Real Discussion of the COVID-19 Vaccine Mandate for Contractors and Subcontractors

Hilary Cairnie, Troutman Pepper -&- Jay Blindauer, Blindauer Law PLLC

The first author, Hilary Cairnie, is a partner with Troutman Pepper Hamilton Sanders LLP (“Troutman Pepper”), and the head of the government contracts practice for the firm.   Mr. Cairnie has been practicing in the field for over thirty years, and before starting his legal career, he worked as an engineer for companies that contracted with the U.S. Department of Defense (“DoD”).

The second author, Jay Blindauer, is the firm lawyer for Blindauer Law PLLC (“BLP”), which is hosting this legal blog.   His background is available here.

Disclaimer: This blog piece is not, nor is it intended to be, legal advice.   Legal advice requires a precise understanding of specific facts in conjunction with a current understanding of the law (which, in this instance, is changing daily).   Consequently, reading this blog piece is not a substitute for engaging a lawyer and obtaining actual legal advice.

Introduction

You’ve probably read your share of legal blogs about the September 9, 2021 COVID-19 vaccine mandate for contractors and subcontractors.   Likely, those blogs did not say much, if anything, substantive.   If that is your preference, stop reading.   This is not the legal blog for you.   Here, we provide unvarnished discussion, in Q&A format, about the legal issues and problems with the vaccine mandate.   And to make it more interesting, we both provide answers, so that the reader can obtain the benefit of differing concerns and viewpoints.  

But first, we lay out the key administrative milestones that cumulatively have resulted in this most recent compliance headache (a.k.a. the “Vaccine Mandate”).   This compliance headache is shared by procuring Agencies, prime contractors, subcontractors, and supply chain vendors, among others.   We also synopsize the latest pronouncements from the FAR Council (“FARC”), DoD, GSA, and others—in the form of FAR deviations.

Where We Have Been:

On January 20, 2021, President Biden signed Executive Order No. 13,991 (Protecting the Federal Workforce and Requiring Mask-Wearing).^[1]   The Order, among other things, directed Agencies “to require compliance with CDC guidelines with respect to wearing masks, maintaining physical distance, and other public health measures by: on-duty or on-site Federal employees; on-site Federal contractors; and all persons in Federal buildings or on Federal lands.”^[2]   The Order also created the Safer Federal Workforce Task Force (the “SFW Task Force”), which is co-chaired by GSA Administrator Robin Carnahan, OPM Director Kiran Ahuja, and White House COVID-19 Response Coordinator Jeffrey Zients.^[3]

On January 21, 2021, President Biden signed Executive Order No. 13,999 (Protecting Worker Health and Safety).^[4]   The Order directed OSHA to issue guidance on workplace safety vis-à-vis COVID-19, and required specific Agencies to collaborate on devising other measures to mitigate the pandemic.^[5]

On January 29, 2021, OSHA issued its initial guidance on protecting workers from the workplace transmission of COVID-19.^[6]   OSHA has updated that guidance twice since.^[7]

On June 21, 2021, OSHA put into effect its Emergency Temporary Standard (“ETS”) for workplaces providing healthcare or healthcare support services (the “Healthcare ETS”).^[8]   The Healthcare ETS does not require that employees are vaccinated, only that “[t]he employer must support COVID-19 vaccination for each employee by providing reasonable time and paid leave (e.g., paid sick leave, administrative leave) to each employee for vaccination and any side effects experienced following vaccination.”^[9]

On July 26, 2021, “Department of Veterans Affairs Secretary Denis McDonough announced he will make COVID-19 vaccines mandatory for Title 38 VA health care personnel[.]”^[10]

On July 29, 2021, the White House made this announcement:

“[E]very federal government employee and onsite contractor will be asked to attest to their vaccination status.   Anyone who does not attest to being fully vaccinated will be required to wear a mask on the job no matter their geographic location, physically distance from all other employees and visitors, comply with a weekly or twice weekly screening testing requirement, and be subject to restrictions on official travel.”^[11]

Further:

“Today, the President will announce that he is directing the Department of Defense to look into how and when they will add COVID-19 vaccination to the list of required vaccinations for members of the military.”^[12]

On September 9, 2021, President Biden issued Executive Order No. 14,042 (Ensuring Adequate COVID Safety Protocols for Federal Contractors),^[13] Executive Order No. 14,043 (Requiring Coronavirus Disease 2019 Vaccination for Federal Employees),^[14] and a pronouncement that he was ordering OSHA to create a new ETS.^[15]   Specifically, the President ordered OSHA to issue an ETS for each employer with at least 100 employees to require those employees to be “fully vaccinated or show a negative test at least once a week.”^[16]   Legal issues with the President’s September 9 vaccine mandates are discussed in detail in BLP’s September 15 blog titled, “The COVID-19 Vaccine Mandate Legal Donnybrook Has Arrived[.]”^[17]

On September 16, 2021, the SFW Task Force issued guidance (in Q&A form) on the implementation of the Federal employee vaccine mandate.^[18]   That guidance has been updated twice since.

