Biden Administration Backs Off from Blacklisting Federal Contractors

The U.S. Department of Agriculture withdrew a proposed rule that could have barred companies from federal contracts if they had outstanding or previous labor and employment law violations. The result is a win for federal contractors by itself, while also suggesting the Biden administration may be more hesitant to flex its executive regulatory authority in the face of the Supreme Court’s Chevron decision and other hostility to agency actions from the federal courts.

Background: The rule was originally proposed by the USDA in 2022 and would have required USDA contractors to disclose previous violations of 15 different labor and employment laws. The Association, as part of a coalition of business groups, opposed the rule. “Blacklisting” – debarment of federal contractors due to previous or outstanding labor and employment law violations (or allegations) – was a central policy of both the Clinton and Obama administrations. Thus far, the USDA proposed rule is the only foray of the Biden administration into blacklisting. 

Backing down? The USDA’s withdrawal of the rule two years after it was first proposed perhaps signals that the Biden administration is more reluctant than before – and more than previous democratic presidents – to broadly wield executive branch authority in the face of increased opposition from the federal judiciary and the Supreme Court’s recent decision overturning Chevron. While the current administration has been notably hesitant to issue high-impact executive orders as a means of regulating employers, it has nevertheless, used all other levers of executive regulatory power as part of an “all of government” approach to labor reform – the USDA’s rule withdrawal here is a notable potential retreat from that approach. 

Yes, but... In the leadup to the November elections it might have been expected that the Biden administration would begin ramping up executive actions and regulations to take advantage of what might be the only time it has left. The withdrawal of the USDA rule suggests otherwise. However, the withdrawal might instead be the prelude to broader action beyond simply the USDA – a general blacklisting rule, for example. 

2024 and beyond: The current administration may simply be keeping its powder dry pending the results of the Presidential election in November. Should the Democrats retain the White House, we could see a Harris administration that is emboldened to double down on workplace regulations.