53720 Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 

DEPARTMENT OF LABOR 

Office of the Secretary 

29 CFR Part 9 

RIN 1215–AB69;1235–AA02 

Nondisplacement of Qualified Workers 

Under Service Contracts 

AGENCY: Wage and Hour Division, 

Labor. 

ACTION: Final rule. 

SUMMARY: In this final rule, the 

Department of Labor (Department or 

DOL) issues final regulations to 

implement Executive Order 13495, 

Nondisplacement of Qualified Workers 

Under Service Contracts. The Executive 

Order establishes a general policy of the 

Federal Government concerning service 

contracts and solicitations for service 

contracts for performance of the same or 

similar services at the same location. 

This policy mandates the inclusion of a 

contract clause requiring the successor 

contractor and its subcontractors to offer 

those employees employed under the 

predecessor contract, whose 

employment will be otherwise 

terminated as a result of the award of 

the successor contract, a right of first 

refusal of employment under the 

successor contract in positions for 

which they are qualified. 

DATES: The effective date for this final 

rule is pending, and the Department 

will publish a notice in the Federal 

Register announcing the effective date 

once it is determined. 

FOR FURTHER INFORMATION CONTACT: 

Timothy Helm, Branch Chief, Division 

of Enforcement Policies and Procedures, 

Branch of Government Contracts 

Enforcement, Wage and Hour Division, 

U.S. Department of Labor, Room S– 

3014, 200 Constitution Avenue, NW., 

Washington, DC 20210; telephone: (202) 

693–0064 (this is not a toll-free 

number). Copies of this notice may be 

obtained in alternative formats (Large 

Print, Braille, Audio Tape or Disc), upon 

request, by calling (202) 693–0023 (not 

a toll-free number). TTY/TDD callers 

may dial toll-free (877) 889–5627 to 

obtain information or request materials 

in alternative formats. 

SUPPLEMENTARY INFORMATION: This 

regulatory action first appeared on the 

Spring 2009 Regulatory Agenda with 

regulatory identification number (RIN) 

1215–AB69. Due to an organizational 

restructuring which resulted in the 

Wage and Hour Division becoming a 

free-standing agency within the 

Department, the RIN changed to 1235– 

AA02. Throughout this final rule, 

citations to various statutes such as the 

Service Contract Act have been revised 

to reflect the recodification of those Acts 

in January 2011. 

I. Executive Order 13495 Requirements 

and Background 

On January 30, 2009, President Barack 

Obama signed Executive Order 13495, 

Nondisplacement of Qualified Workers 

Under Service Contracts (Executive 

Order 13495, E.O. 13495, or Order). 74 

FR 6103 (Feb. 4, 2009). This Order 

establishes that when a service contract 

expires and a follow-on contract is 

awarded for the same or similar services 

at the same location, the Federal 

Government’s procurement interests in 

economy and efficiency are better 

served when a successor contractor 

hires the predecessor’s employees. A 

carryover workforce reduces disruption 

to the delivery of services during the 

period of transition between contractors 

and provides the Federal Government 

the benefits of an experienced and 

trained workforce that is familiar with 

the Federal Government’s personnel, 

facilities, and requirements. As 

explained in the Order, the successor 

contractor or its subcontractors often 

hires the majority of the predecessor’s 

employees when a service contract ends 

and the work is taken over from one 

contractor to another. Occasionally, 

however, a successor contractor or its 

subcontractors hires a new workforce, 

thus displacing the predecessor’s 

employees. 

Section 1 of Executive Order 13495 

sets forth a general policy of the Federal 

Government that service contracts and 

solicitations for service contracts shall 

include a clause that requires the 

contractor and its subcontractors, under 

a contract that succeeds a contract for 

performance of the same or similar 

services at the same location, to offer 

those employees (other than managerial 

and supervisory employees) employed 

under the predecessor contract, whose 

employment will be terminated as a 

result of the award of the successor 

contract, a right of first refusal of 

employment under the contract in 

positions for which they are qualified. 

Section 1 also provides that there shall 

be no employment openings under the 

contract until such right of first refusal 

has been provided. Section 1 further 

stipulates that nothing in Executive 

Order 13495 is to be construed to permit 

a contractor or subcontractor to fail to 

comply with any provision of any other 

Executive Order or law of the United 

States. 

As discussed above in the DATES

section, this rule will not be effective 

until the Federal Acquisition Regulatory 

Council (FARC) issues regulations. The 

Executive Order requires the FARC to 

issue regulations in Section 6 of the 

Order, which is discussed in further 

detail below. 

Section 2 of Executive Order 13495 

defines service contract or contract to 

mean any contract or subcontract for 

services entered into by the Federal 

Government or its contractors that is 

covered by the McNamara-O’Hara 

Service Contract Act of 1965 (SCA), as 

amended, 41 U.S.C. 6701 et seq., and its 

implementing regulations. Section 2 

also defines employee to mean a service 

employee as defined in the SCA. 74 FR 

6103 (Feb. 4, 2009). See 41 U.S.C. 

6701(3). 

Section 3 of the Order exempts from 

its terms (a) contracts or subcontracts 

under the simplified acquisition 

threshold as defined in 41 CFR 2.101; 

(b) contracts or subcontracts awarded 

pursuant to the Javits-Wagner-O’Day 

Act, 41 U.S.C. 8501–8506; (c) guard, 

elevator operator, messenger, or 

custodial services provided to the 

Federal Government under contracts or 

subcontracts with sheltered workshops 

employing the severely handicapped as 

described in section 505 of the Treasury, 

Postal Services and General Government 

Appropriations Act, 1995, Public Law 

103–329; (d) agreements for vending 

facilities entered into pursuant to the 

preference regulations issued under the 

Randolph-Sheppard Act, 20 U.S.C. 107; 

and (e) employees who were hired to 

work under a Federal service contract 

and one or more nonfederal service 

contracts as part of a single job, 

provided that the employees were not 

deployed in a manner that was designed 

to avoid the purposes of the Order. 74 

FR 6103–04 (Feb. 4, 2009). 

Section 4 of Executive Order 13495 

authorizes the head of a contracting 

department or agency to exempt its 

department or agency from the 

requirements of any or all of the 

provisions of the Executive Order with 

respect to a particular contract, 

subcontract, or purchase order or any 

class of contracts, subcontracts, or 

purchase orders, if the department or 

agency head finds that the application 

of any of the requirements of the Order 

would not serve the purposes of the 

Order or would impair the ability of the 

Federal Government to procure services 

on an economical and efficient basis. 74 

FR 6104 (Feb. 4, 2009). 

Section 5 of the Order provides the 

wording for the required contract clause 

regarding the nondisplacement of 

qualified workers that is to be included 

in solicitations for and service contracts 

that succeed contracts for performance 

of the same or similar services at the 


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same location. 74 FR 6104–05 (Feb. 4, 

2009). Specifically, the new contract 

clause provides that the contractor and 

its subcontractors shall, except as 

otherwise provided by the clause, in 

good faith offer those employees (other 

than managerial and supervisory 

employees) employed under the 

predecessor contract whose 

employment will be terminated as a 

result of award of the contract or the 

expiration of the contract under which 

the employees were hired, a right of first 

refusal of employment under the 

contract in positions for which they are 

qualified. The successor contractor and 

its subcontractors determine the number 

of employees necessary for efficient 

performance of the contract, and may 

elect to employ fewer employees than 

the predecessor contractor employed in 

performance of the work. Except as 

provided by the contract clause, there is 

to be no employment opening under the 

contract, and the successor contractor 

and any subcontractors shall not offer 

employment under the contract to any 

person prior to having complied fully 

with the obligation to offer employment 

to employees on the predecessor 

contract. The successor contractor and 

its subcontractors must make a bona 

fide, express offer of employment to 

each employee including stating the 

time within which the employee must 

accept such offer, which must be no less 

than 10 days. The clause also provides 

that, notwithstanding the obligation to 

offer employment to employees on the 

predecessor contract, the successor 

contractor and any subcontractors (1) 

May employ under the contract any 

employee who has worked for the 

contractor or subcontractor for at least 

3 months immediately preceding the 

commencement of the contract and who 

would otherwise face lay-off or 

discharge; (2) are not required to offer a 

right of first refusal to any employee(s) 

of the predecessor contractor who are 

not service employees within the 

meaning of the SCA, 41 U.S.C. 6701(3); 

and (3) are not required to offer a right 

of first refusal to any employee(s) of the 

predecessor contractor whom the 

successor contractor or any of its 

subcontractors reasonably believes, 

based on the particular employee’s past 

performance, has failed to perform 

suitably on the job. The contract clause 

also provides that, in accordance with 

Federal Acquisition Regulation (FAR) 

52.222–41(n), not less than 10 days 

before completion of the contract, the 

contractor must furnish the Contracting 

Officer a certified list of the names of all 

service employees working under the 

contract and its subcontracts during the 

last month of contract performance. The 

list must also contain anniversary dates 

of employment of each service 

employee under the contract and its 

predecessor contracts either with the 

current or predecessor contractors or 

their subcontractors. The Contracting 

Officer must provide the list to the 

successor contractor, and the list must 

be provided on request to employees or 

their representatives. If it is determined, 

pursuant to regulations issued by the 

Secretary of Labor, that the contractor or 

its subcontractors are not in compliance 

with the requirements of this clause or 

any regulation or order of the Secretary, 

appropriate sanctions may be imposed 

and remedies invoked against the 

contractor or its subcontractors, as 

provided in the Executive Order, the 

regulations, and relevant orders of the 

Secretary, or as otherwise provided by 

law. Finally, the clause provides that in 

every subcontract entered into in order 

to perform services under the contract, 

the contractor will include provisions 

that ensure that each subcontractor will 

honor the requirements of the clause in 

the prime contract with respect to the 

employees of a predecessor 

subcontractor or subcontractors working 

under the contract, as well as employees 

of a predecessor contractor and its 

subcontractors. The subcontract must 

also include provisions to ensure that 

the subcontractor will provide the 

contractor with the information about 

the employees of the subcontractor 

needed by the contractor to comply with 

the prime contractor’s requirement, in 

accordance with FAR 52.222–41(n). The 

contractor must also take action with 

respect to any such subcontract as may 

be directed by the Secretary of Labor as 

a means of enforcing these provisions, 

including the imposition of sanctions 

for noncompliance; provided, however, 

that if the contractor, as a result of such 

direction, becomes involved in litigation 

with a subcontractor, or is threatened 

with such involvement, the contractor 

may request that the United States enter 

into the litigation to protect the interests 

of the United States. 74 FR 6104–05 

(Feb. 4, 2009). 

Section 6 of the Order assigns 

responsibility for investigating and 

obtaining compliance with the Order to 

the Department. In such proceedings, 

this section also authorizes the 

Department to issue final orders 

prescribing appropriate sanctions and 

remedies, including, but not limited to, 

orders requiring employment and 

payment of wages lost. The Department 

also may provide that where a 

contractor or subcontractor has failed to 

comply with any order of the Secretary 

of Labor or has committed willful 

violations of Executive Order 13495 or 

its implementing regulations, the 

contractor or subcontractor, its 

responsible officers, and any firm in 

which the contractor or subcontractor 

has a substantial interest will be 

ineligible to be awarded any contract of 

the United States for a period of up to 

3 years. Neither an order for debarment 

of any contractor or subcontractor from 

further Government contracts under this 

section nor the inclusion of a contractor 

or subcontractor on a published list of 

noncompliant contractors is to be 

carried out without affording the 

contractor or subcontractor an 

opportunity for a hearing. Section 6 also 

specifies that Executive Order 13495 

creates no rights under the Contract 

Disputes Act, and disputes regarding the 

requirement of the contract clause 

prescribed by Section 5, to the extent 

permitted by law, will be disposed of 

only as provided by the Department in 

regulations issued under the Order. To 

the extent practicable, such regulations 

shall favor the resolution of disputes by 

efficient and informal alternative 

dispute resolution methods. Finally, 

Section 6 provides that, to the extent 

permitted by law and in consultation 

with the FARC, the Department will 

issue regulations to implement the 

requirements of the Executive Order. In 

addition, to the extent permitted by law, 

the FARC is to issue regulations in the 

Federal Acquisition Regulation to 

provide for inclusion of the contract 

clause in Federal solicitations and 

contracts subject to the current Order. 

See 74 FR 6105 (Feb. 4, 2009). 

Section 7 of Executive Order 13495 

revokes Executive Order 13204 of 

February 17, 2001, rescinding Executive 

Order 12933 of October 20, 1994, 

Nondisplacement of Qualified Workers 

Under Certain Contracts. Id. See also 59 

FR 53559 (Oct. 24, 1994), 66 FR 11228 

(Feb. 22, 2001). 

Section 8 of the Order provides that 

if any provision of the Order or its 

application is held to be invalid, the 

remainder of the Order and the 

application shall not be affected. 

Section 9 of the Order specifies that 

nothing in Executive Order 13495 is to 

be construed to impair or otherwise 

affect the authority granted by law to an 

executive department, agency, or the 

head thereof; or functions of the 

Director of the Office of Management 

and Budget (OMB) relating to budgetary, 

administrative, or legislative proposals. 

In addition, the Order is to be 

implemented consistent with applicable 

law and subject to the availability of 

appropriations, and the Order is not 

intended to, and does not, create any 


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right or benefit, substantive or 

procedural, enforceable at law or in 

equity by any party against the United 

States, its departments, agencies, or 

entities, its officers, employees, or 

agents, or any other person. Section 9 

clarifies, however, that the Order is not 

intended to preclude judicial review of 

final decisions by the Department in 

accordance with the Administrative 

Procedure Act, 5 U.S.C. 701 et seq. 74 

FR 6105–06 (Feb. 4, 2009). 

As indicated, Section 7 of Executive 

Order 13495, revoked Executive Order 

13204, signed by President Bush on 

February 17, 2001, which rescinded 

Executive Order 12933, 

Nondisplacement of Qualified Workers 

Under Certain Contracts, signed by 

President Clinton on October 24, 1994. 

More specifically, these rescinded 

Executive Orders pertained to the 

obligations of successor contractors to 

offer employment to employees of 

predecessor contractors on Federal 

contracts to maintain public buildings. 

See 59 FR 53559 (Oct. 24, 1994), 66 FR 

11228 (Feb. 22, 2001). The Department 

promulgated regulations, 29 CFR part 9 

(62 FR 28185) to implement Executive 

Order 12933 (62 FR 28176 (May 22, 

1997)) and, per Executive Order 13204, 

rescinded them through a Notice 

appearing in the Federal Register. 66 FR 

16126 (Mar. 23, 2001). There are some 

notable differences between Executive 

Order 13495, and Executive Order 

12933. For example, Executive Order 

13495 covers all contracts covered by 

the SCA above the simplified 

acquisition threshold, whereas 

Executive Order 12933 was limited to 

building services contracts in excess of 

the simplified acquisition threshold for 

maintenance of public buildings. In 

addition, exemptions listed for U.S. 

Postal Service, NASA, military, and 

Veterans Administration installations 

(among others) in Executive Order 

12933 have been eliminated. A new 

provision authorizes the head of a 

contracting department or agency to 

exempt any of its contracts from the 

current Order if the agency finds the 

requirements would not serve the 

purposes of the Order or would impair 

the Federal Government’s ability to 

procure services economically and 

efficiently. In addition, the current 

Order expressly provides that it applies 

to subcontracts awarded in amounts 

equal to or above the simplified 

acquisition threshold, while coverage 

under Executive Order 12933 was 

determined at the prime contract level. 

Subsequent to publication of the 

proposed rule upon which this final 

rule is responsive, the simplified 

acquisition threshold was raised to 

$150,000 from $100,000. 75 FR 53129 

(August 30, 2010) (codified at 41 CFR 

2.101). 

II. Discussion of Final Rule 

The Department published and sought 

comments on a proposed rule 

implementing the provisions of 

Executive Order 13495 on March 19, 

2010 (75 FR 13382 (Mar. 19, 2010)). A 

total of 21 comments were received 

from labor organizations, government 

contractors, and government agency 

contract personnel, among others. These 

comments are discussed in the 

following section-by-section analysis of 

the final rule. 

Subpart A—General 

Executive Order 13495 does not 

establish wage or fringe benefit rates. 

The minimum wage and fringe benefit 

rates established under the SCA to be 

paid service employees will apply to 

work performed on service contracts 

covered by the Executive Order. SCA 

rates will apply equally to successor 

contracts with a workforce made up of 

employees who worked under the 

predecessor contract and to successor 

contracts with, under one of the 

Executive Order’s exceptions, a 

workforce not made up of employees 

who worked under the predecessor 

contract. The SCA requires contractors 

and subcontractors performing services 

on prime contracts in excess of $2,500 

to pay service employees in various 

classes no less than the wage rates and 

fringe benefits found prevailing in the 

locality, or the rates (including 

prospective increases) contained in a 

predecessor contractor’s collective 

bargaining agreement as provided in 

wage determinations issued by the 

Department. These determinations are 

incorporated into the service contract. 

The Department received several 

comments opposing the Executive Order 

and questioning its stated purpose. For 

example, the Professional Services 

Council (PSC) questioned when private 

employment under a government 

contract became an immutable 

entitlement. The PSC and the Society 

for Human Resource Management 

(SHRM) doubted whether the Executive 

Order would fulfill its stated goals of 

promoting economy and efficiency in 

government procurement, and the 

Associated Builders and Contractors, 

Incorporated (ABC, Inc.), stated that 

there was no evidentiary support that 

nondisplacement of workers would 

result in greater efficiency. Comments 

questioning the legality of and rationale 

for the Executive Order are clearly not 

within the purview of this rulemaking 

action. All other comments are 

summarized in the preamble under the 

relevant subsections. 

Proposed subpart A addressed general 

matters, including the purpose and 

scope of the rule, its definitions, 

coverage under the Order, and the 

exclusions it provides. 

Section 9.1 Purpose and Scope 

The Department proposed in § 9.1 to 

explain the purpose of the proposed 

rule and to reiterate policy statements 

from the Executive Order. This section 

articulates the Executive Order’s general 

requirement that successor service 

contractors performing on Federal 

contracts offer a right of first refusal to 

suitable employment (i.e., a job for 

which the employee is qualified) under 

the contract to those employees under 

the predecessor contract whose 

employment will be terminated as a 

result of the award of the successor 

contract, and emphasizes the Executive 

Order’s underlying principle that the 

Federal Government’s procurement 

interests in economy and efficiency are 

served when the successor contractor 

hires the predecessor’s employees and 

that a carryover workforce both 

minimizes disruption in the delivery of 

services during a period of transition 

between contractors and provides the 

Federal Government the benefit of an 

experienced and trained workforce that 

is familiar with the Federal 

Government’s personnel, facilities, and 

requirements. No comments were 

received on this section; the final rule 

therefore implements § 9.1 as proposed, 

except with one additional sentence as 

discussed below. 

Specifically, § 9.1 has been revised to 

include the following sentence: 

‘‘Additionally, the Order also provides 

that it is to be implemented consistent 

with applicable law and subject to the 

availability of appropriations.’’ This 

sentence has been added to emphasize 

in particular that, as stated in Section 9 

of the Order, the Order is to be 

implemented consistent with applicable 

law. Along similar lines, Section 1 of 

the Order provides, as noted, that 

nothing in the Order shall be construed 

to permit a contractor or subcontractor 

to fail to comply with any provision of 

any other Executive Order or law of the 

United States. The applicable law 

encompassed by these Sections 

includes, for example, the HUBZone 

program established by title VI of the 

Small Business Reauthorization Act of 

1997, Executive Order 11246 (Equal 

Employment Opportunity), and the 

Vietnam Era Veterans’ Readjustment 

Assistance Act of 1974. When (and only 

when) the requirements of such laws 


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would conflict with the requirements of 

Executive Order 13495 under the 

particular factual circumstances of a 

specific situation, then the requirements 

of such laws may be satisfied in tandem 

with—and, when necessary, prior to— 

the requirements of Executive Order 

13495. 

For example, HUBZone small 

business concerns (SBCs) are required to 

have 35 percent of all of their employees 

reside in a HUBZone. When both the 

successor and the predecessor 

contractors are SBCs, the residence 

requirement threshold normally could 

be met through a standard application of 

this final rule. Under circumstances 

where the successor is a SBC but the 

predecessor is not, we believe that 

HUBZone SBCs can still meet both the 

requirements of the HUBZone program 

and the Executive Order. For instance, 

the successor SBC awardee could first 

extend offers of employment to the 

qualified predecessor awardee’s 

employees that reside in a HUBZone. If 

necessary to reach the residency 

threshold, the successor HUBZone SBC 

would next extend offers of employment 

to qualified residents of a HUBZone 

who were not employees of the 

predecessor. The HUBZone SBC could 

next extend offers for the remaining 

vacancies to non-HUBZone resident 

qualified employees of the predecessor 

awardee. The HUBZone SBC would 

need to first ensure that it meets the 

statutory requirements of the HUBZone 

program so that it is not decertified, and 

must consider the predecessor’s 

employees pursuant to the Executive 

Order in doing so. This approach would 

also apply in other circumstances, such 

as where the predecessor HUBZone SBC 

did not maintain the HUBZone 

residence requirement but was 

permitted to remain in the program. 

While the HUBZone SBC must maintain 

the 35 percent HUBZone residency 

requirement at all times while certified 

in the program, there is an exception: an 

SBC may ‘‘attempt to maintain’’ this 

requirement when performing on a 

HUBZone contract. When that occurs 

and the HUBZone SBC is permitted to 

fall below the 35 percent threshold, it 

still must meet the requirement any 

time it submits a subsequent offer and 

wins a HUBZone contract. 

Section 9.2 Definitions 

The proposed rule included 

definitions of several important terms, 

such as ‘‘contractor’’, ‘‘month’’, ‘‘same 

or similar service’’, ‘‘managerial 

employee and supervisory employee’’, 

and ‘‘employee or service employee’’. 

The Department received comments on 

only two of the proposed definitions. 

The Department proposed to define 

‘‘employee or service employee’’ to 

mean a service employee as defined in 

the Service Contract Act of 1965, 41 

U.S.C. 6701(3). The Service Employees 

International Union (SEIU) and Change 

to Win commented that they agreed 

with this proposed definition as it is 

based on the definition under the SCA. 

No other comments were received on 

this definition and it is adopted as 

proposed. 

The Department proposed to define 

‘‘managerial or supervisory employee’’ 

to mean a person engaged in the 

performance of services under the 

contract who is employed in a bona fide 

executive, administrative, or 

professional capacity, as those terms are 

defined in 29 CFR part 541, and 

specifically sought comments on this 

proposed definition. The PSC and 

American Federation of Labor and 

Congress of Industrial Organizations 

(AFL–CIO) supported the proposed 

definition. The PSC commented that 

‘‘adopting a different definition would 

lead to unnecessary confusion about the 

proper standard to apply in different 

situations, could lead to unintended 

consequences regarding coverage, and 

would create a trap for unwary 

contractors.’’ 

The American Maritime Officers 

Union (AMOU) suggested the 

Department define the term ‘‘managerial 

or supervisory employee’’ through 

reference to definitions set forth in the 

National Labor Relations Act (NLRA) or 

established by the National Labor 

Relations Board (NLRB). The American 

Maritime Association (AMA) stated that 

the proposed definition will not clarify 

the scope of the supervisory and 

managerial exclusion and would result 

in the unintended consequence of 

removing most ‘‘supervisors’’ from the 

scope of the exclusion. The AMA 

further commented that the proposed 

definition of managerial and 

supervisory employee would require the 

successor contractor to hire supervisory 

employees of the predecessor 

contractor, which would contradict the 

intent of the Executive Order. The 

Chamber of Commerce of the United 

States of America (Chamber) 

commented that the definition of 

managerial and supervisory employees 

should be more expansive than the 

Department proposed. The Chamber 

also suggested, like the AMOU, that the 

Department use the definitions of these 

terms under the NLRA. The Chamber 

added that the definition proposed by 

the Department renders the words 

‘‘other than managerial and supervisory 

employee’’ in the Executive Order 

superfluous because any employee 

employed in a bona fide executive, 

administrative, or professional capacity, 

as those terms are defined in 29 CFR 

Part 541, is not a service employee 

under the SCA. The SHRM similarly 

urged the Department to embrace the 

definition of ‘‘supervisor’’ under the 

NLRA and recommended that the 

Department consider how NLRB case 

law treats the term ‘‘manager.’’ This 

recommendation, according to the 

commenter, would ‘‘avoid a 

proliferation and possible contradiction 

of statutory and regulatory definitions 

making good-faith compliance more 

difficult.’’ 

The Department carefully considered 

the comments received on the definition 

of ‘‘managerial or supervisory 

employee’’ but is unconvinced that 

defining the term in accordance with 

the NLRA or NLRB caselaw is 

appropriate for the purpose of this 

Executive Order. As discussed in the 

preamble to the proposed rule, Sections 

1 and 5 of the Executive Order 

parenthetically exclude from its 

requirements managerial and 

supervisory employees, without 

defining the term. It is the Department’s 

view that this is a reiteration, not an 

expansion, of the exemption included in 

the SCA. Defining ’’managerial or 

supervisory employee’’ consistent with 

the SCA definition excludes any person 

employed in a bona fide executive, 

administrative, or professional capacity 

as those terms are defined in the 

regulations issued under the Fair Labor 

Standards Act (FLSA), 29 U.S.C. 203 et 

seq., at 29 CFR part 541. Such 

employees are exempt from the 

provisions of the SCA and need not be 

offered employment on the successor 

contract. Thus, the successor contractor 

has complete discretion to decide whom 

to employ as managers and supervisors 

on the contract. If a service employee of 

the predecessor contractor is qualified 

for a managerial or supervisory position, 

an offer of employment in that 

classification would satisfy the 

successor’s obligation to offer the 

employee employment on the contract, 

but the successor contractor is under no 

obligation to make an offer to such a 

position. Of course, the Department 

does not administer or enforce the 

NLRA and it is the Department’s view 

that use of SCA definitions with which 

contractors are already familiar will 

facilitate good-faith compliance, rather 

than making compliance more difficult. 

Contrary to the view of the Chamber, the 

Department believes this definition 

supports and clarifies the policy 

statement in the Executive Order, which 

affords the right to an offer of 


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employment to those service employees 

who are not managerial or supervisory 

employees. 

The proposed rule defined ‘‘same or 

similar service’’, in relevant part, to 

mean a service that is either identical to 

or has characteristics that are alike in 

substance and essentials to another 

service. After consideration, the 

Department has altered this definition to 

avoid inconsistency with the Executive 

Order. The language of the proposed 

definition could have resulted in the 

exclusion of some ‘‘similar’’ services in 

contravention of the Order. For 

example, it is the Department’s 

understanding that the term ‘‘same or 

similar service’’ is broader and more 

inclusive than the term ‘‘substantially 

the same services’’ that is used in the 

SCA. See 41 U.S.C. 6707(c). Therefore, 

the Department has refined the 

proposed definition at § 9.2(13) to mean 

a service that is either identical to or has 

characteristics that are alike in 

substance to a service performed at the 

same location on a contract that is being 

replaced by the Federal Government or 

a contractor on a Federal service 

contract. Apart from that change, the 

final rule implements the definitions as 

proposed. 

Section 9.3 Coverage 

Proposed § 9.3 discussed application 

of the rule and the Executive Order to 

all service contracts and their 

solicitations that succeed contracts for 

the same or similar service at the same 

location, except those specifically 

excluded by § 9.4. No comments were 

received on this proposed section and 

the final rule adopts proposed § 9.3 

without change. 

Section 9.4 Exclusions 

Proposed § 9.4 would implement the 

exclusions contained in Sections 3 and 

4 of Executive Order 13495. Proposed 

§ 9.4(a)(1) addressed the exclusion for 

contracts or subcontracts under the 

simplified acquisition threshold, as 

defined in 41 CFR 2.101. 74 FR 6103 

(Feb. 4, 2009). The simplified 

acquisition threshold, at the time the 

NPRM was published was $100,000; it 

has since been increased to $150,000. 41 

CFR 2.101. In contrast to the prior 

version of part 9, the proposal did not 

state that amount in the regulatory text 

so that in the event that a future 

statutory amendment changes the 

amount, any such change would 

automatically apply to contracts subject 

to part 9. 

Proposed § 9.4(a)(2) explained how 

the exclusion applies to subcontracts, 

including when a successor contractor 

discontinues the services of a 

subcontractor. The Department 

interprets the exclusion for contracts 

and subcontracts under the simplified 

acquisition threshold as applying to 

subcontracts of less than $150,000, even 

when the prime contract is for a greater 

amount because of the definition of a 

service contract in Section 2(a) of the 

SCA and the express terms of the 

exclusion in Section 3(a) of Executive 

Order 13495. However, while the 

proposed § 9.4(a)(1) exclusion would 

apply to subcontracts of less than 

$150,000, the covered prime contractor 

or higher tier subcontractor would still 

be required to comply with the 

requirements of this part. Moreover, if a 

covered contractor that is subject to the 

nondisplacement requirements were to 

discontinue the services of a 

subcontractor at any time during the 

contract and perform those or similar 

services itself at the same location, the 

contractor would be required to offer 

employment to the subcontractor’s 

employees who would otherwise be 

displaced and would otherwise be 

covered in accordance with this part but 

for the size of the subcontract. As noted 

in the preamble to the proposed rule, 

the earlier Executive Order 12933 

excluded prime contracts under the 

simplified acquisition threshold but did 

not mention subcontracts. The Chamber 

requested additional guidance regarding 

the application of the Executive Order 

to subcontracts. The Department has 

concluded that proposed § 9.4(a)(2) is 

sufficiently instructive; as no other 

comments were received on this 

paragraph, no revisions have been made 

to proposed § 9.4(a) and it is 

implemented in the final rule without 

change. 

Proposed § 9.4(b) implemented the 

exclusions applicable to certain 

contracts or subcontracts awarded for 

services produced or provided by 

persons who are blind or have severe 

disabilities. 74 FR 6103–4 (Feb. 4, 2009). 

Proposed § 9.4(b)(4) clarified that the 

exclusions provided by § 9.4(b)(1) 

through (b)(3) apply when either the 

predecessor or successor contract has 

been awarded for services produced or 

provided by the blind or severely 

disabled, as described. To require 

Federal service contractors who obtain 

their work under the specified set-aside 

programs to offer employment to the 

predecessor contractor’s employees 

would defeat the purpose of these 

programs to allow people to participate 

in the workforce who otherwise would 

not be able to do so. No comments were 

received on this paragraph and the final 

rule implements proposed § 9.4(b) 

without change. 

Proposed § 9.4(c) implemented the 

exclusion in Section 3(e) of Executive 

Order 13495 relating to employment 

where Federal service work constitutes 

only part of the employee’s job. 74 FR 

6104 (Feb. 4, 2009). This exclusion 

applies to an employee who was hired 

to work on the predecessor’s contract 

and one or more nonfederal jobs. No 

comments were received on this 

paragraph and the final rule adopts 

proposed § 9.4(c) without change. See 

§ 9.12(c)(5) (discussion of 

implementation of section 3(e) of the 

Executive Order). 

