New and Pending Regulations for Federal Government Contractors – Nondisplacement of Workers
Executive Order 13495 requires federal government contractors with certain types of contracts to offer the first right of refusal for certain jobs to employees of predecessor contractors. Although the Executive Order was effective "immediately" upon its issuance in 2009, the Department of Labor, which is responsible for obtaining compliance with this Order, did not publish its final regulations until August 29, 2011. As of this date, there has not been an effective date established for the DOL's regulation, but an effective date is expected to be forthcoming once the Federal Acquisition Regulation Council updates the FAR to incorporate the Order's requirements.
Covered Contracts
E.O. 13495 and the implementing regulations apply to contracts and subcontracts that are covered by the Service Contract Act, over the simplified acquisition threshold, and succeed contracts for the same or similar service at the same location (successor contracts).
Successor Contractor Obligations
Under the DOL's regulations, a successor contractor cannot fill any employment openings under the follow-on contract prior to making good faith offers of employment to employees of the predecessor contractor. Offers of employment do not have to be made to all of the predecessor's employees. Successor contractors may continue to employ their own employees who worked for contractor (or subcontractor) at least three months preceding commencement of contract and who otherwise would be laid off. If the successor employs fewer workers on the contract than the predecessor, however, the obligation to offer employment is extended to 90 days from the first date of employment, and the predecessor's employees must have the right of first refusal for any service positions added during that 90 days.
The offers that are made to a predecessor contractor's employees must be for positions in which the employees are qualified, must be express, bona fide offers, and must give the employees at least 10 days to accept the offer. Offers can be made in a group setting. Under the DOL's regulations, a successor contractor may only use employment screening processes when hiring its predecessor employees when such processes are provided for by the contracting agency, are a condition of the contract, and are consistent with the E.O.
Exceptions
There are exceptions to the requirements to offer positions to certain employees of predecessor contractors, such as if the worker will be retained by the predecessor or failed to perform suitably on the job. The burden is on the successor contractor to prove the existence of the exceptions, and the regulations are specific as to how the exceptions may be applied.
Predecessor Contractor Obligations
The predecessor contractor also has obligations under the regulations. A predecessor contractor must provide the Contracting Officer a certified list of service employees not less than 30 days before contract completion, which the Contracting Officer must then provide to the successor contractor. This obligation is similar to the requirement already imposed upon predecessor contractors under the Service Contract Act and FAR 52.222-41(n). The predecessor contractor must also give written notice to its service employees of a possible right to an offer of employment. Such notice must be posted in conspicuous place or delivered to employees individually.
Recordkeeping Requirements
Contractors must keep copies of written offers or a contemporaneous written record of oral offers of employment. If offers are made at a group meeting, the contractor must keep a record of the meeting including specified data. Contractors must also keep records that form the basis for exclusion or exemption, the list of employees received from contracting agency, and records relating to retroactive payments for violations. Records must be kept for 3 years.
Penalties for Violations
A Successor contractor violating the Order may be required to hire the affected employees and provide them compensation, including lost wages, and pay the employees costs and expenses. The government can withhold payments of amounts due on any contract with the federal government until the compensation is paid. A predecessor contractor who violates the Executive Order may fact suspension of payment of contract funds and debarment. Debarment applies not only to the contractor, but to its responsible officers as well.
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