DOD sets rule for overriding arbitration ban

Rule applies to contractors with employee arbitration agreements

In the name of national security, Defense Department officials issued an interim rule today that gives them the right to waive any funding restrictions on contractors that required their employees to sign arbitration agreements.

Under the interim rule, the defense secretary can let DOD use a particular contractor or subcontractor, even if they have the mandatory arbitration agreements with employees. However, officials first must prove that the work is necessary to avoid harm to the nation's security, according to a notice in today’s Federal Register.

The rule is the result of a provision in the fiscal 2010 Defense Department Appropriations Act. The law restricts DOD from using money from this year’s budget for contracts if the contractor demands that its employees sign arbitration agreements. The rule applies to task and delivery orders as well as to contract modifications, which add work to a current contract, as long as they’re worth at least $1 million.

The law applies only to fiscal 2010 funds and its restrictions don’t apply to buying commercial items, including commercially available off-the-shelf products.

President Barack Obama signed the appropriations bill into law Dec. 19, 2009.

The rule goes into effect today and is open for comment until July 19.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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