Section 9.4(d) Contracts Exempted by 

Federal Agency 

Section 9.4(d) implements the Section 

4 exclusion in the Executive Order that 

provides that the head of a contracting 

department or agency may exempt its 

department or agency from the 

requirements of any or all of the 

provisions of the Executive Order with 

respect to a particular contract, 

subcontract, or purchase order, or any 

class of contracts, subcontracts, or 

purchase orders, if the department or 

agency head finds that the application 

of any of the requirements of the 

Executive Order would not serve the 

purposes of the Executive Order or 

would impair the ability of the Federal 

Government to procure services on an 

economical and efficient basis. 74 FR 

6104 (Feb. 4, 2009). 

A number of commenters addressed 

issues relating to proposed language 

concerning the exemption authority of 

Federal agencies, including the 

notification and timing requirements 

relating to the exemption process, the 

factors agencies should use when 

considering whether to exempt 

contracts, and whether exemption 

decisions should be reviewable by and 

appealable to the Secretary of Labor. 

The introductory language of 

paragraph (d) remains as proposed 

except for a minor clarification 

specifying that the authority for 

contracting department or agency heads 

to exempt certain contracts from the 

Executive Order stems from Section 4 of 

the Order. 

Section 9.4(d)(1) Agency Determination 

No Later Than the Solicitation Date 

Section 9.4(d)(1) of the proposed rule 

limited the time in which an agency 

may decide to exempt contracts to no 

later than the solicitation date. This 

limitation was intended to ensure that 

the contract clause is included in the 

solicitation, if applicable, as required by 

the Executive Order. 

Two commenters addressed this 

issue. The Chamber opposed the 


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requirements that the agency exemption 

decision be made by the solicitation 

date and that the decision be supported 

by a written analysis in which the 

agency compares anticipated outcomes 

under both a carryover workforce and a 

non-carryover workforce scenario. It 

asserted that these requirements would 

significantly limit the contracting 

agency’s exercise of its waiver authority 

and would prevent the contracting 

agency from having ‘‘the full benefit of 

the contractors’ bids/proposals, many of 

which might include significant cost 

savings or other improvements in 

contract performance if the contract was 

exempted from coverage.’’ 

A labor advisor with the United States 

Navy (Navy Labor Advisor), asserted 

that the final regulations should remove 

the time limitation for agency 

exemption decisions, which he 

characterized as ‘‘an unwarranted 

infringement on agency deliberations 

and decisions that are essential to the 

mission of each agency.’’ He added that 

the time limitation was not needed to 

ensure that the contract clause is 

included in the solicitation because, 

under procurement practices and the 

Federal Acquisition Regulation, ‘‘any 

solicitation may be amended to correct 

oversights, errors, or changes to the 

originally issued document * * *’’. 

After carefully considering the 

comments, the Department has decided 

to adopt the proposed time limitation 

for agency exemption decisions to 

ensure that solicitations accurately 

reflect agency exemption 

determinations, either including the 

contract clause required by the 

Executive Order or omitting it following 

an agency exemption determination. 

This time limitation will ensure that the 

predecessor contractor’s service 

employees, as well as prospective 

bidders, receive timely notice of the 

agency’s decision. The Department has 

added language providing that the 

failure to follow this procedural 

requirement shall render any agency 

exemption decision inoperative and 

require the inclusion or addition of the 

clause in Appendix A of the final rule 

in the solicitation and any resulting 

contract, subcontract, or purchase order, 

or class of contracts, subcontracts, or 

purchase orders. 

Section 9.4(d)(2) and § 9.4(d)(3) Written 

Notice to Affected Workers of Finding 

and Decision No Later Than Solicitation 

Date Using the Notification Method 

Specified in § 9.11(b) 

Under § 9.4(d)(2) and § 9.4(d)(3), the 

Department proposed that when an 

agency exercises its exemption 

authority, it is required to notify 

‘‘affected workers in writing of the 

finding and decision no later than the 

award date’’ either in an individual 

notice given to each worker or through 

a posting at the location where the work 

is performed. The notification would 

need to include facts supporting the 

decision and use the method specified 

in proposed § 9.11(b). 

A number of commenters addressed 

this issue. The Chamber stated that 

requiring an agency to provide written 

notification to all affected workers that 

it will be exercising its exemption 

authority—including the facts 

supporting its decision—would 

significantly limit the agency’s exercise 

of its authority. 

A Navy Labor Advisor commented 

that the notification requirement is not 

supported by the language of the 

Executive Order and is not possible for 

agencies to fulfill under current 

recordkeeping rules for employment 

and protection of personally identifiable 

information. He further indicated that 

the prime contractor, not the contracting 

agency, should be required to notify 

affected workers of a waiver. He also 

stated that agencies lack ‘‘access to 

workers or the ability to require 

personally identifiable information,’’ 

and that under certain circumstances, 

contracting agencies may lack 

knowledge of who these service 

employees are or how to provide them 

with notice of the waiver decision. He 

added that agencies do not retain postal 

or e-mail addresses for these service 

employees; that under certain 

circumstances, there may be no 

appropriate place for a contracting 

agency to post a notice; that the 

methods called for in the proposed rule 

would infringe on the privacy of 

workers in question; that ‘‘neither the 

Service Contract Act nor the Executive 

Order provides any rationale or 

authority to collect such information 

and no other laws or regulations would 

require or allow contractors to provide 

this personal identifiable information 

(PII) to the contracting agencies,’’ and 

that agencies seek to avoid establishing 

a ‘‘ ‘personal service’ type relationship 

where employees are perceived to be 

directly employed by the contracting 

agency.’’ An individual commenter also 

expressed concern that the proposed 

rule could lead to the appearance of 

personal services contracts. 

The AFL–CIO stated that the final rule 

should clarify that agencies must 

provide written notice of their intent to 

exempt a contract to the labor union, if 

any, that represents the incumbent 

workers. It also asserted that instead of 

the date of contract award, notice 

should be provided at least 180 days 

before the contract award to ‘‘allow 

employees and their bargaining 

representative to have sufficient time to 

analyze the asserted reasons for the 

proposed exemption, and, if warranted, 

to challenge the exemption.’’ 

The SEIU and Change to Win 

supported the requirement that 

contracting agencies provide written 

notice of an exemption decision to 

affected workers, but stated that the 

final rule should clarify that notice must 

also be provided to the labor union, if 

any, that represents the incumbent 

workers. They noted that other 

provisions of the proposed rule 

provided for the worker representative 

to receive notice or to make a complaint 

on behalf of service workers. They also 

stated that the final rule should require 

notice of an exemption decision 

‘‘sufficiently in advance of the 

solicitation to bid’’ to allow affected 

workers and their representatives the 

opportunity to respond to the 

exemption, and if necessary contest it 

through an administrative review 

process. They suggested that such notice 

be provided no later than 120 days 

before the solicitation date. 

After careful consideration of the 

comments, the Department has decided 

to adopt the proposed language 

requiring notification with five changes. 

It remains the Department’s view that 

service employees are entitled to written 

notice of an agency exemption decision. 

However, we agree with the 

aforementioned commenters that the 

obligation to provide the notice should 

rest with the contractor, and not the 

contracting agency. Section 9.4(d)(2) 

and § 9.4(d)(3) have been revised to 

reflect that the ‘‘contracting agency shall 

ensure that the predecessor contractor 

notify affected workers and their 

collective bargaining representatives in 

writing of its determination no later 

than five business days after the 

solicitation date’’ and that ‘‘the agency 

shall ensure that the predecessor 

contractor uses the notification method 

specified in § 9.11(b) of this part to 

inform workers and their collective 

bargaining representatives of the 

exemption determination.’’ An agency 

exercising exemption authority will 

need to ensure that affected workers 

‘‘and their collective bargaining 

representatives’’ are notified of the 

finding and decision, in writing, no later 

than five business days after the 

‘‘solicitation’’ date, i.e., the date the 

solicitation is issued. The added 

language is needed to keep the 

provision consistent with other 

provisions in the rule and to provide 

those affected by the exemption 

decision with additional time to 


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consider their employment options. (See 

§ 9.11(b); § 9.21(a).) For clarity, the 

Department has also added language 

providing that the failure to follow this 

requirement shall render any agency 

exemption decision inoperative and 

require the inclusion of the clause in 

Appendix A of the final rule in the 

solicitation and any resulting contract, 

subcontract, or purchase order, or class 

of contracts, subcontracts, or purchase 

orders. 

The Department considers that 

written notification be provided to 

affected workers and their collective 

bargaining representatives of its 

exemption finding and decision— 

including facts supporting the 

decision—by no later than the 

solicitation date as consistent with the 

President’s commitment to openness 

and transparency in government. See 

January 21, 2009, Memorandum for the 

Heads of Executive Departments and 

Agencies. 74 FR 4685 (Jan. 21, 2009). 

Also in the interest of openness and 

transparency in government, language 

has been added to this subsection 

stating that the contracting agency shall 

notify the Department of its exemption 

decision and provide the Department a 

copy of its written analysis no later than 

5 business days after the solicitation 

date, which the Department will post on 

its Web site at www.dol.gov. Language 

has been added providing that the 

failure to follow this requirement shall 

render any agency exemption decision 

inoperative and require the inclusion of 

the clause in Appendix A of the final 

rule in the solicitation and any resulting 

contract, subcontract, or purchase order, 

or class of contracts, subcontracts, or 

purchase orders. 

In response to comments stating that 

notice of the exemption decision needs 

to be made at an earlier time than the 

contract award date for affected workers 

or their collective bargaining 

representatives to contest the decision 

with the agency, the Department has 

changed the time by which notice of the 

exemption decision must be provided 

from the award date to no later than five 

business days after the solicitation date. 

This change provides increased time for 

affected workers and their collective 

bargaining representatives to seek 

reconsideration of an exemption 

decision by the head of the contracting 

department or agency without 

burdening the agency with providing 

notice prior to the solicitation date, the 

date by which the decision must be 

made. The notification requirement 

should not be burdensome to fulfill 

because service contractors on Federal 

service contracts are already required to 

maintain, and make available for 

inspection and transcription, basic 

employment information concerning 

their employees, including their names 

and addresses. See 29 CFR 4.6. 

Section 9.4(d)(4) Factors and Analysis 

for Written Agency Determination 

Section 9.4(d)(4) of the proposed rule 

provided that when exercising the 

authority to exempt contracts, the 

agency shall prepare a written analysis 

supporting the determination that 

application of the nondisplacement 

provisions would not serve the purposes 

of the Executive Order or would impair 

the ability of the Federal Government to 

procure services on an economical and 

efficient basis. A number of commenters 

addressed this issue. Before addressing 

those comments individually, the 

Department believes that it may be 

helpful to summarize both what an 

exemption determination accomplishes 

and why the wage and fringe benefit 

costs of the predecessor contractor are 

rarely germane to such a determination. 

Executive Order 13495 and this final 

rule simply require a successor 

contractor and its subcontractors to offer 

a right of first refusal of employment on 

a successor contract to qualified service 

employees who are employed under the 

predecessor contract and whose 

employment would otherwise be 

terminated as a result of the award of 

the successor contract. When a 

contracting agency decides to exempt a 

contract from the Executive Order, that 

decision reflects a determination that 

none of the service employees on the 

predecessor contract should have a right 

to employment on the successor 

contract. A decision not to provide a 

single employee on the predecessor 

contract with a right to employment on 

the successor contract generally runs 

counter to the purpose of Executive 

Order 13495, which recognizes that the 

Federal Government’s procurement 

interests in economy and efficiency are 

served when a successor contractor 

hires the predecessor’s employees 

Although an exemption decision can 

be expected to have a profound impact 

on whether the employees on a 

predecessor contract are discharged or 

retained, it would generally have little, 

if any impact on the successor’s wage 

and fringe benefit costs. The Executive 

Order does not establish what wages or 

fringe benefits the successor employer 

pays any of its employees. Regardless of 

whether a contracting agency exempts a 

contract from the requirements of the 

Executive Order, SCA-mandated wage 

rates and fringe benefits still will apply 

to the successor contractor. An 

exemption determination simply 

determines who receives an offer of 

employment on the successor contract 

at whatever rate the contracting agency 

and/or the successor contractor choose 

(as long as that rate at least equals the 

applicable SCA rate). Given these 

realities, any focus at the exemption 

stage on wage rates or related costsavings is misplaced. 

As noted, the SCA establishes the 

minimum wage rates and fringe benefits 

to be paid to service employees on a 

contract for services. These minimum 

wage rates and fringe benefits can result 

from the SCA prevailing wage and 

fringe benefit rates or, under Section 

4(c) of the SCA, the wages and fringe 

benefits that service employees would 

have been paid under any collective 

bargaining agreement that would have 

applied had the predecessor contractor 

retained the service contract. 47 U.S.C. 

6707(c); 29 CFR 4.163(a). In either case, 

the SCA sets a floor for wage rates and 

fringe benefits, and, as noted, that floor 

will apply regardless of whether an 

agency exempts a contract from the 

requirements of the Executive Order. 

The SCA’s wage requirements thus 

buttress the Department’s view that, as 

noted above, wage and fringe benefit 

costs on successor service contracts 

could rarely serve as the basis for any 

agency to exercise its exemption 

authority. 

Finally, it is important to understand 

that a contracting agency remains free to 

consider wage rates and fringe benefits 

at other stages of the contracting process 

when it would normally consider such 

costs. A contracting agency can, for 

example, consider wage rates and fringe 

benefit costs at the solicitation stage for 

purposes other than exercising 

exemption authority, provided that the 

agency’s consideration of such costs is 

in accordance with the SCA and other 

applicable law. Similarly, bidders on 

service contracts may base their bids on 

the minimum wage rates and fringe 

benefits required by the SCA (including, 

where applicable, wage rates and fringe 

benefits required by section 4(c) of the 

SCA). A contracting agency also may 

consider wage rates and fringe benefit 

costs at the contract award stage, and 

may award the contract (if it so chooses 

and if the award is otherwise consistent 

with applicable law) to a prospective 

contractor whose bid reflects the 

payment of the minimum wage rates 

and fringe benefits required by the SCA. 

Thus, the decision to exempt a 

successor from the requirement to offer 

jobs to the predecessor’s workforce does 

not interfere with the agency’s ability to 

consider the costs, including the labor 

costs, of potential contractors. However, 

the fact that wage rates thus may change 

between contracts should not be used to 


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deprive service employees on the 

predecessor contract of any right to an 

offer of employment on the successor 

contract. 

Turning to the specific comments 

received, the Chamber stated that the 

determination of relevant factors in the 

agency exemption analysis should be 

left to the discretion of the contracting 

agency because ‘‘[t]he contracting 

agency knows better than DOL what 

costs and other factors are most 

significant to a particular contract.’’ It 

found unclear the purpose of a written 

determination in light of its conclusion 

that there does not appear to be any 

right of appeal regarding the agency’s 

decision. 

The PSC stated that the contracting 

agency should be able to delegate its 

exemption authority to the Contracting 

Officer for use whenever it would be in 

the best interests of the government. It 

stated that the Contracting Officer is the 

government official best positioned to 

identify the government’s needs and act 

in its best interests and that the 

delegation and less rigorous standard 

would ‘‘eliminate the stigma that a 

waiver can only be considered in rare 

circumstances or represents a failure to 

adhere to government policy.’’ It found 

that the proposed standard ‘‘suggests 

that the government must first conduct 

a highly-technical, objective market 

survey or analysis to determine whether 

services can be economically and 

efficiently obtained.’’ The PSC also 

stated that ‘‘collective poor performance 

of an incumbent labor staff or its 

resistance to change management’’ may 

not impair the government’s ability to 

obtain services on an economical or 

efficient basis, but that in such 

circumstances the contract should be 

excludable because it may ‘‘prevent the 

government from obtaining the highest 

quality services.’’ Similarly, the HR 

Policy Association asked whether 

agency dissatisfaction with a 

predecessor contractor because of 

inefficient work or poor performance by 

service employees would provide a 

‘‘sufficient justification for the 

contracting agency to exempt the 

contract or for the agency to authorize 

certain employees with performance 

issues’’ to be replaced. TechAmerica, an 

industry association representing the 

technology industry, requested that the 

Department consider an exception from 

the nondisplacement requirements 

when the predecessor contract has been 

terminated for default or cause. 

A Navy Labor Advisor stated that the 

requirement of a written analysis 

supporting an agency’s determination of 

exemption is ‘‘an unnecessary and 

unsupportable directive to the 

contracting agencies by DOL,’’ and 

requested that it be removed. An 

individual commenter stated that when 

an agency considers the cost of the 

nondisplacement requirements for a 

particular contract or class of contracts, 

it should also consider the savings to 

successor contractors derived from ‘‘a 

supply of qualified, experienced service 

employees.’’ 

The AFL–CIO stated that agencies 

should only be permitted to exempt 

contracts based on non-cost factors, and 

not on anticipated labor cost savings, 

after making ‘‘a strong and affirmative 

showing that an exemption is required 

in order to provide an essential 

government service.’’ This commenter 

added that the need to provide an 

essential government service in 

emergency circumstances could provide 

an appropriate basis to exempt a service 

contract. For example, the government’s 

ability to provide necessary services 

could be seriously impaired as a result 

of ‘‘a natural disaster, an act of war, or 

a terrorist attack [that] physically 

displaces incumbent employees from 

the geographic location in which they 

are employed, [making] it impossible for 

a successor contractor to reach such 

employees through any economicallyreasonable efforts in order to extend the 

job offers required by the 

nondisplacement rule.’’ 

The SEIU and Change to Win asserted 

that the agency exemption authority 

should be narrowly construed and that 

agencies should be required to 

substantiate the findings on which they 

base an exemption. These commenters 

further stated that an agency should 

exempt a contract only if the agency can 

present clear proof that application of 

the Executive Order to the contract 

would seriously impair the ability of the 

Federal Government to procure services, 

such as in circumstances where ‘‘the 

agency cannot procure the needed 

services if the Executive Order is 

applied.’’ They added that there should 

exist an ‘‘irrebuttable presumption that 

the Executive Order does not impair the 

ability of the Federal Government to 

procure services’’ where, in the past, a 

Federal service contract has involved 

the successor hiring all or most of the 

predecessor’s workers, because it has 

been demonstrated that the agency is 

able to procure those services with a 

carryover workforce. Concerned that a 

broad application of the waiver 

authority could defeat the purpose of 

the Executive Order, the SEIU and 

Change to Win stated that the agency 

waiver provision of the Executive Order 

‘‘could not have been meant to create a 

means by which agencies could easily 

exempt some or all of their service 

contracts.’’ Like the AFL–CIO, they 

asserted that anticipated labor cost 

savings, including the use of a 

workforce with less seniority, should 

never be an appropriate justification for 

an agency exemption. 

As with other exemptions applicable 

to labor standards, the Department 

interprets the exemption authority of 

the agencies under Section 4 of the 

Executive Order to be narrow. The 

Executive Order states that the Federal 

Government’s procurement interests in 

economy and efficiency are served 

when the successor contractor hires the 

predecessor’s employees. This 

conclusion is predicated on the 

determination that a carryover 

workforce reduces disruption to the 

delivery of services during the period of 

transition between contractors and 

provides the Federal Government the 

benefits of an experienced and trained 

workforce that is familiar with the 

Federal Government’s personnel, 

facilities, and requirements. Therefore, 

the Executive Order reflects a 

presumption that nondisplacement is in 

the interest of the Federal Government 

for each contract, class of contracts, 

subcontract, or purchase order, and the 

head of a contracting department or 

agency should only exercise exemption 

authority in those instances when the 

presumption can be clearly overcome 

based on a finding that 

nondisplacement would not serve the 

purposes of the Executive Order or 

would impair the ability of the Federal 

Government to procure services on an 

economical and efficient basis. The 

basis for such a finding must not be 

arbitrary and capricious. The 

regulations require a reasoned and 

transparent written analysis to support 

the decision to claim the exemption, 

because the Executive Order provides 

that it is normally in the government’s 

interest to use a carryover workforce. 

In the proposal, the Department 

specifically requested comments 

concerning proposed § 9.4(d) and what, 

if any, specific guidance the regulation 

should provide regarding the 

consideration of cost and other factors 

in exercising an agency’s exemption 

authority, including guidance regarding 

what information should be included in 

the agency’s written analysis supporting 

a decision to exercise exemption 

authority. For example, the Department 

sought comments on what costs would 

be most appropriately considered in 

determining whether application of the 

Executive Order’s requirements would 

not serve the purposes of the Executive 

Order or would impair the ability of the 

Federal Government to procure services 

on an economical and efficient basis, 


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53728 Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 

and how much weight should be given 

to such costs. Although the AFL–CIO 

and the SEIU and Change to Win 

responded concerning whether the 

regulation should restrict a contracting 

agency’s ability to exercise the 

exemption based solely on a 

demonstration that the cost of the 

predecessor contractor’s workers is 

greater than the cost of hiring new 

employees, no specific responses were 

received to other related inquiries, such 

as how an agency could project cost 

savings, whether a contracting agency 

should be prohibited from making 

projections based on how it believes a 

successor contractor may reconfigure 

the contract or wages to be paid, and 

what non-cost factors are most 

appropriately considered in determining 

whether application of the Executive 

Order’s requirements would or would 

not serve the purposes of the Executive 

Order or impair the ability of the 

Federal Government to procure services 

on an economical and efficient basis, 

and how much weight should be given 

to such non-cost factors. 

After careful consideration of the 

comments received, and based on the 

purposes of the Executive Order, the 

Department believes it is appropriate to 

add language to § 9.4(d)(4) explaining 

the framework and factors that may be 

used as well as what factors shall not be 

used, when conducting an analysis of 

relevant facts in order to make an 

exemption decision. Language has also 

been added to clarify that the failure to 

properly make such a written analysis 

shall render the exemption inoperative 

and require the inclusion of the clause 

in Appendix A of the final rule in the 

solicitation and any resulting contract, 

subcontract, or purchase order, or class 

of contracts, subcontracts, or purchase 

orders. 

An agency determination that the 

nondisplacement requirements would 

not serve the purpose of the Executive 

Order, or would impair the ability of the 

Federal Government to procure the 

services on an economical and efficient 

basis, must be supported with a detailed 

written analysis. Such a written 

analysis, among other things, shall 

compare the anticipated outcomes of 

hiring predecessor contract employees 

against those of hiring a new workforce. 

The consideration of costs and other 

factors should reflect the basic finding 

in the Executive Order that the 

government’s procurement interests in 

economy and efficiency are normally 

served when the successor contractor 

hires the predecessor’s employees, and 

should demonstrate how, in the 

particular factual circumstances, the 

finding does not apply. As discussed 

earlier, because the Executive Order 

simply requires the successor to offer a 

job to the predecessor’s employees, and 

because of the minimum wage and 

fringe benefit rates applicable to 

employees that are independently 

established by the requirements of the 

SCA, the contracting agency’s 

exemption decision should rarely take 

wage and fringe benefit rates into 

account. Therefore, a contracting 

agency’s decision to exercise the 

exemption should rarely be based on a 

demonstration that the wages and fringe 

benefits paid to the predecessor 

contractor’s workers are in some manner 

greater than the wages and fringe 

benefits to be paid to new employees. 

Instead, the written analysis typically 

must demonstrate that the cost savings 

other than wages and fringe benefits 

clearly outweigh the benefits of 

retaining the predecessor’s workers 

under the criteria provided in Section 4 

of the Executive Order. 

As for factors other than cost, the 

Executive Order presumes that ‘‘a 

carryover work force reduces disruption 

to the delivery of services during the 

period of transition between contractors 

and provides the Federal Government 

the benefits of an experienced and 

trained work force that is familiar with 

the Federal Government’s personnel, 

facilities, and requirements.’’ In order 

for an agency to exempt itself from the 

requirements of the Executive Order, an 

agency must overcome this presumption 

by demonstrating why use of the 

carryover workforce would not be 

beneficial and would be inconsistent 

with economy and efficiency. When 

analyzing whether the application of the 

Executive Order’s requirements would 

not serve the purpose of the Order and 

would impair the ability of the Federal 

Government to procure services on an 

economical and efficient basis, the head 

of a contracting department or agency 

shall consider the specific 

circumstances associated with the 

services to be acquired. General 

assertions or presumptions of an 

inability to procure services on an 

economical and efficient basis using a 

carryover workforce shall be 

insufficient. Factors that may be 

considered include, but are not limited 

to, the following: 

• Whether the use of a carryover 

workforce would greatly increase 

disruption to the delivery of services, 

such as during the transition period 

between contracts, and in its entirety 

would not yield an experienced and 

trained workforce that is familiar with 

the Federal Government’s personnel, 

facilities, and requirements as pertinent 

to the contract, subcontract, purchase 

order, class of contracts, subcontracts, or 

purchase orders at issue and would 

require extensive training to learn new 

technology or processes that would not 

be required of a new workforce. 

• Emergency situations, such as a 

natural disaster or an act of war, that 

physically displace incumbent 

employees from the locations of the 

service contract work and make it 

impossible or impracticable to extend 

offers to hire as required by the Order. 

With respect to the job performance of 

the predecessor contractor’s workforce, 

a contract, subcontract or purchase 

order may be exempted under Section 4 

of the Order if the head of the 

contracting department or agency 

reasonably believes, based on the 

predecessor employees’ past 

performance, that the entire predecessor 

workforce failed, individually as well as 

collectively, to perform suitably on the 

job and that it is not in the interest of 

economy and efficiency to provide 

supplemental training to the 

predecessor’s workers. Under those 

circumstances, it would be futile to 

require the successor contractor to 

evaluate the predecessor service 

employees on an individualized basis, 

as provided in § 9.12 of the final rule, 

to determine whether they had 

performed suitably on the job. A 

reasonable belief that some subset of the 

predecessor’s service employees failed 

to perform suitably on the job, standing 

alone, would not satisfy the exemption 

standards of Section 4 of the Executive 

Order because it would not serve the 

government’s procurement interests in 

economy and efficiency to exercise 

exemption authority when the 

predecessor’s workforce contains 

qualified service employees who are 

familiar with the contracting agency’s 

personnel, facilities, and requirements. 

Similarly, the termination of a service 

contract for default, standing alone, 

would not satisfy the exemption 

standards of Section 4 of the Executive 

Order. Such defaults, as well as other 

performance problems not leading to 

default, may result from poor 

management decisions of the 

predecessor contractor that have been 

addressed by awarding the contract to 

another entity, and that do not warrant 

the exercise of exemption authority, 

even when such management decisions 

have negatively affected the overall 

performance of the workforce. 

A head of the contracting department 

or agency that makes a reasonable 

determination that an entire predecessor 

contractor’s workforce failed to perform 

suitably on the job must demonstrate 

that his or her belief is reasonable and 

is based upon credible information that 


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has been provided by a knowledgeable 

source such as department or agency 

officials responsible for monitoring 

performance under the contract. Absent 

an ability to demonstrate that this belief 

is based upon written credible 

information provided by such a 

knowledgeable source, the employees 

working under the predecessor contract 

in the last month of performance will be 

presumed to have performed suitable 

work on the contract. The head of a 

contracting agency or department may 

demonstrate a reasonable belief that an 

entire workforce, in fact, failed to 

perform suitably on the predecessor 

contract through written evidence that 

all of the employees, collectively and 

individually, did not perform suitably. 

Information regarding the general 

performance of the predecessor 

contractor is not sufficient to claim the 

exception. It is also unlikely that the 

agency will be able to make this 

showing where the predecessor 

employed a large workforce. 

Narrowly circumscribing an agency’s 

ability to exempt a contract, 

subcontract, or purchase order from the 

requirements of the Executive Order 

based on poor performance of the 

predecessor contractor’s workforce is 

consistent with the Section 5(b)(3) of the 

Executive Order, which expressly 

contemplates evaluating employee 

performance on an individual basis. It 

also ensures that an agency will not 

claim the exemption based on 

deficiencies of the predecessor 

contractor, even when those 

deficiencies have negatively affected the 

quality of the predecessor contractor’s 

workforce. 

Further, we agree with the SEIU and 

Change to Win that the seniority of the 

workforce is an inappropriate and 

irrelevant consideration for exercising 

an exemption. 

Finally, a contracting agency should 

not base an exemption determination on 

inherently speculative assessments of 

how a successor contractor might 

reconfigure contract work. Since a 

contractor may consider the size of its 

workforce and the job classifications 

that are needed in the course of 

determining which employees of the 

predecessor contractor should receive 

an offer of employment, the agency’s 

interest in economy and efficiency can 

be preserved without having to exempt 

an entire contract or class of contracts 

from the requirements of the Executive 

Order. 

As discussed, the successor’s wage 

and fringe benefit costs on an aggregate 

basis do not generally depend on 

whether its employees come from the 

predecessor’s workforce, and thus are 

not a permissible basis for an agency 

exemption decision, absent exceptional 

circumstances. This is consistent with 

the presumption in the Executive Order 

that the Federal Government’s 

procurement interests in economy and 

efficiency are served when the successor 

contractor hires the predecessor’s 

employees. Moreover, except with 

respect to the nondisplacement 

obligation, the Executive Order does not 

preclude contracting agencies from 

considering aggregate wage and fringe 

benefit costs at the solicitation and 

award stages. For example, a contracting 

agency may reconfigure a contract at the 

solicitation stage in order to reduce 

costs (including aggregate wage and 

fringe benefit costs) by, for example, 

consolidating sites of performance, and 

it may also consider bidders’ 

calculations of aggregate wage and 

fringe benefit costs in making contract 

awards as well. To consider such costs 

in connection with an exemption 

decision, however, would mean that 

service employees on the predecessor 

contract would have no right of first 

refusal of employment on such a 

reconfigured or lower-cost successor 

contract. Such an outcome would be 

neither consistent with the 

presumptions and findings of the 

Executive Order nor be necessary to 

ensure that contracting agencies have 

sufficient flexibility to consider the full 

range of potential costs at the 

solicitation and award stages. 

Of course, there may be exceptional 

circumstances in which a contracting 

agency could consider wage and fringe 

benefit costs in exercising its exemption 

authority. As noted, a contracting 

agency could exercise its exemption 

authority in emergency situations, such 

as a natural disaster or an act of war, 

that physically displace incumbent 

employees from the locations of the 

service contract work and make it 

impossible or impracticable to extend 

offers to hire as required by the Order. 

It could also exercise its exemption 

authority when a carryover workforce in 

its entirety would not constitute an 

experienced and trained workforce that 

is familiar with the Federal 

Government’s personnel, facilities, and 

requirements but rather would require 

extensive training to learn new 

technology or processes that would not 

be required of a new workforce. In each 

of these two scenarios—in which 

exigent circumstances may make the use 

of a carryover workforce prohibitively 

expensive—a contracting agency could 

consider wage and fringe benefit costs 

in deciding whether to exercise its 

exemption authority. There may be 

other, similar circumstances in which 

the cost of employing a carryover 

workforce on the successor contract 

would be prohibitive, and wage and 

fringe benefit costs could be considered 

in such circumstances, as well. Absent 

such truly exceptional circumstances, 

however, a contracting agency may not 

consider wage and fringe benefit costs 

in making an exemption decision for the 

reasons described above. 

