[Federal Register Volume 75, Number 96 (Wednesday, May 19, 2010)]
[Rules and Regulations]
[Pages 27946-27948]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11966]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 212, 222, and 252

RIN 0750-AG70


Defense Federal Acquisition Regulation Supplement; Restrictions 
on the Use of Mandatory Arbitration Agreements (DFARS Case 2010-D004)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Interim rule with request for comments.

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SUMMARY: DoD is issuing an interim rule to implement section 8116 of 
the DoD Appropriations Act for Fiscal Year 2010. Section 8116 restricts 
the use of mandatory arbitration agreements when using funds 
appropriated or otherwise made available by this DoD Appropriations Act 
to award contracts that exceed $1 million. It allows the Secretary of 
Defense to waive applicability to a particular contractor or 
subcontractor, if determined necessary to avoid harm to national 
security.

DATES: Effective date: May 19, 2010.
    Comment date: Comments on this interim rule should be submitted in 
writing to the address shown below on or before July 19, 2010, to be 
considered in the formation of the final rule.

ADDRESSES: You may submit comments, identified by DFARS Case 2010-D004, 
using any of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments.
    E-mail: dfars@osd.mil. Include DFARS Case 2010-D004 in the subject 
line of the message.
    Fax: 703-602-0350.
    Mail: Defense Acquisition Regulations System, Attn: Mr. Julian E. 
Thrash, OUSD (AT&L) DPAP (DARS), Room 3B855, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Mr. Julian E. Thrash, 703-602-0310.

SUPPLEMENTARY INFORMATION:

A. Background

    Section 8116 of the DoD Appropriations Act for Fiscal Year 2010 (FY 
10) (Pub. L. 111-118) prohibits the use of funds appropriated or 
otherwise made available by the FY 10 DoD Appropriations Act for any 
contract (including task or delivery orders and bilateral modifications 
adding new work) in excess of $1 million, if the contractor restricts 
its employees to arbitration for claims under title VII of the Civil 
Rights Act of 1964, or tort related to or arising out of sexual assault 
or harassment, including assault and battery, intentional infliction of 
emotional distress, false imprisonment, or negligent hiring, 
supervision, or retention, hereinafter the ``covered areas.''
    This rule does not apply to the acquisition of commercial items, 
including commercially available off-the-shelf items. After June 17, 
2010, section 8116(b) requires the contractor to certify compliance by 
subcontractors.
    Additionally, enforcement of this rule does not affect the 
enforcement of other aspects of an agreement that is not related to the 
covered areas.
    This rule allows the Secretary of Defense to waive applicability to 
a particular contract or subcontract, if determined necessary to avoid 
harm to national security.
    The following examples are provided to help determine 
applicability:
     A new order that exceeds $1 million using funds 
appropriated or otherwise made available by the FY 10 DoD 
Appropriations Act, placed against an indefinite-delivery/indefinite-
quantity contract for an applicable item or service, is covered by this 
restriction, regardless of whether the basic indefinite-delivery/
indefinite-quantity contract was covered.
     A funding modification adding more than $1 million of 
funds appropriated or otherwise made available by the FY 10 DoD 
Appropriations Act to a contract that does not contain the clause at 
252.222-7006 or 252.222-7999 (Deviation), is not covered.
     A bilateral modification adding new work that uses funds 
appropriated or otherwise made available by the FY 10 DoD 
Appropriations Act in excess of $1 million is covered.
     The award of a new order using funds appropriated or 
otherwise made available by the FY 10 DoD Appropriations Act with a 
value of $700,000 is not covered, since the value is under $1 million.
     A contract valued at $1.5 million awarded today, and only 
$10,000 in funds appropriated or otherwise made available by the FY 10 
DoD Appropriations Act will be obligated, with the remaining balance 
being FY 11 funding, is not covered, because the total value of funds 
appropriated or otherwise made available by the FY 10 DoD 
Appropriations Act is less than $1 million.
     An entity or firm that does not have a contract in excess 
of $1 million appropriated or otherwise made available by the FY 10 DoD 
Appropriations Act is not affected by the clause. The term 
``contractor'' is narrowly applied only to the entity that has the 
contract. Unless a parent or subsidiary corporation is a party to the 
contract, it is not affected.
    Contracting officers will modify existing contracts, on a bilateral 
basis, if using funds appropriated or otherwise made available by the 
FY 10 DoD Appropriations Act, when such funds will be used for 
bilateral modifications adding new work or orders that exceed $1 
million and are issued after the effective date of this interim rule. 
In the event that a contractor refuses to accept such a modification, 
the contractor will not be eligible for receipt of funds appropriated 
or otherwise made available by the FY 10 DoD Appropriations Act on such 
modifications or orders.
    This is a significant regulatory action and, therefore, was subject 
to review under section (6)b of Executive Order 12866, Regulatory 
Planning and Review, dated September 30, 1993. This is not a major 
rule.

