The Department of Labor’s (DOL)’s Nondisplacement Rule is Back!

At a glance:

• The main takeaway: Executive Order (EO) 14055 Nondisplacement of Qualified Workers under Service Contracts will apply to solicitations issued on or after February 12, 2024.
• Impact on your business: Successor contractors must provide written job offers to service employees who performed under the predecessor contract.
• Next steps: Predecessor contractors have obligations under the EO,  including providing a certified list of employees to the agency and notifying impacted employees of their right of first refusal on the successor contract.

Schedule a consultation with Aprio’s Government Contracts Consulting Team today.

The full story:

The Department of Labor (DOL) published a Final Rule for the Nondisplacement of Qualified Workers Under Service Contracts, which implements Executive Order (EO) 14055. This EO requires government contractors and their subcontractors on covered contracts to offer jobs to the predecessor contractor’s and subcontractors’ qualified service employees.

Contractors may be feeling déjà vu to the previous iteration of nondisplacement obligations under the Obama Administration; however, the new final rule has its differences, including increased obligations and penalties for non-compliance for government contractors. The final rule applies to solicitations issued on or after February 12, 2024.

Covered contracts

The final rule applies to any contract or subcontract and contract-like instrument covered by the Service Contract Labor Standards that is for “same or similar work.” The DOL defines “same or similar work” as “work that is either identical to or has primary characteristics that are alike in substance to work performed on another service contract.” The previous iteration of the nondisplacement rule limited applicability to contracts performed at the same location; however, EO 14055 is not limited to locality. The latest iteration requires agencies to complete a “location continuity” analysis during the pre-solicitation phase. A location requirement or preference will be included in the solicitation should the agency determine the work should be performed at the same localities.

The final rule does not apply to contracts under the simplified acquisition threshold (SAT). The final rule still applies to subcontracts below the SAT when the prime contract meets or exceeds the threshold. In addition, agencies can waive some or all the requirements of the EO; however, these circumstances are extremely limited.

Predecessor contractor requirements

Under the final rule, predecessor contractors have the following obligations:

• Within 30 calendar days before contract completion, provide the Contracting Officer a certified list of names, anniversary dates, mailing addresses (if known), phone numbers, and email addresses for all services employees, including subcontractor employees, working on the contract.
• If there are workforce changes after submission of the certified list, provide an updated certified list within ten business days before completion of the contract.
• Provide written notice to service employees working on covered contracts of their right to an employment offer on the successor contract. This notice can be provided to individual employees or posted at the worksite. The DOL has a sample posted on their website.
• Notify employees and their representatives if the agency waives the EO requirements.
• Notify collective bargaining representatives of the location continuity analysis and the opportunity to provide relevant information.

Successor contractor requirements

Under the final rule, successor contractors have the following obligations:

• If a covered solicitation or contract does not include the nondisplacement clause, notify the contracting officer if it appears to be a mistake.
• Provide written job offers to service employees who performed under the predecessor contract. Contractors must give these employees at least ten business days to respond to the offer.

Successor contractors may be exempt from offering employment to service employees in minimal circumstances. If, based on reliable evidence of past performance, there would be cause to terminate an employee or if the number of open positions is less than the qualified employees, successor contractors may not be required to offer employment to all predecessor service employees. If employment is not provided to all impacted predecessor employees, the contractor’s obligation to offer employment continues from the start of performance for 90 calendar days.

The position offered does not need to be the same position previously held. Contractors can provide different positions as long as the employee is qualified. In addition, the terms of the employment, including pay, benefits, etc., may differ from the predecessor employer.

Penalties for non-compliance with EO 14055 may include withholding of payments, hiring of affected employees, payment of back wages, termination of the contract, or debarment. Both It’s important for both predecessor and successor contractors need to prepare now. Additional planning or procedure updates may be required for compliance with EO 14055. For more information, please see the DOL’s Final Rule and contact Aprio’s Government Contracts Consulting Team.

Related Resources:

Service Contract Labor Standards (SCLS) Minimum Health & Welfare Amounts Increased

Aprio’s Government Contract Compliance Services