The Department did not change the 

regulations to provide for an 

‘‘irrebuttable presumption that the 

Executive Order does not impair the 

ability of the Federal Government to 

procure services’’ under a service 

contract where, in the past, the contract 

has involved the successor hiring all or 

most of the predecessor’s workers, as 

requested by the SEIU and Change to 

Win. Circumstances surrounding service 

contracts can change. The Department 

concludes that such a provision would 

exceed the standard in Section 4 of the 

Executive Order. 

Language has been added to § 9.4 

stating that the written analysis shall be 

prepared no later than the solicitation 

date and retained in accordance with 

FAR 4.805. 48 CFR 4.805. This addition 

is intended to clarify that the written 

analysis and the exemption 

determination are to be made 

contemporaneously, and that the 

written analysis is to be retained and 

made available for disclosure in a 

manner consistent with the President’s 

commitment to openness and 

transparency in government. 

Section 9.4(d)(5) Reconsideration of 

Exemption Decisions 

Three commenters addressed the 

issue of whether agency decisions to 

exempt contracts are subject to 

challenge or review. Both the Chamber 

and the SEIU and Change to Win noted 

that the proposed regulations do not 

provide for any review of an agency 

decision to exempt a contract, 

subcontract or purchase order from 

coverage of the Executive Order. The 

SEIU and Change to Win and the AFL– 

CIO asserted that exemption decisions 

should be reviewable by and appealable 

to the Secretary of Labor. The SEIU and 

Change to Win believe that some 

oversight is necessary to ensure that an 

agency exemption is in full compliance 

with the Executive Order; otherwise, 

‘‘the Secretary would be abdicating her 

responsibility’’ to ensure compliance 

with the Executive Order and, by 

allowing agencies to exempt contacts 

without some form of external review, 

would be warranting ‘‘a breach of 

fundamental due process.’’ They 

suggested an administrative process 


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through which interested parties could 

challenge, and the Department of Labor 

could review, an agency’s exemption 

decision. The AFL–CIO requested that 

the final rule require administrative 

review and Departmental approval of an 

agency’s contract exemption decision in 

advance of the contract solicitation date. 

After careful consideration, the 

Department has decided not to add 

provisions for Departmental review of 

agency exemption decisions because it 

is the Department’s view that the 

Executive Order does not provide for 

such review. The Department’s final 

rule is intended to ensure that agencies 

exercise exemption authority 

appropriately based on proper 

consideration of the relevant factors. 

Such safeguards, rather than 

Departmental review, are designed to 

ensure that agencies do not exempt 

contracts from the nondisplacement 

protections of the Executive Order in an 

arbitrary or capricious manner. 

However, the Department has added 

language stating that any requests for 

reconsideration of an exemption 

decision shall be directed to the head of 

the relevant contracting department or 

agency. Such reconsiderations would, of 

course, be final agency actions 

appealable in accordance with the 

Administrative Procedure Act, 5 U.S.C. 

701–06. 

Contracts Involving the Marine Industry 

Finally, the Marine Engineers 

Beneficial Association (MEBA) 

requested that the final rule exempt 

service contracts involving U.S. Coast 

Guard Licensed Officers because 

application of the nondisplacement 

requirements would allegedly disrupt 

longstanding hiring practices in the 

maritime industry. Similarly, the AMA 

and the Seafarers International Union 

(SIU) requested that the final rule 

exempt the maritime industry because 

application of the Executive Order 

would ‘‘over-ride and cancel longestablished industry collectively 

bargained obligations and practices and 

frustrate, rather than further, the 

underlying goals of that Order.’’ After 

consideration, the Department has 

decided not to add a provision 

exempting service contracts involving 

U.S. Coast Guard Licensed Officers 

specifically or the maritime industry in 

general because the Executive Order 

does not provide the Secretary with 

such authority. 

In addition, the Department believes 

that the provisions governing exemption 

authority, as presently drafted, suffice to 

address the concerns raised by the 

MEBA, the AMA, and the SIU. 

Subpart B—Requirements 

Proposed subpart B established the 

requirements that contracting agencies 

and contractors shall undertake to 

comply with the nondisplacement 

provisions. 

Section 9.11 Contracting Agency 

Requirements 

Proposed § 9.11(a) provided the 

regulatory requirement to incorporate 

the contract clause specified in 

Appendix A in covered service 

contracts, and solicitations for such 

contracts, that succeed contracts for 

performance of the same or similar 

services at the same location. Appendix 

A of the proposed rule established the 

employee nondisplacement contract 

clause to implement Section 5 of 

Executive Order 13495. 74 FR 6105 

(Feb. 4, 2009). Paragraph (e) of proposed 

Appendix A required the contractor to 

include, in every subcontract entered 

into in order to perform services under 

the prime contract, provisions to ensure 

that each subcontractor honors the 

requirements of paragraphs (a) through 

(b) of the employee nondisplacement 

contract clause with respect to the 

employees of a predecessor 

subcontractor or subcontractors working 

under the contract, as well as employees 

of a predecessor contractor and its 

subcontractors. Under proposed 

Appendix A, the subcontract must also 

include provisions ensuring that the 

subcontractor will provide the 

contractor with the information about 

the employees of the subcontractor 

needed by the contractor to comply with 

paragraph (c) of the employee 

nondisplacement clause. Paragraph (d) 

of proposed Appendix A concerned 

sanctions and remedies for 

noncompliance with the 

nondisplacement contract clause. 

Proposed Appendix A also set forth 

additional provisions necessary to 

implement the Order. With the 

exception of a provision that addressed 

recordkeeping, similar contract clause 

provisions appeared in the earlier 

version of part 9. See 62 FR 28188 (May 

22, 1997). The additional provisions 

would appear in paragraphs (f) through 

(i) of the nondisplacement contract 

clause. Specifically, proposed paragraph 

(f) provided notice that under certain 

circumstances the Contracting Officer 

will withhold, or cause to be withheld, 

from the prime contractor funds 

otherwise due under the subject 

contract or any other Government 

contract with the same prime contractor 

for violations of the Executive Order or 

these regulations. Paragraph (g) of 

Appendix A required the contractor to 

maintain certain records to demonstrate 

compliance with the substantive 

requirements of part 9, and specified the 

records to be maintained. Paragraph (h) 

required the contractor, as a condition 

of the contract award, to cooperate in 

any investigation by the contracting 

agency or the Department into possible 

violations of the provisions of the 

nondisplacement clause and to make 

records requested by such official(s) 

available for inspection, copying, or 

transcription upon request. Paragraph (i) 

provided that disputes concerning the 

requirements of the nondisplacement 

clause would not be subject to the 

general disputes clause of the contract. 

Instead, such disputes are to be resolved 

in accordance with the procedures in 

part 9. 

The Department received three 

comments on the contract clause 

provision. The PSC commented that it 

was concerned that if the Department 

and the FARC contract clauses are not 

identical then it would prevent efficient 

administration of the Executive Order. 

The PSC recommended that the 

Department not include the contract 

clause proposed at Appendix A, but 

instead, explicitly incorporate by 

reference the mandatory contract clause 

promulgated in the FAR. The PSC also 

stated that the final rule should include 

a provision similar to that found in the 

SCA regulations at 29 CFR 4.5(c) 

indicating that when a contract is not 

initially considered to be covered by the 

SCA but is later determined to be, in 

fact, SCA-covered that the Contracting 

Officer unilaterally modify the contract 

to include the relevant SCA clause and 

wage determination. The PSC 

commented that a similar provision 

should be included in part 9 to ensure 

the incumbent contractor’s obligation to 

timely deliver to the Contracting Officer 

a list of service employees performing 

on the contract. The Chamber 

commented that a ‘‘safe harbor’’ 

provision is necessary for circumstances 

where the contracting agency 

erroneously failed to include the 

nondisplacement contract clause in a 

contract. It asserted that retroactive 

application of the clause during the 

course of the contract would result in 

‘‘chaos or significant liability.’’ The 

Chamber stated that if contract 

performance had begun with nonpredecessor contractor employees, the 

successor contractor would be required 

to terminate its workforce in sufficient 

numbers to accommodate any qualified 

workers or pay back wages to workers 

who were denied their right to an offer 

of employment. The Chamber also 

argued that a contracting agency’s 


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determination that a contract is not 

subject to the provisions of the 

Executive Order because it is not for the 

same or similar service, or for any other 

reason, should be dispositive for the 

duration of the contract. 

The Small Business Administration, 

Office of Advocacy (SBA) sought 

clarification concerning the effect 

compliance with the proposed rule 

would have on non-unionized successor 

contractors. Specifically, it asked 

whether a successor contractor who 

hires a predecessor contractor’s 

employees under Executive Order 13495 

will be deemed a successor to the 

predecessor’s collective bargaining 

agreement under the NLRA, 29 U.S.C. 

151–169. It also suggested that the 

Department disclose in contract bidding 

materials whether or not the 

predecessor contractor has a collective 

bargaining agreement and whether it is 

a union shop. The SHRM also inquired 

about the possible interaction of the 

proposed rule with the NLRA. 

In response to the PSC’s comments, 

the Department notes that the Executive 

Order requires the FARC and the 

Department to consult in regards to 

drafting regulations that are required for 

implementation of the Order. The 

Department has consulted with the 

FARC and will continue to work with 

the FARC to promote consistency in the 

regulations. 

The Department understands the 

concern raised by the Chamber; 

however, we believe that inclusion of a 

‘‘safe harbor’’ provision in the 

regulation would be inappropriate and 

would exceed the Secretary’s authority 

under the Executive Order. The 

Department also notes that a mandatory 

contract clause expressing a ‘‘significant 

or deeply ingrained strand of public 

procurement policy,’’ such as the clause 

mandated by Executive Order 13495 

and its implementing regulations, ‘‘is 

considered to be included in a contract 

by operation of law.’’ S.J. Amoroso 

Constr. Co. Inc., v. United States, 12 

F.3d 1072, 1075 (Fed. Cir. 1993); see 

also Office of Federal Contract 

Compliance Programs, United States 

Dep’t of Labor v. UPMC Braddock, 

UPMC McKeesport, and UPMC 

Southside, Case No. 08–048, 2009 WL 

1542298, at *3 (Admin. Rev. Bd. May 

29, 2009). Therefore, the Department 

concludes that it is not necessary to 

include a provision in the final rule 

mirroring 29 CFR 4.5(c), as suggested by 

the PSC, in order to require the 

Contracting Officer to modify such a 

contract by adding the clause required 

by Executive Order 13495 and the final 

rule. However, where the provisions of 

the Executive Order were incorrectly 

omitted from a contract or a contract 

solicitation, the Department shall, 

consistent with the Executive Order, 

employ informal alternative dispute 

resolution to remedy the situation and 

may require the retroactive application 

of the nondisplacement requirements of 

the Executive Order and its 

implementing regulations. Additionally, 

in those instances where the 

Department is notified of the potential 

misapplication, of the contract clauses 

(such as the improper inclusion or 

omission of those clauses) prior to 

contract award, the Department will 

notify the contracting agency and 

provide advice concerning how to revise 

the solicitation. In response to 

comments, the Department added 

paragraph (f)(1) to Appendix A to 

require the predecessor contractor to 

provide a certified seniority list to the 

Contracting Officer not less than 30 days 

before completion of the contract. 

Where changes to the workforce are 

made after the submission of the list 

provided 30 days before completion of 

the contract, the predecessor contractor 

shall furnish an updated certified list to 

the Contracting Officer not less than 10 

days before completion of the contract. 

See § 9.12(e) for further discussion of 

this change to the contract clause. 

Proposed paragraph (f) has been 

renumbered as (f)(2). 

Concerning the possible effect of the 

final rule on an employer’s obligations 

under the NLRA, it is the Department’s 

conclusion that any statement about the 

potential interplay between the 

nondisplacement provisions of this final 

rule and the NLRA would exceed 

Departmental authority; the Department 

does not administer or enforce the 

NLRA and the NLRB has not ruled on 

whether a successor contractor under 

these or similar circumstances would 

also be a successor in interest for NLRA 

purposes. The Department declines the 

SBA’s suggestion that the Department 

supplement the bidding materials of 

contracting agencies with information 

concerning whether the predecessor has 

a collective bargaining agreement and a 

unionized workforce; such action would 

exceed the Department’s responsibilities 

under Executive Order 13495. When a 

collective bargaining agreement governs 

the wage rates and fringe benefits of 

service employees employed on the 

predecessor contract, the provisions of 

section 4(c) of the SCA require the 

successor contractor to pay no less than 

the predecessor’s contractor’s collective 

bargaining agreement rates. 

Proposed § 9.11(b) specified that 

contracting agencies must provide 

notice to incumbent service employees 

when the contract on which they are 

employed will be awarded to a 

successor contractor. Under the 

proposed language in Appendix B, the 

Contracting Officer shall provide 

written notice to such service 

employees of their possible right to an 

offer of employment by either posting a 

notice in a conspicuous place at the 

worksite or delivering it to the 

employees individually. Under the 

proposal, where a significant portion of 

the incumbent contractor’s workforce is 

not fluent in English, the notice shall be 

provided in both English and the 

language with which the employees are 

more familiar. The Department would 

translate the notice into several foreign 

languages and make the English and 

foreign language versions available in a 

poster format to contracting agencies via 

the Internet in order to allow easy 

access; however, another format with 

the same information may be used. 

Multiple foreign language notices would 

be required where significant portions 

of the workforce speak different foreign 

languages and there is no common 

language. If, for example, a significant 

portion of a workforce spoke Korean 

and another significant portion of the 

same workforce spoke Spanish, then the 

contracting agency would need to 

provide the information in English, 

Korean, and Spanish. Under those 

circumstances, providing the 

information only in English and Korean 

typically would not provide the notice 

in a language with which the Spanish 

speakers are more familiar than English. 

Proposed § 9.11(b) did not provide for 

notice through electronic 

communications; instead, the 

Department sought comments as to 

whether allowing contracting agencies 

an electronic notification option, in lieu 

of physical posting or providing a paper 

copy to the worker, will provide the 

agencies greater flexibility and 

efficiency without sacrificing the quality 

of the information provided to workers, 

especially when contract work is 

performed at a location that is remote 

from procurement staff. 

The Department received several 

comments on the notification 

requirements in proposed § 9.11(b). The 

U.S. Air Force Installations & Sourcing 

Division stated that because the 

Contracting Officer has no contact 

information for contractor employees, 

and because the contract clause already 

puts the contractor on notice regarding 

its responsibilities with respect to 

nondisplacement, the requirements for 

agency contracting personnel to notify 

employees and the contractor of their 

rights and responsibilities are 

burdensome and redundant. 


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A Navy Labor Advisor commented 

that requiring the successor contractor 

to distribute the notices would result in 

a collection of Personal Identifiable 

Information (PII) in the form of 

employee mailing and email addresses. 

He suggested that because the 

contracting agency has a direct 

relationship with only the prime 

contractor, the requirement for direct 

notice to the employees should be 

placed upon the prime contractor. 

Furthermore, this commenter expressed 

the concern that contracting agency 

acquisition personnel are already 

overburdened and that, ‘‘regardless of 

the good and honorable intentions of 

contracting agency acquisition officials, 

the notice requirements will likely not 

get accomplished routinely as currently 

written into the Part 9 regulations.’’ 

However, if the requirement to provide 

the notice remains with the contracting 

agency, he added, the contracting 

agency should be allowed to distribute 

the notice via a general electronic 

posting, since service employees often 

work in facilities not controlled by the 

contracting agency. The AFL–CIO 

commented that providing electronic 

notification to employees is reasonable, 

assuming the agency has determined 

that the workforce has the ability to 

receive the e-mail. This commenter 

added that the agency should also be 

required to physically post a copy of the 

notice at the job site. The PSC stated 

that e-mail notification would 

encourage compliance with the 

proposed rule; however, such e-mail 

notification would only be sufficient 

when employees hold e-mail accounts 

maintained by the predecessor 

contractor or government. 

Concerning the proposed requirement 

that notice be provided in English and, 

when appropriate, in other languages, 

the HR Policy Association suggested 

that the final rule clarify what 

constitutes a ‘‘significant’’ portion of the 

workforce in terms of how many 

employees speak a language other than 

English, as the notification requirement 

would put a burden on the successor 

contractor if it would have to create 

notices and new offer letters in multiple 

languages if it was determined that a 

significant portion of its workforce 

spoke a language other than English. A 

Navy Labor Advisor, along with the U.S. 

Air Force Installations and Sourcing 

Division, also stated that because the 

incumbent contractor knows best the 

languages of its employees, it should be 

responsible for distributing notices. 

It remains the Department’s view that 

notifying service employees of their 

possible right to an offer of employment 

is an effective means by which to ensure 

compliance with the Executive Order. 

However, we do agree with the 

aforementioned commenters that the 

obligation to provide the notice should 

rest with the contractor, and not the 

contracting agency. Section 9.11(b) has 

been revised to reflect that the 

‘‘Contracting Officer will ensure that the 

predecessor contractor provide written 

notice to service employees of the 

predecessor contractor of their possible 

right to an offer of employment’’ and 

that ‘‘Contracting Officers may advise 

contractors to provide the notice set 

forth in Appendix B * * *’’ This is 

consistent with ‘‘existing’’ contractor 

obligations under the SCA with regards 

to providing notice of compensation 

through posting ‘‘or the delivery’’ of the 

applicable wage determination, and 

SCA poster. 29 CFR 4.183, 4.184. 

Therefore, the Department believes that 

placement of this obligation with the 

contractor is appropriate and best 

accomplishes the goal of employee 

notification. 

Concerning providing notice through 

the use of electronic communications, 

the Department has decided, after 

careful consideration of the comments, 

to allow contractors to distribute the 

notices through the use of effective 

electronic communications. The 

Department has added language to the 

rule allowing contractors to use an 

effective electronic mail 

communication, and describing 

effective electronic communication. To 

be effective, such a communication 

must result in an electronic delivery 

receipt or some other reliable 

confirmation that the intended recipient 

received the notice. Any particular 

determination of the adequacy of a 

notification, regardless of the method 

used, must be fact-dependent and made 

on a case-by-case basis. The Department 

recognizes that reliance on electronic 

communication will increase in the 

future and often may provide an 

inexpensive and reliable way to 

communicate information quickly. For 

example, using electronic mail may be 

the most effective method to notify 

service employees who work in 

facilities not controlled by the 

contractor. The Department disagrees 

with the PSC that sufficient e-mail 

notification would require employees to 

have email accounts maintained by the 

predecessor contractor or the 

government. Additionally, the 

Department declines to implement the 

suggestion from the Navy Labor Advisor 

that contracting agencies be allowed to 

distribute the notice via a general 

electronic posting. The Department 

believes that providing for individual 

electronic notices to workers will result 

in the affected workers receiving the 

notice and appropriately addresses the 

concern of providing notice to service 

employees. 

Concerning the proposed requirement 

that the notice be provided in English 

and in other languages, as appropriate, 

the Department notes that this 

requirement is similar to regulatory 

requirements implementing other DOLadministered and enforced statutes, 

such as the Family and Medical Leave 

Act, the H–2A provisions of the 

Immigration and Nationality Act, the 

Migrant and Seasonal Agricultural 

Worker Protection Act, and Executive 

Order 13496, Notification of Employee 

Rights Under Federal Labor Laws. The 

term ‘‘significant portion’’ has not been 

defined under these other regulations, 

and the lack of a definition or brightline test has not prevented employers 

from complying with the requirement. 

For these reasons, the term is not 

defined in the final rule. If there is a 

question of whether a portion of the 

workforce is significant and the 

Department has a poster in the language 

common to those workers, the notice 

should be posted in that language. 

Proposed § 9.11(c) requires the 

Contracting Officer to provide the list of 

employees employed by the predecessor 

contractor, referenced in proposed 

§ 9.12(e), to the successor contractor 

and, on request, to employees or their 

representatives. A Navy Labor Advisor 

suggested that two lists be required: an 

alphabetical list, provided long before 

the end of the predecessor contract and 

used to comply with the Executive 

Order, and a list organized by date of 

hire, provided at the beginning of 

contract performance and used for 

compliance with SCA-mandated wage 

and fringe benefit terms. This 

commenter asserted that the use of two 

separate lists would protect more senior 

employees from discrimination by 

concealing their seniority during the 

transition process. The Department’s 

consideration of this comment can be 

found in the discussion of proposed 

§ 9.12(e). No other comments were 

received on this provision and the final 

rule implements this paragraph as 

proposed. 

Proposed § 9.11(d) addressed 

Contracting Officers’ responsibilities 

regarding complaints of alleged 

violations of part 9. As under the prior 

version of part 9, the proposed rule 

provided that contracting agencies 

would initially receive complaints of 

alleged violations of the 

nondisplacement requirements and, in a 

compliance assistance mode, provide 

information to the complainant and 


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contractor about their rights and 

responsibilities under the employee 

nondisplacement provision of the 

contract. 

Under the proposed rule, contracting 

agencies would not be obligated to 

forward to the Wage and Hour Division 

(WHD) any complaint that is withdrawn 

because of this compliance assistance. 

Thus, for example, a Contracting Officer 

would not need to forward to the WHD 

a complaint that an employee 

withdraws because the employee was 

previously not aware of the application 

of a particular exclusion. In all other 

cases, the contracting agency would 

forward certain information necessary 

for the Department to determine 

compliance. Under the proposal, the 

Contracting Officer, within 30 days of 

receipt of a complaint, would forward to 

the WHD headquarters any allegations 

of any violation of this part; available 

statements by the employee or the 

contractor regarding the alleged 

violation; evidence that a seniority list 

was issued by the predecessor and 

provided to the successor; a copy of the 

seniority list; evidence that the 

nondisplacement contract clause was 

included in the contract or that the 

contract was exempted by the agency; 

information concerning known 

settlement negotiations between the 

parties (if applicable); and other 

pertinent information the Contracting 

Officer chooses to disclose. The 

proposal also required the Contracting 

Officer to provide copies of the 

information to the successor contractor 

and the complainant. To assist the 

contracting agency in providing 

information to the WHD and to protect 

the interests of the contracting agency, 

the proposal provided for the 

contracting agency to conduct an initial 

review of any nondisplacement 

complaint, including obtaining 

statements of the positions of the parties 

and inspecting the records of the 

predecessor and successor contractors 

(and making copies or transcriptions 

thereof); questioning the predecessor 

and successor contractors and any 

employees of these contractors; and 

requiring the production of any 

documentary or other evidence deemed 

relevant to determine whether a 

violation of this part had occurred. 

Contracting agencies would be obligated 

to refer questions of interpretations 

regarding part 9 to the nearest WHD 

local office. 

The Department received few 

comments on this provision. The SEIU 

and Change to Win as well as the AFL– 

CIO both commented that the 30-day 

period for the contracting agency to 

forward complaints to the WHD 

constituted an appropriate amount of 

time in order for complaints to be 

handled expeditiously. A Navy Labor 

Advisor requested the elimination of the 

entire provision, suggesting that WHD 

handle all complaints. This commenter 

claimed that ‘‘there is no basis for 

involving the contracting agency in the 

receipt or resolution of complaints.’’ In 

addition, contracting officers from 

Federal agencies represented on the 

FARC expressed their concerns with the 

implementation of this proposed 

requirement. After careful consideration 

of these comments, the Department has 

revised § 9.11(d) to limit the Contracting 

Officer’s responsibilities with regard to 

handling complaints. The Contracting 

Officer is no longer responsible for 

initial review of or compliance 

assistance with complaints. Instead, the 

Contracting Officer shall be responsible 

for reporting information to the WHD 

within 14 days of WHD’s request. 

Because the contracting agency no 

longer has the responsibility of 

reviewing complaints, the Department 

believes 14 days is an appropriate 

timeframe within which to require 

production of information necessary to 

evaluate the complaint. Further 

consideration of this comment can be 

found in the discussion of § 9.21(a). 

Section 9.12 Contractor Requirements 

and Prerogatives 

General 

Proposed § 9.12 articulated 

contractors’ requirements and 

prerogatives under the nondisplacement 

requirements. The proposed section 

included the general obligation to offer 

employment, the method of the job 

offer, exceptions, permitted staffing 

reductions, obligations near the end of 

the contract, recordkeeping, and 

obligations to cooperate with reviews 

and investigations. 

Proposed § (a)(1) of this section 

implemented the Executive Order 

requirement that no employment 

openings may be posted before the 

successor contractor has offered 

employment to the employees on the 

predecessor contract. Under the 

proposed rule, except as provided under 

the exclusions listed in proposed § 9.4 

and the exceptions in proposed § 9.12 

paragraphs (c) and (d), a successor 

contractor or subcontractor could not 

fill any employment openings under the 

contract prior to making bona fide, 

express offers of employment, in 

positions for which the employees are 

qualified, to those employees employed 

under the predecessor contract whose 

employment would be terminated as a 

result of award or expiration of the 

contract under which they were hired. 

Except as provided under the 

aforementioned exclusions and 

exceptions, all employees working on 

the contract at the time of contract 

completion, regardless of length of 

tenure, would be entitled to such an 

offer. The successor contractor and its 

subcontractors would be required to 

make a bona fide, express offer of 

employment to each employee and state 

the time within which the employee 

must accept such offer, but in no case 

would the period within which the 

employee must accept the offer of 

employment be less than 10 days. 

The HR Policy Association suggested 

that the final rule should permit a 

successor contractor to post and offer 

positions to non-predecessor employees 

within the same time frame—at least 10 

days—during which the successor 

contractor offers positions to 

predecessor employees, in case the 

predecessor employees do not accept 

the job offers. The HR Policy 

Association also commented that 

proposed § 9.12(a)(1) implied that if an 

employee was laid off because, for 

instance, the successor contract has 

fewer positions in a particular job, the 

successor contractor must permit the 

otherwise displaced employee to be 

offered other positions for which he or 

she is arguably minimally qualified, 

including jobs he or she never 

performed before. This commenter 

recommended that the final rule clarify 

that the right of first refusal exists for 

predecessor employees who would 

perform the same job with the successor 

employer. The SEIU and Change to Win 

commented that proposed § 9.12(a)(1) 

did not specify the manner in which 

such offers should be made. 

The Department disagrees with the 

HR Policy Association’s assertion to the 

extent that it suggests that the successor 

contractor would be required to offer a 

position to an employee who is not 

qualified for the position. Proposed 

§ 9.12(b)(4) described the criteria by 

which a successor contractor can 

determine whether an employee is 

qualified for the position, based upon 

the employee’s education and 

employment history, with particular 

emphasis on the employee’s experience 

on the predecessor contract, and the 

Department believes this section 

provides appropriate guidance to 

successor contractors for determining 

whether a particular employee is 

qualified. The Department also 

disagrees with this commenter’s 

suggested revision to allow the 

successor contractor to make contingent 

offers of employment to nonpredecessor employees in the period 


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during which predecessor employees 

are considering the successor’s offer. 

The Department notes that the HR 

Policy Association’s suggestions to 

provide contingent offers to nonpredecessor employees would be 

contrary to the express language of the 

Executive Order. 

Proposed § 9.12(a)(2) clarified that the 

successor contractor’s obligation to offer 

a right of first refusal exists even if the 

successor contractor was not provided a 

list of the predecessor contractor’s 

employees or the list did not contain the 

names of all persons employed during 

the final month of contract performance. 

The Navy Labor Advisor suggested that 

this requirement should be eliminated 

entirely, asserting that the successor 

contractor would have no reason to 

know, in the absence of a seniority list, 

to whom it is legally required to offer 

employment. He also suggested that 

responsibility should be placed upon 

the predecessor contractor to provide an 

accurate seniority list or other 

information on a timely basis rather 

than to place what he characterized as 

unreasonable demands upon the 

successor contractor and/or the 

contracting agency. The SBA Office of 

Advocacy also commented that if a list 

of employees is not provided by the 

predecessor contractor, then the 

successor contractor may incur costs in 

trying to determine to which employees 

it is supposed to extend job offers. An 

individual commenter recommended 

that if the predecessor contractor fails to 

provide a list of incumbent employees, 

then ‘‘the successor contractor [should] 

be permitted to offer probationary 

employment to incoming employees, 

with the understanding that 

employment may be revoked upon a 

good faith finding that the employee 

was not previously employed.’’ The PSC 

also expressed concern about a 

predecessor contractor failing to furnish 

a list of employees, and suggested that 

the Contracting Officer should have the 

authority to allocate remedies to the 

responsible party in an effort to 

encourage compliance and allocate risks 

of non-compliance. 

After carefully considering the 

comments, the Department has decided 

to adopt the proposed language without 

change. The Department notes that 

meeting the requirement to make an 

offer of employment should not be 

burdensome because the predecessor 

contractor may use the list submitted to 

satisfy the requirements of the SCA 

contract clause specified at 29 CFR 

4.6(l)(2) to meet its list submission 

requirement under part 9. In those 

instances where the list is not provided 

or is incomplete, the Department 

disagrees that the nondisplacement 

requirements should be extinguished or 

altered. While sympathetic to the 

successor contractor’s needs in such 

circumstances, the Department 

concludes that waiving the predecessor 

employees’ right of first refusal of 

employment is not consistent with the 

Executive Order. Furthermore, the 

Department is not authorized under the 

Executive Order to make such an 

exception. The Department also does 

not agree that a successor contractor 

should be permitted to offer 

probationary employment. 

Proposed § 9.12(a)(3) discussed 

determining the employee’s eligibility 

for the job offer and provided related 

guidance. While a person’s eligibility for 

a job offer usually would be based on 

whether his or her name is included on 

the certified list of all service employees 

working under the predecessor’s 

contract or subcontracts during the last 

month of contract performance, a 

successor contractor would also be 

required to accept other credible 

evidence of an employee’s entitlement 

to a job offer. For example, even if a 

person’s name does not appear on the 

list of employees on the predecessor 

contract, an employee’s assertion of an 

assignment to work on a contract during 

the predecessor’s last month of 

performance, coupled with contracting 

agency staff verification, could 

constitute credible evidence of an 

employee’s entitlement to a job offer. 

Similarly, an employee could 

demonstrate eligibility by producing a 

paycheck stub identifying the work 

location and dates worked for the 

predecessor. The successor could verify 

the claim with the contracting agency, 

the predecessor, or another person who 

worked at the facility. 

The Chamber asserted that the 

presumption that all employees on the 

seniority list are entitled to a right of 

first refusal should be reciprocal, so that 

the successor contractor could presume 

that only those employees identified on 

the seniority list are entitled to a right 

of first refusal. A Navy Labor Advisor 

requested that the Department provide 

additional examples of proof of credible 

evidence of entitlement to a job offer, 

while SEIU and Change to Win 

recommended that the regulations make 

clear that the submission of any 

evidence of employment is acceptable 

as long as such evidence is credible. 