On September 24, 2021, the SFW Task Force issued guidance on the implementation of the Federal contractor and subcontractor vaccine mandate.^[19]

On September 30, 2021, the FARC issued implementation guidance to procuring Agencies, including providing its recommended FAR Deviation Clause 52.223-99 (Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors).^[20]   At least initially, Executive Order No. 14,042 is being implemented by each procuring Agency developing its own FAR Subpart 1.4 deviation.   Hence, contractor/subcontractor will need to check requirements on an Agency-by-Agency basis.

Also on September 30, 2021, GSA issued its FAR deviation for implementing Executive Order No. 14,042.^[21]   GSA arguably failed to comply with FAR 1.501 by not publishing a proposed FAR deviation in the Federal Register, and not permitting a comment period of 30-60 days.^[22]   Further, GSA’s FAR deviation goes well beyond Executive Order No. 14,042 by imposing the vaccine mandate on supply contracts/orders.^[23]   And even though GSA recognizes that a contract/order modification must be bilaterally executed, for a contractor that refuses the modification, GSA threatens to “hid[e] contractor information on GSA websites and/or e-tools[,]” and “[f]lag[ ] contractors that have not accepted the modification[.]”^[24]

Also on September 30, 2021, the Chair of the Civilian Agency Acquisition Council (“CAAC”), Mr. William Clark, issued a memorandum encouraging procuring Agencies to adopt without emendation FAR Deviation Clause 52.223-99.^[25]

On October 1, 2021, DoD issued its FAR deviation, directing DoD Contracting Officers to employ DFARS Deviation Clause 252.223-7999 (Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors (Deviation 2021-O0009)), which is FAR Deviation Clause 52.223-99 by a different name.^[26]   Like many other procuring Agencies, DoD’s implementation encourages Contracting Officers to incorporate the clause into supply contracts/orders, and contracts/orders for services or construction that are at or below the simplified acquisition threshold (presently $250,000, unless the procurement meets a FAR 2.101 contingency/disaster exception).^[27]

Also on October 1, 2021, the VA,^[28] Homeland Security,^[29] and NASA^[30] issued their FAR deviations.

On October 4, 2021, Department of Justice issued its FAR deviation.^[31]

On October 5, 2021, Department of Commerce issued its FAR deviation.^[32]

On October 7, 2021, Department of Treasury issued its FAR deviation.^[33]

On October 8, 2012, Department of Interior issued its FAR deviation.^[34]

More agencies have published their FAR deviations on acquisition.gov, and more will continue to do so up to the October 15, 2021 deadline.   Generally, procuring Agencies seem to be adopting the FARC-recommended clause without changes.   However, each procuring Agency has a different view as to when to apply the clause.

On October 12, 2021, OSHA sent its draft ETS to the White House for review, signaling that it may soon issue its ETS for employers with at least 100 employees.

Where We Are Going:

No later than October 15, 2021, procuring Agencies must issue their FAR deviations.

From October 15, 2021 on, all covered solicitations are supposed to include the mandatory vaccination requirement, and any option exercise, extension, or new order is supposed to include the requirement.

By November 2, 2021, U.S. Air and Space Force servicemembers are supposed to be fully vaccinated.^[35]

From October 15 to November 14, 2021, the FARC encourages a procuring Agency to add the Vaccine Mandate to a newly awarded contract that is against a covered solicitation that was issued before October 15.

From November 14, 2021 on, all newly awarded covered contracts are supposed to include the requirement, regardless as to when the underlying solicitation was issued.

By November 17, 2021, the Case Report is due for FAR Case No. 2021-021, which may lead to a permanent change to the FAR for the Executive Order No. 14,042 vaccine mandate.^[36]

By November 22, 2021, 5 U.S.C. § 2105 Government employees are supposed to be fully vaccinated.

