DOL Issues Proposed Rule Implementing the Nondisplacement of Qualified Workers Under Service Contracts Executive Order
noun: displacement; plural noun: displacements
1. the moving of something from its place or position.
2. the occupation by a submerged body or part of a body of a volume which would otherwise be occupied by a fluid
https://www.google.com/search?q=definition+of+displacement
Here we go again. On November 18, 2021, President Joe Biden issued Executive Order (“EO”) 14055 titled the Nondisplacement of Qualified Workers Under Service Contracts. Abrahams Wolf-Rodda wrote a blog on the subject just a short while later that you can view here: https://www.awrcounsel.com/blog/2021/12/8/everything-old-is-new-again-nondisplacement-of-qualified-workersnbsp?rq=nond.
The EO’s purpose is to prevent a successor contractor under a service contract from needlessly replacing the employees that worked on the same/similar predecessor contract. This was not the first time that a President penned an EO to this affect. The EO is largely a rerun of both the prior Clinton-era and Obama-era nondisplacement EOs. President Clinton implemented a nondisplacement requirement, but President George W. Bush revoked it. Similarly, President Obama implemented a nondisplacement requirement and President Trump, after some delay and vacillation, revoked it. President Biden has turned the clock back yet again. Yes, we have been down this road before. Each turn of the political wheel results in a now predicable political initiative, which is no way to run a government.
However, one part of the Biden EO was new, this is the requirement that the contracting officer evaluate whether each successor contract would benefit from being performed in the same locality. If they determine it would, then they will include a requirement or preference for the successor contract to be performed in the same locality or localities. In other words, the contracting officer will include a requirement or can express a preference that the successor contract be performed in the same locality of the contract it was succeeding, provided the specification are for the same or similar work, thus ensuring that the previous contract’s workers are given the right to work on the successor contract.
The Department of Labor (“DOL”) was given 180 days to publish final rules that implement this EO. That deadline expired on May 17, 2022, and only recently (July 15, 2022) has DOL published proposed rules that implement the regulation. (I suppose that shows how overworked DOL’s national office is, since the final rule is still some ways off). The final rule will appear at 29 C.F.R. part 9. The proposed rule states that coverage of the EO, and thus its requirements extend to contracts for services covered by the Service Contract Act (“SCA”) and exceed the simplified acquisition threshold. 87 FR 42557. This means that the contract or contract like instrument must be covered by the SCA for the EO to apply. Currently the simplified acquisition threshold is defined as $250,000. Additionally, the proposed rule at 29 C.F.R. 9.3 would state that the EO and its requirements apply to contracts that succeed the contract for performance of the same or similar work. DOL places emphasis on the contract being succeeded and the work being performed. This means that a contract for similar services would have a predecessor – successor relationship even if a different agency solicited the new contract, or if the contract was awarded to a different contractor.
DOL proposes to define the phrase “same or similar work” as “work that is either identical to or has primary characteristics that are alike in substance to work performed on a contract that is being replaced by the Federal Government or a contractor on a Federal service contract.” 87 FR 42559. The proposed rule also lists a few exclusions, the primary one being prime contracts under the $250,000 simplified acquisition. If the prime contract is less than the $250,000 threshold then all of its subcontracts are exempt as well. But, if the prime contract is over the $250,000 threshold, then its subcontracts are not exempt from the EO regardless of their value. In other words, if the prime contract meets the criteria for coverage, so does the subcontract. Additionally, the proposed rule states that if there is a direct legal conflict between the EO and any existing statute, regulation, Executive Order or Presidential Memoranda, the Nondisplacement Executive Order will not apply.
The proposed rule also allows the contracting agency to except a contract from coverage under the following circumstances:
(1) where adhering to the requirements of the order or the implementing regulations would not advance the Federal Government's interests in achieving economy and efficiency in Federal procurement;
(2) where based on a market analysis, adhering to the requirements of the order or the implementing regulations would both substantially reduce the number of potential bidders so as to frustrate full and open competition and not be reasonably tailored to the agency's needs for the contract; or
(3) where adhering to the requirements of the order or the implementing regulations would otherwise be inconsistent with statutes, regulations, Executive orders, or Presidential Memoranda.
87 FR 42560.
For violations of the EO, the proposed rule will require contractors to rehire wrongfully terminated employees, pay backpay with interest, and remedy any non-compliance. Additionally, the agency will be allowed to withhold money due the contractor and the contractor may be subject to a 3-year debarment period for willful violations. Hopefully it doesn’t come to that. The number of reported cases involving the prior nondisplacement EOs is comparatively small, albeit many complaints were likely conciliated. Moreover, the EO itself merely codifies the existing practice of most federal contractors of hiring the predecessor’s work force anyway. That is because those workers from the predecessor contract have the experience and if the successor didn’t propose to hire them, the successor might find its own capacities questioned either during the bidding stage or the performance stage. Additionally, their experience will likely allow them to do a better job than a brand-new workforce.
The main attraction for this EO to the workers is that it gives protections to workers who engage in union organizing and other protected activities from retaliation by the successor contractor. It also protects poor performers, but that is likely an unintended side effect. This proposed rule was published almost two months after the 180-day deadline which called for a final rule by May 17, 2022. For more information and to read the proposed rule yourself, please visit https://www.federalregister.gov/documents/2022/07/15/2022-14967/nondisplacement-of-qualified-workers-under-service-contracts. Comments are open until August 15, 2022, and can be made here: https://www.regulations.gov/commenton/WHD-2022-0002-0001/.