Although it’s almost been four years since it was issued in January 2009, Executive Order 13495, known as “Nondisplacement of Qualified Workers Under Service Contracts” (74 Fed. Reg. 6103) has not had much impact upon government contracting employers. That is about to change as the final rule and regulations that will make Executive Order 13495 enforceable go into effective January 18, 2013.  

What Executive Order 13496 Says

Executive Order 13495 requires most federal service contractors (including subcontractors)under a contract that succeeds a contract for performance of the same or similar services at the same location to offer the predecessor contractor’s employees a right of first refusal of employment under the contract for those positions for which they qualify. The requirement imposed by the Executive Order does not require a successor contractor to hire all of its predecessor’s employees. Successor contractors may still reduce the size of the workforce and give first preference to certain members of its own workforce (those employees that have worked for the successor contractor for at least three months and face layoff if they are not employed on the new contract). Certain contracts are exempt from this hiring obligation and waivers may be granted by senior procurement executives in limited circumstances.

But, the purported overall goal of this new contracting requirement was to ensure a larger carryover workforce so that there is less disruption to the delivery of services during the period of transition between contractors. The new requirement is also intended to provide the Federal Government with the benefit of an experienced and trained workforce that is familiar with the Federal Government’s personnel, facilities, and requirements. As acknowledged in the Executive Order, it is already quite common for a successor contractor or its subcontractor to hire the majority of the predecessor’s employees when a service contract ends and the work is taken over from one contractor to another. But, there have been occasions where a whole new workforce has been hired, thus displacing all of the predecessor’s employees. The Executive Order was issued to end such practices – and it was undoubtedly coincidental that the Executive Order had effect of virtually ensuring that the new contractor is a “successor” for labor law purposes, thus requiring the new contractor to bargain with the union representing the predecessor contractor’s employees.

Why Did It Take So Long?

While the Executive Order was issued in 2009, it did not become immediately effective. Instead, implementation of the requirement imposed by the Executive Order was passed along to the Department of Labor (DOL). More than two years later, on August 29, 2011, DOL’s  Wage and Hour Division published its final rule implementing the Executive Order. However, DOL stated that the final rule would not take effect until the Federal Acquisition Regulatory Council (the FAR Council) issued regulations to amend the Federal Acquisition Regulation. A proposed rule was published on May 3, 2012 (at 77 Fed. Reg. 26232) and several agencies and interested parties responded with comments and questions.

Since then, employers in the government contracting world have been waiting with anticipation for the FAR Council to issue its final regulations. The final regulation and amendment to the FAR (new subpart FAR 22.22 and new clause at FAR 52.222-17) finally issued on December 21, 2012 (77 Fed. Reg. 75766). This final rule will become effective January 18, 2013 and apply to solicitations issued on that date and thereafter. The final rule and amendments to the FAR address various comments submitted and questions raised after the DOL’s final rule issued in August 2011 and the FAR Council’s proposed rule was issued in May 2012. The responses to the comments and questions are helpful in understanding how this new hiring requirement impacts both successor and predecessor contractors and how successor contractors should address certain issues that may arise during their efforts to comply with the new requirement.

Now That It’s Here Employers Need To Get Ready!

Given that January 18th is right around the corner, employers covered by the final rule should immediately evaluate what, if any, obligations they may have moving forward and take any steps necessary to ensure timely compliance with the final rule.  The DOL and Federal Register provide some helpful info on the basic nuts and bolts of the new requirements, including a sample notice. Employers may also want to consult with their outside legal counsel to ensure all compliance requirements are met.