By November 28, 2021, U.S. Navy and Marine Corps servicemembers are supposed to be fully vaccinated.

By December 2, 2021, U.S. Air Force Reserve and Air National Guard servicemembers are supposed to be fully vaccinated.

By December 8, 2021, all covered contractor/subcontractor employees are supposed to be fully vaccinated.

By December 15, 2021, U.S. Army active duty servicemembers are supposed to be fully vaccinated.

By December 28, 2021, U.S. Navy and Marine Corps Reserve servicemembers are supposed to be fully vaccinated.

By June 30, 2022, U.S. Army Reserve and National Guard servicemembers are supposed to be fully vaccinated.

FAR Deviation Clause 52.223-99

As stated, generally, the procuring Agencies are implementing the FARC-recommended clause without changes.   Here is what the clause says.

Application of the Clause

Executive Order No. 14,042 excluded contracts with Government Corporations, contracts and other agreements under the Indian Self-Determination and Education Assistance Act of 1975 (“ISDEAA”), Federal grants, contracts at or below the SAT, where an employee is performing outside the United States (as the United States is defined at FAR 2.101), and contracts/subcontracts for supplies.

Despite the scope of the Executive Order, the FARC’s September 30, 2021 guidance basically encourages procuring Agencies to include the recommended clause in all contracts except ISDEAA contracts, or except where an employee is performing outside the United States.^[37]   In turn, some procuring Agencies, most notably GSA, are moving aggressively in expanding the coverage of the mandate.   The significant difference between what the Executive Order requires, and what some procuring Agencies are attempting to implement, increases the ability of a contractor to refuse a contract modification.   More on that is discussed below.

Discussion

As elaborated upon above, the Government has made all of these pronouncements in rapid succession.   Many deadlines will soon arrive.   This is a novel circumstance.   What is a contractor or subcontractor to do?   We offer our answers to some of the biggest questions about the contractor/subcontractor COVID-19 vaccine mandate.    

Is the contractor/subcontractor vaccine mandate legally enforceable?

Jay:

No with a but, yes with an if.   Specifically, procuring Agencies are so eager to issue these FAR deviations that they are acting inattentively and are arguably failing to follow the FAR deviation process at FAR Subparts 1.4 and 1.5.   For a significant FAR revision (and a vaccine mandate clause qualifies), the deviation must be posted in the Federal Register, and 30-60 days must be allotted for public comments, even where urgent and compelling circumstances require prompt issuance of the deviation.^[38]   By failing to do so, a procuring Agency gives a contractor/subcontractor a weighty argument that the at-issue FAR deviation is not the product of proper rulemaking, and consequently is of no legal effect.^[39]  

That said, this is not an instance for a contractor/subcontractor to sleep on its rights.   If it is a bilateral contract modification, and the contractor/subcontractor wishes to take the position that the FAR deviation is a legal nullity, then the contractor/subcontractor should not sign it.   If it is a unilateral contract modification, the contractor/subcontractor should dispute it.   There is also a potential problem with the enforceability of FAR Deviation Clause 52.223-99 based upon the language of the clause, and insufficient Government funding, both addressed below.

Hilary:

Regardless of the rulemaking process for a FAR deviation, if the prime contractor agrees to the contract change without dispute, it becomes part of the contract.   In which case, it becomes an enforceable part of the contract.   That means administrative, civil, and criminal enforcement mechanisms potentially apply.  

Administratively, where applicable, the procuring Agency can invoke its rights under FAR Clause 52.215-2 (Audit and Records-Negotiation) to inspect contractor records to verify compliance with the Vaccine Mandate (review payroll records, vaccine records, exemption records, etc.).   Where non-compliance is detected, the procuring Agency can issue show cause or cure notices.   If non-compliance is not rectified, the procuring Agency could potentially withhold funds and/or default terminate the contract.  

Civilly, if the contractor misrepresents its compliance, it could be subject to civil enforcement under the False Claims Act.  

Criminally, in a particularly egregious case, if the contractor knowingly misrepresents its compliance, it could be subject to criminal enforcement.   So, yes, once the vaccine mandate becomes part of the contract, it is enforceable – until such time as it is determined to be legally unenforceable by court order.

