Government Contracts & Investigations

For Federal Contractors, Another Potential Hurdle to Engaging Foreign Labor

By | | August 7, 2020

On August 3, 2020, the president issued Executive Order No. 13940 on Aligning Federal Contracting and Hiring Practices with the Interests of American Workers. As indicated by the title of the order, the purported underlying policy is to create opportunities, particularly in light of the COVID-19 pandemic, for American workers to compete for federal contracting jobs.

In furtherance of this policy, the order directs the head of each federal executive department and agency to review their federal contracts, including subcontracts, awarded by the agency and assess a number of issues including:

  • Whether and how temporary foreign labor was used to perform contracts in the U.S.; whether opportunities for U.S. workers were affected by such hiring; and any potential national security implications of such hiring; and
  • Whether contractors, including subcontractors, performed services in foreign countries that were previously performed in the U.S.; whether opportunities for U.S. workers were affected by such offshoring; and any potential national security implications of such offshoring.

The order also requires agency heads (i) to propose necessary and appropriate actions to improve the economy and efficiency of federal procurement and to protect national security and (ii) to review employment policies to assess compliance with Executive Order 11935 and Section 704 of the Consolidated Appropriations Act of 2020.

Within 45 days of the issuance of this order, the Secretaries of Labor and Homeland Security must take appropriate action to protect American workers from unfavorable effects, such as adverse working conditions and wages, caused by the employment of H-1B visa holders at job sites, including third party locations. Both direct federal employers and secondary employers (federal contractors) who place H-1B workers at federal agencies are subject to the executive order.

Finally, within 120 days of the issuance of this order, each agency must submit a report to the Director of the Office of Management and Budget summarizing its assessments and other efforts pursuant to this order, including corrective actions that may be appropriate and the timeframe in which such actions will be implemented.

For federal contractors, this order expresses a preference for U.S. workers and worksites and signifies another potential hurdle to engaging foreign labor or offshoring. The effects of this Executive Order will remain largely unclear until agencies publish their reports in the next six months. We will track these reports and their implications for government contractors closely.

Contact Elizabeth Chatham or Judith Araujo for more information.