August 07, 2020

Executive Order Sets Policy Restricting Federal Contractors' Use of Foreign Labor

3 min

On August 3, 2020, President Trump issued an Executive Order titled "Aligning Federal Contracting and Hiring Practices With the Interests of American Workers," which builds on the White House's various "America First" initiatives aimed at limiting immigration and protecting American workers. The Order highlights the Trump administration's emphasis on domestic sourcing of supplies and services and furthers the administration's attacks on the H-1B visa program for specialized foreign professionals.

The stated policy behind this Executive Order is to "create opportunities for United States workers to compete for jobs, including jobs created through Federal contracts," particularly in areas where "the Federal Government remains the largest employer" and those that have been impacted by the "economic dislocation caused by the 2019 novel coronavirus (COVID-19) pandemic."

The Order includes two distinct directives. First, the Order requires the heads of each federal contracting agency to review their contracting and hiring practices, considering the extent to which contractors and subcontractors use temporary foreign labor for contracts performed in the United States, as well as whether services previously performed in the United States were affected by such hiring of foreign workers. The Order also directs agencies to assess the effect of foreign labor hiring and/or offshoring practices on opportunities for U.S. workers, the eligibility of affected workers for Trade Adjustment Assistance, and national security interests. In addition to looking at the hiring practices of federal contractors, the Order requires each agency to review its own employment policies to assess compliance with existing laws requiring federal hiring of U.S. persons. The Order provides agencies 120 days (through December 1, 2020) to submit a report to the Office of Management and Budget (OMB) summarizing the results of their review and recommending corrective actions, if necessary, and associated timeframes for implementing such changes.

Second, the Order also directs the Secretaries of Labor and Homeland Security to "take action," as appropriate and consistent with applicable law, to prevent adverse effects on the wages and working conditions of U.S. workers caused by employment of H-1B visa holders. The policy includes requiring employers and "secondary employers" of H-1B visa holders to file certifications required by the Immigration and Nationalization Act (INA) regarding the impact of hiring a foreign worker. In speaking about the purpose of the Order, the administration has indicated that its goal is to restrict scenarios in which a contractor outsources services to H-1B workers that would have otherwise been performed by U.S. employees of the contractor, to ensure that "no American worker is replaced ever again."

Although both of the initiatives set forth in the Executive Order are preliminary and lack sufficient detail or guidance to understand their full impact, they suggest that the administration intends to prohibit or substantially limit the use of non-American labor on federal contracts — either through prohibitions on foreign labor sources or by favoring American labor sources in the procurement process from the outset.

Government contractors (both prime and subcontractors) should prepare for the possibility of impending reviews of their federal government contracts by auditors and/or inspectors general. In particular, contractors may be required to provide detailed information about any foreign labor supporting performance of their federal contracts in the United States and abroad, particularly those who are H-1B visa holders. Contractors should also be prepared to provide an explanation regarding their need to hire foreign labor.

Venable will continue to monitor federal agencies' implementation of this Order and will keep our clients updated regarding developments that may impact their business.