But, what if the procuring Agency unilaterally imposes the deviation clause, without economic adjustment, without negotiation, and when the Agency issues a unilateral mod., exercises an option, or issues a new order?   Still enforceable?   Conventional wisdom says, arguably, yes.   However, at a minimum, the contractor would be entitled to invoke its rights under the contract-applicable changes clause (e.g., FAR Clause 52.243-4), including submitting a price adjustment claim and, if necessary, filing a claim appeal.   Conventional thinking would also discourage the contractor from exercising self-help remedies such as walking off the job site, attempting to terminate the contract, or stopping work – all of which could be viewed as anticipatory repudiation and grounds for default termination.   And a default termination is never a good idea, no matter the motivation.

That said, is there a courageous contractor out there who would resort to the disputes clause right out of the box and claim that the vaccine mandate constitutes a cardinal change (an illegal, out of scope, unenforceable contract modification)?   One argument could be that requiring the contractor to compel non-exempt employees to be injected with the vaccine is a compliance obligation that was not foreseeable at award, was not priced into the contract, and most importantly, was not a condition of employment at the time of hire.

Is the vaccine mandate enforceable by a prime contractor against a subcontractor?   The answer to this question necessarily turns on the specific subcontract in question.   If the subcontract was awarded before October 15, 2021, the clause ought not apply and the prime contractor ought not attempt to impose it.   But if that subcontract has any remaining unexercised option periods, then, the parties will likely be constrained by the terms as agreed and those terms could (1) allow the prime contractor to cram down the FAR deviation clause, or (2) allow the subcontractor to reject any such unilateral directive.  

Obviously, any subcontract awarded after October 15, 2021 for services valued above the SAT will likely include the FAR deviation clause, and, once included, that clause will be enforceable against the subcontractor.

What should a contractor/subcontractor think about or be wary of regarding the language of FAR Deviation Clause 52.223-99?

Jay:

The FARC-recommended deviation clause is woefully inadequate.   First, the clause should have included an upward equitable adjustment provision.   The Government is not going to be able to eschew liability by hiding behind the Sovereign Acts Doctrine (addressed below).   And a contractor/subcontractor is going to incur additional costs to implement the clause—e.g., employee paid time-off, potential overtime, other possible acceleration costs, tracking, paperwork, recordkeeping, reporting, added recruiting/onboarding costs for replacements, and potentially paying for specific types of COVID-19 testing (where unavailable).   At least the vaccines are free.  

Second, the clause should also have provided Government indemnification for contractors/subcontractors.   Since this is essentially the Government acting as a super-employer (because, at this point, the FAR 37.104(b) personal services prohibition is basically dead letter), the Government should first indemnify a contractor/subcontractor if an employee sues because of a vaccine injury.   Moreover, the Government should be jointly liable and indemnify a contractor/subcontractor when an employee sues because of an adverse employment action due to vaccine refusal.   It all costs money.   I hope the Government has appropriated sufficient funds because, presently, the Government is running on a continuing resolution, and Executive Order No. 14,042 expressly stated that “this order shall be implemented . . . subject to the availability of appropriations.”^[40]   And beyond fiscal law, there is the common law rule that new performance requires new consideration.^[41]   So, no money, no modification.^[42]

Third, the core of the clause states that “[t]he Contractor shall comply with all guidance, including guidance conveyed through Frequently Asked Questions, as amended during the performance of this contract, for contractor or subcontractor workplace locations published by the Safer Federal Workforce Task Force[.]”^[43]   How is there a meeting of the minds (consensus ad idem) for agreeing to a clause that the Government can unilaterally change at will?   This poses yet another enforceability issue.

Hilary:

I concur fully, but, would add that Executive Order No. 14,042 and the guidance issued to date urges procuring Agencies to include the Vaccine Mandate in all contracts – including contracts other than services (supplies, products, manufactured items).   Hence, agencies are supposed to include the mandate with service and construction contracts, and have discretion for inclusion in any other contracts.

For contractors delivering products and supplies, there may be room to negotiate with the procuring Agency to exclude the mandate – but the time to do that is before offers are submitted, before the solicitation closes, before it is too late to lodge a protest to formally challenge the Agency’s exercise of discretion.   The Vaccine Mandate is controversial and the discretionary inclusion of that mandate into solicitations for supplies and products – especially if the requirement is SOLELY for supplies and products – could be quite susceptible to protest scrutiny.

What about the Sovereign Acts Doctrine?

