OFCCP Week in Review: July 2022 #3 | Direct Employers Association
Friday, July 15, 2022: The Wage and Hour Division released its long-awaited proposed rule on “non-displacement of skilled workers under service contracts”
Moving Forward on President Biden’s November 23, 2021 Term Executive Order 14055 requiring successor federal service contractors and subcontractors to make good faith offers to hire the predecessor’s employees when taking over a federal service contract, the Wage and Hour Division (WHD) of the U.S. Department of work has published a proposed rule in the Federal Register (87FR 42552) entitled “Non-displacement of skilled workers under service contracts”. The Division intends the rule to keep people employed after contract federal service (that’s to say, most contracts over $250,000 covered by the Service Contracts Act 1965, as amended) has expired. As proposed, the rule would generally require contractors and subcontractors who work on covered federal service contracts to insert clauses in successor contracts involving the “same or similar” work for existing service contracts to provide employees with a right of first refusal for the positions under the contract for which these employees are qualified.
Executive Order 14055 builds on Executive Order 13495 that President Obama signed in 2009 but President Trump rescinded in 2019. The Obama order had previously established a no-travel requirement for federal service contractors , a agency press release on the proposed rule noted. The proposed right of first refusal would cover service workers on about 119,700 federal contracts, the agency statement also said.
The proposed rule would amend existing regulations to add a new section with four subparts and two schedules
The proposed rule claims that its authors designed the 45-page rule to promote economy and efficiency in procurement by modifying Title 29 of the Code of Federal Regulations by adding Part 9, with four subsections:
- Subpart A deals with general matters, including the purpose and scope of the rule, and the definitions, coverage, exclusions and exceptions that the rule provides pursuant to the EO
- Subpart B establishes requirements for contracting agencies and contractors to comply with the Order.
- Subpart C specifies standards and procedures related to the receipt of complaints, investigations and appeals.
- Subpart D details administrative procedures for enforcement, including penalties and remedies that USDOL may impose for violations.
Appendix A to Part 9 contains the specific text of the required contract clause. Appendix B to Part 9 contains the text of a draft Notice to Employees Under Contract for Service.
The parameters of the offer are described in the proposal, in accordance with the provisions of the EO
Subpart 9.12(b) of the proposed rule would provocatively require the successor federal services contractor to make offers to former employees for any employment available to the successor federal services contractor, not just employment that the employee previously held for the previous federal service contractor. . It looks like litigation is on the horizon. Additionally, if this part of the rule survives the rulemaking process, successor federal service contractors may find it necessary to establish a full talent acquisition team to measure and score the qualifications of the incoming workforce instead of just accepting that existing workforce uncritically into their same future jobs. In addition, the contractor or subcontractor must, without exception, give an employee on the previous service contract at least 10 business days to consider and accept the successor contractor’s offer of employment.
As we pointed out in our discussion of EO 14055 in November 2021 (New executive order aims to keep employees on the job when federal contracts change hands), the new EO does not obligate the new contractor or subcontractor to offer a right of first refusal to one or more employees of the previous contractor who were not service (defined) employees. In addition, the Contractor may decline an offer to an employee who provided services under the previous federal service contract if the new service provider believes, based on reliable evidence of the particular employee’s past performance, that there is “just cause” for terminating the employee.
Contractors would have some latitude in determining the number and configuration of employees needed
The proposed contract clause would require outgoing contractors to provide the new federal service contractor, at least 10 business days prior to the contract expiration date, with a list of all service employees working on the previous contract during the last month of its execution. (Of course, this does not give the new service provider enough time to develop and offer job offers to former service contract staff, let alone verify their qualifications, let alone allow employees to former workforce to receive and take up to 10 business days to accept or decline the offer of continued employment on the new contract). Under a proposed Subpart D, the proposed rule would give the new contractor/subcontractor the discretion to determine the number of employees the new employer needs for “efficient performance”. The new employer may staff the new contract differently and may not need the same number of employees as the previous contractor. Successor contractors would also be allowed to reconfigure the staffing scheme to increase the number of employees in some positions while decreasing the number of employees in others. Nonetheless, the proposed settlement would require the contractor to review the qualifications of each employee in order to minimize travel.
Location provisions differ from overturned Obama rule
Unlike the defunct Obama rule, the proposed rule contains no “same location” requirement, meaning the Biden order applies more broadly to contracts moved to a new physical location or expanded to include greater geographic coverage. than the old contract. In addition, for each contract covered, the contracting officer should determine whether to include a requirement or preference for location continuity.
WHD Seeks Public Comment Regarding Exemptions for Subcontracts
The proposal would allow Competent Bodies to make exceptions only for “a [prime] Contract.” In contrast, the old Obama rule gave senior agency officials the authority to exempt “a particular contract, subcontract, or purchase order or any class of contracts, subcontracts, or WHD is also seeking public comment on the potential impact, including unintended consequences, of not allowing procurement agency exceptions for particular subcontracts or categories of subcontracts.
Sanctions may include employee remedies, withholding of contract payments, and temporary suspension
Proposed penalties for violations would include requiring the successor contractor to offer employment to employees of the previous contract and payment of lost wages, withholding by the procurement agency of progress payments from the contract, and exclusion from federal contract work for up to three years.
An online landing page on the proposal is available
The WHD has posted an online homepage for the proposal at: https://www.dol.gov/agencies/whd/government-contracts/service-contracts/NPRM-nondisplacement.
Comments on the proposal should be submitted no later than August 15, 2022.