DOL Issues Final Rule on Nondisplacement of Service Contract Workers by Federal Contractors

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The U.S. Department of Labor announced a final rule implementing Executive Order 14055, which requires federal contractors and subcontractors on certain successor federal service contracts (those that follow any other contract for the same or similar work) to offer employment to service employees on predecessor contracts.

The final rule and its FAQs explains the following, among other things:

  • It applies to any contract, contract-like instrument or subcontract for services covered by the Service Contract Act (SCA). It does not apply to contracts or subcontracts under the simplified acquisition threshold. In addition, the contracting agency may waive the requirements of the EO under certain circumstances.
  • Contracting agencies will determine whether a solicitation for services is covered by the EO, and whether to include a location-continuity requirement or preference. They must also send the successor contractor a certified list of names of the employees working under the predecessor contract.
  • Predecessor contractors must provide a certified list of names, contact information, and contract/subcontract anniversary dates for all service employees working under the contract/subcontracts, not less than 30 calendar days before completion of its services. They must also update the list for any changes not less than 10 business days before completion of its services. In addition, they must provide written notice, in an appropriate language, to the service employees under the contract of their possible right to employment under the successor contract. This notice may be done by posting or individually.
  • Successor contractors must make written job offers to service employees employed under the predecessor contract – even if it does not receive the certified list of names. Employees must be given at least 10 business days in which to accept. The offer need not be for a similar position; just one for which the employee is qualified. In addition, the offer may include different employment terms and conditions, including pay, benefits, and remote work options (which must be made equally to all in similar occupational classifications on the contract), as long as the different terms are not offered to discourage acceptance.
  • Contractors must keep relevant records for at least 3 years.

The final rule takes effect on February 12, 2024, and will apply only to contract solicitations issued by the Federal Acquisition Regulatory (FAR) Council on or after that date.