Jay:

The Sovereign Acts Doctrine (“SAD”) protects the Government from liability when the Government creates a new law and is merely acting in its capacity as a lawmaker or regulator (acting as “the Sovereign”), as opposed to the Government acting in its role as a contracting party, in which case the Government could be found liable.   For the SAD to apply, the at-issue new rule must be “public and general, [and] cannot be deemed specially to alter, modify, obstruct or violate the particular contracts into which it enters with private persons[.]”^[44]   Here, President Biden specially created Exec. Order No. 14,042 to apply to only contractors, and consequently the Executive Order arguably should not qualify as a public and general act.    Moreover, in his September 9 remarks, the President expressly stated “[i]f you want to work with the federal government and do business with us, get vaccinated.    If you want to do business with the federal government, vaccinate your workforce.”^[45]   Hence, the President admitted that he was using the Government’s bargaining power as a contracting party to implement the policy.   That is not a Sovereign Act, that is the Government wielding its contracting authority.   The Government must pay.   As stated above, no money, no modification.

Hilary:

I concur with the view that Federal agencies will have an uphill climb in asserting SAD as an affirmative defense to liability, whether the cause of action is sounding in tort for claims filed under the Federal Tort Claims Act, or in contract for a contractor claiming increased cost of performance.

And, I also agree with the premise that a contractor should be compensated under each of its covered contracts for the costs incurred (now and in the future) for complying with the Vaccine Mandate.   Practically speaking, the contractor’s best opportunity for doing so is in its price proposal submitted in response to a covered solicitation.   Barring that, it should be contemplated when the contractor is negotiating a bilateral modification that includes the Vaccine Mandate.   If faced with a unilateral modification, the contractor would draw upon the Changes and Disputes clauses to negotiate or litigate a price adjustment.  

Does a contractor/subcontractor have to agree to a modification including FAR Deviation Clause 52.223-99, or another form of the vaccine mandate?

Jay:

Probably not.   First, if the at-issue contract is commercial in nature, meaning it includes FAR Clause 52.212-4 (Contract Terms and Conditions-Commercial Items), then all modifications must be bilaterally agreed upon.^[46]   That is the clearest case for refusing a vaccine mandate mod.  

Second, as touched on above, if the Government does not possess funds to obligate to the contract to pay for the mod., then the Contracting Officer has no authority to issue the mod.   Particularly, the Anti-Deficiency Act at 31 U.S.C. § 1341 states that “an officer or employee of the United States Government . . . may not . . . make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation[.]”^[47]   So again, no money, no modification.

Third, unless the at-issue contract already contemplates required vaccinations (e.g., perhaps because the contract involves international travel), a modification to add in mandatory COVID-19 vaccinations could constitute a cardinal change.   Specifically, a cardinal change “occurs when the government effects an alteration in the work so drastic that it effectively requires the contractor to perform duties materially different from those originally bargained for.”^[48]   Here, the problem the Government faces is that mandating contractor/subcontractor employees to take COVID-19 vaccines is a requirement that is new, unprecedented, and akilter from the purpose of the contract.  In turn, it is inherently difficult for the Government to argue that a vaccine mandate falls within the ambit of what was bargained for at the time of contract formation.   Consequently, in many instances, a vaccine mandate mod. will be a cardinal change.   In which case, it is actually the Government breaching the contract, and it is entirely up to the contractor to accept the mod. and waive that breach, or cease all performance and walk away from the contract.    

Hilary:

For a contract awarded before October 15, 2021, the contractor is not obligated to accept such a modification.

For a covered contract awarded under a solicitation issued on or after October 15, 2021, the Deviation clause will be included, and will properly be part of the contract.

For a contract awarded after October 15, 2021 pursuant to a solicitation issued before October 15, whether the contractor is obligated to accept the change depends upon whether the solicitation was modified to include the Deviation clause, and what communications occurred before award.

But, the Government may not care whether the contractor bilaterally accepts the modification. Particularly, the FARC’s September 30 guidance mandates inclusion of the Deviation clause in any future option exercise, contract extension, or newly issued order under an IDIQ contract.    Hence, in those circumstances the Government intends to compel a contractor to comply with the requirement, even if the contractor does not voluntarily accept such a modification.   In which case, the Government arguably can issue a unilateral modification and force the prime contractor to invoke its rights under other contract provisions.    In turn, the prime contractor can issue a unilateral change to the subcontract and force the subcontractor to pursue its remedies under the subcontract’s version of a changes or disputes clause.

