Daniel J. Kelly, McCarter & English, LLP
A day following his national address on September 8, 2021, President Biden issued two Executive Orders directed respectively to federal employees and federal contractors with the stated purpose of decreasing or halting the spread of COVID-19, including its Delta variant: Executive Order on Requiring Coronavirus Disease 2019 Vaccination for Federal Employees (Federal Employee EO) and Executive Order on Ensuring Adequate COVID Safety Protocols for Federal Contractors (Federal Contractor EO, or EO). The Federal Contractor EO was followed, on September 10, 2021, by a clarifying statement by the Deputy Director for Management of the Office of Management and Budget (OMB) (OMB Statement). Here are some key takeaways from the two Executive Orders as they pertain to the federal contracting community, including all companies and other entities in the federal supply chain.
The Executive Orders will mandate immediate vaccination for “covered” employees of federal contractors.
The Federal Employee EO explicitly calls for the “mandatory” vaccination of employees of executive agencies. Contrary to some reporting, this includes employees of the United States Postal Service and other so-called independent agencies and Government corporations but does not include employees of other branches of the government, including the US Congress and the Federal Courts. The Federal Employee EO calls for the Safer Federal Workforce Task Force (implemented by a January 20, 2021, Executive Order) (Task Force) to issue guidance by September 16 on agency implementation of those directives.
In contrast, the Federal Contractor EO does not mention the word “vaccination.” Rather, it calls for “adequate COVID-19 safety protocols” in “contractor or subcontractor workplace locations” to be included in clauses in contracts and subcontracts “at any tier” as defined and directed by the Task Force and approved by the Director of the OMB. The Task Force in conjunction with the OMB must do the following by September 24, 2021:
· Define the meaning of contractor and subcontractor.
· Explain the protocols required “to comply with workplace safety guidance.”
· Identify exceptions to workplace locations and individuals in these locations.
While the Federal Contractor EO does not mention vaccination, the OMB Statement does and infers what will come next. It states explicitly that “if you want to do business with the Federal Government, you must vaccinate your workforce,” and provides that the Task Force will issue protocols that include the “[v]accination of covered Federal Contractor employee.” The word “covered,” however, is not defined. The OMB Statement also provides that the protocols will include for “covered” contractor employees a “masking and physical distancing” requirement” and the designation by the contractor of a dedicated point of contact to “coordinate “COVID-19 workplace safety efforts at covered worksites.” It is unclear, and appears rather unlikely, whether weekly testing of covered employees will be permitted as an alternative to vaccination, as may be permitted in the US Department of Labor’s Occupational Safety and Health Administration (OSHA) Emergency Temporary Standard (ETS) to be issued for all US businesses with 100 or more employees as directed by the President in his September 8, 2021 address and published in the White House’s Path out of the Pandemic. For more on the general vaccination mandates on US business, see this analysis from our Labor and Employment Group.
For contractors, the “safety protocols” for “covered employees” will likely apply to workplace locations where any employee with a “connection” to a nonexempt Federal contract is working.
Despite speculation that President Biden would limit government contractor COVID safety measures to employees working on site at U.S. Government facilities, buildings, military bases and vessels, there is no such limitation in this EO. Rather, the EO is applicable to the more expansive contractor and subcontractor “workplace locations;” referred to in the OMB Statement as “covered worksites.” Although the EO provides that the Task Order will define these terms, the EO refers to such locations as those “in which an individual is working on or in connection with a Federal Government contract or contract-like instrument . . . .” The forthcoming definition may provide otherwise but this could well include all contractor locations where back office and executive functions occur.
Federal Contractor obligations could become effective as early as next month.
The Federal Contractor EO sets out steps to ensure that as of October 15, 2021, contracts governed by the Federal Acquisition Regulation (FAR) and “contract-like instruments” not governed by the FAR, such as Other Transaction Agreements and solicitations for such contracts, include a clause that embodies the Task Force’s definitions and mandates as blessed by the OMB. (Grants are specifically exempt from the Federal Contractor EO.) The clause will be applicable to new solicitations, renewals, and extensions of existing contracts, and exercised options on existing contracts. Although the Federal Contractor EO does not specifically identify Task Orders under Indefinite Quantity Indefinite Delivery contracts, it is reasonable to conclude that the regulators will consider and include new Task Orders and extensions, options and renewals of existing Task Orders will be included.
