New COVID-19 executive order expands requirements for U.S. government contractors

The Executive Order on Ensuring Adequate COVID Safety Protocols for Federal Contractors (Executive Order) requires many federal contractors and subcontractors to comply with forthcoming COVID-19 workplace safety protocols to be published by the Safer Federal Workforce Task Force (Task Force) in the coming weeks. While the Executive Order itself does not expressly mandate COVID-19 vaccinations for federal government contractor employees, the Administration has signalled that this is what is intended. 

Although the full scope of the new contractor obligations will remain unclear until additional details are released, the Executive Order is expected to have a significant impact on covered federal contractors and their workforces.   

What does the Executive Order require of covered contractors and subcontractors?

The Executive Order directs federal agencies¹ to include a new clause in government contracts and “contract-like instruments” to require both contractors and subcontractors to comply with COVID-19 workplace safety guidance published by the Task Force, which are to be published by 24 September 2021 (“Task Force Guidance”). The Task Force Guidance will set forth the substantive requirements of the Executive Order, including by defining relevant terms and specifying the workplace safety protocols that covered contractors and subcontractors must implement.

A recent blog post from the Office of Management and Budget (“OMB”) strongly suggests that the Task Force Guidance will include a “hard” vaccine mandate (i.e., each covered worker must be fully vaccinated unless he or she can show a valid exemption such as for disability or sincerely held religious belief or practice) rather than a “soft” mandate (i.e., covered workers can elect either to be fully vaccinated or subject to regular COVID-19 testing), which the Administration has announced will apply to large employers under an Emergency Temporary Standard (ETS) to be issued by the Occupational Safety and Health Administration (OSHA) (for more information on the OSHA ETS, see our blog post). According to OMB, in addition to vaccination, the Task Force Guidance will address other health and safety measures related to masking and physical distancing by contractor employees and will require covered contractors to designate a person or persons to coordinate COVID-19 safety protocols at covered worksites. 

How will the new contract clause be applied to contractors? 

The Federal Acquisition Regulatory (“FAR”) Council must develop a new clause for inclusion in covered contracts and solicitations. And by 8 October 2021, the FAR Council must provide initial policy direction to acquisition offices on exercising their FAR Subpart 1.4 authority to implement the new clause. Subpart 1.4 authorizes agencies to issue deviations that affect multiple contracts at once. Also, by 8 October, the Executive Order directs agencies to include the new clause in contracts that are not subject to the FAR and that are entered into after 15 October 2021. Contractors and subcontractors will be required to flow down the requirements to subcontracts at any tier. 

Which types of contracts are covered?  Are existing contracts covered?

The new requirements will apply to “contract or contract-like instruments,” which are defined consistent with the Department of Labor’s proposed rule, “Increasing the Minimum Wage for Federal Contractors” (22 July 2021) (“proposed Minimum Wage rule”). Notably, the definition includes procurement contracts, lease agreements, cooperative agreements, provider agreements, intergovernmental service agreements, service agreements, licenses, and permits, and it appears to include other transaction authority (OTA) agreements, as well.

A contract or contract-like instrument will be subject to the new requirements only if it is: (i) a procurement contract or contract-like instrument for services, construction, or a leasehold interest in real property, or a contract or contract-like instrument (ii) for services covered by the Service Contract Act; (iii) for the provision of concessions; or (iv) in connection with “Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.” 

The Executive Order does not apply to (i) grants; (ii) certain contracts, contract-like instruments, or agreements with Indian Tribes; (iii) contracts or subcontracts below the simplified acquisition threshold (currently $250,000); (iv) employees who perform work outside the United States or its outlying areas (as defined in FAR Section 2.101); and (v) subcontracts solely for the provision of products. The Executive Order does not address whether prime contracts for the provision of supplies are within the scope of the new requirements, and we expect the FAR Council to clarify this open question in the coming weeks.

The new requirements will not automatically apply to existing government contracts; rather, the new contract clause will apply on or after 15 October only to a new contract or contract-like instrument; a new solicitation for a contract or contract-like instrument; an extension or renewal of an existing contract or contract-like instrument; and exercise of an option on an existing contract or contract-like instrument. Accordingly, an agency action would be required to extend the clause to a contract or contract-like instrument that was already in effect prior to 15 October 2021, and such action could come through unliteral modifications or other mechanisms. The Executive Order states that agencies are “strongly encouraged, to the extent permitted by law,” to ensure that safety protocols required under existing contracts and contract-like instruments are consistent with the requirements of the Executive Order.

