The Department of Defense is seeking comment on a proposed amendment to the Federal Acquisition Regulation that would bar contractors from being reimbursed for costs incurred in promoting or opposing union organizing.

The Civilian Agency Acquisition Council and the Defense Acquisition Council published a proposal for comment that would amend the FAR to disallow the costs of any activities "undertaken to persuade employees" whether or not to organize and bargain collectively through a union.

The proposal implements and largely tracks the language of Executive Order 13494, one of three pro-labor Executive Orders affecting employees of government contractors issued by President Obama in early 2009 that revoked Bush administration Executive Orders and shifted federal labor policy, according to an alert by attorneys in the law firm Jenner & Block.

The Executive Order says the move will promote economy and efficiency in Government contracting by eliminating certain costs not directly related to the contractors ' provision of goods and services, and is "consistent with Government policy to remain impartial concerning any labor-management dispute involving Government contractors."

If adopted as proposed, as is expected, the proposal could impact decisions about whether to educate employees about union membership because they may not want to incur the costs anymore, says Cynthia Robertson, a government contracts emerging issues attorney with Jenner & Block and one of the alert's authors.

As proposed, and in keeping with the order, unallowable costs include: preparing and distributing materials; hiring or consulting legal counsel or consultants; holding meetings (including paying the salaries of the attendees at meetings held for this purpose); and planning or conducting activities by managers, supervisors, or union representatives during work hours, when they are undertaken to persuade employees to exercise or not to exercise, or concern the manner of exercising, rights to organize and bargain collectively.

Allowable labor relations costs include costs incurred in maintaining satisfactory relations between the contractor and its employees (other than those unallowable, as specified) such as: Costs of shop stewards; labor management committees; employee publications; and other related activities.

Practically speaking, Robertson says businesses will have to keep careful tabs on the specific costs that are permitted and not permitted. "They'll basically have to open up their records and show the government how they're assessing whether those costs are allowable or not," she says.

As a result, she says they "may feel pressure not to educate employees about union membership in the same way they had the freedom to before, or they may avoid engaging in some activities in order to avoid incurring costs that aren't reimbursable."

According to the Federal Register Notice, the Councils say the proposed rule isn't expected to have a significant economic impact on most small entities because most contracts awarded to small businesses use simplified acquisition procedures or are awarded on a competitive fixed-price basis, and don't require application of the rule's cost principles.

Comments on the proposal, which may be submitted online, are due by June 14.