Labor relations costs
Contractors must exclude from billings any costs related to persuading employees about unionization or collective bargaining, as these are unallowable under federal contracts.
Overview
FAR 31.205-21 addresses the allowability of labor relations costs in government contracts. It distinguishes between costs that are allowable—such as those incurred to maintain satisfactory relations between contractors and employees (e.g., shop stewards, labor management committees, employee publications)—and those that are unallowable, specifically costs related to persuading employees about unionization or collective bargaining rights. The regulation implements Executive Order 13494, making it clear that any costs associated with influencing employees' decisions regarding organizing or bargaining collectively are unallowable. This includes costs for preparing materials, hiring consultants, holding meetings, or conducting related activities during work hours.
Key Rules
- Allowable Labor Relations Costs
- Costs for maintaining good labor relations (excluding prohibited activities) are allowable.
- Unallowable Persuasion Activities
- Costs to persuade employees regarding unionization or collective bargaining are unallowable, including materials, legal counsel, meetings, and planning activities.
Responsibilities
- Contracting Officers: Must ensure contractors do not claim unallowable labor persuasion costs.
- Contractors: Must segregate and exclude unallowable labor persuasion costs from billings and maintain documentation.
- Agencies: Should monitor compliance with Executive Order 13494 and FAR cost principles.
Practical Implications
- This section exists to prevent the use of federal funds for anti-union or union-persuasion activities.
- Contractors must carefully track labor relations costs and distinguish between allowable and unallowable expenses.
- Common pitfalls include inadvertently including unallowable persuasion costs in indirect cost pools or failing to document the nature of labor relations activities.