The Department disagrees with the 

Chamber’s suggestion that only those 

employees whose names appear on the 

seniority list should be entitled to an 

offer of employment under the 

Executive Order. To deny an employee 

an offer because of a failure of the 

predecessor contractor to meet its 

obligations under the Executive Order 

would unfairly disadvantage the 

employee. The final rule adopts the 

proposed language without change. 

Section 9.12(b) Method of Job Offer 

Proposed § 9.12(b) discussed the 

method of the job offer. Proposed 

§ 9.12(b)(1) stated that except as 

otherwise provided in part 9, a 

contractor must make a bona fide 

express offer of employment to each 

employee on the predecessor contract 

before offering employment on the 

contract to any other person. The 

obligation to offer employment would 

cease upon the employee’s first refusal 

of a bona fide, express offer to 

employment on the contract. Proposed 

§ 9.12(b)(2) provided that the contractor 

shall state the time period within which 

the employee must accept the 

employment offer, but in no case may 

that time period be less than 10 days. 

Proposed § 9.12(b)(3) required the 

successor contractor to make an oral or 

written employment offer to each 

employee, and, in order to ensure that 

the offer is effectively communicated, to 

take reasonable efforts to make the offer 

in a language that each worker 

understands. 

Proposed § 9.12(b)(4) clarified that the 

employment offer may be for a different 

position on the contract than the 

position the employee held on the 

previous contract. An offer of 

employment on the successor’s contract 

would generally be presumed to be a 

bona fide offer of employment even if it 

was not for a position similar to the one 

the employee previously held, provided 

that the position was one for which the 

employee was qualified. Questions 

concerning an employee’s qualifications 

would be decided based upon the 

employee’s education and employment 

history with particular emphasis on the 

employee’s experience on the 

predecessor contract. A successor 

contractor would have to base its 

decision regarding an employee’s 

qualifications on credible information 

provided by a knowledgeable source 

such as the predecessor contractor, the 

local supervisor, the employee, or the 

contracting agency. For example, an oral 

or written outline of job duties or skills 

used in prior employment, school 

transcripts, or copies of certificates and 

diplomas all would be credible 

information. Under proposed 

§ 9.12(b)(5), the offer of employment 

could be for a position providing 

different terms and conditions of 

employment than those that applied to 

the employee’s work for the predecessor 

contractor, where the different terms 


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and conditions are not related to a 

desire that the employee refuse the offer 

or that other employees be hired. Lastly, 

proposed § 9.12(b)(6) provided that, 

where an employee is terminated under 

circumstances suggesting the offer of 

employment may not have been bona 

fide, the facts and circumstances of the 

offer and the termination will be closely 

examined to ensure the offer was bona 

fide. 

Many of the comments received on 

proposed § 9.12(b) expressed concern 

with the timing of required actions, 

particularly the time frame between the 

successor contractor’s receipt of the list 

of the predecessor contractor’s 

employees (seniority list) from the 

contracting agency, the timeframe 

within which employees must respond 

to an offer of employment, and the start 

date of the contract. This issue is 

discussed in greater detail with respect 

to proposed § 9.12(e). 

CAE USA, Inc. commented that there 

is a possibility that positions will be 

unfilled at the start of the contract, since 

the obligatory offer of employment to 

the predecessor contractor employee has 

a deadline for acceptance on or after the 

contract start date. A Navy Labor 

Advisor commented that this section 

must be supplemented with additional 

information because it fails to address 

predecessor contractor employees that 

may, in fact, refuse a bona fide 

employment offer. This commenter also 

suggested that the Department include 

the full description of how 

determinations of qualification would 

be made in the text of the final rule. 

TechAmerica suggested that successor 

contractors be given the flexibility to 

review the qualifications of incumbent 

personnel before those employees are 

offered employment. The HR Policy 

Association, the Chamber, and 

TechAmerica commented concerning 

hiring practices, stating that the final 

rule should identify whether the 

application of the successor contractor’s 

‘‘higher standards for employment’’ or 

‘‘normal hiring validation processes’’ 

(e.g., requiring passing a drug test as a 

condition of employment) would be 

permissible in determining whether an 

employee is qualified. The SBA Office 

of Advocacy sought clarification on 

whether successor contractors can vet 

the predecessor employees through 

means such as, but not limited to, 

interviews, drug tests, and security tests. 

The AFL–CIO commented that the 

final rule should require all 

employment offers by successor 

contractors to be made in writing in 

order to reduce disputes about whether 

offers were made and whether they were 

bona fide. This commenter added that 

having the offer in writing would be 

particularly helpful for workers who are 

not fluent in English. The SEIU and 

Change to Win stated that the proposed 

requirement that an employer ‘‘take 

reasonable efforts to make an offer in a 

language that each worker understands’’ 

should require that offers be made in 

English and in a language that the 

worker understands. The International 

Union of Operating Engineers (IUOE) 

commented that to ensure that service 

workers receive an offer that affords 

prevailing wage protection, there should 

be no presumption that an offer of 

employment to a lower paying job is a 

bona fide offer. The IUOE suggested that 

the positions offered should, as a 

general rule, be in the same 

classifications or in higher paid 

classifications for individual workers, 

stating that this section as proposed will 

exacerbate the existing problem of 

deliberate misclassification of prevailing 

wage workers by creating an additional 

incentive to misclassify workers. The 

AFL–CIO stated that offers for lesser pay 

or benefits cannot presumptively be 

considered bona fide, and should only 

be considered bona fide if the successor 

contractor proves by clear and 

convincing evidence that the reasons for 

the offer are not related to a desire to 

reduce labor costs, to induce the 

incumbent employee to refuse the offer, 

or to ensure that other employees are 

hired for the offer. The SEIU and 

Change to Win stated that to allow an 

employer to offer a lesser position when 

the person’s equivalent position is 

available cannot be considered a ‘‘bona 

fide offer of employment.’’ They 

suggested that the final regulations 

provide that a ‘‘bona fide offer of 

employment’’ must be for an equivalent 

or better position under the successor 

contract as long as such a position 

remains open. The SEIU and Change to 

Win also commented that the provision 

as proposed is inadequate because it 

would allow successor contractors to 

hire employees who did not work for 

the predecessor contractor at higher 

wages and benefits than it offers the 

predecessor’s employees for the same 

position. 

The Chamber commented that if the 

provision allowing the successor to offer 

employment to a position with different 

terms and conditions did not exist, 

Federal contractors would be 

significantly disadvantaged when 

attempting to craft appropriate bids and 

could easily be locked into inefficient 

business models that would further 

hinder the provision of economic and 

efficient services. This commenter 

suggested that clearer language creating 

a presumption in favor of the employer 

and requiring more than a suggestion 

that the offer was not bona fide to rebut 

the presumption would go a long way 

toward making this important part of 

the regulations practically functional. 

The PSC expressed concern that the 

provision concerning termination after 

contract commencement would restrict 

companies from using policies of ‘‘at 

will’’ employment to terminate 

‘‘employees who fail to deliver excellent 

services.’’ It also stated that such 

examination of a successor Federal 

service contractor’s termination 

decisions would contradict or preempt 

state at-will employment laws, and that 

the proposed rule does not indicate the 

standard that will be used in 

government investigations to determine 

whether a termination was bona fide or 

pretextual. 

After a careful review of the 

comments, the Department has 

concluded that a successor contractor 

may apply employment screening 

processes (i.e., drug tests, background 

checks, security clearance checks, and 

similar pre-employment screening 

mechanisms) only when such processes 

are provided for by the contracting 

agency, are conditions of the service 

contract, and (in addition to being 

otherwise consistent with applicable 

Federal and state law) are consistent 

with the Executive Order. Conversely, a 

successor contractor may not impose its 

own hiring standards (such as college 

degree requirements for particular 

positions) in making determinations 

regarding whether an employee of a 

predecessor contactor is qualified. 

Contracting agencies and prospective 

bidders and successor contractors may 

exchange views during the contracting 

process about the need for particular 

employment screening processes. For 

example, a prospective bidder may 

inform a contracting agency that the 

bidder requires drug testing of all of its 

service employees and may recommend 

that the contracting agency provide for 

such drug testing in connection with the 

service contract; whether drug testing 

would be permitted in this circumstance 

would depend upon whether the 

contracting agency agrees with the 

bidder and provides for such testing as 

provided in this rule. With respect to 

determining employee qualifications, 

the Executive Order focuses on an 

employee’s past performance, and it 

specifically provides that a right of first 

refusal need not be offered to an 

employee whom the contractor or any of 

its subcontractors reasonably believes, 

based on the particular employee’s past 

performance, has failed to perform 


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suitably on the job. Consistent with the 

Executive Order, the final rule provides 

that questions concerning an employee’s 

qualifications should be decided based 

upon the employee’s education and 

employment history, with particular 

emphasis on the employee’s experience 

on the predecessor contract. A 

contractor’s hiring standards or 

employment screening processes 

typically would not measure the 

employee’s performance on the 

predecessor contract, and use of such 

standards or processes thus could not be 

used to determine whether an employee 

is qualified unless a contracting agency 

provided for use of such standards or 

processes and made them a condition of 

the service contract. Such standards or 

processes would, of course, also need to 

be consistent with the Executive Order; 

a contracting agency or successor 

contractor could not, for example, 

determine that otherwise-qualified 

service employees on a predecessor 

contract would not be qualified to 

perform the same or similar services on 

a successor contract because they lack a 

college degree. The Department has 

added language to § 9.12(b)(1) to reflect 

these changes. 

In response to concerns raised by 

some commenters regarding a successor 

contractor offering employment to a 

qualified employee on different terms 

and conditions than those under which 

the employee worked for the 

predecessor contractor, the Department 

notes that nothing in the Executive 

Order or in the SCA prevents a 

contractor from restructuring its staff 

and putting its employees into other 

positions for which they are qualified or 

from subjecting them to different terms 

and conditions of employment. The 

Department does not agree that 

continuing to provide contractors on 

Federal service contracts with such 

flexibility will lead to an increase in 

employee misclassification. The 

Department also disagrees that offers 

must be made in writing to be sufficient. 

Adequate oral or written offers could 

satisfy the requirements of the Executive 

Order. 

The Department advises that 

proposed § 9.12(b)(6) concerns only 

those terminations that suggest earlier 

employment offers were not bona fide. 

Such terminations would circumvent 

the requirements of the Executive Order. 

Because the Secretary is charged with 

enforcing compliance with the 

Executive Order, it is appropriate for her 

to closely examine terminations that 

suggest a failure to provide a bona fide 

offer of employment. The Department 

does not agree that § 9.12(b)(6) will 

conflict with the requirements of state 

employment laws, but notes that the 

Executive Order, and its implementing 

regulations, will provide controlling law 

concerning the nondisplacement of 

qualified workers under Federal 

Government service contracts. The 

Department also does not believe that it 

is necessary to articulate a standard in 

the final rule that will be used in 

termination investigations to determine 

whether an employee received a bona 

fide offer of employment. The final rule 

implements proposed § 9.12(b) with the 

modification noted above. No other 

changes were made to the proposed 

provision. 

Section 9.12(c) Exceptions 

In proposed § 9.12(c), the Department 

addressed the exceptions to the general 

obligation to offer employment under 

Executive Order 13495. These 

exceptions are included in the contract 

clause established in section 5 of the 

Order and are distinct from the 

exclusions discussed in § 9.4. The 

exceptions specify both certain classes 

of contracts and certain employees 

excluded from the provisions of 

Executive Order 13495. The exception 

from the successor contractor’s 

obligation to offer employment on the 

contract to employees on the 

predecessor contract prior to making the 

offer to anyone else does not relieve the 

contractor of other requirements of this 

part (e.g., the obligation near the end of 

the contract to provide a list of 

employees who worked on the contract 

during the last month). The exceptions 

are to be construed narrowly and the 

contractor will bear the burden of proof 

regarding the appropriateness of 

claiming any exception. 

Under proposed § 9.12(c)(1), a 

contractor or subcontractor would not 

be required to offer employment to any 

employee of the predecessor who will 

be retained by the predecessor 

contractor. The contractor would be 

required to presume that all employees 

hired to work under a predecessor’s 

Federal service contract will be 

terminated as a result of the award of 

the successor contract, absent an ability 

to demonstrate a reasonable belief to the 

contrary based upon credible 

information provided by a 

knowledgeable source such as the 

predecessor contractor, the employee, or 

the contracting agency. 

Proposed § 9.12(c)(2) provided that a 

successor contractor or subcontractor 

would be allowed to employ under the 

contract any employee who has worked 

for the successor contractor or 

subcontractor for at least 3 months 

immediately preceding the 

commencement of performance under 

the contract, i.e., the first date of 

performance of the contract, and who 

would otherwise face lay-off or 

discharge. As with any exception to the 

nondisplacement requirements, a 

successor contractor bears the burden of 

showing how the exception applies. For 

example, a successor contractor would 

have to demonstrate that an employee it 

has employed for at least 3 months will 

be discharged if a position on the 

contract is not offered because the 

employee’s work on another contract 

has expired and there are no other 

openings for which the employee is 

qualified. A successor contractor could 

not claim this exception to reemploy an 

employee who was already terminated 

or laid off because such a person has not 

been employed for the 3 months 

preceding the commencement of the 

successor contract. However, an 

employee would still be considered to 

be employed during a period of leave, 

such as vacation or sick leave, or a 

similar short-term absence. 

Under proposed § 9.12(c)(3), the 

contractor or subcontractor would not 

be required to offer employment to any 

employee of the predecessor contractor 

who is not a service employee. 

Typically, this exception would apply 

to a person who is a managerial or 

supervisory employee on the 

predecessor contract. The successor 

contractor would be required to 

presume that all persons appearing on 

the list required by § 9.12(e), or who 

have demonstrated they should have 

been included on the list were service 

employees under a predecessor’s 

Federal service contract, absent an 

ability to demonstrate a reasonable 

belief to the contrary, based upon 

credible information provided by a 

knowledgeable source such as the 

predecessor contractor, the employee, or 

the contracting agency. Information 

regarding the general business practices 

of the predecessor contractor or the 

industry would not be sufficient for 

purposes of the exception. 

The Department proposed in 

§ 9.12(c)(4) that a contractor or 

subcontractor would not be required to 

offer employment to any employee of 

the predecessor contractor whom the 

contractor or any of its subcontractors 

reasonably believes, based on the 

particular employee’s past performance, 

has failed to perform suitably on the job. 

The successor contractor would be 

required to presume that all employees 

working under the predecessor contract 

in the last month of performance 

performed suitable work on the 

contract, absent an ability to 

demonstrate a reasonable belief to the 

contrary based upon credible 


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information provided by a 

knowledgeable source such as the 

predecessor contractor, the local 

supervisor, the employee, or the 

contracting agency. A successor 

contractor could demonstrate its 

reasonable belief that the employee in 

fact failed to perform suitably on the 

predecessor contract through evidence 

of disciplinary action taken for poor 

performance or evidence directly from 

the contracting agency that the 

particular employee did not perform 

suitably. Similarly, a successor 

contractor could use performance 

appraisal information in determining 

whether an employee failed to perform 

suitably on the job; however, the 

Department notes that this does not 

require a predecessor contractor to 

provide performance information. 

Information regarding the general 

performance of the predecessor 

contractor would not be sufficient for 

purposes of this exemption. The 

Department sought comments as to 

whether there should be any 

requirement that the information 

supporting the contractor’s or 

subcontractor’s reasonable belief that an 

employee of the predecessor contractor 

had failed to perform suitably on the job 

be in writing and relatively 

contemporaneous with the employee’s 

past performance. 

Under proposed § 9.12(c)(5), a 

contractor or subcontractor is not 

required to offer employment to any 

employee hired to work under a 

predecessor’s Federal service contract 

and one or more nonfederal service 

contracts as part of a single job, 

provided that the employee was not 

deployed in a manner that was designed 

to avoid the purposes of this part. The 

successor contractor is required to 

presume that all employees hired to 

work under a predecessor’s Federal 

service contract did not work on one or 

more nonfederal service contracts as 

part of a single job, unless the successor 

contractor can demonstrate a reasonable 

belief to the contrary based upon 

credible information provided by a 

knowledgeable source such as the 

predecessor contractor, the local 

supervisor, the employee, or the 

contracting agency. Information 

regarding the general business practices 

of the predecessor contractor or the 

industry would not be sufficient for 

purposes of this exception. For instance, 

claims from several employees stating 

that a janitorial contractor reassigned its 

janitorial workers who previously 

worked exclusively in a Federal 

building to both Federal and private 

clients as part of a single job may 

indicate that the predecessor deployed 

workers to avoid the requirements of the 

nondisplacement provisions. 

Conversely, where the employees on the 

predecessor contract were deployed to 

Federal and other buildings as part of 

their job, the successor contractor would 

not be required to offer employment to 

the workers. Knowledge that contractors 

generally deploy workers to both 

Federal and other clients would not be 

sufficient for the successor contractor to 

claim the exception because such 

general practices may not have been 

observed on the particular predecessor 

contract. 

The Department received various 

comments on proposed § 9.12(c). A 

Navy Labor Advisor requested that the 

final rule at § 9.12(c)(2) include 

language concerning the eligibility of 

employees on leave. The HR Policy 

Association commented that proposed 

§ 9.12(c)(3) is illogical because if a 

successor employer determines that 

certain positions will be supervisory or 

managerial positions, it should not be 

obligated to hire predecessor employees 

into these non-service positions, even if 

the predecessor employer elected to 

treat the positions as service employee 

positions. The Chamber commented that 

the Department should eliminate the 

presumption that all employees 

included on the list by the predecessor 

and competitor contractor are ‘‘service 

employees’’. The Chamber suggested 

that if the Department maintains the 

presumption that all workers are service 

employees, then the evidentiary 

standard for rebutting that presumption 

should be changed to require only that 

the successor contractor have a good 

faith belief that the employee is not a 

service employee and that the 

Department should provide additional 

guidance and allow the successor 

contractor to use information regarding 

general business practices. 

The Chamber also commented that 

the requirement that the successor 

contractor presume the predecessor 

contractor’s employees would be 

terminated, absent a reasonable belief to 

the contrary based on credible evidence 

from a knowledgeable source, involved 

evidentiary standards that are too 

difficult to meet because a successor 

contractor does not necessarily have 

access to the predecessor contractor or 

employees. The Chamber suggested that 

the final rule eliminate the presumption 

that all employees will be terminated as 

a result of the award of a successor 

contract and provide additional 

guidance regarding what type of 

evidence will support this exception. 

The PSC commented that ‘‘unsuitable 

past performance’’ is inadequately 

defined in the proposed rule and will 

result in confusion and litigation. The 

PSC also noted that the rule does not 

provide sufficient guidance regarding 

the ‘‘evidence’’ on which a successor 

contractor may rely to determine that a 

prospective employee’s performance is 

unsuitable. The PSC also felt that since 

an employee’s poor performance is often 

not reflected in any formal employment 

action, a formal record of ‘‘disciplinary 

action’’ should not be among the criteria 

that a contractor must demonstrate to 

justify employment decisions affecting 

unsuitable incumbent employees. The 

PSC stated that the proposed rule 

provides little guidance on what 

information the predecessor contractor 

must provide to the successor contractor 

concerning the performance of 

employees. The SBA Office of Advocacy 

stated that successor contractors may 

not receive information about employee 

performance because seniority lists do 

not contain performance reviews, and 

should the predecessor contractor 

provide employee information, it may 

not be reliable since the predecessor 

contractor may have lost the contract 

due to its inability to manage personnel. 

The SHRM commented that the 

predecessor contractor may not 

maintain, or provide, thorough 

employment records, and recommended 

that when this occurs, the successor 

contractor notify the contracting agency 

to be relieved of its obligation to offer 

a right of first refusal. 

The PSC commented, and 

TechAmerica agreed, that an employee’s 

prior work experience is not necessarily 

the sole qualification for the job, and 

recommended that the successor 

contractor be allowed to not make an 

offer of employment to those of the 

predecessor’s employees who are 

‘‘undesirable’’ for reasons other than 

past instances of unsuitable 

performance. The PSC opined that few 

contractors would be willing to try to 

satisfy the proposed rule’s standard for 

excusing a successor contractor from the 

obligation to offer a predecessor’s 

employee a position on the contract. 

This commenter recommended that, 

should the Department retain the 

presumption that an employee’s prior 

experience on the predecessor contract 

makes the employee qualified for the 

successor contract, the time period 

should be expanded to six months of 

continuous employment on the 

predecessor contract. The SHRM 

recommended that the final rule relieve 

a successor contractor of any 

requirement to hire any of the 

predecessor’s employees in any 

situation where a predecessor contractor 


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retains 10% or more of its workforce 

employed during the 90 days preceding 

the completion of the Federal contract 

because that may indicate that the 

predecessor has moved its more 

experienced and valuable employees off 

the contract. Similarly, the SBA Office 

of Advocacy and the PSC expressed 

concern that, under the proposed 

section, a predecessor contractor might 

keep its best performing employees and 

leave the successor contractor with less 

qualified employees. These commenters 

argued that the standard for establishing 

non-qualification should be changed to 

a good faith belief by the successor 

contractor. The Chamber suggested that 

the presumption of qualification be 

eliminated from the proposal because it 

provides an incentive for the 

predecessor contractor to ‘‘dump’’ lowperforming employees from other 

contracts onto the contract it is about to 

lose. The Chamber further commented 

that the proposed section did not 

provide the successor contractor with 

access to the information required to 

disprove qualification. The PSC and 

TechAmerica added that predecessor 

contractors would not want to provide 

employee evaluations to successor 

contractors because of privacy and legal 

concerns. The SBA Office of Advocacy 

and the PSC recommended that the final 

rule contain a safe harbor provision for 

those predecessor contractors who 

provide employee information due to 

the high litigation risk disclosure 

produces. TechAmerica also requested a 

safe harbor provision to protect the 

successor contractor from litigation 

brought by employees of the 

predecessor contractor. 

The AFL–CIO stated that the final rule 

should require a successor contractor to 

support its belief in an employee’s 

unsuitable performance with written 

evidence of poor performance created 

contemporaneously with the reliedupon disciplinary action. The SEIU and 

Change to Win suggested that the final 

regulation require a successor contractor 

to support its belief in an employee’s 

unsuitable performance with written 

evidence of poor performance created 

contemporaneously with the reliedupon disciplinary action, that any poor 

past performance relied on be sufficient 

under the contractor’s own policies to 

justify termination, and that the poor 

performance be equivalent to ‘‘just or 

proper cause’’ as those terms are used 

under collective bargaining agreements. 

The SEIU and Change to Win agreed 

with the AFL–CIO’s suggestion that the 

final rule require a successor contractor 

to show that an employee engaged in a 

‘‘terminable offense’’ as a basis for 

denying to extend the employee a job 

offer on the contract. 

Regarding the exception from the 

requirement to offer employment to an 

employee who was hired to work on the 

predecessor’s contract and one or more 

nonfederal jobs as part of a single job, 

the Chamber suggested that the final 

rule eliminate the presumption that no 

employee was hired for more than the 

contract at issue, or at least change the 

evidentiary standard for rebutting that 

presumption to require only that the 

successor contractor have a good faith 

belief that the employee was employed 

on one or more nonfederal jobs as part 

of a single job. The Chamber requested 

additional guidance on what type of 

evidence will support this exception. 

The SEIU and Change to Win 

commented that it would defeat the 

intent of the Executive Order if the 

requirement to offer employment was 

not applied to employees who worked 

relatively less time on nonfederal 

contracts and who would face layoff 

because of the award of the contract to 

another contractor. They suggested that 

the final regulations provide that an 

employee who spends at least 59% of 

his or her time working on a Federal 

service contract and who would face 

layoff as a result of the contract change 

should not be excluded from coverage 

under Section 3(e) of the Executive 

Order. 

The Department disagrees with the 

Chamber that the evidentiary standard 

required to establish the exception in 

proposed § 9.12(c)(1) is too difficult to 

meet. As the proposal indicated, 

credible information may be obtained 

from the predecessor contractor, the 

employee, or the contracting agency. 

Therefore no changes have been made to 

proposed § 9.12(c)(1). The Department 

declines the Navy Labor Advisor’s 

request that § 9.12(c)(2) include 

language concerning the eligibility of 

employees on leave as not necessary. 

Such employees would clearly still be 

employed by the predecessor while on 

leave. Therefore, § 9.12(c)(2) is also 

adopted as proposed. 

After careful review of the comments, 

the Department has also decided to 

adopt § 9.12(c)(3) without change. It is 

the Department’s conclusion that the 

provision, as proposed, suffices to 

ensure job protection for eligible 

employees of the successor contractor. 

Under the SCA, all employees 

performing work on the contract are 

considered service employees unless 

they are defined as executive, 

administrative, or professional 

employees exempt under the Fair Labor 

Standards Act, 29 U.S.C. 203 et seq., 

and its regulation at 29 CFR Part 541. 

Also under the SCA, the contractor 

already bears the burden to show that 

the workers working on a Federal 

service contract are not service 

employees. 

The Department is not convinced that 

evidence of past poor performance 

would be difficult to obtain. The 

Department’s experience from Executive 

Order 12933 showed that successor 

contractors were able to obtain 

information on the predecessor’s 

employees’ job performance. The 

Department does not agree that, under 

the proposed rule, predecessor 

contractors will be encouraged to 

‘‘dump’’ unsuitable employees onto 

expiring contracts, nor that the 

inclusion of a ‘‘safe harbor’’ provision in 

the regulation is appropriate or 

authorized by the Executive Order. The 

Department also does not agree that a 

different standard from what was 

proposed is needed for determining a 

service employee’s eligibility for an 

offer of employment from the successor 

contractor. Neither lengthening the 

period of employment prior to the end 

of the predecessor contract, nor 

eliminating the requirement for an offer 

of employment when the predecessor 

retains a certain percentage of its 

workforce, would address the stated 

concern that the predecessor contractor 

may retain some of its most qualified 

workforce. The Department also notes 

that where the predecessor contractor 

retains some, but not all, of the 

workforce employed on the contract 

during the last month of the contract, 

those remaining employees will likely 

have more experience with the contract 

and contracting agency than new hires 

recruited by the successor contractor for 

the purpose of filling the contract 

requirements. 

In response to the comments, the 

Department has modified the exception 

for unsuitable performance in 

§ 9.12(c)(4) to include the requirement 

that a successor contractor must support 

its belief that an employee has exhibited 

unsuitable job performance with written 

credible evidence provided by a 

knowledgeable source to enhance the 

reliability of such evidence. The final 

rule, however, does not require that 

such written evidence be 

contemporaneous or concern a 

workplace offense justifying termination 

because it is the Department’s 

conclusion that such requirements 

would be overly restrictive. 

Regarding the exception from the 

requirement to offer employment to an 

employee who was hired to work on the 

predecessor’s contract and one or more 

nonfederal service contracts as part of a 

single job, the Department notes that 


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this exception is required by the 

Executive Order and would only apply 

to workers of a predecessor contractor 

who were deployed on Federal and 

nonfederal service contracts. It is the 

Department’s conclusion that generally 

determining eligibility for this exception 

should not be difficult and the 

Department therefore has decided to 

adopt § 9.12(c)(5) without change. 

Section 9.12(d) Reduced Staffing 

Proposed § 9.12(d) addressed the 

provision in paragraph (a) of Executive 

Order 13495’s contract clause that 

allows the successor contractor to 

reduce staffing. 74 FR 6104 (Feb. 4, 

2009). 

Proposed § 9.12(d)(1)(i) allowed the 

contractor or subcontractor to determine 

the number of employees necessary for 

efficient performance of the contract 

and, for bona fide staffing or work 

assignment reasons, to elect to employ 

fewer employees than the predecessor 

contractor employed in performance of 

the work. Thus, the successor contractor 

would not be required to offer 

employment on the contract to all 

employees on the predecessor contract, 

but would be required to offer 

employment only to the number of 

eligible employees the successor 

believes necessary to meet its 

anticipated staffing pattern. Where a 

successor contractor does not offer 

employment to all the predecessor 

contract employees, the obligation to 

offer employment would continue for 3 

months after the successor contractor’s 

first date of performance on the 

contract. In § 9.12(d)(1)(ii), the 

Department proposed that if a successor 

contractor did not offer employment to 

all the predecessor contractor’s service 

employees, the obligation to offer 

employment would continue for 90 days 

after the successor contractor’s first date 

of performance on the contract. The 

successor contractor’s obligation under 

this part would end when all of the 

predecessor contract employees 

received a bona fide job offer or the 90- 

day window of obligation expired. The 

Department sought comments on this 

issue. 

Proposed § 9.12(d)(2) allowed the 

contractor, subject to provisions of this 

part and other applicable restrictions 

(including non-discrimination laws and 

regulations), to determine to which 

employees it will offer employment. 

Proposed § 9.12(d)(3) allowed, in some 

cases, a successor contractor to 

reconfigure the staffing pattern to 

increase the number of persons 

employed in some positions while 

decreasing the number of employees in 

others, provided the contractor 

examined the qualifications of each 

employee so as to minimize 

displacement. Consistent with proposed 

§ 9.1(b), this exception should not be 

construed to permit a contractor or 

subcontractor to fail to comply with any 

provision of any Executive Order, 

regulation, or law of the United States; 

therefore, a contractor could not use this 

exemption to justify unlawful 

discrimination against any worker. 

While the WHD would not make 

compliance determinations regarding 

Federal contractors’ compliance with 

nondiscrimination requirements 

administered by other regulatory 

agencies, a finding by the Department’s 

Office of Federal Contract Compliance 

Programs, another agency, or a court 

that a contractor has unlawfully 

discriminated against a worker would 

be considered in determining whether 

the discriminatory action has also 

violated the nondisplacement 

requirements. Under the proposal, the 

successor contractor’s obligation would 

end when all of the predecessor contract 

employees have received a bona fide job 

offer or the 90-day obligation period 

expires. The proposed regulation 

provided several examples to 

demonstrate the principle. 

The Chamber commented that the 

requirement to provide a right of first 

refusal should cease once the contract 

has started, since it would otherwise 

create an unnecessary regulatory 

burden. The SEIU and Change to Win 

took the opposite position on this issue, 

stating that the 90-day limit should not 

be included in the final rule. They 

asserted that to require that the 

predecessor’s employees be offered 

employment at any time there is an 

opening for which they are qualified is 

consistent with one of the purposes of 

the Executive Order, which is to provide 

an experienced and trained workforce. 

The Department notes that the proposal 

struck a balance with the obligation to 

provide the predecessor’s employees 

with a right of first refusal of 

employment and successor contractor’s 

need to address workforce needs during 

the contract term. It is the Department’s 

conclusion that to require successor 

contractors to make offers to 

predecessor employees for subsequently 

vacant positions more than 90 days after 

the successor’s first day of performance 

on the contract would be impractical 

and unduly burdensome. Ninety days 

was selected as a reasonable period for 

continuing to impose an obligation to 

offer a right of first refusal in order to 

ensure that any necessary staffing 

adjustments during the start-up period 

would be covered while at the same 

time discouraging attempts to 

manipulate the starting workforce. No 

other comments were received for 

proposed § 9.12(d) and it is adopted as 

proposed. 

