December 08, 2020

EO 13950 Update: Effective (For Now) and the Rollout of Class Deviations

6 min

With nearly two months until President-elect Joe Biden's inauguration, it remains important to be cognizant and mindful of what can happen with respect to Executive Order 13950 (EO 13950 or the EO) between now and that time, which is when the Biden Administration will presumptively rescind the EO. Aside from the election, there have been a few developments related to EO 13950 since our last article. Among those are the filing of two separate lawsuits challenging the legality of the EO, the passage of both the November 21, 2020 effective date for the integration of the contract clause applicable to Federal contractors and subcontractors and submission deadline for the agency heads' reports on their respective grant programs, the issuance of separate DFARS and NASA class deviations, and the closure of the window to respond to the Office of Federal Contract Compliance Programs' (OFCCP) Request for Information, which occurred on December 1, 2020. Given that the OFCCP has the authority to begin investigating complaints and enforcing compliance with EO 13950 over the coming weeks, it is key that Federal contractors and subcontractors fully conform to all enumerated EO requirements should they wish to avoid potentially severe sanctions for non‑compliance.

November 21, 2020 Effective Date and Deadline

As discussed in greater detail in our first article, EO 13950 directed that, as of November 21, 2020, "[e]xcept in contracts exempted in the manner provided by section 204 of Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity), as amended, all Government contracting agencies shall include in every Government contract hereafter entered into" the provision set forth in Section 4 therein. Accordingly, all Federal contracts, subcontracts, and purchase orders newly entered into or executed on or after November 21, 2020, must include the contract clause listed in Section 4 of the EO. Even if that contract, subcontract, or purchase order does not explicitly include that EO provision, or the DFARS or NASA provisions discussed below, we believe it is plausible to conclude that the relevant provision may still apply given the Federal Circuit's 2018 holding in K-Con, Inc. v. Secretary of the Army, 908 F.3d 719 (Fed. Cir. 2018).

Thus, due to the effective date and severity of consequences for non-compliance, it is critical that Federal contractors and subcontractors closely monitor whether they have executed a Federal contract, subcontract, or purchase order on or after November 21, 2020. If they have, they must immediately ensure full compliance with EO 13950, particularly given the following statement published on the OFCCP's FAQ page, which we discussed in greater detail here:

Once Executive Order 13950 becomes effective in federal contracts, OFCCP will begin enforcing it. Contractors found in violation may have their contracts canceled, terminated, or suspended in whole or in part. The contractor may also be declared ineligible for further Government contracts in accordance with the procedures authorized in Executive Order 11246.

In addition, the FAQ page, among other sources, again confirms the close link between the two executive orders, explaining that the OFCCP will investigate EO 13950 complaints consistent with the enforcement methods used for EO 11246.

While the obligations and restrictions applicable to Federal contractors and subcontractors are, for the most part, relatively clear, the requirements for Federal grant recipients remain unknown. Recall, the EO provided that by November 21, 2020, agency heads were required to submit to the director of the Office of Management and Budget (OMB) comprehensive reports on how the EO should be applied to their respective grant programs. Presumably, the agency heads met this deadline, but as the OMB parses through what is likely a significant amount of information, the Federal Government has yet to give even an indication of when it might release the precise requirements with which Federal grant recipients must comply. Though it is quite possible that the Biden Administration will rescind the EO before any such requirements make their way to Federal grant recipients, the fact remains that the OFCCP has clearly expressed its intent to eliminate all facets of discrimination through EO 11246, which effectively includes elements of the purported categories of discrimination discussed in EO 13950 that OFCCP believes is an integral part of fulfilling its mission.

DFARS and NASA Class Deviations

On November 20, 2020, both the U.S. Department of Defense and the National Aeronautics and Space Administration (NASA) separately issued class deviations for the purpose of implementing Section 4 of EO 13950. In the individualized memoranda that precede the text of the deviations, both agencies interestingly include a qualifying statement, which stipulates that the class deviation shall remain in effect "until it is incorporated in the FAR" or is otherwise rescinded; the NASA memorandum additionally contemplated the extension of its deviation. This language arguably suggests that both DOD and NASA anticipate that the Biden Administration will rescind EO 13950, or, perhaps, that the EO may not withstand judicial review.

In terms of the substance of the class deviations, both incorporate the thrust of the language of Section 4 and definitions from EO 13950, including the flowdown requirement and ramifications for non-compliance. They also state that the relevant clause must be included in all contracts that contain the clause at FAR 52.222-26, Equal Opportunity, or its Alternate I. However, what may be most noteworthy is that both deviations cite to FAR 22.807 and indicate that the exemptions applicable to EO 11246 "also apply" to EO 13950, thereby exempting a slew of contracts that include, among other categories, all subcontracts worth $10,000 or less, contracts for work performed outside the United States by employees not recruited within the United States, contracts with state or local governments, and contracts with religious entities. While these exemptions were not clearly articulated as applicable before, the vast majority of contractors remain subject to the EO's prohibitions, including, but not limited to, commercial product or service contractors with a single contract in excess of $10,000, irrespective of whether the contractor privately funds such training. Last, both deviations provide a copy of the notice that contractors must send to "each labor union or representative of workers with which it has a collective bargaining agreement or other contract or understanding" and post "in conspicuous places available to employees and applicants for employment."

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Given the passage of the November 21, 2020 deadline and the immediacy of OFCCP's intent to investigate complaints, if Federal contractors and subcontractors continue to hold training sessions and discussions around diversity and inclusion, it is extremely important that they carefully review all related materials in order to ensure that their organization complies with both EO 13950 and EO 11246. Moreover, absent the issuance of additional guidance over the coming weeks, it is critical that those contractors and subcontractors guarantee that such trainings and discussions remain focused on objective facts and data; otherwise, they might face an undesirable investigation by the OFCCP, even if the EO is ultimately rescinded in January of next year.

Although the Biden Administration has indicated that it will "[m]ake a historic commitment to equalizing federal procurement," which very likely includes the rescission of this EO, given the serious implications for non-compliance in these intervening months, we will continue to monitor developments in handling this controversial and highly contested executive order.