Of course, from a purely practical perspective, for many contractors, the Vaccine Mandate is actually a good thing.   No contractor wants to experience massive labor disruption on account of sick days attributed to COVID-19.   Contractors very much want a healthy workforce and, at least anecdotally, there is widely reported evidence that vaccinated folks are more resistant to catching COVID-19 and, if caught, tend to be less impacted by the illness compared to unvaccinated folks.   All that said, many contractors will actually choose to comply with the Vaccine Mandate and welcome it.   With the welcome mat, however, are many complicated considerations that will impact the employer/employee relationship.   Of course, those complications are less welcome.   But, when balancing the pros and the cons, there is a natural expectation that contractors will accept the mandate, without challenge, so long as there is a financial upside for doing so.

How far should the contractor/subcontractor go in granting medical or religious exemptions?

Jay:

Bottom line up front, the Religious Freedom Restoration Act of 1993 (“RFRA”) takes a giant bite out of Executive Order No. 14,042.   Whereas the medical exemption provided by the Americans with Disabilities Act (“ADA”) is narrow, as is the religious exemption provided by Title VII of the Civil Rights Act of 1964, the religious exemption provided by RFRA is broad and dominating.   RFRA protects “any exercise of religion, whether or not compelled by, or central to, a system of religious belief.”^[49]   And even where the imposed requirement is due to a “compelling governmental interest,” the “least restrictive means” must be exercised, meaning, in this case, reasonable accommodations such as testing, mask wearing, and/or telework.^[50]   And it’s not just the Federal Government that can be sued.   RFRA extends liability to any “person acting under color of law[,]” which, in this case, means contractor/subcontractor employers.^[51]  

So, if an employee says last week that the squirrel god told him/her not to take the vaccine, the employer cannot question the reasonableness of that assertion.   The employer can inquire into the sincerity of the assertion, such as by asking the employee to put it in writing, or maybe completing a sworn statement.   However, even that practically can only go so far, especially given that a person’s religious beliefs, and understanding of his/her beliefs, changes over time.   Likely, the employee will get the religious accommodation.   To better understand employee religious liberty rights, it is worth reading DOJ’s October 6, 2017 Governmentwide Memorandum on the Federal Law Protections for Religious Liberty.^[52]

Hilary:

As far as possible.   Executive Order No. 14,042 and all of the interim issued guidance, including the Deviation clauses, do not instruct contractors to look behind an employee’s claim of religious or medical grounds for an exemption.   Which means the contractor should be free to accept a statement from a physician simply asserting that the employee, for medical reasons, is not to be given the vaccine.   Owing to the very subjective nature of religious beliefs and the constitutional right of every citizen to freely worship in his/her chosen way, a signed statement from the employee claiming that his/her closely held religious belief prohibits him/her from being vaccinated should suffice for purposes of granting a religious exemption.   There is no guidance instructing that such an approach is in any way deficient or inadequate.

What do you do if you have an employee that refuses to get vaccinated but does not qualify for an exemption?

Jay:

This is the toughest question of all.   Practically, the first thing to do is to double-check and triple-check the conclusion that the person does not qualify for a medical or religious exemption.   Second, if there is a union involved, obviously the issue needs to be discussed with the union.   At the end of the day, if the employee refuses to get vaccinated and, in fact, does not qualify for an exemption, then the contractor/subcontractor has to decide if it is going to ignore the vaccine mandate (potentially for the legal reasons already discussed), or follow it.   And if the contractor/subcontractor is going to follow the vaccine mandate, then it is still prudent to take the issue to a higher-tier contractor or the Government and say that the person will not be removed or fired unless the higher-tier contractor or the Government says that it has to be done.   That way, whatever wrongful discharge or other legal action follows, the higher-tier contractor and/or the Government can potentially be jointly liable for the suit.   Indeed, the Government created this mess.   The Government should be responsible for it.    

Hilary:

Assuming that the contractor is absolutely subject to the vaccine mandate vis-a-vis the FAR Deviation clause or its equivalent, allowing unvaccinated and non-exempt employees to remain on the payroll would arguably constitute (1) a breach of contract, and (2) a material non-compliance with an Executive Order and its implementing regulations and contract clauses.   Either of which could give rise to a cure notice, show cause notice, suspension of work/stop work order, anticipatory repudiation, and potentially default termination.   So, the contractor has the very difficult choice of keeping its unvaccinated employees all the while breaching its contract(s), or firing the employees thereby allowing it to comply with the mandate, but risking a failure to timely perform the work for lack of trained employees.   This could lead the contractor right back to a cure notice, show cause, anticipatory repudiation, and/or default termination.  It is a potential Catch-22.