Section 9.12(e) Contract Obligations 

Near End of Contract Performance 

Proposed § 9.12(e) specified the 

predecessor contractor’s obligations 

near the end of the contract—not less 

than 10 days before completion of the 

contract—to furnish the Contracting 

Officer with a certified list of the names 

of all service employees working under 

the contract and its subcontracts during 

the last month of contract performance, 

including their anniversary dates of 

employment with either the predecessor 

contractor or any subcontractors. The 

proposal noted that the contractor may 

use the seniority list submitted to satisfy 

the requirements of the SCA contract 

clause specified at 29 CFR 4.6(l)(2) to 

meet this provision. The earlier version 

of part 9 implementing Executive Order 

12933 included a similar provision that 

did not specifically state that the single 

list could be used to satisfy the 

requirements of both parts 4 and 9; 

however, the Department stated that 

specifying this option in the regulations 

may help clarify that duplication of 

effort is not required to comply with 

this requirement of Executive Order 

13495. The earlier version of part 9 also 

required that the list of employees be 

furnished 60 days before completion of 

the contract. The current proposal 

reflected the time frame used in the 

current Executive Order and is required 

under 29 CFR 4.6(l)(2). In his comments, 

a Navy Labor Advisor suggested that the 

Department require the predecessor to 

provide two lists, one without dates of 

employment, in an effort to combat 

seniority-based discrimination. The 

Chamber requested that the predecessor 

contractor be required to note which 

employees it planned to keep in its 

employment. The PSC commented that 

the predecessor contractor should be 

required to identify the employees 

covered by the SCA, the relevant labor 

category and job duties, and current 

contact information for each covered 

service employee, as this is basic 

information that any successor 

contractor would require to make 

employment decisions, and that the 

predecessor contractor certify the 

factual accuracy and completeness of 

this list. As the employee list is already 

a requirement of Federal service 

contractors under the SCA, the 

Department declines to make changes to 

its contents. 

Several commenters also expressed 

concern that the time frames provided 


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in this section are too restrictive and 

would not give successor contractors the 

time necessary to evaluate and hire 

workers prior to contract performance. 

TechAmerica suggested that the 

predecessor provide the list earlier in 

the procurement process than 10 days 

before the completion of the contract to 

ease the burden on successors. Afognak 

and the SHRM recommended that the 

list be provided at least 30 days before 

performance is to commence. In making 

this recommendation, Afognak 

mentioned the particular complexities 

of classified contracts. The U.S. Air 

Force Installation and Sourcing Division 

suggested that the time frame be 

expanded to 20 days, whereas the SBA 

Office of Advocacy recommended that 

the list of employees be provided to the 

successor contractor at the time of the 

contract solicitation. 

The requirement that the predecessor 

contractor furnish the Contracting 

Officer with the certified list not less 

than 10 days before completion of the 

contract is established in the Executive 

Order, and the Department therefore 

believes that it lacks authority to modify 

that time frame. However, in response to 

the comments received concerning this 

issue and the practical considerations 

they raise, the Department has modified 

§ 9.12(e) to require the predecessor 

contractor to provide a certified 

seniority list to the Contracting Officer 

not less than 30 days before completion 

of the contract. Where changes to the 

workforce are made after the submission 

of the list provided 30 days before 

completion of the contract, the 

predecessor contractor would be 

required to furnish an updated certified 

list to the Contracting Officer not less 

than 10 days before completion of the 

contract. Requiring that a list be 

provided 30 days before completion of 

the contract will provide successor 

contractors with additional time to 

review employment needs and make 

employment offers to incumbent 

employees, which should promote the 

Executive Order’s goal of economy and 

efficiency. The Department anticipates 

that a large portion of contractors will 

not make changes to their workforce in 

the final month of contract performance 

and will therefore not be required to 

submit a second certified list; in those 

cases where the submission of a second 

list is necessary, the Department 

anticipates that differences between the 

two certified lists will usually be 

minimal. The Department encourages 

contracting agencies to modify their 

existing service contracts (and suggests 

that relevant subcontracts likewise be 

modified) so that the requirement to 

provide a preliminary seniority list not 

less than 30 days before completion of 

the contract would apply to existing 

contracts. 

Section 9.12(f) Recordkeeping 

Proposed § 9.12(f) established record 

keeping requirements for contractors 

under Executive Order 13495. Proposed 

§ 9.12(f)(1) clarified that no particular 

order or form of records for contractors 

is prescribed, and the recordkeeping 

requirements apply to all records 

regardless of their format (e.g., paper or 

electronic). A contractor is allowed to 

use records developed for any purpose 

to satisfy the requirements of part 9, 

provided the records otherwise meet the 

requirements and purposes of this part. 

Proposed § 9.12(f)(2) specified the 

records contractors must maintain, 

including copies of any written offers of 

employment or a contemporaneous 

written record of any oral offers of 

employment, including the date, 

location, and attendance roster of any 

employee meeting(s) at which the offers 

were extended, a summary of each 

meeting, a copy of any written notice 

that may have been distributed, the 

names of the employees from the 

predecessor contract to whom an offer 

was made, any written record that forms 

the basis for any exclusion or exemption 

claimed under this part, the employee 

list provided to the contracting agency, 

and the employee list received from the 

contracting agency. In addition, as 

proposed every contractor who makes 

retroactive payment of wages or 

compensation under the supervision of 

the WHD pursuant to proposed § 9.24(b) 

will be required to record and preserve 

for three years in the pay records the 

amount, the period covered, and the 

date of payment to each employee, and 

to report to WHD each such payment on 

a receipt form authorized by the WHD, 

with a copy delivered to each employee. 

Contracting agency and WHD staff will 

use these records in determining a 

contractor’s compliance and the 

propriety of any further sanctions. No 

comments were received on § 9.12(f), 

and it is adopted as proposed. 

Section 9.12(g) Investigations 

Proposed § 9.12(g) outlined the 

contractor’s obligations to cooperate 

during any investigation to determine 

compliance with part 9 and to not 

discriminate against any person because 

such person has cooperated in an 

investigation or proceeding under part 9 

or has attempted to exercise any rights 

afforded under part 9. As proposed, this 

obligation to cooperate with 

investigations is not limited to 

investigations of the contractor’s own 

actions, but also includes investigations 

related to other contractors (e.g., 

predecessor and subsequent contractors) 

and subcontractors. No comments were 

received on this provision and it is 

adopted as proposed. 

Subpart C—Enforcement 

Proposed subpart C addressed 

complaints, informal resolution 

attempts, investigations, and remedies 

and penalties for violations. 

Section 9.21 Complaints 

Under proposed § 9.21(a), any former 

employee of the predecessor contractor 

or authorized employee representative 

who believes that the successor 

contractor violated the provisions of this 

part may file a complaint with the 

Contracting Officer of the appropriate 

Federal agency within 120 days of the 

alleged violation. Proposed § 9.21(b) 

allowed a complainant to file the 

complaint with the WHD if a 

complainant has not been able to file a 

complaint with the Contracting Officer 

prior to the 120-day deadline or has 

filed a complaint with the Contracting 

Officer but has not received a report 

within 30 days of filing the complaint. 

It also stated that a complaint must be 

filed with the WHD within 180 days of 

the alleged violation. 

A Navy Labor Advisor commented 

that the Department has no basis for 

involving contracting agencies in the 

receipt or resolution of complaints and 

that the Department has exceeded its 

authority by assigning such duties to the 

agencies. He recommended that the 

complaints be sent directly to the WHD 

because of the Contracting Officers’ lack 

of training and expertise specific to 

enforcement of the Executive Order. He 

suggested omitting any reference to the 

Contracting Officer as the principal 

point of contact for filing complaints. 

The SEIU and Change to Win likewise 

suggested that complaints be sent 

directly to the WHD without having to 

first file a complaint with the 

Contracting Officer. These commenters 

also suggested that the final rule define 

‘‘authorized representative’’ to include a 

labor union representing the affected 

employees. The SEIU and Change to 

Win added that since the proposed 

regulations stated that only a 

complainant can file a complaint with 

the WHD, there is a question of whether 

an authorized representative or labor 

union could file a complaint. The SEIU 

and Change to Win and the AFL–CIO 

requested that the final rule at § 9.21 

allow employees and their collectively 

bargained representatives to file a 

complaint against a contracting agency 

that fails to provide notice to incumbent 


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employees of a right to an offer of 

employment, as required by proposed 

§ 9.11(b), or fails to provide notice of a 

decision to exempt a contract from the 

nondisplacement requirements, as 

required by proposed § 9.4(d)(2). These 

commenters also requested that the final 

rule specify that incumbent as well as 

former employees may file complaints 

because these issues may arise prior to 

the award of the successor contract. The 

AFL–CIO asked that the final rule 

remove the words ‘‘if the complainant 

has not been able to timely file the 

complaint with the Contracting Officer’’ 

to clarify that a complainant may choose 

to file a complaint with the WHD rather 

than with the Contracting Officer 

without condition. 

After consideration, the Department 

has decided to change the language of 

proposed § 9.21 to remove the need to 

file a complaint with the Contracting 

Officer. Instead, an employee or 

authorized representative may file a 

complaint directly with the WHD, and 

the contracting agency will be 

responsible for forwarding certain 

information that the Department must 

have in order to make a determination 

of compliance, when such information 

is requested by the Department. It is the 

Department’s conclusion that the 

proposed method for receiving and 

processing complaints allows 

compliance concerns to be resolved as 

expeditiously as possible without undue 

burdens on all parties. For these 

reasons, the Department also agrees to 

remove the words ‘‘if the complainant 

has not been able to timely file the 

complaint with the Contracting Officer’’ 

and all references to the Contracting 

Officer as the principal point of contact 

for filing complaints. The Department 

also concludes that § 9.21 as proposed 

provides sufficient guidance on filing 

complaints directly with the WHD. 

The final rule adopts proposed § 9.21 

with changes that allow an employee to 

file a complaint directly with the WHD 

‘‘within 120 days from the first date of 

contract performance. Since the 

contractor’s obligation to offer 

employment continues 90 days after the 

start of performance on the contract, we 

believe 30 days after the end of the 

contractor’s obligation is appropriate, 

and will allow for the most practical 

implementation of the rule. In addition, 

the final rule replaces the term ‘‘former 

employee’’ with the term ‘‘employee’’ to 

allow for possible circumstances when 

an incumbent employee could file a 

complaint. The Department declines to 

alter the term ‘‘authorized 

representative’’ because the term 

encompasses an employee’s collectively 

bargained representative. The 

Department also declines to add 

language allowing the filing of a 

complaint under the Order against a 

contracting agency because the 

Executive Order does not furnish the 

Department with such authority. 

Section 9.22 Wage and Hour Division 

Conciliation 

Proposed § 9.22 established the 

informal complaint resolution process 

for complaints referred to the WHD. 

Specifically, after obtaining the 

necessary information from the 

Contracting Officer regarding the alleged 

violations, the WHD could contact the 

successor contractor about the 

complaint and attempt to conciliate and 

reach a resolution that is consistent with 

the requirements of this part. Other than 

comments that the Contracting Officer 

should not be involved in enforcement 

of the final rule, which are addressed 

elsewhere in this preamble, no 

comments were received on proposed 

§ 9.22. It is adopted in the final rule 

without revision. 

Section 9.23 Wage and Hour Division 

Investigation 

Proposed § 9.23 outlined the authority 

for the WHD to investigate complaints 

under Part 9. Proposed § 9.23(a) 

addressed initial investigations and 

provided that the Administrator may 

initiate an investigation either as the 

result of the unsuccessful conciliation of 

a complaint or at any time on his or her 

own initiative. As part of the 

investigation, the Administrator would 

be able to inspect the records of the 

predecessor and successor contractors 

(and make copies or transcriptions 

thereof), question the predecessor and 

successor contractors and any 

employees of these contractors, and 

require the production of any 

documentary or other evidence deemed 

necessary to determine whether a 

violation of this part (including conduct 

warranting imposition of ineligibility 

sanctions pursuant to § 9.24(d)) has 

occurred. Proposed § 9.23(b) addressed 

subsequent investigations and allowed 

the Administrator to conduct a new 

investigation or issue a new 

determination if the Administrator 

concluded circumstances warrant the 

additional action, such as where the 

proceedings before an ALJ reveal that 

there may have been violations with 

respect to other employees of the 

contractor, where imposition of 

ineligibility sanctions is appropriate, or 

where the contractor failed to comply 

with an order of the Secretary. No 

comments were received on proposed 

§ 9.23, and it is adopted without change. 

Section 9.24 Remedies and Sanctions 

for Violations of This Part 

This proposed section outlined the 

appropriate remedies and sanctions for 

violations of the final rule. Proposed 

§ 9.24(a) stated that the Secretary shall 

have the authority to issue orders 

prescribing appropriate remedies, 

including, but not limited to, requiring 

the contractor to offer employment to 

employees from the predecessor 

contract and the payment of wages lost. 

Proposed § 9.24(b) provided that, in 

addition to satisfying any costs imposed 

by an administrative order under 

proposed §§ 9.34(j) or 9.35(d), a 

contractor that violates part 9 would be 

required to take appropriate action to 

abate the violation, which could include 

hiring the affected employee(s) in a 

position on the contract for which the 

employee is qualified, together with 

compensation (including lost wages), 

terms, conditions, and privileges of that 

employment. Proposed § 9.24(c) 

concerned the withholding of contract 

funds for non-compliance. Proposed 

§ 9.24(c)(1) provided that, after an 

investigation and a determination that 

lost wages or other monetary relief is 

due, the Administrator could direct that 

accrued payments due on either the 

contract or any other contract between 

the contractor and the Government be 

withheld as necessary to pay the 

moneys due; and that, upon final order 

of the Secretary, the Administrator 

could direct that withheld funds be 

transferred to the Department for 

disbursement. Proposed § 9.24(c)(2) 

provided for the suspension of the 

payment of funds if the Contracting 

Officer or the Secretary finds that the 

predecessor contractor has failed to 

provide the required list of employees 

working under the contract as required 

by proposed § 9.12(e). Proposed 

§ 9.24(d) provided for debarment from 

Federal contract work for up to three 

years for noncompliance with any order 

of the Secretary or for willful or 

aggravated violations of the regulations 

in this part. 

The proposed withholding provisions 

mirror the withholding standards of 

other labor standards laws such as the 

Davis-Bacon Act, 40 U.S.C. 3141 et seq., 

and the SCA. Those acts also provide for 

debarment from Federal contract work 

under certain circumstances. No 

comments were received on § 9.24 and 

it is implemented in the final rule 

without revisions. 


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Subpart D—Administrator’s 

Determination, Mediation, and 

Administrative Proceedings 

Proposed subpart D addressed 

informal and formal proceedings 

through which to determine compliance 

with the requirements of part 9 and the 

resolution of disputes. Specifically, it 

addressed the authority of the 

Administrator, Office of Administrative 

Law Judges (ALJ), and the 

Administrative Review Board (ARB); it 

also clarified the effects of various 

notices and filings. A number of 

commenters addressed matters 

concerning proposed language in 

subpart D. As a preliminary matter, the 

SEIU and the AFL–CIO asserted that the 

Department should provide 

administrative review of an agency 

decision to exempt a contract from 

coverage of the Executive Order. The 

SBA Office of Advocacy forwarded a 

suggestion from an attorney that the 

Department enforce penalties against 

predecessor employers who fail to 

provide a seniority list. The Department 

has decided not to add provisions for 

the administrative review of agency 

exemption decisions or the enforcement 

of penalties against predecessor 

contractors for failure to provide a 

seniority list because the Executive 

Order does not confer such authority on 

the Department. See also discussion at 

§ 9.4(d)(5). The Department notes that 

proposed § 9.24(c) authorizes the 

suspension of contract funds under such 

circumstances and agrees that the 

Department should endeavor to pursue 

permissible enforcement action to 

remedy such violations. 

Section 9.31 Determination of the 

Administrator 

Proposed § 9.31(a) provided that 

when an investigation is completed 

without resolution, the Administrator 

will issue a written determination of 

whether a violation occurred. Under the 

proposal, the written determination 

shall contain a statement of the 

investigation findings that shall address 

the appropriate relief and the issue of 

ineligibility sanctions where 

appropriate. Proposed § 9.31(b) required 

notice of the determination to be sent by 

certified mail to the parties. Under 

proposed § 9.31(b)(1), for instances 

where there are relevant facts in 

dispute, the notice of determination 

becomes the final order of the Secretary 

that is not appealable in any 

administrative or judicial proceeding 

unless a request for an ALJ hearing is 

filed within 20 days. Under proposed 

§ 9.31(b)(2), for instances where no 

relevant facts are in dispute, the notice 

of determination becomes the final 

order of the Secretary and is not 

appealable in any administrative or 

judicial proceeding unless a petition for 

review is filed within 20 days with the 

ARB. 

The SEIU and Change to Win noted 

that the proposed rules do not specify 

a time period in which the 

Administrator must issue a 

determination. These commenters 

asserted that the Administrator should 

be required to issue a determination 

within 60 days of a complaint being 

filed with the Wage and Hour Division 

because ‘‘[i]f a service employee has 

been wrongfully denied a job, the need 

by the employee to receive a prompt 

determination from the Administrator is 

of obvious importance’’ and a 60-day 

time period would give the 

Administrator ‘‘ample time to weigh the 

evidence and draft a decision while not 

placing an undue burden on the Wage 

and Hour Division’’ and ‘‘provid[ing] an 

affected employee with a relatively 

timely resolution of his or her 

grievance.’’ 

After careful review, the Department 

has decided not to add the 60-day time 

limit for the Administrator’s 

determinations. Although the 

Department supports the prompt 

investigation of complaints, followed by 

the efficient rendering of decisions by 

the Administrator, a uniform time limit 

could adversely affect complex and factintensive investigations by the Wage 

and Hour Division. Section 9.31 

therefore is adopted as proposed. 

Section 9.32 Requesting Appeals 

Proposed § 9.32 addressed appeals of 

the Department’s administrative 

decisions. Under proposed § 9.32(a) any 

party desiring review of the 

determination of the Administrator, 

including judicial review, must file a 

request for an ALJ hearing or petition for 

review by the ARB. Proposed § 9.32(b) 

provided procedures for requesting 

review of the Administrator’s 

determination. Proposed § 9.32(b)(1) 

provided the process and requirements 

for filing a request for an ALJ hearing. 

Under the proposal, within 20 days of 

the issuance of the Administrator’s 

determination any aggrieved party may 

file a request for an ALJ hearing, under 

the following conditions: The 

complainant or any other interested 

party may request a hearing where the 

Administrator determines that there is 

no basis for a finding that a contractor 

has committed violation(s); the 

complainant or any other interested 

party may request a hearing where the 

complainant or other interested party 

believes that the Administrator has 

ordered inadequate monetary relief; and 

the contractor or any other interested 

party may request a hearing where the 

Administrator determines that the 

contractor has committed violation(s). 

Proposed § 9.31(b)(2) provided the 

process and requirements for filing a 

petition for review with the ARB. Under 

the proposal, any aggrieved party may 

seek review by the ARB of a 

determination of the Administrator in 

which there were no relevant facts in 

dispute, or of an ALJ’s decision, within 

20 days of the date of the determination 

or decision. 

One commenter addressed the 

proposed language in this section. The 

PSC considered the language to be 

overbroad where it permits ‘‘[a]ny 

aggrieved party’’ or ‘‘any other 

interested party’’ to seek review, rather 

than limiting that right to ‘‘the actual 

displaced employee.’’ The PSC stated 

that ‘‘the rule invites parasitic litigation 

by employee groups or activists’’ and 

that, as a result, successor contractors 

will have to spend time and resources 

defending against claims ‘‘even when 

the successors have valid, fully 

documented reasons for declining to 

offer employment.’’ This commenter 

argued that these increased costs to 

successor contractors may be passed on 

to the taxpayer and also result in fewer 

contractors bidding on service contracts 

to ‘‘avoid the hassle of displacement 

decisions [and] * * * the attendant cost 

and administrative burden.’’ 

After carefully considering the 

comment, the Department has decided 

to adopt the proposed language without 

change. While sympathetic to potential 

litigation costs of contractors, the 

Department does not consider the 

language that permits aggrieved and 

interested parties to seek review to be 

overbroad. The Department also notes 

that the Executive Order does not 

contemplate a private right of action, 

which should reduce the potential 

litigation burden on successor 

contractors. 

Section 9.33 Mediation 

Proposed § 9.33 provided for the use 

of settlement judges to mediate 

settlement negotiations when efforts to 

resolve disputes have failed. Consistent 

with section 6(b) of Executive Order 

13495, proposed § 9.33(a) generally 

encouraged parties to resolve disputes 

in accordance with the conciliation 

procedures set forth at § 9.22 or, where 

such efforts fail, to utilize settlement 

judges to mediate settlement 

negotiations pursuant to 29 CFR 18.9, 

when those provisions apply. At any 

time after commencement of a 

proceeding, the parties jointly could 


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Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 53743 

move to defer the hearing for a 

reasonable time to permit negotiation of 

a settlement or an agreement disposing 

of the proceeding. Proposed § 9.33(b) 

established a procedure for appointing a 

settlement judge to mediate cases 

scheduled with the Office of 

Administrative Law Judgers (OALJ). No 

comments were received on § 9.33, and 

it is adopted without change. 

Section 9.34 Administrative Law Judge 

Hearings 

Proposed § 9.34 provided procedures 

and rules applicable to ALJ hearings. 

Proposed § 9.34(a) provided for the 

OALJ to hear and decide appeals 

concerning questions of law and fact 

from determinations of the 

Administrator. Under the proposal, the 

ALJ would act fully as the authorized 

representative of the Secretary subject to 

certain limits. Specifically, the proposed 

rule would bar the ALJ from passing on 

the validity of any provision of part 9 

and from awarding attorney fees and/or 

other litigation expenses pursuant to the 

provisions of the Equal Access to Justice 

Act (EAJA), as amended. 5 U.S.C. 504. 

The proposal stated that the provisions 

of the EAJA would not apply to any 

proceeding under this part because such 

proceedings would not be required by 

an underlying statute to be determined 

on the record after an opportunity for an 

agency hearing. 

Under proposed § 9.34(b), absent a 

stay to attempt settlement, the ALJ shall 

notify the parties and any 

representatives within 15 calendar days 

following receipt of the request for 

hearing of the day, time, and place for 

hearing, which is to be held not more 

than 60 days from the date of receipt of 

the hearing request. Proposed § 9.34(c) 

allowed an ALJ to dismiss challenges for 

the failure to participate. 

Proposed § 9.34(d) allowed the 

Administrator to participate as a party 

or as amicus curiae at any time in the 

proceedings; it also allowed the 

Administrator to petition for review of 

an ALJ decision in a case in which the 

Administrator has not previously 

participated, and added that the 

Administrator would participate as a 

party in any proceeding in which the 

Administrator has found any violation 

of this part, except where the challenge 

only concerns the amount of monetary 

relief. Under proposed § 9.34(e), a 

Federal agency that is interested in a 

proceeding may participate as amicus 

curiae at any time in the proceedings. 

Proposed § 9.34(f) required that copies 

of the request for hearing and 

documents filed in all cases, whether or 

not the Administrator is participating, 

shall be sent to the Department’s 

Administrator, WHD, and the Associate 

Solicitor, Division of Fair Labor 

Standards. 

Proposed § 9.34(g) established, with 

certain exceptions, that the rules of 

practice and procedure for 

administrative hearings before the OALJ 

at 29 CFR part 18, subpart A shall apply 

to administrative proceedings under this 

part 9. However, it also stated that the 

Rules of Evidence at 29 CFR part 18, 

subpart B, were inapplicable and 

provided that part 9 would be 

controlling to the extent it provides any 

rules of special application that may be 

inconsistent with the rules in part 18, 

subpart A. 

Proposed § 9.34(h) required ALJ 

decisions (containing appropriate 

findings, conclusions, and an order) to 

be issued within 60 days after 

completion of the proceeding. Proposed 

§ 9.34(i) allowed the ALJ, upon the 

issuance of a decision that a violation 

has occurred, to order appropriate relief, 

which could include that the successor 

contractor hire the affected employee(s) 

in a position on the contract for which 

the employee is qualified, together with 

compensation (including lost wages), 

terms, conditions, and privileges of that 

employment. Under the proposal, if the 

Administrator has sought ineligibility 

sanctions, the order would also be 

required to address whether debarment 

is appropriate. Proposed § 9.34(j) 

authorized the ALJ to assess against the 

contractor for a violation of this part an 

amount equal to the employees’ costs 

and expenses (not including attorney 

fees). This amount would be awarded in 

addition to any unpaid wages or other 

relief due. Proposed § 9.34(k) stated that 

the decision of the ALJ shall become the 

final order of the Secretary, unless a 

petition for review is timely filed with 

the ARB. No comments were received 

on § 9.34 and it is implemented in the 

final rule without change. 

Section 9.35 Administrative Review 

Board Proceedings 

Proposed § 9.35 provided procedures 

and rules applicable to ARB appeals of 

an ALJ’s decision or of an 

Administrator’s determination wherein 

no facts are at issue. Proposed 

§ 9.35(a)(1) provided that the ARB shall 

act as the authorized representative of 

the Secretary and shall act fully and 

finally on behalf of the Secretary 

concerning such matters. Proposed 

§ 9.35(a)(2) added that the ARB shall 

review the entire record before it on the 

basis of substantial evidence and also 

placed limits on the scope of the ARB’s 

review. Specifically, the proposed rule 

barred the ARB from passing on the 

validity of any provision of part 9, 

accepting new evidence, or awarding 

attorney fees and/or other litigation 

expenses under the provisions of EAJA. 

Proposed § 9.35(b) required the ARB to 

issue final decisions within 90 days of 

the receipt of the petition for review and 

to serve the decisions upon all parties 

by mail to the last known address and 

upon the Chief ALJ in cases involving 

an appeal from an ALJ’s decision. 

Proposed § 9.35(c) provided that if the 

ARB concluded that the contractor had 

violated this part, its final order should 

order action to abate the violation, 

which could include hiring each 

affected employee in a position on the 

contract for which the employee is 

qualified, together with compensation 

(including lost wages), terms, 

conditions, and privileges of that 

employment. If the Administrator 

sought ineligibility sanctions, the 

proposed rule stated that the ARB’s 

order should address whether 

debarment is appropriate. Proposed 

§ 9.35(d) authorized the ARB to assess 

against contractors, for a violation of 

this part, a sum equal to the aggregate 

amount of all costs (not including 

attorney fees) and expenses reasonably 

incurred by the aggrieved employee(s) 

in the proceeding. This amount would 

be awarded in addition to any unpaid 

wages or other relief due under § 9.24(b) 

of this part. Proposed § 9.35(e) declared 

that the decision of the ARB shall 

become the final order of the Secretary. 

No comments were received on this 

provision and no revisions have been 

made. The heading in the proposed 

table of comments for § 9.35 has been 

corrected to state ‘‘Administrative 

Review Board Proceedings’’ rather than 

‘‘Administrative Review Board 

Hearings.’’ 

Appendix A to Part 9 

Proposed Appendix A to part 9 

contained the text of the contract clause 

required by proposed § 9.11(a). The 

Department received several comments 

concerning Appendix A. The PSC 

asserted that the contents of proposed 

Appendix A should be omitted 

consistent with its suggestion that the 

final rule should not include a contract 

clause but incorporate by reference the 

contract clause that will be promulgated 

in the FAR. A Navy Labor Advisor 

objected to paragraph (c) of the contract 

clause in proposed Appendix A that 

required the predecessor contractor to 

provide the seniority list to the 

Contracting Officer at least 10 days 

before the contract’s end because that 

period would not allow sufficient time 

for compliance by all parties. The AFL– 

CIO requested that paragraphs (f) 

through (h) of the contract clause in 


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53744 Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 

proposed Appendix A be amended to 

conform to their comments to the 

provisions of the proposed rule 

concerning of the contents of the 

contract clause. In particular, the AFL– 

CIO suggested that the text remove any 

reference to oral offers of employment 

in section (g)(1) of the contract clause. 

TechAmerica commented that the 

requirements in paragraphs (a) and (b) 

of the contract clause in proposed 

Appendix A would result in eliminating 

those small businesses that do not have 

sufficient resources to replace their 

workforce with the workforce on the 

predecessor contract. 

The Department disagrees with the 

PSC’s suggestion that the final rule 

should omit any contract clause and, 

instead, incorporate by reference the 

contract clause that will appear in the 

FAR. The Department concludes that its 

charge to implement and enforce the 

requirements of the Executive Order 

includes providing the contract clause. 

The Department will work with the 

FARC concerning the implementation of 

the contract clause in the FAR. The 

comments of the Navy Labor Advisor 

and the AFL–CIO that repeat comments 

they made concerning the requirements 

of the proposed rule to provide a 

certified list of employees and the 

method for making an employment offer 

are addressed in subpart B of this 

preamble. TechAmerica’s comment, in 

effect, challenges the contents of the 

Executive Order, and is beyond the 

purview of this rulemaking. Paragraphs 

(a) and (b) of the contract clause restate 

word for word the text of section 5(a) 

and (b) of Executive Order 13495. 

Appendix A has been modified for 

editorial and organizational purposes 

and to reflect changes made to the 

proposed rule. 

Appendix B to Part 9 

Proposed Appendix B contained the 

text for the notice that contracting 

agencies would be required to provide 

to service employees on covered 

contracts that have been awarded to a 

successor contractor. The proposed rule 

stated that the Department intended to 

make the text of Appendix B, should it 

appear in the final rule, available to 

contracting agencies on the Internet in 

a poster format. The proposal allowed 

the text of the notice to be provided to 

affected employees electronically in 

addition to or as an alternative to 

posting. As mentioned in the discussion 

of § 9.11(b), the final rule provides that 

the Contracting Officer will ensure that 

the predecessor contractor provides 

written notice of the possible right to an 

offer of employment to his employees. 

A number of commenters addressed 

issues relating to the proposed text of 

the notice to service contract employees 

contained in proposed Appendix B. The 

AFL–CIO suggested that changes should 

be made to the notice in proposed 

Appendix B to reflect relevant 

comments they made to the proposed 

rule. Specifically, the AFL–CIO 

suggested that the complaints paragraph 

of the notice in Appendix B should be 

amended and expanded to permit 

employees and their collectively 

bargained representatives to file a 

complaint against a contracting agency 

that fails to provide notice to incumbent 

employees of a right to an offer of 

employment, as required by proposed 

§ 9.11(b), or fails to provide notice of a 

decision to exempt a contract from the 

nondisplacement requirements, as 

required by proposed § 9.4(d)(2). This 

commenter also asked that the final rule 

remove the words ‘‘if the complainant 

has not been able to timely file the 

complaint with the Contracting Officer’’ 

to clarify that a complainant may chose 

to file a complaint with the WHD rather 

than with the Contracting Officer 

especially in instances where the 

complaint names the contracting 

agency. The AFL–CIO added that the 

notice should more clearly state that 

incumbent as well as former employees 

may file complaints. A Navy Labor 

Advisor suggested changes to the format 

of the notice to service contract 

employees and also suggested omitting 

any reference to the Contracting Officer 

as the principal point of contact for 

filing complaints. 

