Final Rule on Nondisplacement of Qualified Workers Under Service Contracts

On December 14, 2023, the Department of Labor issued a final rule establishing standards and procedures for the nondisplacement protections of Executive Order (EO) 14055, “Nondisplacement of Qualified Workers Under Service Contracts,” signed by President Biden on November 18, 2021. EO 14055 requires successor contractors and subcontractors on covered federal service contracts to extend employment to certain workers employed on the predecessor contract. The purpose of the EO and final rule is to promote the government’s interests in economy and efficiency by avoiding displacement of existing skilled workers, keeping them employed, and preventing disruptions of federal services.

When performance of a covered service contract shifts to a new contractor, the successor contractor must offer employment to certain qualified predecessor contract employees who are suitable for the new positions. The successor contractor must provide the predecessor employee(s) at least ten business days to accept the offer(s). The successor contractor is not permitted to offer employment to any other employees until the obligation to offer employment to certain qualified predecessor employees has been met, thereby granting these workers the right of first refusal to the new positions.

Contracts below the Simplified Acquisition Threshold and contracts that are not subject to the Service Contract Act are not covered by the final rule, consistent with the exclusions in EO 14055. Further, managerial, supervisory, and nonservice employees are not entitled to an offer of employment from the successor contractor. The Department of Labor has published FAQs that provide additional guidance regarding these new requirements: https://www.dol.gov/agencies/whd/government-contracts/service-contracts/final-rule-nondisplacement/faqs.

This final rule will take effect on February 12, 2024.

Find the Final Rule here: Nondisplacement of Qualified Workers Under Service Contracts