In any event, the contractor is in the best position to know which employees are not vaccinated, as well as their qualifications, experience, education, etc.   As a prelude to firing employees, it may be advantageous to ramp up recruiting activities to attract replacement workers who are equally qualified and vaccinated.   Of course, this may mean paying higher compensation to attract those new workers.   The increased cost, arguably, would be the subject of a claim for price adjustment stemming from compliance with the vaccine mandate.

Is it possible that the Government or a higher-tier contractor could be jointly liable if an employee sues?

Jay:

Yes.   One example as to how joint employer liability works in the government contracting context is the 2009 U.S. District Court for D.C. case of Harris v. Attorney General.^[53]   In the case, a DOJ program official directed the contractor to remove a pregnant employee, the contractor did so, and the employee sued DOJ under the Pregnancy Discrimination Act provisions of Title VII.   Applying a totality of the circumstances test (in this case, the Spirides test), the U.S. District Court found that, for the purpose of the complained of employment action, the pregnant contractor employee was a de facto Government employee.^[54]   Hence, where the Government presumes to act as a super-employer, and essentially directs adverse employment action against a contractor/subcontractor employee, the Government potentially turns itself into a joint employer for any follow-on lawsuit.   There is similar jurisprudence under tort law with the Logue de facto government employee test, and the Boyle Government Contractor Defense.^[55]   In sum, if the Government wants to play super-employer by forcing contractor/subcontractor employees to get vaccinated or else, the Government should accept the consequences of being a de facto employer.

Hilary:

Should an employer be on the receiving end of an employment lawsuit (say, for example, wrongful termination for employee refusal to get vaccinated, a very real scenario), it would understandably want to look for a scapegoat, ideally someone with deeper pockets.   Setting aside for the moment any consideration regarding available insurance protection, the Government’s pocket is no doubt quite a bit deeper than most contractors.   So, Jay makes a number of really good strategic points that should be considered when defending against this type of lawsuit.

What will compliance verification look like?

Jay:

Compliance verification has two big impediments.   First are the privacy concerns, be it medical information privacy requirements in the Family Medical and Leave Act, the Genetic Information Nondiscrimination Act, state law, etc.   The second is that the Government and/or a higher-tier contractor has to respect some modicum of the notion that, vis-à-vis any individual employee, they are not the employer.   Consequently, ideally, a Government official will just ask for an anonymized accounting of who is/is not vaccinated.    If the official asks for by-name information, consistent with the Privacy Act, it is appropriate to (1) refuse to share that information unless and until it can be transmitted directly into a Privacy Act System of Records, or (2) invite the Government officials to review the information at the contractor’s office, or virtually on the contractor’s information system.   If a Government official or a higher-tier contractor wants to see exemption requests, that is a slippery slope for the Government or a higher-tier contractor.   Not only does it come with the legal obligation to keep the information private, but if the Government or the higher-tier contractor wants to do any second-guessing, they might as well sign up for a lawsuit as a joint employer.   With these things in mind, it is significantly possible, maybe even likely, that compliance verification will be nothing more than a general certification to be completed by the contractor/subcontractor employer.

Hilary:

As stated above, where applicable, a procuring Agency can invoke its rights under FAR Clause 52.215-2 (Audit and Records-Negotiation) to inspect contractor records to verify compliance with the vaccine mandate (including reviewing payroll records, vaccine records, exemption records).   If the procuring Agency detects noncompliance, it can issue a show cause or cure notice to require a contractor to correct any deficiency or noncompliance.   This could lead to a withholding of funding and/or a default termination.   In more serious cases, if the contractor misrepresents its compliance status, the contractor could be subject to civil enforcement under the False Claims Act.   In a more egregious case where the contractor knowingly misrepresents its compliance, there is a possibility of criminal enforcement.   In sum, once the vaccine mandate is included in the contract (whether at inception or through a modification), and the contractor accedes to the mandate (as opposed to claiming breach of contract), then a procuring Agency has significant capability to enforce the mandate.

On a related note, in the case of schedule contracts awarded under GSA’s Federal Supply Schedule (“FSS”) program, and purchase orders awarded under such contracts are subject to GSA’s Class Deviation CD-2021-13, which covers service orders and supply orders.   Importantly, GSA has included in this Deviation a potentially big stick: for those contractors who refuse to accept the Deviation, GSA has threatened that it will hide contractor information on GSA websites and/or e-tools, and flag contractors that have not accepted the ostensible bilateral modification.   Call me cynical, but that sure sounds like the makings of a de facto or constructive debarment or exclusion from the FSS contracting program.

