August 28, 2020

Lori Ann Lange Partner and Sabah Petrov, Associate Peckar & Abramson, P.C.

                In response to the COVID-19 pandemic and its detrimental impact on American workers, on August 3, 2020, President Donald Trump issued an Executive Order focusing on federal government contractors’ and subcontractors’ use of foreign workers.  The Aligning Federal Contracting and Hiring Practices With the Interests of American Workers Executive Order states that it is the policy of the executive branch to create opportunities for United States workers to compete for jobs, including jobs created through federal government contracts. The newly issued Executive Order furthers the White House’s policy to hire American as expressed in the 2017 Executive Order 13788, Buy American and Hire American.

                The Executive Order is not a ban on using foreign workers on government contracts and subcontracts. However, it may impact the way in which federal contractors and subcontractors use the H1-B visa program to obtain foreign labor. As discussed below, contractors and subcontractors should anticipate increased enforcement of the H-1B visa program.

Agency Review of Contractors’ and Subcontractors’ Use of Temporary Foreign Labor

                The Executive Order directs the heads of each executive department and agency to review their contracts and subcontracts awarded in Fiscal Years 2018 and 2019 to assess:

  • Whether prime contractors and their subcontractors used temporary foreign labor for contracts performed in the United States and, if so, the nature of the work performed by the temporary foreign labor, and whether such work impacted job opportunities for United States workers; and
  • Whether prime contractors and subcontractors offshored work (i.e., moved work previously performed in the United States to a foreign country) and, if so, whether opportunities for United States workers were affected by the offshoring and whether the offshoring impacted national security.

To the extent practical, the federal agencies are directed to review all contracts awarded by the agency and subcontracts awarded under those contracts regardless of dollar value. This would include construction contracts and subcontracts, although the Executive Order does not define the terms “subcontractor” or “subcontracts” so it is unclear whether the review will be limited to first-tier subcontractors. As of the drafting of this article, it is unclear how the federal agencies will conduct their reviews and whether the agencies will be reaching out to contractors and subcontractors for information on their use of foreign workers practices.

The federal agencies have to submit a report to the Office of Management and Budget within 120 days of the Executive Order summarizing the results of the reviews. Given the sheer number of federal government contracts awarded by the federal agencies (and subcontracts awarded by prime contractors) during Fiscal Years 2018 and 2019 and the short period of time in which to conduct the reviews, it seems highly unlikely that the federal agencies will be able to review more than a fraction of the federal contracts and subcontracts. The depth of each review and the number of contracts and subcontracts actually reviewed remains to be seen.

                In addition to conducting this review, the federal agencies also must determine whether contractors’ and subcontractors’ temporary foreign labor hiring practices or offshoring of work has negatively impacted the United States economy, efficiency of federal procurement, and national security. The federal agencies must propose necessary and appropriate solutions, consistent with applicable law, to rectify any such negative impact.

Further, the Executive Order directs the federal agencies to review their own employment practices. Each federal agency must work with the Office of Personnel Management to determine whether the agency complies with applicable federal laws and regulations.  Within 120 days from the date the Executive Order was issued, each federal agency has to submit a report to the Office of Management and Budget regarding the results of its review and proposing corrective actions to be taken by the agency.

Impact on the H-1B Visa Program

                The H-1B Visa Program is a program that allows United States companies to temporarily employ foreign workers in occupations that require the theoretical and practical application of highly specialized knowledge. To be eligible, a foreign worker must have a bachelor’s degree or higher in the specific specialty, or its equivalent. Construction contractors commonly use the H-1B visa program to temporarily employ foreign workers such as engineers, architects, drafters, accountants, auditors, software developers, cost estimators, logisticians, and project/construction managers.

                The Executive Order directs the Department of Labor (DOL) and the Department of Homeland Security (DHS) to take appropriate action by September 17, 2020 to protect United States workers from any adverse effects on wages and working conditions caused by the employment of H-1B visa holders at job sites, including third-party job sites. These agencies must also ensure that contractors who employ H-1B visa holders are in compliance with the requirements of Section 212(n)(1) of the Immigration and Nationality Act, which requires employers to submit materials to DOL assessing these impacts before they receive authorization to hire an H-1B visa applicant. Specifically, contractors have to attest when sponsoring an H-1B applicant that employment of the foreign worker will not adversely affect the working conditions of similarly situated workers. While the Executive Order does not specify any specific actions to be taken by DOL or DHS, it is like that both agencies will step up their enforcement to ensure that contractors and subcontractors are compliant with the H-1B visa program and that the attestations provided to DOL when sponsoring an H-1B visa remain accurate.

Even prior to the issuance of the Executive Order, it appears that the Federal Government planned to step up on enforcing compliance with the H-1B visa program.  In July 2020, DOL and DHS entered into a Memorandum of Agreement (MOA) to share certain information not previously accessible to DOL to enforce immigration violations. Specifically, the MOA permits U.S. Citizenship and Immigration Services (USCIS) to provide DOL with information on suspected employer violations within the H1-B visa program for enforcement purposes. This information should assist DOL with conducting administrative and targeted site visits. DOL stated it will use its power to initiate investigations of potential violations and robustly examine contractors’ use of H-1B workers.

Impact on Contractors and Subcontractors

The Executive Order does not directly require contractors and subcontractors to take action so the immediate impact on contractors and subcontractors is uncertain. We may not know the full impact until the federal agencies propose corrective action. However, contractors and subcontractors working on federal contracts should anticipate the possibility of investigations into their foreign labor practices, including the use of temporary foreign labor. Contractors and subcontractors should review their current employment practices to ensure they are complying with applicable immigration laws. Contractors and subcontractors that use H-1B workers should determine whether they are in compliance with the H-1B visa program as it is expected the Federal Government may begin more aggressively investigating potential H-1B visa program violations.

[1] Mrs. Petrov is admitted in the State of Maryland only and is practicing under the supervision of DC bar members.

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