After consideration, the Department 

has amended the notice in Appendix B 

to allow any employee(s) or authorized 

representative(s) of the predecessor 

contractor to file a complaint directly 

with the Department. The Department 

declines to amend the notice to state 

that incumbent and former employees of 

the predecessor contract may file 

complaints because the final rule has 

adequately addressed the matter 

through the use of the term ‘‘employee’’. 

The Department also removed the words 

‘‘if the complainant has not been able to 

timely file the complaint with the 

Contracting Officer’’ and any reference 

to the Contracting Officer as the 

principal point of contact for filing 

complaints. The final rule adopts 

proposed Appendix B with changes that 

allow an employee to file a complaint 

directly with the WHD and to improve 

the clarity of the notice. 

III. Paperwork Reduction Act 

General: In accordance with 

requirements of the Paperwork 

Reduction Act (PRA), 44 U.S.C. 3501 et 

seq., and its attendant regulations, 5 

CFR part 1320, the Department seeks to 

minimize the paperwork burden for 

individuals, small businesses, 

educational and nonprofit institutions, 

Federal contractors, State, local and 

tribal governments, and other persons 

resulting from the collection of 

information by or for the agency. An 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless it 

displays a currently valid OMB control 

number. See 5 CFR 1320.6. As required 

by the PRA, the Department has 

submitted the information collections 

contained in this rule to the OMB for 

approval and will publish a notice in 

the Federal Register upon its approval. 

Specifically, information collections for 

employment offers appear in §§ 9.12(a), 

(b), (e) and (f); the information 

collections related to the filing of 

complaints appear in § 9.21. 

The PRA typically requires an agency 

to provide notice and seek public 

comments on any proposed collection of 

information contained in a proposed 

rule. See 44 U.S.C. 3506(c)(2)(B); 5 CFR 

1320.8. The NPRM published in the 

Federal Register on March 19, 2010, 

invited comments on the information 

collection burdens imposed by these 

regulations, and also provided that 

comments regarding the information 

collections within the NPRM could be 

sent directly to OMB. See 75 FR 13394. 

As required by 5 CFR 1320.11, the 

Department also submitted the 

information collections to the OMB for 

approval at the same time as the NPRM 

appeared in the Federal Register. In 

response, the OMB filed a comment on 

April 9, 2010, asking the Department to 

resubmit the approval request after 

considering any public comments 

received on the information collections. 

The Department received no comments 

regarding ways to reduce the 

information collection burden; in fact, 

in order to facilitate the successor 

contractor’s evaluation of the work 

force, several comments urged the 

Department to require predecessor 

contractors to submit the list of 

employees earlier than the 10 days 

before contract expiration proposed in 

the NPRM. (See e.g., Chamber of 

Commerce and SBA). In response to 

these comments, the Department has 

revised the final rule to require a 

predecessor contractor to provide the 

list 30 days before contract expiration. 

The Chamber commented that, in its 

view, the Department’s cost calculations 

omitted or underestimated several 

relevant costs of the rule, however; the 

Chamber did not provide any estimates 


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Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 53745 

or alternative data sources for the 

Department’s consideration. The 

Department consequently resubmitted 

the request, after considering the public 

comments, for OMB approval, and will 

publish a notice in the Federal Register 

upon its approval. 

It should be noted that OMB cleared 

the employee list mentioned in 

§ 9.12(e)(1) under Control Number 

1235–0007, as this list also provides 

seniority information for vacation 

benefit purposes. The Department has 

submitted a change request for this 

Control Number to incorporate the 

additional regulatory citations and 

revise the timing of the list, and will 

publish a notice in the Federal Register 

upon its approval. 

A copy of the information collection 

requests can be obtained at http:// 

www.reginfo.gov/public/do/PRAMain or 

by contacting the Wage and Hour 

Division as shown in the FOR FURTHER

INFORMATION CONTACT section of this 

preamble. 

Purpose and Use: As previously 

explained, Executive Order 13495 

applies to contracts or subcontracts at or 

above the simplified acquisition 

threshold of $150,000 and requires 

service contracts and their solicitations 

to include an additional labor standards 

clause that requires the successor 

contractor, and its subcontractors, under 

a contract for performance of the same 

or similar services at the same location, 

to provide a right of first refusal of 

employment to those employees (other 

than managerial and supervisory 

employees) employed under the 

predecessor contract during the final 

month of contract performance whose 

employment will be terminated as a 

result of the award of the successor 

contract. The Order also requires the 

successor contractor and subcontractor 

to make a bona fide, express offer of 

employment to each predecessor 

employee, with some exceptions, stating 

the timeframe within which each 

employee must accept such offer. For 

purposes of the remaining PRA 

discussion, the term contractor covers 

both contractors and subcontractors, 

except as noted. The Department has 

strived to make the information 

disclosures intuitive. 

Section 9.12 of the final rule describes 

the contractor’s requirements and 

prerogatives. The section includes third 

party disclosures and recordkeeping 

requirements that are subject to the 

PRA. Sections 9.12(a) and (b) require the 

contractor to make a bona fide express 

offer of employment to each employee 

individually, either in writing or orally. 

Section 9.12(f) also requires the 

successor service contractor to maintain 

for specific periods of time copies of 

records (regardless of format, e.g., paper 

or electronic) of its compliance, 

including: (1) Any written offers of 

employment or a contemporaneous 

written record of any oral offers of 

employment, including the date, 

location, and attendance roster of any 

employee meeting(s) at which the offers 

were extended; a summary of each 

meeting; a copy of any written notice 

that may have been distributed; and the 

names of the employees from the 

predecessor contract to whom an offer 

was made; (2) any record that forms the 

basis for any exclusion or exemption 

claimed under this part; and (3) the 

employee list provided to or received 

from the contracting agency that meets 

contractor obligations near the end of a 

contract. Section 9.12(f) also requires 

every contractor who makes retroactive 

payment of wages or compensation after 

an investigation pursuant to § 9.24(b) of 

this part, to record and preserve the 

amount of such payment to each 

employee on a receipt form provided by 

or authorized by the Wage and Hour 

Division, deliver a copy to the 

employee, and file the original with the 

Administrator or an authorized 

representative within 10 days after 

payment is made. 

The Department notes that the final 

rule does not require contractors to 

create any record regarding any basis for 

claiming an exclusion or exemption 

from the nondisplacement provisions of 

Federal service contracts; however, the 

contractor would need to retain any 

such record if created. 

The final rule, in § 9.12(e)(1), requires 

a predecessor contractor near the end of 

a contract to provide a certified list of 

the names of all service employees 

working under that contract (and its 

subcontracts) during the last month of 

contract performance to the contracting 

agency no later than 30 days before 

completion of the contractor’s 

performance of services on a contract. 

That requirement may be met by using 

the seniority list submitted to satisfy the 

requirements of the contract clause 

specified in the current SCA regulations 

at 29 CFR 4.6(l)(2). Therefore, this 

requirement imposes no additional 

burden for PRA purposes. The final 

rule, in § 9.12(e)(2), requires a 

predecessor contractor to also provide a 

certified list of the names of all service 

employees working under that contract 

(and its subcontracts) during the last 

month of contract performance to the 

contracting agency no later than 10 days 

before completion of the contractor’s 

performance of services on a contract 

where changes to the workforce have 

been made after the submission of the 

certified list described in § 9.12(e)(1). 

This requirement imposes a minimal 

additional burden for PRA purposes. 

The Department anticipates that a large 

portion of contractors will not make 

changes to their workforce in the final 

month of contract performance and will 

therefore not be required to submit a 

second certified list; in those cases 

where the submission of a second list is 

necessary, the Department anticipates 

that differences between the two 

certified lists will usually be minimal. 

Section 9.21 of the final rule outlines 

the procedures for filing complaints 

under this part. The Department has 

imposed no specific reporting burden 

on what information complainants must 

provide; however, prudent persons 

asserting certain employment rights 

normally would provide their own 

contact information, contact information 

for their employer, and a basis for why 

they are filing the complaint. 

Information Technology: There is no 

particular order or form of records 

prescribed by the final rule. A 

contractor may meet the requirements of 

this final rule using paper or electronic 

means. 

Public Burden Estimates: The final 

rule contains information collection 

requirements for contractors and 

complainants. As in the NPRM, the 

Department bases the following burden 

estimates for this information collection 

on agency experience in administering 

the SCA, the prior version of part 9, and 

consultations with contracting agencies, 

except as otherwise noted. 

According to the Federal Procurement 

Data System’s (FPDS) 2006 Federal 

Procurement Report, slightly less than 

75,000 (74,611) Federal government 

contract actions were subject to the SCA 

during that reporting period. A contract 

action is any oral or written action that 

results in the purchase, rent, or lease of 

supplies or equipment, services, or 

construction using appropriated dollars 

over the micro-purchase threshold, or 

modifications to these actions regardless 

of dollar value. Many contract actions 

are modifications to or extensions of 

existing Federal contracts or otherwise 

relate to actions where there is no 

successor contractor. The Department, 

therefore, assumes that about 15,000 per 

year (slightly more than 20 percent of all 

SCA covered contract actions in 2006) 

would be successor contracts subject to 

the nondisplacement provisions that 

carry a burden under the PRA. 

Subcontracts are not reported in the 

FPDS, and the Department has not 

found a reliable source on which to 

estimate the number of subcontracts per 

SCA prime contract. Based on 

consultations with Federal procurement 


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53746 Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 

officials, the Department assumes that 

for PRA purposes a typical SCA contract 

has one prime contractor and three 

subcontractors; no comments were 

received from procurement officials or 

the public suggesting the Department 

use alternative data or providing an 

alternative estimate of the number of 

subcontractors per prime contractor. 

Therefore, the Department estimates the 

information collection requirements of 

part 9 would apply to approximately 

60,000 contracts (15,000 covered 

contract actions × 4 contractors). A 

review of FPDS data suggests that, while 

about 110,000 contractors performed 

work on Federal service contracts in FY 

2006, only 44,039 contractors performed 

work on service contracts in excess of 

$25,000. See David Berteau, et al., 

Structure and Dynamics of the U.S. 

Federal Professional Services Industrial 

Base 1995–2007, Center for Strategic 

and International Studies, February 

2009, at 26, http://www.csis.org/media/ 

csis/pubs/090212_fps_report_2009.pdf 

(CSIS Report). Because of the $150,000 

threshold, some lesser number of 

contractors would perform work on 

contracts subject to the 

nondisplacement requirements; the 

Department estimates each year about 

40,000 contractors and subcontractors 

will be subject to this information 

collection. 

Based on the Wage and Hour 

Division’s enforcement experience 

under the SCA, the Department 

estimates that each service contract 

covered by this information collection 

would involve an average of 

approximately 15 employees. Moreover, 

the Department expects successor 

contractors typically would make oral 

offers of employment at all-employee 

meetings where the successor contractor 

need only make notations on a copy of 

the employee roster of the offer of 

employment. Otherwise, the successor 

contractor would likely make offers of 

employment individually by mail or 

electronic means. Beyond making the 

offer of employment, the successor 

contractor would also be responsible for 

maintaining copies of any written offers 

of employment, or contemporaneous 

written records of any oral offers of 

employment, and copies of any records 

that formed the basis for any exclusion 

or exemption claimed under the 

proposed rule. As job offers will 

typically be made in a bulk fashion, the 

Department estimates it would take a 

successor contractor an average of 

approximately one and one-half minutes 

per employee to make an offer, whether 

oral, written, or electronic, and another 

half minute to file the associated 

paperwork for each employee, including 

any paperwork forming the basis for any 

exclusion or exemption from the 

obligation to offer employment to a 

particular employee. Therefore, the 

Department estimates an annual 

disclosure and recordkeeping burden of 

30 minutes per contract for a total 

annual burden of 30,000 hours (60,000 

contracts × 15 third-party disclosures × 

2 minutes). 

The information collection 

requirement for contractors specified in 

proposed § 9.12(e)(1)—the certified list 

of employees provided 30 days before 

contract completion—is cleared under 

the SCA regulations, 29 CFR 4.6(l)(2), 

OMB control number 1235–0007, which 

requires a certified list be provided no 

later than 10 days before contract 

completion, and that burden is not 

duplicated in these estimates. However, 

contractors experiencing a change in 

their workforce between the 30 and 10 

day periods will have to submit an 

additional list. Since a certified list 

would have already been compiled 30 

days before completion of the contract, 

the list produced 10 days before 

contract completion would only require 

updating the initial list, if necessary. 

Therefore, the Department estimates the 

additional burden to be minimal. For 

the purpose of estimating burden 

associated with this requirement, the 

Department estimates that 

approximately 50% of contracts will 

experience a change in workforce 

between 30 and 10 days of completion 

of the contract, requiring an updated 

list. The Department recognizes that the 

actual number of contractors having to 

produce two lists is likely to be less, but 

uses 50% as an upper bound estimate. 

The Department estimates it would take 

a predecessor contractor an average of 

approximately one minute to update the 

employment status of each employee on 

a certified list. Therefore, the 

Department estimates the total burden 

for creating an updated certified list to 

be 7,500 hours (60,000 contracts × .5 

percent of contracts × 15 employees × 1 

minute). 

Estimates prepared for the 

nondisplacement rules promulgated 

pursuant to Executive Order 12933 

suggested the rules applied to only 88 

contract actions per year; however, the 

burdens calculated at that time did not 

include subcontracts. Using the same 

criteria as used to calculate burdens 

under this proposal, the Department 

estimates the total number of covered 

contracts and subcontracts for the 

earlier rule to be approximately 350; 

suggesting the current rule would apply 

to about 170 times more successor 

contracts. As previously noted the Wage 

and Hour Division received 

approximately one complaint per year 

under the old rule. Extrapolating to the 

current estimate of contracts subject to 

the current rule, the Department 

estimates it will receive 170 

nondisplacement complaints per year. 

The Department estimates that each 

complaint filing will take about 20 

minutes; therefore, the Department 

estimates the total burden for filing 

complaints to be about 56.6 hours (170 

responses × 20 minutes). 

The Department acknowledges that 

for each investigation resulting in 

violations remedied through the 

payment of back wages or compensation 

under the supervision of the 

Administrator of the Wage and Hour 

Division, § 9.12(f)(2)(iv) imposes a 

recordkeeping requirement for the 

contractor to preserve a report of such 

payment to each employee on a receipt 

form provided by the Wage and Hour 

Division, deliver a copy to the 

employee, and file the original with the 

Administrator or an authorized 

representative within 10 days after 

payment is made. The Department 

estimates that approximately 20 percent 

of all complaints will result in 

investigations in which violations are 

found and the appropriate remedy is the 

payment of back wages and/or 

restitution, and it will take 

approximately one minute to record. 

The Department therefore estimates the 

total burden to contractors for keeping 

a record of retroactive payments to be 

about 34 minutes. (170 complaints × .20 

× 1 minute). 

The total burden estimates under the 

PRA (including the time for reviewing 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing the collection of information) 

are as follows: 40,170 respondents; 

1,350,170 responses; and 37,556.6 

burden hours. 

Public Comments: The 

Nondisplacement NPRM published on 

March 19, 2010, included a discussion 

of the information collections that are 

part of this regulation. The NPRM also 

invited public comments on the 

information collections during a 60-day 

period and provided that comments on 

the information collection aspects of the 

NPRM could be submitted directly to 

the OMB. The Department specifically 

sought public comments regarding the 

burdens imposed by information 

collections contained in this proposed 

rule. In particular, the Department 

sought comments that would: evaluate 

whether the proposed collection of 

information was necessary for the 

proper performance of the functions of 


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Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 53747 

the agency, including whether the 

information would have practical 

utility; evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information, 

including the validity of the 

methodology and assumptions used; 

enhance the quality, utility and clarity 

of the information to be collected; and 

minimize the burden of the collection of 

information on those who are to 

respond, including through the use of 

appropriate automated, electronic, 

mechanical, or other technological 

collection techniques or other forms of 

information technology, e.g., permitting 

electronic submissions of responses. 

Other portions of this preamble discuss 

the substance of those comments and 

the Department’s response. 

The information collection burdens 

are summarized as follows: 

Type of Review: New collection 

request. [Request for a new OMB control 

number for §§ 9.12(a), (b), (f), and 9.21)]; 

1235–0007, nonmaterial change to an 

information collection for § 9.12(e). 

Agency: Wage and Hour Division, 

Department of Labor. 

Title: Nondisplacement of Qualified 

Workers Under Service Contracts, 

Executive Order 13495. 

OMB Control Numbers: 1235–XXXX 

for §§ 9.12(a), (b), (f), and 9.21; 1235– 

0007 for § 9.12(e). 

Affected Public: Businesses or other 

for-profit institutions for paragraphs 

9.12(a), (b), (e), and (f); individuals for 

§ 9.21. 

Total Estimated Number of 

Respondents: 40,170 for 1235–XXXX; 

50,812 for 1235–0007. 

Total Estimated Number of 

Responses: 1,350,170 for 1235–XXXX; 

50,812 for 1235–0007. 

Response Frequency: On occasion for 

both. 

Estimated Annual Burden Hours: 

37,556.6 for 1235–XXXX; 49,220 for 

1235–0007. 

Estimated Annual Burden Cost 

(Capitol and Start-up Costs): $0. 

Estimated Annual Burden Cost 

(Maintenance and Operation): $0. 

IV. Executive Orders 13563 and 12866 

Executive Orders 13563 and 12866 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated a ‘‘significant 

regulatory action’’ although not 

economically significant, under section 

3(f) of Executive Order 12866. 

Accordingly, the rule has been reviewed 

by the Office of Management and 

Budget. 

On January 30, 2009, President Barack 

Obama signed Executive Order 13495, 

Nondisplacement of Qualified Workers 

Under Service Contracts. 74 FR 6103 

(Feb. 4, 2009). This Order establishes 

that when a service contract expires and 

a follow-on contract is awarded for the 

same or similar services at the same 

location, the Federal Government’s 

procurement interests in economy and 

efficiency are better served when a 

successor contractor hires the 

predecessor’s employees. A carryover 

workforce reduces disruption to the 

delivery of services during the period of 

transition between contractors and 

provides the Federal Government the 

benefits of an experienced and trained 

workforce that is familiar with the 

Federal Government’s personnel, 

facilities, and requirements. As 

explained in the Order, the successor 

contractor or its subcontractors often 

hires the majority of the predecessor’s 

employees when a service contract ends 

and the work is taken over from one 

contractor to another. Occasionally, 

however, a successor contractor or its 

subcontractors hires a new workforce, 

thus displacing the predecessor’s 

employees. This final rule implements 

the Executive Order. 

The first sentence of Executive Order 

13495 recognizes that successor 

contractors often hire most of the 

employees who worked on the 

predecessor contract, if the contract 

work will continue at the same location. 

As further discussed below, the 

Department believes the rule will not 

have a significant economic impact, 

because the proposal would simply 

require contractors to follow a practice 

currently used in many cases as a good 

business practice. The Department 

expects that, as further explained in this 

section, there will be few changes in the 

way most contractors currently conduct 

business, with the exception that they 

will need to ensure the appropriate 

contract language appears in 

subcontracts. The Department also 

expects that a majority of remaining 

contractors will comply with the new 

requirements by simply replacing 

aspects of their existing staffing 

practices with similar practices that do 

not entail substantial additional burden 

but do assure compliance with the rule. 

In addition, the Department expects that 

in certain instances a contracting agency 

will exercise its exemption authority to 

exclude contracts from these 

requirements if it is clear that 

application of the nondisplacement 

requirements would not serve the 

purposes of the Executive Order or 

would impair the ability of the agency 

to procure services on an economical 

and efficient basis. 

In estimating the costs on contractors, 

the Department has also considered how 

current practices compare with 

expected actions contractors typically 

will take under the nondisplacement 

provisions. For example, those 

successor contractors that currently hire 

new employees for a contract must 

recruit workers and evaluate their 

qualifications for positions on the 

contract. In order to match employees 

with suitable jobs under this rule, 

successor contractors will evaluate the 

predecessor contract employees and 

available positions; thus, successor 

contractors are likely to spend an equal 

amount of time determining job 

suitability under the rule as under 

current practices. The costs for 

documenting these employment 

decisions will also be similar under 

both the rule and status quo. 

For purposes of this analysis, the 

Department also believes the time 

contractors will save by not recruiting 

an entirely new workforce from the 

outset will be offset by the additional 

time a successor contractor will spend 

in recruiting a new employee when 

there is a vacant position because the 

contractor cannot find suitable work for 

an employee who worked on the 

predecessor contract or in considering 

how to minimize displacement when 

the successor contractor reconfigures 

how it will deploy employees 

performing on the successor contract. 

See § 9.12(d)(3). This rule will also not 

affect wages contractors will pay 

workers, because of the existing SCA 

requirement for the wage determination 

that establishes the minimum rate for 

each occupation to be incorporated into 

the contract; thus, existing regulatory 

requirements already set wage rates, 

including when the predecessor’s 

collectively bargained rate is 

incorporated into the contract, that 

successors must pay. See 41 U.S.C. 

6707(c); 29 CFR 4.6(b)(1). This rule does 

not require successor contractors to pay 

wages higher than the rate required by 

the SCA. The successor contractor also 

may offer employment under different 

terms and conditions, if the reasons for 

doing so are not related to a desire that 

the employee refuse the offer or that 

other employees be hired for the offer. 

See § 9.12(b)(5). 


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The proposal includes a contract 

clause provision requiring contractors to 

incorporate the nondisplacement 

contract clause into each covered 

subcontract. This provision comes 

directly from Executive Order 13495, 

and the Department estimates that it 

will take a combined total of 30 minutes 

for contractors to incorporate the 

contract clause into each covered 

subcontract and the subcontractor to 

review it. Thus, assuming covered 

contractors spend an additional two 

hours (accounting for any additional 

time spent in making job offers, 

inserting and reviewing the contract 

clause in subcontracts, and maintaining 

records) per contract to comply with 

this proposed rule and increasing the 

October 2009 average hourly earnings 

for professional and business workers 

by 40 percent to account for fringe 

benefits (a total of $31.32 per hour), this 

rule is estimated to impose annual costs 

of $3,758,400 on contractors (60,000 

contracts × 2 hours × $31.32). See The 

Employment Situation—December 

2009, at 28, Table B–3, Bureau of Labor 

Statistics, (http://www.bls.gov/ 

news.release/archives/ 

empsit_01082010.pdf). 

As explained in the PRA section of 

this preamble, the final rule requires a 

predecessor contractor to provide a 

certified list of the names of all service 

employees working under that contract 

(and its subcontracts) to the contracting 

agency no later than 30 days before 

completion of the contractor’s 

performance of services on the contract. 

Where changes to the workforce have 

been made after the submission of the 

certified list described in § 9.12(e)(1), a 

predecessor contractor must submit an 

updated certified list no later than 10 

days before completion of the 

contractor’s performance of services on 

a contract. The clause makes clear that 

this is the same list as the seniority list 

provided under the SCA clauses. Since 

the list already exists and is used by 

contractors in making hiring decisions 

under the status quo, additional costs 

would only be incurred in the instance 

that there is a change in the workforce 

necessitating submission of an updated 

list. The Department does not anticipate 

that a large portion of contractors will 

experience a change in workforce 

between 30 and 10 days of completion 

of the contract period. However, for the 

purpose of estimating the cost and 

burden of this requirement, the 

Department assumes an upper bound 

estimate of approximately 50 percent of 

contracts will experience a change in 

workforce between 30 and 10 days of 

completion of the contract, requiring an 

updated list. The Department estimates 

that it will take a predecessor contractor 

an average of approximately one minute 

to update the employment status of each 

employee on a certified list, and that 

each service contract covered by this 

rule would involve an average of 

approximately 15 employees (30,000 

contracts × 15 minutes = 450,000 

minutes, or 7,500 hours). Thus, this 

requirement is estimated to impose 

annual costs of $234,900 on contractors 

(7500 hours × $31.32 = $234,900). 

Most contractors will obtain their 

information primarily from the contract 

clause, and Wage and Hour Division 

offices throughout the country are 

available to provide compliance 

assistance at no charge to employers; 

however, in the course of researching 

compliance options within the context 

of specific business needs, some 

contractors will incur additional legal, 

accounting, and/or other costs 

associated with complying with the 

nondisplacement requirements. For 

purposes of this analysis, the 

Department estimates 15 percent of 

covered contractors each will incur 

additional costs averaging $5,000 

because of the regulatory requirements, 

for a total of $30,000,000 (40,000 

contractors × 15% × $5000). The 

Department believes 10 percent of these 

6,000 contractors will face complex 

issues that will require each spending 

an average of $10,000 additional dollars, 

totaling $6,000,000 (6000 contractors × 

10% × $10,000). The Department 

estimates total costs contractors will 

incur to comply with this rule to be 

$39,758,400. The Department expects 

some of these costs will be transferred 

to the Federal Government in the form 

of higher bids; however, the Department 

is not aware of a reasonable way to 

allocate those costs. 

Executive Order 13495 and this final 

rule would improve Government 

efficiency and economy in those cases 

where the practice of offering a right of 

first refusal of employment would not 

otherwise have been followed because 

the requirements decrease or eliminate 

the loss of productivity that may occur 

when experienced employees are 

terminated. As previously indicated, the 

Department estimates 20 percent of all 

SCA covered contract actions in 2006 

would be subject to this rule. Applying 

this same percentage to the total FPDS 

reported value of SCA contract actions 

during 2006, just under 

$115,000,000,000 ($114,935,252,182), 

the Department estimates the total value 

of contracts subject to the 

nondisplacement provisions to be 

$23,000,000,000 ($115,000,000,000 × 

0.2). 

Some of the potential savings from 

any increase in economy and efficiency 

will be absorbed by the expenses 

contracting agencies will incur to 

administer the requirements. The 

Department has used the 2010 Rest of 

United States salary table to estimate 

salary expenses. See http:// 

www.opm.gov/oca/10tables/html/ 

RUS_h.asp. The Department believes 

contracting agencies will spend 30 

minutes on each insertion of the 

applicable contract clauses in a 

successor prime contract, for a total of 

7500 hours (15,000 × 0.5 hours). The 

Department assumes this work will be 

performed by a GS–11, step 4 Federal 

employee, earning $30.26 per hour, for 

a cost of $226,950 (7500 hours × 

$30.26). While it will be clear that in 

most cases there is no reason for a 

contracting agency to exempt a contract 

from the nondisplacement 

requirements, the Department estimates 

contracting agencies will spend an 

average of two hours on each covered 

contract and subcontract to make the 

determination and that a GS–13, step 4 

Federal employee earning $43.13 per 

hour will perform the work, for a cost 

of $5,175,600 (60,000 contracts and 

subcontracts × 2 hours × $43.13). Once 

this analysis is done, the contracting 

agency must inform the contract 

employees of the decision to exempt the 

contract. The Department believes this 

notification will take about 30 minutes 

per contract and that the work will be 

performed by a GS–9, Step 4 Federal 

employee earning $25.01, for a cost of 

$750,300 (60,000 contracts and 

subcontracts × 0.5 hours × $25.01). This 

includes the time needed to prepare the 

notice and post it at the worksite or 

prepare a written notice that is provided 

in a bulk manner to the employees. The 

estimated general administrative costs 

equal $6,152,850. 

The rule also requires Contracting 

Officers to provide documentation to 

the Wage and Hour Division within 14 

days of the original filing. § 9.11(d). The 

Federal costs associated with this 

requirement include the time it takes to 

gather the documents related to the 

complaint and the reproduction and 

mailing cost to forward the copies to the 

Wage and Hour Division. Federal costs 

will also include the cost for the Wage 

and Hour Division to review the 

complaint to determine what further 

action might be appropriate. The 

Department estimates the Wage and 

Hour Division will receive 170 

nondisplacement complaints per year. 

GS–13, step 4 to review complaint at 

the Wage and Hour Division and 

determine whether to schedule 

compliance action: 


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Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 53749 

170 complaints × 10 minutes review 

time = 28 hours (rounded) 

28 hours × $43.13 = $1,208 (rounded) 

GS–11, step 4 to compile and review 

the complaint and supplemental 

documents for forwarding: 

170 complaints × 20 minutes = 57 hours 

(rounded) 

57 hours × $30.26 = $1,725 (rounded) 

GS–3, step 4 to photocopy & assemble 

complaint documents: 

170 complaints × 10 minutes = 28 hours 

(rounded) 

28 hours × $13.14 = $368 (rounded) 

Printing costs: 

170 complaints × 4 pages × 3 copies × 

$0.05 per page = $102 

Postage: 

170 complaints × 3 mailings (DOL, 

contractor, and complainant) × 

$0.47 ($0.44 each + $0.03 per 

envelope) = $240 (rounded) 

GS 12, step 4 to investigate 

complaints 

170 complaints × 20 hours = 3,400 

hours 

3400 hours × $36.27 = $123,318 

Printing 60,000 notices × $0.05 per 

notice = $3,000 

Enforcement Subtotal $129,961 

Total Gross Annual Federal Cost 

estimate = $6,282,811 

The Department estimates that some 

cost savings will result from this final 

rule. Some of these savings, however, 

may actually transfer to contractors who 

are bidding on the contract, especially 

in light of the additional costs they are 

likely to incur. After offsetting the 

potential savings attributed to the 

Federal government from the overall 

additional costs attributed to 

contractors, the Department estimates 

the nondisplacement provisions covered 

by this rule could result in a net cost 

savings, but is unable to estimate. The 

Department wishes to emphasize that 

while this analysis is presented in terms 

of contractor and Federal Government 

costs and savings, because costs and 

savings will factor into final bid 

proposals, some of the potential savings 

to the federal government are likely to 

transfer to contractors in the form of 

higher bids. In any event, this rule is 

expected to have an effect on the 

economy that is less than the 

$100,000,000 threshold for a rule to be 

considered economically significant. 

V. Regulatory Flexibility Analysis 

The Regulatory Flexibility Act of 1980 

(RFA) as amended, requires agencies to 

prepare regulatory flexibility analyses 

and make them available for public 

comment, when proposing regulations 

that will have a significant economic 

impact on a substantial number of small 

entities. See 5 U.S.C. 603. If the rule is 

not expected to have a significant 

economic impact on a substantial 

number of small entities, the RFA 

allows an agency to certify such, in lieu 

of preparing an analysis. See 5 U.S.C. 

605. As explained in the Initial 

Regulatory Flexibility Analysis section 

of the proposed rule, the Department 

did not expect the proposed rule to have 

a significant economic impact on a 

substantial number of small entities. 75 

FR 13396 (Mar. 19, 2010). However, in 

the interest of transparency and to 

provide an opportunity for public 

comment, the Department prepared an 

initial regulatory flexibility analysis 

rather than certifying that the proposed 

rule was not expected to have a 

significant economic impact on a 

substantial number of small entities. 

