In a decision issued on September 16, 2024, the United States Government Accountability Office (“GAO”) ruled that federal contracting rules do not prohibit government agencies from requiring contractors to enter into labor harmony agreements. 

In 2022, Maximus Federal Services, Inc. (“Maximus”), won a contract with the Department of Health and Human Services, Centers for Medicare and Medicaid Services for contract call center operations and other support services.  Although the Center for Medicare and Medicaid Services possessed an option to renew the contract with Maximus, it instead decided to issue a request for proposal (“RFP”) and seek new bids for the contract.  As part of the RFP, the agency included a requirement that the ultimate successful bidder enter into a labor harmony agreement with any labor organization interested in representing the service employees performing work under the contract.   

On June 20, 2024, Maximus filed a protest with GAO challenging the inclusion of the labor harmony agreement requirement in the RFP arguing that the provision (i) violated or was preempted by the Labor Management Relations Act (“LMRA”) and the National Labor Relations Act (“NLRA”); (ii) violated or was not authorized under Federal Acquisition Regulation section 22.101-1; and (iii) was unduly restrictive of competition and/or ambiguous.  Although GAO determined that the RFP was ambiguous as to the period of time the successful bidder would have to negotiate a pre-award labor harmony agreement, it rejected Maximus’ remaining arguments. 

GAO’s decision is not yet publicly available, however, GAO’s Managing Associate General Counsel for Procurement Law released a statement regarding the decision on September 17, 2024.  In the statement, GAO noted that it dismissed Maximus’ argument regarding violation and preemption of the LMRA and NLRA, finding that those arguments were beyond its jurisdiction and noting that neither statute is a procurement statute under the Competition in Contracting Act.  Critically, as to Maximus’ challenges pertaining to the Federal Acquisition Regulation, GAO concluded that those regulations do not prohibit an agency from requiring a contractor to enter into a labor harmony agreement.  Per the statement, GAO also denied Maximus’ challenge that the requirement was unduly restrictive of competition “because the record demonstrated that the clause was consistent with the agency’s minimum needs.” 

This decision has implications for other government agencies and contractors alike as agencies may seek to include labor harmony agreement requirements in future solicitations.  Notably, however, per its statement, GAO’s decision “expresses no view regarding the value of including an LHA for these call-center services, or whether an LHA is consistent with federal labor laws.  Further, judgments about an agency’s needs are reserved for the procuring agencies, subject only to statutory and regulatory requirements.”  It remains to be seen how the National Labor Relations Board would rule on this issue. 

We will continue to provide updates on this important topic as developments occur.

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Photo of Paul Salvatore Paul Salvatore

Paul Salvatore provides strategic labor and employment law advice to companies, boards of directors/trustees, senior executives and general counsel in such areas as labor-management relations, litigation, alternative dispute resolution, international labor and employment issues, and corporate transactions.

He negotiates major collective bargaining agreements…

Paul Salvatore provides strategic labor and employment law advice to companies, boards of directors/trustees, senior executives and general counsel in such areas as labor-management relations, litigation, alternative dispute resolution, international labor and employment issues, and corporate transactions.

He negotiates major collective bargaining agreements in several industries, including real estate and construction. Paul represents the NYC real estate industry’s multi-employer organization, the Realty Advisory Board on Labor Relations (RAB), and its principal trade organization, the Real Estate Board of New York (REBNY). In 2023, he helped the RAB reach a new collective bargaining agreement with SEIU Local 32BJ, covering 20,000 commercial building employees, enabling the industry to adapt its labor practices to tenants’ post-COVID utilization of office space, including that caused by remote/hybrid work.

Paul has long represented construction employers and developers, such as the Related Companies, Cement League, Association of Master Painters and others. He negotiates Project Labor Agreements (PLA’s), such as for Related (enabling the construction of Hudson Yards), and presently for Gateway Development Corporation (GDC) in building the New York-New Jersey train tunnels, the largest infrastructure project in America. City & State magazine has named him one of the most powerful lawyers in New York for his work in this sector.

Paul also tries arbitrations and litigations, and argues appeals, arising from labor-management relationships. He argued and won before the U.S. Supreme Court 14 Penn Plaza LLC v. Pyett. In a 5-4 decision of importance to employers, the Court held that a collective bargaining agreement explicitly requiring unionized employees to arbitrate employment discrimination claims is enforceable, modifying 35 years of labor law. Unions and employers now negotiate “Pyett clauses” in collective bargaining. He has argued and won federal circuit court cases reversing the National Labor Relations Board’s findings against employers, including in the D.C. and Fifth Circuits.

Paul represents universities and colleges in their labor and employment relations, including in the currently active areas of unionization and collective bargaining with graduate students, undergraduates, athletes and adjunct faculty. Among other schools he has worked with are Yale, Duke, Chicago, Washington University in St. Louis and Caltech. Paul pioneered innovative non-NLRB graduate student union election agreements at Cornell, Brown and Syracuse Universities.

An honors graduate of Cornell’s School of Industrial and Labor Relations (ILR) and the Cornell Law School, Paul served eight years on Cornell’s Board of Trustees, including on its Executive Committee. He subsequently was elected Trustee Emeritus and Presidential Councilor. He presently serves as a Trustee Member of the Board of Fellows of Weill Cornell Medicine, as well as on the Law School and ILR Deans’ Advisory Councils. In 2002, ILR awarded him the Judge William B. Groat prize, the school’s highest honor.

At Proskauer, Paul was elected to its Executive Committee and served as co-chair of its global Labor & Employment Law Department, named during his tenure by The American Lawyer and Chambers USA as one of the premier U.S. practices. He is widely recognized as a leading U.S. labor and employment lawyer in such publications as Chambers Global and USA (Band 1), and Legal 500 (“Hall of Fame”). The National Law Journal selected Paul as one of “The Decade’s Most Influential Lawyers” – one of only three in the labor and employment law field. His peers elected him to the College of Labor and Employment Lawyers.

An active speaker and writer on labor and employment law issues, Paul’s recent publications include “One Dozen Years of Pyett: A Win for Unionized Workplace Dispute Resolution” in the American Bar Association Labor & Employment Law Journal (“ABA Journal”), Volume 36, Number 2 at 257, and “The PLA Alternative in an Increasingly Open Shop New York City Construction Market: The REBNY-BCTC Statement of Principles,” Volume 37 ABA Journal, Number 3 at 415. He is an Adjunct Professor at Cornell Law School, teaching “Current Issues in Collective Bargaining.”

Photo of Tony S. Martinez Tony S. Martinez

Tony Seda Martinez is an associate in the Labor & Employment Law Department and a member of the Labor-Management Relations and Employment Litigation practice groups.

Tony advises clients on a range of labor and employment matters. As part of his employment law practice…

Tony Seda Martinez is an associate in the Labor & Employment Law Department and a member of the Labor-Management Relations and Employment Litigation practice groups.

Tony advises clients on a range of labor and employment matters. As part of his employment law practice, Tony has represented clients in lawsuits alleging breach of contract, discrimination, harassment, and retaliation before federal and state courts and administrative agencies. He also assists employers with complex investigations matters and provides day-to-day counseling on employment law matters. Tony focuses his labor practice on representing public and private employers in grievance arbitrations and collective bargaining negotiations. He counsels clients across a number of industries including financial services, health care, sports leagues, transportation, and media.

Tony earned his J.D. from Rutgers Law School in 2018 where he was a member of the Rutgers Law Review. From 2022 to 2023, Tony served as a judicial law clerk to the Honorable José R. Almonte in the District of New Jersey.