Last week, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction regarding the mandatory arbitration restriction and other provisions of Executive Order 13673 – Fair Pay and Safe Workplaces (“EO 13673”). In Associated Builders and Contractors of Southeast Texas v. Rung, No. 1:16-CV-00425 (E.D. Tex., October 24, 2016), a group of trade associations whose members regularly bid on federal contracts sought a temporary restraining order pending the outcome of the associations’ challenge to implementation of EO 13673 and certain Federal Acquisitions Regulations. Although the mandatory arbitration provision of the order was set to take effect on October 25th, the federal court held the provision violates the Federal Arbitration Act and enjoined its implementation.
Under Section 6 of EO 13673, a worker must voluntarily consent to arbitrate any claims that arise under Title VII of the Civil Rights Act of 1964 or relate to sexual harassment or assault if employed by or acting as an independent contractor for a federal contractor whose awarded contract value exceeds $1 million unless the contract is for “commercial items.” You may read more about the arbitration provision included in EO 13673 in a prior blog post.
After reviewing EO 13673, the Eastern District of Texas stated although Congress may prohibit mandatory arbitration through statute, the nation’s Executive Branch lacks the power to issue an order that is in conflict with the federal policy favoring arbitration. According to the court:
Contrary to Defendants’ attempt to distinguish a rule prohibiting new arbitration agreements from a rule prohibiting enforcement of existing agreements, neither type of rule is authorized by the FAA in the absence of any congressional command that would override the requirement that arbitration agreements be enforced in accordance with their terms. Defendants’ reliance on the Franken Amendment to the Defense Authorization Act is misplaced. That Amendment simply demonstrates that Congress may choose to modify one statute with another and that it knows how to limit arbitration policies when it so desires. The Executive Branch does not possess similar authority to modify Congressional enactments such as the FAA. Such overstepping of authority in the guise of enhancing federal procurement practices is unwarranted.
Because the plaintiffs “demonstrated a substantial likelihood of success on the merits” and showed they would suffer “irreparable harm in the absence of immediate relief,” the U.S. District Court for the Eastern District of Texas enjoined enforcement of the arbitration restriction enumerated in EO 13673 pending a final decision in the case.
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