DOL Announces Effective Date of Rule on Nondisplacement of Qualified Workers under Service Contracts | Practical Law

DOL Announces Effective Date of Rule on Nondisplacement of Qualified Workers under Service Contracts | Practical Law

The Department of Labor (DOL) has announced that its final rule implementing Executive Order 13495 will be effective on January 18, 2013. The Executive Order requires contractors and subcontractors offered a federal service contract on or after the effective date to offer employees employed under a predecessor contract a right of first refusal of employment.

DOL Announces Effective Date of Rule on Nondisplacement of Qualified Workers under Service Contracts

by PLC Labor & Employment
Law stated as of 31 Jan 2020 • USA (National/Federal)
The Department of Labor (DOL) has announced that its final rule implementing Executive Order 13495 will be effective on January 18, 2013. The Executive Order requires contractors and subcontractors offered a federal service contract on or after the effective date to offer employees employed under a predecessor contract a right of first refusal of employment.
In a notice published December 21, 2012, the DOL announced that its final rule implementing Executive Order 13495 will be effective January 18, 2013. This is also the effective date of the amended Federal Acquisition Regulation (FAR) that incorporates the contract clause set out in the Executive Order.
The Executive Order requires that federal service contracts that are solicited or entered on or after the effective date must include a clause requiring contractors and subcontractors to offer employees employed under a predecessor contract a right of first refusal of employment. The right of first refusal under the successor contract must be provided to employees who performed the same or similar work at the same work location under the predecessor contract. There can be no employment openings under the contract until the contractors and subcontractors have made an express offer of employment to predecessor employees. The stated purpose of the Executive Order is to:
  • Reduce disruption in the delivery of services.
  • Provide an experienced and trained workforce that is familiar with the operations of the contracting department or agency.
However, the Executive Order provides several exceptions to the first refusal requirement. For example:
  • If the head of a contracting department or agency finds that the Executive Order would impair the ability of the federal government to procure services on an economical and efficient basis, he may exempt the department or agency from the first refusal requirement.
  • The successor contractor and subcontractors:
    • can determine the number of employees they need and may choose to employ fewer employees than the predecessor contractor employed in connection with performance of the work;
    • may employ any employee who worked for the contractor or subcontractor for at least three months immediately preceding the commencement of this successor contract and who would otherwise face lay-off or discharge; and
    • are not required to offer employment to an employee of a predecessor contractor if the successor contractor or subcontractor reasonably believes that the employee has failed to perform suitably on the job.
Contractors and subcontractors that do not comply with the Executive Order may be sanctioned by the Secretary of Labor. The DOL's final rule implementing the Executive Order provides detailed guidance on the requirements for successor contractors and subcontractors that work on federal service contracts. It is not clear how the NLRB will apply its rules regarding successor employers who can, under operation of the NLRA, be required to bargain with the union that represents its predecessor's employees, depending on the extent to which it continues the operation of the predecessor employer.

UPDATE:

On October 31, 2019, President Trump issued Executive Order 13897 "Improving Federal Contractor Operations by Revoking Executive Order 13495" (84 FR 59709, November 5, 2019). Executive Order 13897 directed the Secretary of Labor to promptly rescind regulations and other materials implementing or enforcing Executive Order 13495.
On January 31, 2020 the DOL Wage and Hour Division (WHD) published a final rule rescinding the regulations on nondisplacement of qualified workers under service contracts. This rule is effective January 31, 2020. (85 FR 5567-01 (Jan. 31, 2020).)