Can the Government or a higher-tier contractor be sued for breach of contract based upon imposing the vaccine mandate?

Jay:

Yes.   As mentioned above, in many instances, a vaccine mandate mod. will be a cardinal change.   In which case, it is actually the Government breaching the contract, and it is entirely up to the contractor to accept the mod. and waive that breach, or cease all performance and walk away from the contract.  

However, there is another obvious possibility for Government breach of contract.   There are many government contract cases that uphold the proposition that there is no greater form of interference in contract performance than denying a contractor/subcontractor his/her chosen workman.   See, e.g., Adv. Eng’g and Planning Corp., Inc., ASBCA Nos. 54044 and 53366, 05-1 BCA ¶ 32,806 (Nov. 19, 2004) (quoting Liles Constr. Co. v. United States, 455 F.2d 527, 532 (Ct. Cl. 1972)) (“There is no greater interference with the manner and method of performance, short of termination of the work itself, than the ordered replacement of the craftsmen originally chosen to do the work.”).   In fact, preventing a contractor from being able to use its chosen employees has been found to be both a constructive partial termination of the contract, and a contract breach.   See, e.g., Teresa A. McVicker, P.C., ASBCA No. 57487, 2012 WL 3645366 (Aug. 16, 2012), aff’d, 522 F. App’x 914 (Fed. Cir. 2013) (per curiam).   Accordingly, this is not a time to equivocate.   By imposing a vaccine mandate, the Government is really just directing a contractor/subcontractor to remove a certain percentage of employees.   And in some cases, those employees may not be replaceable.   Hence, depending upon the circumstances, the contractor/subcontractor may properly treat the action as a breach of contract.

Hilary:

Yes, yes, and yes, for all the reasons noted above.   But, just to torment Jay for a moment, there is a credible counter-position to any claim that the contractor is being deprived of its workforce of choice by imposition of the Vaccine Mandate.   The argument is that the Mandate actually does the opposite: it preserves the contractor’s workforce of choice by keeping the entire workforce healthy and reasonably protected from the ravages of COVID-19.   And, to drive the point home, the contractor’s legal assertion of Government breach may be undermined by the contractor’s own HR records when it shows the number of lost worker days attributed to COVID-19 before the vaccine versus after the vaccine, and the number of sick days attributed to the illness.   So, arguably, by enforcing the vaccine mandate, the contractor is actually preserving its workforce.   In turn, it is the individual employee who quits or is fired for refusing a vaccine jab that is depriving the employer of its desired workforce – not the Government and not the Vaccine Mandate.

What about the pending OSHA ETS?

Jay:

In the background is the upcoming OSHA ETS, which may impact many contractors and subcontractors regardless of Executive Order No. 14,042.   However, at this point (subject to change), the OSHA ETS should not be a significant factor in compliance decision-making.   First, the President’s pronouncement was for the ETS to require an employee to be “fully vaccinated or show a negative test at least once a week.”^[56]   So, with that flexibility, the ETS is not likely to rankle unions and employees to the same extent as Executive Order No. 14,042.   Second, the OSHA ETS is going to be judicially challenged.   In court, the Government must provide substantial evidence that its measures will adequately stop the workplace transmission of COVID-19.   And, for the reasons discussed in my September 15, 2021 blog piece, I believe, more likely than not, the ETS will legally fail.   Of course, this significantly depends upon how OSHA drafts the ETS.   The White House did not do the OSHA drafters any favors by precluding other methods of stopping COVID-19 workplace transmission.   In sum, it is fruitless to treat the OSHA ETS as a compliance problem unless and until it actually becomes a compliance problem.  

Hilary:

There is real question as to whether a vaccine mandate (a public health measure) fits in the scope of the OSH Act (a workplace safety statute).   Typically, all of the safety measures that OSHA imposes—be it red buttons, safety valves, all manner of tangible things for breathing, etc.—all these things are measures intended to remain at the job site or in the locker room when the employee walks out the door.   An employee cannot leave a vaccine at the workplace.   Hence, it will be interesting to see how the ETS holds up.   Nonetheless, at this juncture, I will let Jay do the speculating.          

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