B. Regulatory Flexibility Act

    DoD has prepared an initial regulatory flexibility analysis 
consistent with 5 U.S.C. 603. A copy of the analysis may be obtained 
from the point of contact specified herein. The analysis is summarized 
as follows:
    The objective of this rule is to implement section 8116 of the DoD 
Appropriations Act for Fiscal Year 2010 (Pub. L. 111-118). The clause 
at 252.222-7006, Restrictions on the Use of Mandatory Arbitration 
Agreements, prohibits the use of funds appropriated

[[Page 27947]]

or otherwise made available by the FY 10 DoD Appropriations Act for any 
contract (including task or delivery orders and bilateral modifications 
adding new work) in excess of $1 million, if the contractor restricts 
its employees to arbitration for claims under title VII of the Civil 
Rights Act of 1964, or tort related to or arising out of sexual assault 
or harassment, including assault and battery, intentional infliction of 
emotional distress, false imprisonment, or negligent hiring, 
supervision, or retention. Most contractors should not be impacted 
unless they have a covered claim. A significant number of small 
businesses provide only commercial items to the Government, and this 
rule does not apply to that portion of the business community. We 
anticipate that there will be limited, if any, additional costs imposed 
on small businesses unless there is, in fact, a covered claim filed 
against a particular contractor.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2010-D004) in 
correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply, because the rule does 
not impose any information collection requirements that require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

D. Determination To Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense (DoD) that urgent and compelling reasons exist to promulgate 
this interim rule without prior opportunity for public comments. This 
action is necessary because section 8116 of the DoD Appropriations Act 
for Fiscal Year 2010 (Pub. L. 111-118) prohibits the use of funds 
appropriated or otherwise made available by the FY 10 DoD 
Appropriations Act for any contract (including task or delivery orders 
and bilateral modifications) in excess of $1 million. This action is 
necessary to provide implementing language quickly to preclude a 
contracting officer from inadvertently awarding a contract that is not 
in compliance with the DoD Appropriations Act for Fiscal Year 2010. 
Pursuant to 41 U.S.C. 418b, DoD will consider public comments received 
in response to this interim rule in the formation of the final rule.

List of Subjects in 48 CFR Parts 212, 222, and 252

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.

0
Therefore, 48 CFR parts 212, 222, and 252 are amended as follows:

0
1. The authority citation for 48 CFR parts 212, 222, and 252 continues 
to read as follows:

    Authority:  41 U.S.C. 421 and 48 CFR chapter 1.

PART 212--ACQUISITION OF COMMERCIAL ITEMS

0
2. Section 212.503 is amended by revising the heading and adding 
paragraph (a)(xi) to read as follows:


212.503  Applicability of certain laws to executive agency contracts 
for the acquisition of commercial items.

    (a) * * *
    (xi) Section 8116 of the Defense Appropriations Act for Fiscal Year 
2010 (Pub. L. 111-118).
* * * * *

0
3. In section 212.504, add paragraph (a)(xix) to read as follows:


212.504  Applicability of certain laws to subcontracts for the 
acquisition of commercial items.

    (a) * * *
    (xix) Section 8116 of the Defense Appropriations Act for Fiscal 
Year 2010 (Pub. L. 111-118).
* * * * *

PART 222--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

0
4. Subpart 222.74 is added to read as follows:
Subpart 222.74--Restrictions on the Use of Mandatory Arbitration 
Agreements
Sec.
222.7400 Scope of subpart.
222.7401 Policy.
222.7402 Applicability.
222.7403 Waiver.
222.7404 Contract clause.

Subpart 222.74--Restrictions on the Use of Mandatory Arbitration 
Agreements


222.7400  Scope of subpart.

    This subpart implements section 8116 of the Defense Appropriations 
Act for Fiscal Year 2010 (Pub. L. 111-118).