How broadly will the new requirements apply to contactor locations?

The required contract clause will apply to contractor and subcontractor “workplace locations … in which an individual is working on or in connection with a Federal Government contract or contract-like instrument.” The Executive Order calls on the Task Force to give further definition and explanation to “workplace location.” Given expansive language in the Executive Order, the Task Force guidance may apply to federal contractor employees regardless of whether they work onsite at a federal facility, at a contractor-owned or contractor-leased property, or elsewhere. 

In its blog post, the OMB suggests the requirements would extend to all employees working at a covered contractor or subcontractor “workplace location,” including individuals in roles with no nexus to the government contract. This is broader than the proposed Minimum Wage rule discussed above, under which a worker is considered to be performing “on” a contract if the worker is performing “the specific services called for by the contract.” By contrast, a worker is performing “in connection with” a contract if the worker is “performing work activities that are necessary to the performance of a covered contract,” even if the worker “is not directly engaged in performing the specific services called for by the contract itself.” Workers who do not work “on” the contract and only work “in connection with” the contract for “less than 20 percent of their work hours” are not covered under the proposed Minimum Wage rule.

As noted above, the Executive Order specifically excludes employees who perform work outside of the United States or its outlying areas. It is unclear how much foreign work will cause an employee to fall within this exception (e.g., whether an employee who only occasionally works abroad will be exempt) and whether the Executive Order will account for potential conflicts with foreign laws. 

What if there are more restrictive federal, state, or local COVID-19 safety requirements in effect? 

The Executive Order expressly states that it does not supersede or excuse noncompliance with more stringent workplace safety requirements established under state laws, municipal ordinances, or federal agency regulations or instructions for covered contractors.

A more difficult question is whether a state or local government could block or interfere with a contractor’s compliance with the Executive Order. There is precedent suggesting that the Executive Order would preempt state or local authority, but this is a complex factual and legal question.

Didn’t the Administration already mandate COVID-19 vaccination for contractors?

Under prior Task Force guidance issued on 29 July, federal onsite contractors were required to attest to their vaccination status and/or adhere to worksite safety protocols, such as masking, social distancing, and weekly COVID-19 testing. Hogan Lovells’ coverage of the 29 July requirements for contractors is available here. 

The Executive Order is not limited to onsite contractors at federal worksites, and the new Task Force Guidance likely will apply a “hard” rather than “soft” vaccine mandate. 

What are the penalties for noncompliance?

The Executive Order is silent on this topic. Depending on the circumstances, remedies for a contractor’s noncompliance could include default termination by the government, negative performance reviews, cost disallowance, audits, and in egregious cases, there is the potential for suspension, debarment, and/or liability under the False Claims Act.

Next steps

To any extent that the Executive Order for federal contractors does not bind a contractor to a contractually required vaccine mandate, the contractor may nevertheless be subject to the OSHA ETS for large employers. And OSHA stated in a recent stakeholder conference call that contractors covered by the Executive Order who also have 100 or more employees will be required to comply with both the ETS and the Executive Order, but also stated the two will be “consistent.” 

Many details of the Executive Order’s scope and requirements will remain unclear until the Task Force Guidance issues. In the interim, covered contractors should consider the operational realities and practical implications of these requirements for their organization, such as communication plans with employees; obtaining and tracking employee vaccination status; addressing confidentiality, privacy, and potential accommodations; planning for any workforce attrition, and how to handle employees who refuse to comply; determining and tracking costs associated with the new obligations; and concurrent compliance with state or local requirements. 

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Hogan Lovells continues to monitor the Executive Order and developments on this front. If you have questions about how the Executive Order will impact your workplace and how to prepare for it, please contact one of the authors of this alert, or the Hogan Lovells lawyer with whom you work.

References

1 The Executive Order does not extend to government entities that do not meet the definition of “executive agency.” Section 2(a) of the Executive Order relies on a limited definition of “executive agency” set forth in the Federal Property and Administrative Services Act, 40 U.S.C. § 102(4)(a), which may exclude certain independent agencies such as the United States Postal Service.

Authored by William Ferreira, George Ingham, Mike Mason, Joy Sturm, Allison Pugsley, Stacy Hadeka, Michael Scheimer, Amy Kett, and Lauren Olmsted.