The Department specifically requested 

comments on the initial regulatory 

flexibility analysis, including the 

number of small entities affected by the 

nondisplacement requirements, and the 

existence of alternatives that would 

reduce burden on small entities while 

still meeting the requirements of 

Executive Order 13495. See 75 FR 

13396–13399 (Mar. 19, 2010). The 

Department received five comments on 

the initial regulatory flexibility analysis. 

TechAmerica commented that the 

proposed rule should be revised to 

address the negative impact on small 

businesses, particularly the requirement 

to make an offer of employment to the 

predecessor contractor’s employees. 

This commenter stated that small 

businesses often do not possess 

sufficient resources to both retain their 

current employees and hire incumbent 

personnel, and it therefore 

recommended that the Department 

exempt small business prime 

contractors from the nondisplacement 

requirements in order to avoid 

displacement of incumbent small 

business employees. The Department 

notes that the potential for a contractor’s 

current personnel to be displaced due to 

the requirement to offer employment to 

a predecessor’s employees is alleviated 

by Section 5(b) of the Executive Order 

and Section 9.12(c)(2) of this final rule, 

which provide that a successor 

contractor may employ under the 

contract any employee who has worked 

for the contractor for at least 3 months 

immediately preceding the 

commencement of the contract and who 

would otherwise face lay-off or 

discharge. Therefore, the Department 

does not believe that revising the rule as 

suggested by this commenter is 

necessary or appropriate. 

The Chamber stated that many of the 

Department’s assumptions in the initial 

regulatory flexibility analysis and the 

Executive Order 12866 analysis were 

not appropriately explained, making the 

Department’s calculations difficult to 

fully replicate. The Chamber 

specifically commented that there is no 

mention of the burden on small 

businesses created by the record 

keeping requirements of this rule. 

Similarly, TechAmerica commented 

that it believes that the Department’s 

initial regulatory flexibility analysis 

underestimates the impact of the rule on 

small businesses and that the 

Department’s estimates were unrealistic. 

TechAmerica asked the Department to 

conduct a more thorough analysis based 

on a realistic estimate of the burdens 

and costs that the requirements would 

impose on small businesses. The 

Department used the best data available 

for conducting its review of the rule 

under the PRA, Executive Order 12866, 

and the RFA. As discussed in the 

preamble of the proposed rule, where 

the Department was unable to find 

reliable data sources, the Department 

made reasonable assumptions and 

characterized the assumptions as such. 

75 FR 13393–13399 (Mar. 19, 2010). 

Neither the Chamber nor TechAmerica 

offered any data sources or alternative 

assumptions for the Department to use 

in determining the impact of the rule. 

The Department does not believe that 

additional analysis of the impacts of the 

rule are warranted as the analyses 

included in the proposed rule were 

based on the best available data, the 

Department identified where it made 

assumptions, and the commenters did 

not provide any alternative data or data 

sources for the Department’s 

consideration. However, in reviewing 

the analyses in light of these comments, 

the Department determined that it 

inadvertently omitted reference to the 

particular chart used to determine the 

number of contract actions subject to the 

SCA in FY 2006. The chart, Subject to 

Labor Statute, appears in the Federal 

Procurement Report FY 2006, Section III 

Agency Views, available at: https:// 

www.fpds.gov/fpdsng_cms/index.php/ 

reports. 

Several commenters, including SBA 

Office of Advocacy, the PSC, and 

TechAmerica, suggested that the 

Department consider alternatives that 

provide flexibilities for small 

businesses. However, only two 

commenters offered alternatives for 

consideration. TechAmerica 

recommended that the Department 

revise the proposed rule to include an 

exception for small business prime 


Emcdonald on DSK2BSOYB1PROD with RULES2
53750 Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 

1See chart entitled Subject to Labor Statute, 

Federal Procurement Report FY 2006, Section III 

Agency Views, available at: https://www.fpds.gov/ 

fpdsng_cms/index.php/reports. 

contractors, while the PSC 

recommended that the Department 

consider exempting contracts where ten 

or fewer employees are employed by the 

predecessor contractor. The Department 

appreciates these suggestions, but 

believes the suggested alternatives are 

beyond the scope of the Department’s 

authority in implementing the Executive 

Order. The Executive Order excludes 

contracts or subcontracts below the 

simplified acquisition threshold, 

effectively excluding many small 

contractors from compliance with its 

provisions and provides no specific 

authority to the Department for creating 

other exemptions or exceptions from 

compliance with the provisions of the 

Executive Order. 

The SBA Office of Advocacy 

questioned how this rule will work with 

other requirements applicable to Federal 

Government contractors, such as use of 

the Department of Homeland Security’s 

e-Verify system. The Department does 

not believe that application of this final 

rule interferes with or impacts an 

employer’s compliance with other 

applicable Federal laws. Pursuant to 

Executive Order 13465, which amended 

Executive Order 12989, contractors to 

all executive departments and agencies 

are required to electronically verify 

employment authorization of employees 

performing work under qualifying 

Federal contracts. See 73 FR 33285 (Jun. 

11, 2008). Nothing in this final rule 

interferes with or impedes a contractor’s 

compliance with Executive Order 12989 

as amended. Additionally, based on 

Sections 1 and 9(b) of Executive Order 

13495, and as discussed in connection 

with Section 9.1 of this final rule, the 

Department does not believe that 

application of this final rule will 

interfere with or a contracting agency’s 

or contractor’s compliance with other 

applicable Federal laws, such as 

Executive Order 11246 (Equal 

Employment Opportunity), the Vietnam 

Era Veterans’ Readjustment Assistance 

Act of 1974, or the requirements of the 

HUBZone program established by title 

VI of the Small Business 

Reauthorization Act of 1997. 

This commenter also stated that the 

Small Business Regulatory Enforcement 

Fairness Act (SBREFA) requires that the 

Department prepare a Small Business 

Compliance Guide to assist small 

entities in complying with this rule and 

to set up a response system to answer 

inquiries from small entities about the 

rule. The Department is committed to 

providing employers subject to this rule, 

regardless of whether or not the 

employer is a small business, with 

information and assistance on 

compliance with the provisions of this 

final rule. However, because the 

Department is able to certify that this 

rule will not have a significant 

economic impact on a substantial 

number of small entities (as further 

discussed below), the Department is not 

required by SBREFA to develop a Small 

Business Compliance Guide with 

respect to this rule. The Department will 

provide compliance assistance to 

contracting agencies, contractors and 

employees through the publication of 

materials on the agency’s Web site, 

outreach and education seminars, and 

through Wage and Hour Division offices 

throughout the country, which provide 

compliance assistance at no charge to 

employers. 

Based on the analysis below, the 

Department has estimated the number of 

covered small contractors and 

subcontractors subject to the rule and 

the financial burdens to these small 

contractors and subcontractors 

associated with complying with the 

requirements of this final rule. The 

Department estimates that 28,800 small 

contractors will be subject to this rule, 

the majority of which will incur 

compliance costs of less than $100. 

Therefore, the Department has certified 

to the Chief Counsel for the Office of 

Advocacy of the Small Business 

Administration that this rule will not 

have a significant economic impact on 

a substantial number of small entities. 

Executive Order 13495 establishes 

that, when a service contract expires 

and a follow-on contract is awarded for 

the same or similar services at the same 

location, the Federal Government’s 

procurement interests in economy and 

efficiency are better served when a 

successor contractor hires the 

predecessor’s employees. A carryover 

workforce reduces disruption to the 

delivery of services during the period of 

transition between contractors and 

provides the Federal Government the 

benefits of an experienced and trained 

workforce that is familiar with the 

Federal Government’s personnel, 

facilities, and requirements. This final 

rule implements the Executive Order. 

This final rule applies to entities that 

perform work for the Federal 

Government on contracts or 

subcontracts subject to the SCA of 

$150,000 or more. The Department has 

found no precise data with which to 

measure the precise number of small 

entities that would be covered by this 

final rule; however, certain available 

data allow for estimates. As discussed 

more fully in the Paperwork Reduction 

Act portion of this preamble, according 

to the Federal Procurement Data 

System’s (FPDS) 2006 Federal 

Procurement Report 1, slightly less than 

75,000 (74,611) Federal government 

contract actions were subject to the SCA 

during that reporting period. A contract 

action is any oral or written action that 

results in the purchase, rent, or lease of 

supplies or equipment, services, or 

construction using appropriated dollars 

over the micro-purchase threshold, or 

modifications to these actions regardless 

of dollar value. Many contract actions 

are modifications to or extensions of 

existing Federal contracts or otherwise 

relate to actions where there is no 

successor contractor. The Department, 

therefore, assumes that about 15,000 per 

year (slightly more than 20 percent of all 

SCA covered contract actions in 2006) 

would be successor contracts subject to 

the nondisplacement provisions. The 

Department also assumes, based on 

consultations with Federal procurement 

officials, that for PRA purposes a typical 

SCA contract has one prime contractor 

and three subcontractors; therefore, the 

Department estimates the requirements 

of part 9 would apply to approximately 

60,000 contracts (15,000 covered 

contract actions × 4 contractors). A 

review of FPDS data suggests that only 

44,039 contractors performed work on 

service contracts in excess of $25,000 in 

FY 2006. See David Berteau, et al., 

Structure and Dynamics of the U.S. 

Federal Professional Services Industrial 

Base 1995–2007, Center for Strategic 

and International Studies, February 

2009, at 26, http://www.csis.org/media/ 

csis/pubs/090212_fps_report_2009.pdf 

(CSIS Report). Because of the $150,000 

threshold, some lesser number of 

contractors would perform work on 

contracts subject to the 

nondisplacement requirements; the 

Department estimates each year about 

40,000 contractors and subcontractors 

will be subject to this information 

collection. FPDS data also suggest that 

slightly less than 55 percent of all 

contract actions relate to small entities. 

Applying this percentage to the 40,000 

estimated covered contractors and 

subcontractors (generically referred to as 

contractors in this analysis, unless 

otherwise noted), suggests this rule will 

apply to 22,000 small entities. The 

Chamber contends that multiplying a 

percentage of contract actions by the 

estimated number of covered 

contractors and subcontractors 

erroneously compares apples with 

oranges, given that small and large 

entities may not work on SCA contracts 

in equal proportions, particularly given 


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the indication that there may be 

approximately three subcontractors for 

every prime contractor. However, the 

Chamber points to no specific data to 

substantiate its stated concern, nor does 

it provide any concrete basis for its own 

assumption that subcontractors are 

disproportionately likely to be small 

businesses. The Department remains 

persuaded that its calculation is valid 

based on the available data, as 

supplemented by reasonable 

assumptions. 

The CSIS Report found that 31,700 

small businesses in FY 2006 undertook 

contracts worth at least $25,000 (72 

percent of all contractors undertaking 

Federal professional service contracts of 

at least $25,000). CSIS Report at 26. 

Again, this rule would apply only to a 

portion of these contractors; however, 

using this latter percentage suggests the 

rule might apply to 28,800 small 

businesses. This is an upper bound 

estimate, because (in addition to not 

applying to contracts or subcontracts of 

less than $150,000) the final rule would 

not apply to small entities with certain 

contracts or subcontracts awarded for 

services produced or provided by 

persons who are blind or have severe 

disabilities or contracts exempted by the 

contracting agency. The earlier analysis 

showing 40,000 contractors will work 

on 60,000 successor contracts and 

subcontracts (generically referred to as 

contracts in this analysis, unless 

otherwise noted) subject to this rule 

suggests a typical contractor will work 

on 1.5 successor contracts subject to the 

nondisplacement provisions. For 

purposes of this analysis, the 

Department assumes each covered small 

contractor will also work on an average 

of 1.5 covered successor contracts each 

year, the same ratio as all contractors; 

thus, this final rule is expected to apply 

to no more than 43,200 successor 

contracts awarded to small contractors. 

In estimating the costs on small 

contractors, the Department has 

considered how current practices 

compare with expected actions 

contractors typically will take under the 

nondisplacement provisions. For 

example, those successor contractors 

that currently hire new employees for a 

contract must recruit workers and 

evaluate their qualifications for 

positions on the contract. In order to 

match employees with suitable jobs 

under this final rule, successor 

contractors will evaluate the 

predecessor contract employees and 

available positions; thus, successor 

contractors are likely to spend an equal 

amount of time determining job 

suitability under the final rule as under 

current practices. The costs for 

documenting these employment 

decisions will also be similar under 

both the final rule and status quo. 

For purposes of this analysis, the 

Department also believes the time small 

contactors will save by not recruiting an 

entirely new workforce from the outset 

will be offset by the additional time a 

successor contractor will spend in 

recruiting a new employee when there 

is a vacant position because the 

contractor cannot find suitable work for 

an employee who worked on the 

predecessor contract or in considering 

how to minimize displacement when 

the successor contractor reconfigures 

how it will deploy employees 

performing on the successor contract. 

See § 9.12(d)(3). As previously 

mentioned, this final rule will also not 

affect wages that contractors will pay 

workers because of the existing SCA 

requirement for the wage determination 

that establishes the minimum rate for 

each occupation to be incorporated into 

the contract; thus, existing regulatory 

requirements already set wage rates, 

including when the predecessor’s 

collectively bargained rate is 

incorporated into the contract, 

successors must pay. See 41 U.S.C. 

353(c); 29 CFR 4.6(b)(1). This final rule 

does not require successor contractors to 

pay wages higher than the rate required 

by the SCA. The successor contractor 

also may offer employment under 

different terms and conditions, if the 

reasons for doing so are not related to 

a desire that the employee refuse the 

offer or that other employees be hired 

for the offer. See § 9.12(b)(5). 

The final rule includes a contract 

clause provision requiring contractors to 

incorporate the nondisplacement 

contract clause into each covered 

subcontract. This provision comes 

directly from Executive Order 13495, 

and the Department estimates that it 

will take a combined total of 30 minutes 

for contractors to incorporate the 

contract clause into each covered 

subcontract and the subcontractor to 

review it. As will be further explained 

later in this analysis, 85 percent of all 

small contractors are expected to incur 

no additional costs under this final rule. 

Assuming covered contractors spend an 

additional two hours (accounting for 

any additional time spent in making job 

offers, inserting and reviewing the 

contract clause in subcontracts, and 

maintaining records) per contract to 

comply with this final rule and 

increasing the October 2009 average 

hourly earnings for professional and 

business workers by 40 percent to 

account for fringe benefits (a total of 

$31.32 per hour), this rule is estimated 

to impose annual costs of less than $100 

on most small contractors (1.5 contracts 

per contractor × 2 hours × $31.32). See 

The Employment Situation—December 

2009, at 28, Table B–3, Bureau of Labor 

Statistics, (http://www.bls.gov/ 

news.release/archives/ 

empsit_01082010.pdf). Aggregate 

compliance costs for these general 

requirements are expected to be 

$2,706,048 (28,800 contractors × 1.5 

contracts × 2 hours × $31.32). 

As explained in the PRA section of 

this preamble, the final rule requires a 

predecessor contractor to provide a 

certified list of the names of all service 

employees working under that contract 

(and its subcontracts) to the contracting 

agency no later than 30 days before 

completion of the contractor’s 

performance of services on a contract. 

Where changes to the workforce have 

been made after the submission of the 

certified list described in § 9.12(e)(1), a 

predecessor contractor must submit an 

updated certified list no later than 10 

days before completion of the 

contractor’s performance of services on 

a contract. The clause makes clear that 

this is the same list as the seniority list 

provided under the Service Contract Act 

clauses. This list already exists and is 

used by contractors in making hiring 

decisions under the status quo. 

Additional costs would only be incurred 

when there is a change in the workforce 

necessitating submission of an updated 

certified list. The department 

anticipates that a large portion of 

contractors will not make changes to 

their workforce in the final month of 

contract performance and will therefore 

not be required to submit a second 

certified list. However, to assure the 

most inclusive approximation the 

Department estimates that 50 percent of 

small contractors’ contracts will 

experience a change in workforce 

between 30 and 10 days of completion 

of the contract, requiring an updated 

list. The Department recognizes that the 

actual number of contractors having to 

produce two lists is likely to be less, but 

uses 50 percent as an upper bound 

estimate (28,800 contractors × 1.5 

contracts × .5 = 21,600 contracts). The 

Department estimates that it will take a 

predecessor contractor an average of 

approximately one minute to update the 

employment status of each employee on 

a certified list, and that each service 

contract covered by this rule would 

involve an average of approximately 15 

employees. The Department has found 

no precise data with which to measure 

the precise number of employees on 

contracts awarded to small contractors, 

but applies the estimate used for the 

class of all contracts subject to the 


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53752 Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 

nondisplacement provisions. The 

Department recognizes that this will be 

an upper bound estimate, since the 

number of employees employed on 

contracts awarded to small contractors 

is likely to be less than those in the class 

of all contracts subject to the 

nondisplacement provisions. Thus, this 

requirement is estimated to impose 

annual costs of $169,128 on small 

contractors (21,600 contracts × 15 

employees × 1 minute = 5,400 hours. 

5,400 hours × $31.32 = $169,128). 

As with other contractors, most small 

contractors will obtain information 

about the nondisplacement 

requirements primarily from the 

contract clause, and Wage and Hour 

Division offices throughout the country 

are available to provide compliance 

assistance at no charge to employers. 

While the Department believes this rule 

has been drafted in a way that should 

enable the vast majority of contractors to 

comply with the nondisplacement 

requirements without the need of 

professional assistance from an attorney 

or accountant, the Department 

recognizes some contractors will seek 

such assistance in the course of 

researching compliance options within 

the context of specific business needs. 

As a result, for purposes of this analysis, 

the Department estimates 15 percent of 

covered contractors each will incur 

additional costs averaging $5000 

because of the final rule requirements, 

for a total of $21,600,000 spent by 4320 

small contractors (28,800 contractors × 

15% × $5000). The Department 

estimates that ten percent of these 4320 

contractors will face complex issues for 

which each will spend an average of 

$10,000 additional dollars to address, 

totaling $4,320,000 spent by 432 small 

contractors (4320 contractors × 10% × 

$10,000). The Department estimates 

total compliance costs that the 28,800 

small contractors subject to this final 

rule will incur will be $28,626,048, with 

more than 90 percent of costs being 

borne by 4320 of these contractors 

($26,325,907/$28,626,048). As with 

other contractors, the Department 

expects some compliance costs will be 

transferred to the Federal Government 

in the form of higher bids; however, the 

agency is not aware of a reasonable way 

to allocate those costs. 

VI. Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995, 2 U.S.C. 

1532, this final rule does not include 

any Federal mandate that may result in 

excess of $100 million in expenditures 

by state, local, and tribal governments in 

the aggregate or by the private sector. 

VII. Executive Order 13132 

(Federalism) 

The Department has (1) Reviewed this 

rule in accordance with Executive Order 

13132 regarding federalism and 

(2) determined that it does not have 

federalism implications. The final rule 

would not have substantial direct effects 

on the States, on the relationship 

between the national government and 

the States, or on the distribution of 

power and responsibilities among the 

various levels of government. 

VIII. Executive Order 13175, Indian 

Tribal Governments 

This final rule would not have tribal 

implications under Executive Order 

13175 that would require a tribal 

summary impact statement. The final 

rule would not have substantial direct 

effects on one or more Indian tribes, on 

the relationship between the Federal 

Government and Indian tribes or on the 

distribution of power and 

responsibilities between the Federal 

Government and Indian tribes. 

IX. Effects on Families 

The undersigned hereby certifies that 

the final rule would not adversely affect 

the well-being of families, as discussed 

under section 654 of the Treasury and 

General Government Appropriations 

Act, 1999. 

X. Executive Order 13045, Protection of 

Children 

This final rule would have no 

environmental health risk or safety risk 

that may disproportionately affect 

children. 

XI. Environmental Impact Assessment 

A review of this final rule in 

accordance with the requirements of the 

National Environmental Policy Act of 

1969 (NEPA), 42 U.S.C. 4321 et seq.; the 

regulations of the Council on 

Environmental Quality, 40 CFR part 

1500 et seq.; and the Departmental 

NEPA procedures, 29 CFR part 11, 

indicates that the rule would not have 

a significant impact on the quality of the 

human environment. There is, thus, no 

corresponding environmental 

assessment or an environmental impact 

statement. 

XII. Executive Order 13211, Energy 

Supply 

This final rule is not subject to 

Executive Order 13211. It will not have 

a significant adverse effect on the 

supply, distribution, or use of energy. 

XIII. Executive Order 12630, 

Constitutionally Protected Property 

Rights 

This final rule is not subject to 

Executive Order 12630, because it does 

not involve implementation of a policy 

that has takings implications or that 

could impose limitations on private 

property use. 

XIV. Executive Order 12988, Civil 

Justice Reform Analysis 

This final rule was drafted and 

reviewed in accordance with Executive 

Order 12988 and will not unduly 

burden the Federal court system. The 

final rule was: (1) Reviewed to eliminate 

drafting errors and ambiguities; 

(2) written to minimize litigation; and 

(3) written to provide a clear legal 

standard for affected conduct and to 

promote burden reduction. 

List of Subjects in 29 CFR Part 9 

Employment, Federal buildings and 

facilities, Government contracts, Law 

enforcement, Labor. 

Nancy J. Leppink, 

Deputy Administrator, Wage and Hour 

Division. 

For the reasons set out in the 

preamble, the Department amends Title 

29 of the Code of Federal Regulations by 

adding part 9 as set forth below: 

PART 9—NONDISPLACEMENT OF 

QUALIFIED WORKERS UNDER 

SERVICE CONTRACTS 

Subpart A—General 

Sec. 

9.1 Purpose and scope. 

9.2 Definitions. 

9.3 Coverage. 

9.4 Exclusions. 

Subpart B—Requirements 

9.11 Contracting agency requirements. 

9.12 Contractor requirements and 

prerogatives. 

Subpart C—Enforcement 

9.21 Complaints. 

9.22 Wage and Hour Division conciliation. 

9.23 Wage and Hour Division investigation. 

9.24 Remedies and sanctions for violations 

of this part. 

Subpart D—Administrator’s Determination, 

Mediation, and Administrative Proceedings 

9.31 Administrator’s determination. 

9.32 Requesting appeals. 

9.33 Mediation. 

9.34 Administrative Law Judge hearings. 

9.35 Administrative Review Board 

proceedings. 

Appendix A to Part 9—Contract Clause 

Appendix B to Part 9—Notice to Service 

Contract Employees. 


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Authority: 5 U.S.C. 301; section 6, E.O. 

13495, 74 FR 6103; Secretary’s Order 9–2009, 

74 FR 58836. 

Subpart A—General 

§ 9.1 Purpose and scope. 

(a) Purpose. This part contains the 

Department of Labor’s rules relating to 

the administration of Executive Order 

13495, ‘‘Nondisplacement of Qualified 

Workers Under Service Contracts,’’ and 

implements the enforcement provisions 

of the Executive Order. The Executive 

Order assigns enforcement 

responsibility for the nondisplacement 

requirements to the Department. The 

Executive Order states that the Federal 

Government’s procurement interests in 

economy and efficiency are served 

when the successor contractor hires the 

predecessor’s employees. A carryover 

workforce minimizes disruption in the 

delivery of services during a period of 

transition between contractors and 

provides the Federal Government the 

benefit of an experienced and trained 

workforce that is familiar with the 

Federal Government’s personnel, 

facilities, and requirements. Executive 

Order 13495, therefore, generally 

requires that successor service 

contractors performing on Federal 

contracts offer a right of first refusal to 

suitable employment (i.e., a job for 

which the employee is qualified) under 

the contract to those employees under 

the predecessor contract whose 

employment will be terminated as a 

result of the award of the successor 

contract. 

(b) Policy. Executive Order 13495 

establishes a Federal Government policy 

for service contracts and their 

solicitations to include a clause that 

requires the contractor and its 

subcontractors under a contract that 

succeeds a contract for performance of 

the same or similar services at the same 

location to offer a right of first refusal of 

employment to those employees (other 

than managerial and supervisory 

employees) employed under the 

predecessor contract whose 

employment will be terminated as a 

result of the award of the successor 

contract in positions for which the 

employees are qualified. Nothing in 

Executive Order 13495 or this part shall 

be construed to permit a contractor or 

subcontractor to fail to comply with any 

provision of any other Executive Order, 

regulation, or law of the United States. 

(c) Scope. Neither Executive Order 

13495 nor this part creates any rights 

under the Contract Disputes Act or any 

private right of action. The Executive 

Order provides that disputes regarding 

the requirement of the contract clause 

prescribed by section 5 of the Order, to 

the extent permitted by law, shall be 

disposed of only as provided by the 

Secretary of Labor in regulations issued 

under the Order. It also provides for this 

part to favor the resolution of disputes 

by efficient and informal alternative 

dispute resolution methods to the extent 

practicable. The Order does not 

preclude judicial review of final 

decisions by the Secretary in accordance 

with the Administrative Procedure Act. 

Additionally, the Order also provides 

that it is to be implemented consistent 

with applicable law and subject to the 

availability of appropriations. 

§ 9.2 Definitions. 

For purposes of this part: 

Administrator means the 

Administrator of the Wage and Hour 

Division and includes any official of the 

Wage and Hour Division authorized to 

perform any of the functions of the 

Administrator under this part. 

Administrative Review Board means 

the Administrative Review Board, U.S. 

Department of Labor. 

Contractor means a prime contractor 

and all of its first or lower tier 

subcontractors on a Federal service 

contract. 

Contracting Officer means the 

individual, a duly appointed successor, 

or authorized representative who is 

designated and authorized to enter into 

procurement contracts on behalf of the 

Federal contracting agency. 

Day means, unless otherwise 

specified, a calendar day. 

Employee or service employee means 

any person engaged in the performance 

of a service contract other than any 

person employed in a bona fide 

executive, administrative, or 

professional capacity, as those terms are 

defined in 29 CFR part 541. The term 

employee or service employee includes 

all such persons, as defined in the 

McNamara-O’Hara Service Contract Act 

of 1965, as amended, regardless of any 

contractual relationship that may be 

alleged to exist between a contractor or 

subcontractor and such persons. 

Employment opening means any 

vacancy in a position on the contract, 

including any vacancy caused by 

replacing an employee from the 

predecessor contract with a different 

employee. 

Federal Government means an agency 

or instrumentality of the United States 

that enters into a procurement contract 

pursuant to authority derived from the 

Constitution and the laws of the United 

States. 

Managerial employee and supervisory 

employee mean a person engaged in the 

performance of services under the 

contract who is employed in a bona fide 

executive, administrative, or 

professional capacity, as those terms are 

defined and delimited in 29 CFR part 

541. 

Month means a period of 30 

consecutive days, regardless of the day 

of the calendar month on which it 

begins. 

Office of Administrative Law Judges 

means the Office of Administrative Law 

Judges, U.S. Department of Labor. 

Secretary means the U.S. Secretary of 

Labor or an authorized representative of 

the Secretary. 

Same or similar service means a 

service that is either identical to or has 

one or more characteristics that are alike 

in substance to a service performed at 

the same location on a contract that is 

being replaced by the Federal 

Government or a contractor on a Federal 

service contract. 

Service contract or contract means 

any contract or subcontract for services 

entered into by the Federal Government 

or its contractors that is covered by the 

McNamara-O’Hara Service Contract Act 

of 1965, as amended, and its 

implementing regulations. 

Solicitation means any request to 

submit offers or quotations to the 

Government. 

United States means the United States 

and all executive departments, 

independent establishments, 

administrative agencies, and 

instrumentalities of the United States, 

including corporations of which all or 

substantially all of the stock is owned 

by the United States, by the foregoing 

departments, establishments, agencies, 

instrumentalities, and including nonappropriated fund instrumentalities. 

Wage and Hour Division means the 

Wage and Hour Division, U.S. 

Department of Labor. 

§ 9.3 Coverage. 

This part applies to all service 

contracts and their solicitations, except 

those excluded by § 9.4 of this part, that 

succeed contracts for the same or 

similar service at the same location. 

§ 9.4 Exclusions. 

(a) Small contracts. (1) General. The 

requirements of this part do not apply 

to contracts or subcontracts under the 

simplified acquisition threshold set by 

the Office of Federal Procurement 

Policy Act, as amended. 

(2) Application to subcontracts. While 

the § 9.4(a)(1) exclusion applies to 

subcontracts that are less than the 

simplified acquisition threshold, the 

prime contractor must comply with the 

requirements of this part, if the prime 

contract is at least the threshold 


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53754 Federal Register / Vol. 76, No. 167 / Monday, August 29, 2011 / Rules and Regulations 

amount. When a contractor that is 

subject to the nondisplacement 

requirements of this part discontinues 

the services of a subcontractor at any 

time during the contract and performs 

those services itself at the same location, 

the contractor shall offer employment 

on the contract to the subcontractor’s 

employees who would otherwise be 

displaced and would otherwise be 

qualified in accordance with this part 

but for the size of the subcontract. 

(b) Certain contracts or subcontracts 

awarded for services produced or 

provided by persons who are blind or 

have severe disabilities. (1) The 

requirements of this part do not apply 

to contracts or subcontracts pursuant to 

the Javits-Wagner-O’Day Act. 

(2) The requirements of this part do 

not apply to contracts or subcontracts 

for guard, elevator operator, messenger, 

or custodial services provided to the 

Federal Government under contracts or 

subcontracts with sheltered workshops 

employing the severely handicapped as 

described in sec. 505 of the Treasury, 

Postal Services and General Government 

Appropriations Act, 1995. 

(3) The requirements of this part do 

not apply to agreements for vending 

facilities entered into pursuant to the 

preference regulations issued under the 

Randolph-Sheppard Act. 

(4) The exclusions provided by 

paragraphs (b)(1) through (3) of this 

section apply when either the 

predecessor or successor contract has 

been awarded for services produced or 

provided by the severely disabled, as 

described in paragraphs (b)(1)–(3) of this 

section. 

(c) Federal service work constituting 

only part of employee’s job. This part 

does not apply to employees who were 

hired to work under a Federal service 

contract and one or more nonfederal 

service contracts as part of a single job, 

provided that the employees were not 

deployed in a manner that was designed 

to avoid the purposes of Executive 

Order 13495. 

(d) Contracts exempted by Federal 

agency. This part does not apply to any 

contract, subcontract, or purchase order 

or any class of contracts, subcontracts, 

or purchase orders as to which the head 

of a contracting department or agency 

finds that the application of any of the 

requirements of this part would not 

serve the purposes of Executive Order 

13495 or would impair the ability of the 

Federal Government to procure services 

on an economical and efficient basis. 

(1) Any agency determination to 

exercise its exemption authority under 

Section 4 of the Executive Order shall 

be made no later than the solicitation 

date. As an alternative to exempting the 

agency from all provisions of this part, 

the head of a contracting department or 

agency may exempt the agency from one 

or more individual provisions no later 

than the contract solicitation date. Any 

agency determination to exercise its 

exemption authority under Section 4 of 

the Executive Order made after the 

solicitation date shall be inoperative 

and in such a circumstance the contract 

clause set forth in Appendix A of this 

part shall be included in, or added to, 

the covered service contracts and their 

solicitations. 

