(b)(4) of this part, 
failed to comply with the provisions of the Executive Order and this 
part, or of related rules, regulations, and orders of the Secretary of 
Labor, and as a result have been declared ineligible for future 
contracts or subcontracts under the Executive Order and the regulations 
in this part.


Sec.  470.15  Under what circumstances must a contractor be provided 
the opportunity for a hearing?

    Before the Assistant Secretary takes the following action, a 
contractor must be given the opportunity for a hearing before the 
Assistant Secretary:
    (a) Issues an order debarring the contractor from further 
Government contracts under section 6(b) of the Executive Order and 
Sec.  470.14(d)(2) of this part; or
    (b) Includes the contractor on a published list of noncomplying 
contractors under section 6(c) of the Executive Order and Sec.  
470.14(f) of this part.


Sec.  470.16  Under what circumstances may a contractor be reinstated?

    Any contractor or subcontractor debarred from or declared 
ineligible for further contracts or subcontracts under the Executive 
Order may request reinstatement in a letter to the Assistant Secretary. 
If the Assistant Secretary finds that the contractor or subcontractor 
has come into compliance with the Order and this part and has shown 
that it will carry out the Order and this part, the contractor or 
subcontractor may be reinstated.

Subpart C--Ancillary Matters


Sec.  470.20  What authority under this part or the Executive Order may 
the Secretary delegate, and under what circumstances?

    Section 9 of the Executive Order grants the Secretary the right to 
delegate any of his/her functions or duties under the Order to any 
officer in the Department of Labor 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.  470.21  Who will make rulings and interpretations under the 
Executive Order and this part?

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


Sec.  470.22  What actions may the Assistant Secretary take in the case 
of intimidation and interference?

    The sanctions and penalties contained in Section 470.14 of this 
part may be exercised by the Assistant Secretary against any contractor 
or subcontractor who fails to take all necessary steps to ensure that 
no person intimidates, threatens, or coerces any individual for the 
purpose of interfering with the filing of a complaint, furnishing 
information, or assisting or participating in any manner in a 
compliance evaluation, complaint investigation, hearing, or any other 
activity related to the administration of the Executive Order or the 
regulations in this part.


Sec.  470.23  What other provisions apply to this part?

    (a) The regulations in this part implement Executive Order 13201 
only, and do not modify or affect the interpretation of any other 
Department of Labor regulations or policy.
    (b) Consistent with section 8 of the Executive Order, each 
contracting department and agency must cooperate with the Assistant 
Secretary, the Deputy Assistant Secretary for Labor-Management 
Programs, and/or the Deputy Assistant Secretary for Federal Contract 
Compliance, and must provide such information and assistance as the 
Assistant Secretary or Deputy Assistant Secretary may require, in the 
performance of his or her functions under the Executive Order and the 
regulations in this part.
    (c) Consistent with section 13 of the Executive Order, nothing 
contained in the Executive Order or this part, or promulgated pursuant 
to the Executive Order or this part, is intended to confer any 
substantive or procedural right, benefit, or privilege enforceable at 
law by any party against the United States, its agencies or 
instrumentalities, its officers or employees, or any other person.

[FR Doc. 04-6823 Filed 3-26-04; 8:45 am