US Department of Labor announces final rule to protect federal service contract workers from displacement, provide right of first refusal

WASHINGTON – The U.S. Department of Labor today announced the final rule to implement the requirements of Executive Order 14055, “Nondisplacement of Qualified Workers Under Service Contracts,” which seeks to prevent the displacement of skilled and experienced workers in the federal services workforce.

The final rule will provide economic benefits and enhanced efficiency in covered federal service contracts by promoting the retention of experienced workers. Retaining these workers reduces disruption in service delivery when contracts are transferred, maintains physical and information security, and provides the federal government with an experienced, well-trained workforce familiar with government personnel, facilities and requirements. The final rule will cover service contracts such as those used to employ security, janitorial, cafeteria and grounds maintenance services.

“The final rule safeguards the rights and benefits afforded to federal service contract workers and provides peace of mind and a measure of economic security to these workers and their families,”explained Wage and Hour Division Administrator Jessica Looman. “The new regulations also benefit taxpayers and contractors by ensuring continuity of services and reducing costly employee turnover.” 

EO 14055 requires that contractors and subcontractors that work on covered federal service contracts, which include most contracts valued at or above $250,000 covered by the Service Contract Act, must in good faith offer service employees employed under the predecessor contract a right of first refusal of employment on the successor contract, helping prevent the displacement of skilled and experienced workers in the federal services workforce.

The final rule reflects consideration of public comments submitted in response to the Notice of Proposed Rulemaking published on July 15, 2022. 

Specifically, the final rule does the following:

• Establishes standards and procedures for implementing and enforcing Executive Order 14055.
• Specifies contracting agency and contractor obligations under the order.
• Creates an investigation process familiar to federal contractors to protect workers from displacement.
• Specifies how the order applies to subcontracts.
• Identifies sanctions and remedies that may be imposed by the department under the order.

Executive Order 14055 builds upon Executive Order 13495, signed by President Obama, that established a non-displacement requirement for federal service contractors. The order was rescinded in 2019. 

The final rule announced today will increase job security and improve the well-being of employees on federal service contracts and take effect on Feb. 12, 2024. It will apply to solicitations issued on or after the effective date of the final regulations issued by the Federal Acquisition Regulatory Council. 

View more information about the final rule. 

Learn more about Service Contract Act worker protections and the Wage and Hour Division. Workers, contractors, and contracting agencies may call the division toll-free at 1-866-4US-WAGE to speak directly and confidentially to a trained agency professional. The division protects workers regardless of where they are from and can communicate with callers in more than 200 languages.