Final rules implementing Executive Order 13495 were recently issued by DOL. The Order, titled “Nondisplacement of Qualified Workers Under Service Contracts,” requires certain successor federal government contractors to grant the right of first refusal to the predecessor contractor’s employees.
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Download NowThe effective date of the final regulations is currently pending until additional regulations are established. However, DOL has stated that it will publish a notice in the Federal Register announcing the effective date once it is determined.
Final Rule Basics
In order to prepare for the final rule, the following are the basics for what contractors should know:
- Predecessor employees must be engaged in the performance of the same or similar services, at the same location, and would be terminated as a result of the award to a successor contractor.
- Employment openings cannot be offered to nonpredecessor employee prospects until a right of first refusal has been provided to the predecessor employees.
- If a contractor terminates its relationship with a subcontractor under a particular contract and decides to perform the work itself, the contractor is required to offer employment to the subcontractor’s employees who would otherwise be displaced.
At least 10 days’ notice must be given to affected employees, and the notice must state the period within which the offer must be accepted. In addition, no later than 10 days before the completion of the predecessor contract term, the predecessor contractor must provide the successor contractor with a certified list of names and employment anniversary dates of all the service employees working under the contract and its subcontractors during the last month of contract employment.
Exceptions
There are some exceptions to the final rule—not covered are short-term employees; employment where federal service work constitutes only part of the employee’s job; managerial and supervisory staff; certain contracts or subcontracts awarded for services produced or provided by persons who are blind or have severe disabilities; and contracts and subcontracts under the simplified acquisition threshold of $150,000, even when the prime contract is for a greater amount.
In order to be protected, an employee must have worked for the predecessor contractor or subcontractor for at least 3 months immediately before the start of the follow-on contract. In addition, the employee must not have been otherwise subject to termination, and must be a service employee within the meaning of the Service Contract Act. The final rule does not apply to any employee who the successor contractor reasonably believes has failed to sufficiently perform the job, on the basis of past performance.
Penalties for Noncompliance
If a covered contractor fails to comply with the Executive Order, DOL has the power to issue sanctions and remedies, including payment of lost wages, and for willful violations, to debar the contractor for up to 3 years. DOL may also withhold contract funds.