Both the Federal Contractor EO and the OMB Statement provide that the clause to be issued embodying the Task Force recommendations will be applicable to federal contractors and subcontractors. Section 2 of the EO instructs that federal agencies include the clause “that the contractor and any subcontractors (at any tier) shall incorporate into lower-tier subcontracts.” Accordingly, unless exempt, all contractors in the entire Government supply chain will be subject to these requirements.
The Federal Contractor EO, together with the OMB Statement, includes some gaping exemptions, including contracts for the “provision of products.”
The EO specifically applies to FAR-based and non-FAR-based agreements for:
· “[S]ervices, construction, or a leasehold interest in real property”
· Services covered by the Service Contract Act
· Concessions contracts
· Services for Federal employees, their dependents, or the general public in connection with Federal property or lands
While the EO excludes subcontracts “solely for the products,” the OMB Statement appears to include all contracts in this broad exclusion. Using awkward and somewhat repetitive language, the OMB Statement excludes“[c]ontracts, contract-like instruments, or contracts, contract-like instruments, or subcontracts solely for the provision of products.” It remains unclear whether the regulators will include in the clause issued in October the broader language in the OMB Statement, or the narrower language (limiting the exclusion to subcontracts) in the Federal Contractor EO.
The use of the word “product” in the Federal Contractor EO creates a term which the regulators will need to define. FAR 2.101 provides that the terms “products” and “supplies” are synonymous, and defines the latter as “all property except land or interest in land.” The FAR provides that the term can include but is not limited to public works, buildings, ships, aircraft, equipment, parts, accessories, machine tools, and the installation and alteration of any of these things. The Federal Contractor EO does not limit this exemption to Commercial-Off-The-Shelf Items (COTS) or Commercial Items (as defined by FAR 2.101). Moreover, with the use of the word “solely,” contracts for both services and products presumably will not be exempt. We will look to the FAR clause and updating guidance on the applicability of the exclusion to contracts for both services and products where the “services” component is delegated to a lower-tier contractor.
In addition, the Federal Contractor EO does not apply to contracts equal to or below the simplified acquisition threshold (SAT), currently set at $250,000 under FAR 2.101. It also exempts work performed outside the United States and its outlying areas, and agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act.
All contractors with 100 or more employees should prepare NOW, even if deemed exempt under the Federal Contractor EO.
For those prime contractors and subcontractors resistant to implementing the likely vaccination and/or testing requirements, the perceived exemptions may be cold comfort if the contractors have 100 or more employees. As noted, unless enjoined by a court order, OSHA will be issuing an ETS requiring such companies to implement the same requirements. If they have not done so already, senior managers together with human resources personnel and experienced counsel should be planning:
· Measures to determine the vaccination status of their employees
· Measures allowing for paid time off for employees to obtain initial vaccination shots and likely boosters
· A verifiable COVID-19 testing regime for all employees who may resist vaccination, if permissible
· Disciplinary measures that may need to be imposed to the extent an employee refuses to cooperate in providing information as to the employee’s vaccination status or willingness to submit to testing
· A review of local, state, and federal laws and regulations protecting the employees’ privacy rights and limiting grounds for imposing disciplinary measures for a variety of reasons, including but not limited to religious or medical objections.
For nonexempt contractors in the federal supply chain, mandatory vaccination of employees having a “connection” to a federal contract, together with other workplace protocols, is imminent. Immediate preparation, including acquiring knowledge of the legal constraints surrounding the imposition of such protocols, is essential for those affected. We will continue to provide our readers updates as more information becomes available.
Daniel J. Kelly is a partner in the Boston office of McCarter & English, LLP and a member of the firm’s Government Contracts and Global Trade group. He provides advice and guidance to clients who are in the government supply chain, either as prime contractors, subcontractors, or vendors. He can be reached at firstname.lastname@example.org.