US Department of Labor proposes rule to provide workers on federal service contracts right of first refusal of employment

WASHINGTON – The U.S. Department of Labor will publish a Notice of Proposed Rulemaking on July 15, 2022, to implement the requirements of Executive Order 14055, “Nondisplacement of Qualified Workers Under Service Contracts.” The proposal would benefit workers who perform work on service contracts by generally requiring that they receive an offer of employment from a successor contractor to a position for which they are qualified.

EO 14055 requires that contractors and subcontractors performing work on covered federal service contracts (i.e., most SCA-covered contracts over $250,000), must, in good faith, offer service employees employed under the predecessor contract a right of first refusal of employment on the successor contract. By doing so, the order seeks to prevent displacement of skilled workers in the federal services workforce. The proposed rule would establish standards and procedures for implementing and enforcing the nondisplacement protections under the order.

The department anticipates the proposed rule would if finalized provide economic benefits and enhanced efficiency in covered contracts by promoting the retention of experienced workers, thereby reducing the disruption in the delivery of services during the transfer of covered federal service contracts, maintaining physical and information security, and providing the federal government with an experienced and well-trained work force familiar with government personnel, facilities and requirements.

Specifically, the NPRM proposes to do the following:

• Establish standards and procedures for implementing and enforcing Executive Order 14055.
• Specify contracting agency and contractor obligations, respectively, under the Executive Order.
• Establish an investigation process that protects workers from displacement and is familiar to federal contractors.
• Identify sanctions and remedies that may be imposed by the department under the Executive Order.

“Executive Order 14055 and these proposed implementing regulations ensure efficient and effective continuity of services and enhanced security of personnel, facilities and information on federal service contracts,” said Acting Wage and Hour Division Administrator Jessica Looman. “The order also safeguards the rights and benefits afforded to workers employed under these federal service contracts and provides peace of mind and a measure of economic security to these workers and their families.”

Executive Order 14055 builds upon Executive Order 13495, originally signed by President Obama in 2009 but rescinded in 2019, which previously established a nondisplacement requirement for federal service contractors. The proposed rule implementing this Executive Order 14055 would establish a right of first refusal for service workers on an estimated 119,700 federal contracts, increasing job security and improving overall well-being for these workers.

Learn more about the NPRM announced today.

The Wage and Hour Division solicits comments on the proposed rule from interested parties and encourages all stakeholders to participate in the process. The comment period is July 15, 2022, through Aug. 15, 2022,  and comments may be submitted online or commenters may address written submissions to: Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210.

Learn more about the Wage and Hour Division, including a search tool to use if you think you may be owed back wages collected by the division. Workers can call the division confidentially with questions – regardless of their immigration status – and the department can speak with callers in more than 200 languages.