222.7401  Policy.

    (a) Departments and agencies are prohibited from using funds 
appropriated or otherwise made available by the Fiscal Year 2010 
Defense Appropriations Act (Pub. L. 111-118) for any contract 
(including task or delivery orders and bilateral modifications adding 
new work) in excess of $1 million, unless the contractor agrees not 
to--
    (1) Enter into any agreement with any of its employees or 
independent contractors that requires, as a condition of employment, 
that the employee or independent contractor agree to resolve through 
arbitration--
    (i) Any claim under title VII of the Civil Rights Act of 1964; or
    (ii) Any tort related to or arising out of sexual assault or 
harassment, including assault and battery, intentional infliction of 
emotional distress, false imprisonment, or negligent hiring, 
supervision, or retention; or
    (2) Take any action to enforce any provision of an existing 
agreement with an employee or independent contractor that mandates that 
the employee or independent contractor resolve through arbitration--
    (i) Any claim under title VII of the Civil Rights Act of 1964; or
    (ii) Any tort related to or arising out of sexual assault or 
harassment, including assault and battery, intentional infliction of 
emotional distress, false imprisonment, or negligent hiring, 
supervision, or retention.
    (b) After June 17, 2010, no funds appropriated or otherwise made 
available by the Fiscal Year 2010 Defense Appropriations Act (Pub. L. 
111-118) may be expended unless the contractor certifies that it 
requires each covered subcontractor to agree not to enter into, and not 
to take any action to enforce, any provision of any agreement, as 
described in paragraph (a) of this section, with respect to any 
employee or independent contractor performing work related to such 
subcontract.


222.7402  Applicability.

    This requirement does not apply to the acquisition of commercial 
items.


222.7403  Waiver.

    The Secretary of Defense may waive the applicability of paragraphs 
(a) or (b) of 222.7401, in accordance with PGI 222.7403, to a 
particular contract or subcontract, if the Secretary or the Deputy 
Secretary personally determines that the waiver is necessary to avoid 
harm to national security interests of the United States, and that the 
term of the

[[Page 27948]]

contract or subcontract is not longer than necessary to avoid such 
harm. The Secretary of Defense shall transmit the determination to 
Congress and simultaneously publish it in the Federal Register, not 
less than 15 business days before the contract or subcontract addressed 
in the determination may be awarded.


222.7404  Contract clause.

    Use the clause at 252.222-7006 Restrictions on the Use of Mandatory 
Arbitration Agreements, in all solicitations and contracts valued in 
excess of $1 million utilizing funds appropriated or otherwise made 
available by the Fiscal Year 2010 Defense Appropriations Act (Pub. L. 
111-118), except in contracts for the acquisition of commercial items, 
including commercially available off-the-shelf items.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
5. Section 252.222-7006 is added to read as follows:


252.222-7006  Restrictions on the Use of Mandatory Arbitration 
Agreements.

    As prescribed in 222.7404, use the following clause:

Restrictions on the Use of Mandatory Arbitration Agreements (Date)

    (a) Definitions. As used in this clause--
    Covered subcontractor means any entity that has a subcontract 
valued in excess of $1 million, except a subcontract for the 
acquisition of commercial items, including commercially available 
off-the-shelf items.
    Subcontract means any contract, as defined in Federal 
Acquisition Regulation subpart 2.1, to furnish supplies or services 
for performance of this contract or a higher-tier subcontract 
thereunder.
    (b) The Contractor--
    (1) Agrees not to--
    (i) Enter into any agreement with any of its employees or 
independent contractors that requires, as a condition of employment, 
that the employee or independent contractor agree to resolve through 
arbitration--
    (A) Any claim under title VII of the Civil Rights Act of 1964; 
or
    (B) Any tort related to or arising out of sexual assault or 
harassment, including assault and battery, intentional infliction of 
emotional distress, false imprisonment, or negligent hiring, 
supervision, or retention; or
    (ii) Take any action to enforce any provision of an existing 
agreement with an employee or independent contractor that mandates 
that the employee or independent contractor resolve through 
arbitration--
    (A) Any claim under title VII of the Civil Rights Act of 1964; 
or
    (B) Any tort related to or arising out of sexual assault or 
harassment, including assault and battery, intentional infliction of 
emotional distress, false imprisonment, or negligent hiring, 
supervision, or retention; and
    (2) Certifies, by signature of the contract, for contracts 
awarded after June 17, 2010, that it requires each covered 
subcontractor to agree not to enter into, and not to take any action 
to enforce, any provision of any agreements, as described in 
paragraph (b)(1) of this clause, with respect to any employee or 
independent contractor performing work related to such subcontract.
    (c) The prohibitions of this clause do not apply with respect to 
a contractor's or subcontractor's agreements with employees or 
independent contractors that may not be enforced in a court of the 
United States.
    (d) The Secretary of Defense may waive the applicability of the 
restrictions of paragraph (b) of this clause in accordance with 
Defense Federal Acquisition Regulation Supplement 222.7403.


(End of clause)

[FR Doc. 2010-11966 Filed 5-18-10; 8:45 am]
BILLING CODE 5001-08-P