On May 19, 2010, DoD issued an interim rule implementing Section 8116 of the FY2010 Defense Appropriations Act. This rule, which does not apply to commercial items, prohibits use of appropriated funds for contracts, task/delivery orders, or bilateral modifications in excess of $1 million, unless the contractor agrees not to enforce, or enter into, agreements with employees or independent contractors that require arbitration of certain civil rights claims or numerous tort actions arising out of or relating to sexual assault or harassment.

In addition, as of June 17, 2010, no appropriated funds 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, an agreement requiring arbitration of the claims discussed above, with respect to any employee or independent contractor performing work related to such subcontract.

This rule does not affect the enforcement of other aspects of an agreement that are not related to arbitration of civil rights claims or tort actions relating to sexual assault or harassment. 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.

DoD has provided examples to help contractors determine applicability of the rules:

• A new order that exceeds $1 million using funds appropriated or otherwise made available by the FY10 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 bilateral modification adding new work that uses funds appropriated or otherwise made available by the FY10 DoD Appropriations Act in excess of $1 million is covered.

• A contract valued at $1.5 million awarded today, and only $10,000 in funds appropriated or otherwise made available by the FY10 DoD Appropriations Act will be obligated, with the remaining balance being FY11 funding, is not covered, because the total value of funds appropriated or otherwise made available by the FY10 DoD Appropriations Act is less than $1 million.