NEW Government Contractor Hiring Obligations – Non-Displacement of Qualified Workers Rule

On December 14, 2023, the U.S. Department of Labor (DOL) published a Final Rule implementing Executive Order 14055, Non-Displacement of Qualified Workers Under Service Contracts, aimed at preventing disruptions in federal services by encouraging use of the same workers when the performance of a federal service contract shifts from one contractor to another.

Executive Order 14055 and the Final Rule essentially provide that a successor contractor must hire or offer the right of first refusal to the predecessor’s employees whenever a service contract with the government expires and a follow-on contract is awarded.

Effective February 12, 2024, Executive Order 14055 and the Final Rule apply to any contract, contract-like instrument, or subcontract for services entered into by the federal government or its contractors that is covered by the Service Contract Act (SCA). The current simplified acquisition threshold amount for the SCA to apply to a federal contract is $250,000.

For both predecessor and successor contractors, the new Final Rule implementing Executive Order 14055 contains a number of changing obligations that differ from the prior Obama-Era Executive Order 13495 (with the same subtitle) – including:

Similarly, Executive Order 14055 and the Final Rule place additional responsibilities on contracting agencies (e.g., the Department of Defense, Department of the Navy) that did not exist before – including:

A “senior official” within an agency may except a particular contract from the employment requirements of Executive Order 14055 and the Final Rule by, no later than the solicitation date, providing a specific written explanation of why at least one of the particular circumstances enumerated in the order as grounds for exception exists with respect to that contract.

The agency must ensure that the incumbent contractor notifies affected employees and their collective bargaining representatives, if any, in writing of the agency’s determination to grant an exception. Agencies must publish a description of each exception granted on a centralized public website and must also report all exceptions granted to the Office of Management and Budget (OMB) on a quarterly basis.

An agency must consider when preparing a solicitation for a service contract that succeeds a contract for performance of the same or similar workwhether performance of the contract in the same locality as the predecessor is reasonably necessary to ensure economical and efficient provision of services.

If the agency determines that performance of the contract in the same locality or localities is reasonably necessary to ensure economical and efficient provision of services, then the agency will, to the extent consistent with law, include a requirement or preference in the solicitation for the successor contract that it be performed in the same locality.

While the changes under Executive Order 14055 and the Final Rule may seem small, contractors must take everything into account when dealing with the federal government in order to stay in compliance and out of hot water.

Questions? Concerns? Contact one of Reaves Gov Con Group’s skilled government contracts attorneys today to discuss. We are happy to help navigate your way through.

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