## Facts

- The President issued Executive Order 12,954 under the Federal Property and Administrative Services Act (Procurement Act) directing contracting agencies not to contract (generally for contracts over $100,000) with employers that permanently replace lawfully striking employees.
- The Order asserted procurement-related justifications, including that permanent replacements can prolong strikes and impair contractors’ performance by losing experienced workers.
- The Order instructed the Secretary of Labor to issue implementing regulations and enforce the policy, including recommending contract termination for covered employers.
- Under the National Labor Relations Act (NLRA) and Supreme Court precedent, an employer may hire permanent replacements during a lawful economic strike as part of the “free play of economic forces.”
- Business associations and employers sued the Secretary of Labor, alleging the Order and regulations conflicted with the NLRA and were judicially reviewable.
- The district court held the challenge not judicially reviewable and, alternatively, upheld the Order; the plaintiffs appealed.

## Issues

1. Whether a challenge alleging that an executive order and implementing regulations conflict with a federal statute is judicially reviewable.
2. Whether Executive Order 12,954 and its regulations conflict with the NLRA by penalizing employers for hiring permanent replacements during lawful economic strikes.

## Decision

- The D.C. Circuit held the challenge was judicially reviewable because the claim was that executive action exceeded authority granted by Congress and conflicted with a federal statute.
- The court reversed the district court and held Executive Order 12,954 and the implementing regulations were invalid because they conflicted with the NLRA.
- The court rejected the view that the Procurement Act authorized the President to displace other statutory schemes; it read the Act’s “paramount” language as limited to procurement-related statutes, not substantive regulatory regimes like federal labor law.
- The court concluded the Order was regulatory in nature, sought to alter the labor-management economic balance, and therefore could not stand in light of NLRA policies permitting permanent replacements.

## Legal Principles

- Executive orders grounded in statutory authority are subject to judicial review when challenged as inconsistent with congressional statutes.
- The Procurement Act’s authority to pursue “economical and efficient” procurement does not permit executive action that conflicts with other federal statutes governing the same subject matter.
- Under NLRA preemption principles, government action may not intrude into conduct Congress intended to leave to the “free play of economic forces,” including economic self-help permitted by federal labor law.
- Government “market participant” rationales do not justify broad procurement rules that operate as general labor-policy regulation affecting a substantial segment of the economy.

## Conclusion

The court held that executive procurement authority cannot be used to penalize employers for conduct the NLRA permits, and it invalidated the federal contracting ban on employers that hire permanent replacements for lawfully striking workers.


Chamber of Commerce of U.S. v. Reich, 74 F.3d 1322 (D.C. Cir. 1996)