(2) When an agency exercises its 

exemption authority with respect to any 

contract, subcontract, or purchase order, 

the contracting agency shall ensure that 

the contractor notifies affected workers 

and their collective bargaining 

representatives in writing of the 

agency’s determination no later than 

five business days after the solicitation 

date. The notification shall include facts 

supporting the determination that the 

application of one or more requirements 

of this part would not serve the 

purposes of Executive Order 13495 or 

would impair the ability of the Federal 

Government to procure services on an 

economical and efficient basis. Where a 

contracting agency exempts a class of 

contracts, subcontracts, or purchase 

orders, the contractor shall provide the 

notice to incumbent workers and their 

collective bargaining representatives for 

each individual solicitation. A 

contracting agency’s failure to ensure 

that the contractor notifies incumbent 

workers and their collective bargaining 

representatives in writing of the 

agency’s determination to exercise its 

exemption authority under Section 4 of 

the Executive Order no later than five 

business days after the solicitation date 

shall render the exemption decision 

inoperative and in such a circumstance 

the contract clause set forth in 

Appendix A of this part shall be 

included in, or added to, the covered 

service contracts and their solicitations. 

The contracting agency also shall notify 

the Department of its exemption 

decision and provide the Department 

with a copy of its written analysis no 

later than five business days after the 

solicitation date, which the Department 

will post on its Web site at http:// 

www.dol.gov. The contracting agency’s 

failure to follow this requirement shall 

render any agency exemption decision 

inoperative and in such a circumstance 

the clause in Appendix A of this part 

shall be included in, or added to, the 

covered service contracts and their 

solicitations. 

(3) The agency shall ensure that the 

predecessor contractor uses the 

notification method specified in 

§ 9.11(b) of this part to inform workers 

and their collective bargaining 

representatives of the exemption 

determination. The failure by a 

contracting agency to ensure that the 

contractor uses the notification method 

specified in § 9.11(b) of this part shall 

render the exemption decision 

inoperative and in such a circumstance 

the contract clause set forth in 

Appendix A of this part shall be 

included in, or added to, the covered 

service contracts and their solicitations. 

(4)(i) In exercising the authority to 

exempt contracts under this section 

based on a finding that any of the 

requirements of Executive Order 13495 

would not serve the purposes of the 

Order, or would impair the ability of the 

Federal Government to procure services 

on an economical and efficient basis, 

the agency shall prepare a written 

analysis by the solicitation date 

supporting such determination. The 

written analysis shall be retained in 

accordance with FAR 4.805. 48 CFR 

4.805. Such a written analysis shall, 

among other things, compare the 

anticipated outcomes of hiring 

predecessor contract employees with 

those of hiring a new workforce. The 

consideration of cost and other factors 

in exercising the agency’s exemption 

authority shall reflect the general 

finding made by the Executive Order 

that the government’s procurement 

interests in economy and efficiency are 

normally served when the successor 

contractor hires the predecessor’s 

employees, and shall specify how the 

particular circumstances support a 

contrary conclusion. Any agency 

determination to exercise its exemption 

authority under Section 4 of the 

Executive Order without a written 

analysis as required by this part shall be 

inoperative and in such a circumstance 

the contract clause set forth in 

Appendix A of this part shall be 

included in, or added to, the covered 

service contracts and their solicitations. 

(ii) When analyzing whether the 

application of the Executive Order’s 

requirements would not serve the 

purposes of the Order and impair the 

ability of the Federal Government to 

procure services on an economical and 

efficient basis, the head of a contracting 

department or agency shall consider the 

specific circumstances associated with 

the services to be acquired. General 

assertions or presumptions of an 

inability to procure services on an 

economical and efficient basis using a 

carryover workforce shall be deemed 

insufficient. Factors that may be 

considered include, but are not limited 

to the following: 


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(A) Whether the use of a carryover 

workforce would greatly increase 

disruption to the delivery of services 

during the period of transition between 

contracts (e.g., the carryover workforce 

in its entirety would not be an 

experienced and trained workforce that 

is familiar with the Federal 

Government’s personnel, facilities, and 

requirements as pertinent to the 

contract, subcontract, purchase order, 

class of contracts, subcontracts, or 

purchase orders at issue and would 

require extensive training to learn new 

technology or processes that would not 

be required of a new workforce). 

(B) Emergency situations, such as a 

natural disaster or an act of war, that 

physically displace incumbent 

employees from the location of the 

service contract work and make it 

impossible or impracticable to extend 

offers to hire as required by the Order. 

(C) Situations where the head of the 

contracting department or agency 

reasonably believes, based on the 

predecessor employees’ past 

performance, that the entire predecessor 

workforce failed, individually as well as 

collectively, to perform suitably on the 

job and that it is not in the interest of 

economy and efficiency to provide 

supplemental training to the 

predecessor’s workers. 

(iii) Factors the head of a contracting 

department or agency shall not consider 

in making an exemption determination 

(because consideration of such factors 

would contravene the Executive Order’s 

purposes and findings) include whether 

the use of a carryover workforce, in 

general, would greatly increase 

disruption to the delivery of services 

during the period of transition between 

contracts; whether, in general, a 

carryover workforce would not be an 

experienced and trained workforce that 

is familiar with the Federal 

Government’s personnel, facilities, and 

requirements; the job performance of the 

predecessor contractor; the seniority of 

the workforce; and the reconfiguration 

of the contract work by a successor 

contractor. The head of a contracting 

department or agency also shall not 

consider wage rates and fringe benefits 

of service employees in making an 

exemption determination except in the 

following exceptional circumstances: 

(A) In emergency situations, such as 

a natural disaster or an act of war, that 

physically displace incumbent 

employees from the locations of the 

service contract work and make it 

impossible or impracticable to extend 

offers to hire as required by the Order; 

(B) When a carryover workforce in its 

entirety would not constitute an 

experienced and trained workforce that 

is familiar with the Federal 

Government’s personnel, facilities, and 

requirements but rather would require 

extensive training to learn new 

technology or processes that would not 

be required of a new workforce; or 

(C) Other, similar circumstances in 

which the cost of employing a carryover 

workforce on the successor contract 

would be prohibitive. 

(5) Any request by interested parties 

for reconsideration of a contracting 

department or agency head’s 

determination to exercise its exemption 

authority under Section 4 of the 

Executive Order shall be directed to the 

head of the contracting department or 

agency. 

(e) Managerial and supervisory 

employees. This part does not apply to 

employees who are managerial or 

supervisory employees of Federal 

service contractors or subcontractors. 

See § 9.2(9) of this part, definition of 

managerial employee and supervisory 

employee. 

Subpart B—Requirements 

§ 9.11 Contracting agency requirements. 

(a) Contract Clause. The contract 

clause set forth in Appendix A of this 

part shall be included in covered service 

contracts, and solicitations for such 

contracts, that succeed contracts for 

performance of the same or similar 

services at the same location. 

(b) Notice. Where a contract will be 

awarded to a successor for the same or 

similar services to be performed at the 

same location, the Contracting Officer 

will ensure that the predecessor 

contractor provide written notice to 

service employees of the predecessor 

contractor of their possible right to an 

offer of employment. Such notice shall 

be either posted in a conspicuous place 

at the worksite or delivered to the 

employees individually. Where the 

predecessor contractor’s workforce is 

comprised of a significant portion of 

workers who are not fluent in English, 

the notice shall be provided in both 

English and a language with which the 

employees are more familiar. Multiple 

foreign language notices are required 

where significant portions of the 

workforce speak different foreign 

languages and there is no common 

language. Contracting Officers may 

advise contractors to provide the notice 

set forth in Appendix B to this part in 

either a physical posting at the job site, 

or another format that effectively 

provides individual notice such as 

individual paper notices or effective 

email notification to the affected 

employees. To be effective, email 

notification must result in an electronic 

delivery receipt or some other reliable 

confirmation that the intended recipient 

received the notice. Any particular 

determination of the adequacy of a 

notification, regardless of the method 

used, must be fact-dependent and made 

on a case-by-case basis. 

(c) Disclosures. The Contracting 

Officer shall provide the incumbent 

contractor’s list of employees referenced 

in § 9.12(e) of this part to the successor 

contractor and, on request, to employees 

or their representatives. 

(d) Actions on complaints. (1) 

Reporting. (i) Reporting time frame. 

Within 14 days of being contacted by 

the Wage and Hour Division, the 

Contracting Officer shall forward all 

information listed in paragraph (d)(1)(ii) 

of this section to the Branch of 

Government Contracts Enforcement, 

Wage and Hour Division, U.S. 

Department of Labor, Washington, DC 

20210. 

(ii) Report contents: Except as 

provided by paragraph (d)(3) of this 

section, the Contracting Officer shall 

forward to the Branch of Government 

Contracts Enforcement, Wage and Hour 

Division, U.S. Department of Labor, 

Washington, DC 20210 any: 

(A) Complaint of contractor 

noncompliance with this part; 

(B) Available statements by the 

employee or the contractor regarding the 

alleged violation; 

(C) Evidence that a seniority list was 

issued by the predecessor and provided 

to the successor; 

(D) A copy of the seniority list; 

(E) Evidence that the 

nondisplacement contract clause was 

included in the contract or that the 

contract was exempted by the 

contracting agency; 

(F) Information concerning known 

settlement negotiations between the 

parties, if applicable; 

(G) Any other relevant facts known to 

the Contracting Officer or other 

information requested by the Wage and 

Hour Division. 

(2) [Reserved] 

§ 9.12 Contractor requirements and 

prerogatives. 

(a) General. (1) No employment 

openings prior to right of first refusal. 

Except as provided under the exclusions 

listed in § 9.4 of this part or paragraphs 

(c) and (d) of this section, a successor 

contractor or subcontractor shall fill no 

employment openings under the 

contract prior to making good faith 

offers of employment (i.e., a right of first 

refusal to employment on the contract), 

in positions for which the employees 

are qualified, to those employees 

employed under the predecessor 


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contract whose employment will be 

terminated as a result of award of the 

contract or the expiration of the contract 

under which the employees were hired. 

The contractor and its subcontractors 

shall make a bona fide, express offer of 

employment to a position for which the 

employee is qualified to each employee 

and shall state the time within which 

the employee must accept such offer, 

but in no case shall the period within 

which the employee must accept the 

offer of employment be less than 10 

days. 

(2) No seniority list available. The 

successor contractor’s obligation to offer 

a right of first refusal exists even if the 

successor contractor has not been 

provided a list of the predecessor 

contractor’s employees or the list does 

not contain the names of all persons 

employed during the final month of 

contract performance. 

(3) Determining eligibility. While a 

person’s entitlement to a job offer under 

this part usually will be based on 

whether he or she is named on the 

certified list of all service employees 

working under the predecessor’s 

contract or subcontracts during the last 

month of contract performance, a 

contractor must also accept other 

credible evidence of an employee’s 

entitlement to a job offer under this part. 

For example, even if a person’s name 

does not appear on the list of employees 

on the predecessor contract, an 

employee’s assertion of an assignment 

to work on a contract during the 

predecessor’s last month of performance 

coupled with contracting agency staff 

verification could constitute credible 

evidence of an employee’s entitlement 

to a job offer, as otherwise provided for 

in this part. Similarly, an employee 

could demonstrate eligibility by 

producing a paycheck stub identifying 

the work location and dates worked. 

(b) Method of job offer. (1) Bona-fide 

offer. Except as otherwise provided in 

this part, a contractor must make a bona 

fide express offer of employment to each 

qualified employee on the predecessor 

contract before offering employment on 

the contract to any other person. In 

determining whether an employee is 

entitled to a bona fide, express offer of 

employment, a contractor may consider 

the exceptions set forth in paragraph (c) 

of this section and may utilize 

employment screening processes (i.e., 

drug tests, background checks, security 

clearance checks, and similar preemployment screening mechanisms) 

only when such processes are provided 

for by the contracting agency, are 

conditions of the service contract, and 

are consistent with the Executive Order. 

The obligation to offer employment 

under this part shall cease upon the 

employee’s first refusal of a bona fide 

offer to employment on the contract. 

(2) Establishing time limit for 

employee response. The contractor shall 

state the time within which an 

employee must accept an employment 

offer, but in no case may the period in 

which the employee has to accept the 

offer be less than 10 days. 

(3) Process. The successor contractor 

must, in writing or orally, offer 

employment to each employee. See also 

paragraph (f) of this section, 

Recordkeeping. In order to ensure that 

the offer is effectively communicated, 

the successor contractor should take 

reasonable efforts to make the offer in a 

language that each worker understands. 

For example, if the contractor holds a 

meeting for a group of employees on the 

predecessor contract in order to extend 

the employment offers, having a coworker or other person who fluently 

translates for employees who are not 

fluent in English would satisfy this 

provision. 

(4) Different job position. As a general 

matter, an offer of employment on the 

successor’s contract will be presumed to 

be a bona fide offer of employment, 

even if it is not for a position similar to 

the one the employee previously held 

but one for which the employee is 

qualified. If a question arises concerning 

an employee’s qualifications, that 

question shall be decided based upon 

the employee’s education and 

employment history, with particular 

emphasis on the employee’s experience 

on the predecessor contract. A 

contractor must base its decision 

regarding an employee’s qualifications 

on credible information provided by a 

knowledgeable source such as the 

predecessor contractor, the local 

supervisor, the employee, or the 

contracting agency. 

(5) Different employment terms and 

conditions. An offer of employment to a 

position on the contract under different 

employment terms and conditions, 

including changes to pay or benefits, 

than the employee held with the 

predecessor contractor will be 

considered bona fide, if the reasons are 

not related to a desire that the employee 

refuse the offer or that other employees 

be hired for the offer. 

(6) Termination after contract 

commencement. Where an employee is 

terminated under circumstances 

suggesting the offer of employment may 

not have been bona fide, the facts and 

circumstances of the offer and the 

termination will be closely examined 

during any compliance action to ensure 

the offer was bona fide. 

(c) Exceptions. The successor 

contractor will bear the responsibility of 

demonstrating the appropriateness of 

claiming any of the following 

exceptions to the nondisplacement 

provisions subject to this part. 

(1) Nondisplaced employees. (i) A 

contractor or subcontractor is not 

required to offer employment to any 

employee of the predecessor contractor 

who will be retained by the predecessor 

contractor. 

(ii) The contractor must presume that 

all employees hired to work under a 

predecessor’s Federal service contract 

will be terminated as a result of the 

award of the successor contract, absent 

an ability to demonstrate a reasonable 

belief to the contrary that is based upon 

credible information provided by a 

knowledgeable source such as the 

predecessor contractor or the employee. 

(2) Successor’s current employees. A 

contractor or subcontractor may employ 

under the contract any employee who 

has worked for the contractor or 

subcontractor for at least 3 months 

immediately preceding the 

commencement of the contract and who 

would otherwise face lay-off or 

discharge. 

(3) Predecessor contractor’s nonservice employees. (i) A contractor or 

subcontractor is not required to offer 

employment to any employee of the 

predecessor who is not a service 

employee. See § 9.2 of this part for 

definitions of employee, managerial 

employee and supervisory employee. 

(ii) The contractor must presume that 

all employees hired to work under a 

predecessor’s Federal service contract 

are service employees, absent an ability 

to demonstrate a reasonable belief to the 

contrary that is based upon credible 

information provided by a 

knowledgeable source such as the 

predecessor contractor, the employee, or 

the contracting agency. Information 

regarding the general business practices 

of the predecessor contractor or the 

industry is not sufficient to claim this 

exemption. 

(4) Employee’s past unsuitable 

performance. (i) A contractor or 

subcontractor is not required to offer 

employment to any employee of the 

predecessor contractor for whom the 

contractor or any of its subcontractors 

reasonably believes, based on the 

particular employee’s past performance, 

has failed to perform suitably on the job. 

(ii)(A) The contractor must presume 

that all employees working under the 

predecessor contract in the last month 

of performance performed suitable work 

on the contract, absent an ability to 

demonstrate a reasonable belief to the 

contrary that is based upon written 


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credible information provided by a 

knowledgeable source such as the 

predecessor contractor and its 

subcontractors, the local supervisor, the 

employee, or the contracting agency. 

(B) For example, a contractor may 

demonstrate its reasonable belief that 

the employee, in fact, failed to perform 

suitably on the predecessor contract 

through written evidence of disciplinary 

action taken for poor performance or 

evidence directly from the contracting 

agency that the particular employee did 

not perform suitably. The performance 

determination must be made on an 

individual basis for each employee. 

Information regarding the general 

performance of the predecessor 

contractor is not sufficient to claim this 

exception. 

(5) Non-Federal work. (i) A contractor 

or subcontractor is not required to offer 

employment to any employee hired to 

work under a predecessor’s Federal 

service contract and one or more 

nonfederal service contracts as part of a 

single job, provided that the employee 

was not deployed in a manner that was 

designed to avoid the purposes of this 

part. 

(ii) The successor contractor must 

presume that no employees hired to 

work under a predecessor’s Federal 

service contract worked on one or more 

nonfederal service contracts as part of a 

single job, unless the successor can 

demonstrate a reasonable belief to the 

contrary. The successor contractor must 

demonstrate that its belief is reasonable 

and is based upon credible information 

provided by a knowledgeable source 

such as the predecessor contractor, the 

local supervisor, the employee, or the 

contracting agency. Information 

regarding the general business practices 

of the predecessor contractor or the 

industry is not sufficient. 

(iii) A contractor that makes a 

reasonable determination that a 

predecessor contractor’s employee also 

performed work on one or more 

nonfederal service contracts as part of a 

single job must also make a reasonable 

determination that the employee was 

not deployed in such a way that was 

designed to avoid the purposes of this 

part. The successor contractor must 

demonstrate that its belief is reasonable 

and is based upon credible information 

that has been provided by a 

knowledgeable source such as the 

employee or the contracting agency. For 

example, evidence from a contracting 

agency that an employee worked only 

occasionally on a Federal service 

contract combined with a statement 

from the employee indicating fulltime 

employment with the predecessor 

would, absent other facts, constitute the 

basis for a reasonable belief that there is 

no obligation to offer employment to the 

employee. On the other hand, 

information suggesting a change in how 

a predecessor contractor deployed 

employees near the end of the contract 

period could suggest an effort to evade 

the purposes of this part. 

(d) Reduced staffing. (1) Contractor 

determines how many employees. (i) A 

contractor or subcontractor shall 

determine the number of employees 

necessary for efficient performance of 

the contract or subcontract and, for bona 

fide staffing or work assignment 

reasons, may elect to employ fewer 

employees than the predecessor 

contractor employed in connection with 

performance of the work. Thus, the 

successor contractor need not offer 

employment on the contract to all 

employees on the predecessor contract, 

but must offer employment only to the 

number of eligible employees the 

successor contractor believes necessary 

to meet its anticipated staffing pattern, 

except that: 

(ii) Where, in accordance with this 

authority to employ fewer employees, a 

successor contractor does not offer 

employment to all the predecessor 

contract employees, the obligation to 

offer employment shall continue for 90 

days after the successor contractor’s first 

date of performance on the contract. The 

contractor’s obligation under this part 

will end when all of the predecessor 

contract employees have received a 

bona fide job offer, including stating the 

time within which the employee must 

accept such offer, which must be no less 

than 10 days, or the 90-day window of 

obligation has expired. The following 

three examples demonstrate the 

principle. 

(A) A contractor with 18 employment 

openings and a list of 20 employees 

from the predecessor contract must 

continue to offer employment to 

individuals on the list until 18 of the 

employees accept the contractor’s 

employment offer or until the remaining 

employees have rejected the offer. If an 

employee quits or is terminated from 

the successor contract within 90 days of 

the first date of contract performance, 

the contractor must first offer 

employment to any remaining eligible 

employees of the predecessor contract. 

(B) A successor contractor originally 

offers 20 jobs to predecessor contract 

employees on a contract that had 30 

positions under the predecessor 

contractor. The first 20 predecessor 

contract employees the successor 

contractor approaches accept the 

employment offer. Within a month of 

commencing work on the contract, the 

successor determines that it must hire 

seven additional employees to perform 

the contract requirements. The first 

three predecessor contract employees to 

whom the successor offers employment 

decline the offer; however, the next four 

predecessor contract employees accept 

the offers. In accordance with the 

provisions of this section, the successor 

contractor offers employment on the 

contract to the three remaining 

predecessor contract employees who all 

accept; however, two employees on the 

contract quit five weeks later. The 

successor contractor has no further 

obligation under this part to make a 

second employment offer to the persons 

who previously declined an offer of 

employment on the contract. 

(C) A successor contractor reduces 

staff on a successor contract by two 

positions from the predecessor 

contract’s staffing pattern. Each 

predecessor contract employee the 

successor approaches accepts the 

employment offer; therefore, 

employment offers are not made to two 

predecessor contract employees. The 

successor contractor terminates an 

employee five months later. The 

successor contractor has no obligation to 

offer employment to the two remaining 

employees from the predecessor 

contract, because more than 90 days 

have passed since the successor 

contractor’s first date of performance on 

the contract. 

(2) Contractor determines which 

employees. The contractor, subject to 

provisions of this part and other 

applicable restrictions (including nondiscrimination laws and regulations), 

will determine to which employees it 

will offer employment. See § 9.1(b) 

regarding compliance with other 

requirements. 

(3) Changes to staffing pattern. Where 

a contractor reduces the number of 

employees in any occupation on a 

contract with multiple occupations, 

resulting in some displacement, the 

contractor shall scrutinize each 

employee’s qualifications in order to 

offer positions to the greatest number of 

predecessor contract employees 

possible. Example: A successor contract 

is awarded for a food preparation and 

services contract with Cook II, Cook I 

and dishwasher positions. The Cook II 

position requires a higher level of skill 

than the Cook I position. The successor 

contractor reconfigures the staffing 

pattern on the contract by increasing the 

number persons employed as a Cook II 

and Dishwashers but reducing the 

number of Cook I employees. The 

successor contractor must examine the 

qualifications of each Cook I to see if a 

position as either a Cook II or 

Dishwasher is possible. Conversely, 


Emcdonald on DSK2BSOYB1PROD with RULES2
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were the contractor to increase the 

number of Cook I employees, decrease 

the number of Cook II employees, and 

keep the same number of Dishwashers 

the contractor would generally be able 

offer Cook I positions to some Cook II 

employees, because the Cook II 

performs a higher level occupation. The 

contractor would also need to consider 

whether offering Dishwasher positions 

to Cook I employees would result in less 

overall displacement. Finally, should 

some Dishwashers decline the 

employment offer, the Contractor would 

need to consider the qualifications of 

the Cooks at both levels and offer 

positions on the contract in a way that 

results in the least displacement. 

(e) Contractor obligations near end of 

contract performance. (1) Certified list 

of employees provided 30 days before 

contract completion. The contractor 

shall, not less than 30 days before 

completion of the contractor’s 

performance of services on a contract, 

furnish the Contracting Officer with a 

list of the names of all service 

employees working under the contract 

and its subcontracts at the time the list 

is submitted. The list shall also contain 

anniversary dates of employment of 

each service employee under the 

contract and its predecessor contracts 

with either the current or predecessor 

contractors or their subcontractors. 

Assuming there are no changes to the 

workforce before the contract is 

completed, the contractor may use the 

list submitted, or to be submitted, to 

satisfy the requirements of the contract 

clause specified at 29 CFR 4.6(l)(2) to 

meet this provision. 

(2) Certified list of employees 

provided 10 days before contract 

completion. Where changes to the 

workforce are made after the submission 

of the certified list described in 

paragraph (e)(1) of this section, the 

contractor shall, not less than 10 days 

before completion of the contractor’s 

performance of services on a contract, 

furnish the Contracting Officer with a 

certified list of the names of all service 

employees employed within the last 

month of contract performance. The list 

shall also contain anniversary dates of 

employment and, where applicable, 

dates of separation of each service 

employee under the contract and its 

predecessor contracts with either the 

current or predecessor contractors or 

their subcontractors. The contractor may 

use the list submitted to satisfy the 

requirements of the contract clause 

specified at 29 CFR 4.6(l)(2) to meet this 

provision. 

(f) Recordkeeping. (1) Form of records. 

This part prescribes no particular order 

or form of records for contractors. A 

contractor may use records developed 

for any purpose to satisfy the 

requirements of this part, provided the 

records otherwise meet the 

requirements and purposes of this part 

and are fully accessible. The 

requirements of this part shall apply to 

all records regardless of their format 

(e.g., paper or electronic). 

(2) Records to be retained. (i) The 

contractor shall maintain copies of any 

written offers of employment or a 

contemporaneous written record of any 

oral offers of employment, including the 

date, location, and attendance roster of 

any employee meeting(s) at which the 

offers were extended, a summary of 

each meeting, a copy of any written 

notice that may have been distributed, 

and the names of the employees from 

the predecessor contract to whom an 

offer was made. 

(ii) The contractor shall maintain a 

copy of any record that forms the basis 

for any exclusion or exemption claimed 

under this part. 

(iii) The contractor shall maintain a 

copy of the employee list received from 

the contracting agency. See paragraph 

(e) of this section, contractor obligations 

near end of contract. 

(iv) Every contractor who makes 

retroactive payment of wages or 

compensation under the supervision of 

the Administrator of the Wage and Hour 

Division pursuant to § 9.24(b) of this 

part, shall: 

(A) Record and preserve, as an entry 

on the pay records, the amount of such 

payment to each employee, the period 

covered by such payment, and the date 

of payment. 

(B) Prepare a report of each such 

payment on a receipt form provided by 

or authorized by the Wage and Hour 

Division, and 

(1) Preserve a copy as part of the 

records, 

(2) Deliver a copy to the employee, 

and 

(3) File the original, as evidence of 

payment by the contractor and receipt 

by the employee, with the 

Administrator or an authorized 

representative within 10 days after 

payment is made. 

(3) Records retention period. The 

contractor shall retain records 

prescribed by section § 9.12(f)(2) of this 

part for not less than a period of three 

years from the date the records were 

created. 

(4) Disclosure. The contractor must 

provide copies of such documentation 

upon request of any authorized 

representative of the contracting agency 

or Department of Labor. 

(g) Investigations. The contractor shall 

cooperate in any review or investigation 

conducted pursuant to this part and 

shall not interfere with the investigation 

or intimidate, blacklist, discharge, or in 

any other manner discriminate against 

any person because such person has 

cooperated in an investigation or 

proceeding under this part or has 

attempted to exercise any rights 

afforded under this part. This obligation 

to cooperate with investigations is not 

limited to investigations of the 

contractor’s own actions, but also 

includes investigations related to other 

contractors (e.g., predecessor and 

subsequent contractors) and 

subcontractors. 

Subpart C—Enforcement 

§ 9.21 Complaints. 

With Wage and Hour Division. Any 

employee(s) or authorized employee 

representative(s) of the predecessor 

contractor who believes the successor 

contractor has violated this part may file 

a complaint with the Wage and Hour 

Division within 120 days from the first 

date of contract performance. The 

employee may file a complaint directly 

with the Branch of Government 

Contracts Enforcement, Wage and Hour 

Division, U.S. Department of Labor, 

Washington, DC 20210. 

§ 9.22 Wage and Hour Division 

conciliation. 

After obtaining information regarding 

alleged violations, the Wage and Hour 

Division may contact the successor 

contractor about the complaint and 

attempt to conciliate and reach a 

resolution that is consistent with the 

requirements of this part and is 

acceptable to both the complainant(s) 

and the successor contractor. 

§ 9.23 Wage and Hour Division 

investigation. 

(a) Initial investigation. The 

Administrator may initiate an 

investigation under this part either as 

the result of the unsuccessful 

conciliation of a complaint or at any 

time on his or her own initiative. As 

part of the investigation, the 

Administrator may inspect the records 

of the predecessor and successor 

contractors (and make copies or 

transcriptions thereof), question the 

predecessor and successor contractors 

and any employees of these contractors, 

and require the production of any 

documentary or other evidence deemed 

necessary to determine whether a 

violation of this part (including conduct 

warranting imposition of ineligibility 

sanctions pursuant to § 9.24(d) of this 

part) has occurred. 

(b) Subsequent investigations. The 

Administrator may conduct a new 


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investigation or issue a new 

determination if the Administrator 

concludes circumstances warrant, such 

as where the proceedings before an 

Administrative Law Judge reveal that 

there may have been violations with 

respect to other employees of the 

contractor, where imposition of 

ineligibility sanctions is appropriate, or 

where the contractor has failed to 

comply with an order of the Secretary. 

§ 9.24 Remedies and sanctions for 

violations of this part. 

(a) Authority. Executive Order 13495 

provides that the Secretary shall have 

the authority to issue orders prescribing 

appropriate remedies, including, but not 

limited to, requiring the contractor to 

offer employment, in positions for 

which the employees are qualified, to 

employees from the predecessor 

contract and the payment of wages lost. 

(b) Unpaid wages or other relief due. 

In addition to satisfying any costs 

imposed under §§ 9.34(j) or 9.35(d) of 

this part, a contractor who violates any 

provision of this part shall take 

appropriate action to abate the violation, 

which may include hiring each affected 

employee in a position on the contract 

for which the employee is qualified, 

together with compensation (including 

lost wages), terms, conditions, and 

privileges of that employment. 

(c) Withholding of funds. (1) Unpaid 

wages or other relief. After an 

investigation and a determination by the 

Administrator that lost wages or other 

monetary relief is due, the 

Administrator may direct that so much 

of the accrued payments due on either 

the contract or any other contract 

between the contractor and the 

Government shall be withheld as are 

necessary to pay the moneys due. Upon 

the final order of the Secretary that such 

moneys are due, the Administrator may 

direct that such withheld funds be 

transferred to the Department of Labor 

for disbursement. 

(2) List of employees. If the 

Contracting Officer or the 

Administrator, upon final order of the 

Secretary, finds that the predecessor 

contractor has failed to provide a list of 

the names of employees working under 

the contract in accordance with § 9.12(e) 

of this part, the Contracting Officer may 

in his or her discretion, or upon request 

by the Administrator, take such action 

as may be necessary to cause the 

suspension of the payment of contract 

funds until such time as the list is 

provided to the Contracting Officer. 

(d) Ineligibility listing. Where the 

Secretary finds that a contractor has 

failed to comply with any order of the 

Secretary, or has committed willful or 

aggravated violations of this part, the 

Secretary may order that the contractor 

and its responsible officers, and any 

firm in which the contractor has a 

substantial interest, shall be ineligible to 

be awarded any contract or subcontract 

of the United States for a period of up 

to three years. Neither an order for 

debarment of any contractor or 

subcontractor from further Government 

contracts under this section nor the 

inclusion of a contractor or 

subcontractor on a published list of 

noncomplying contractors shall be 

carried out without affording the 

contractor or subcontractor an 

opportunity for a hearing. 

Subpart D—Administrator’s 

Determination, Mediation, and 

Administrative Proceedings 

§ 9.31 Determination of the Administrator. 

(a) Written determination. Upon 

completion of an investigation under 

§ 9.23 of this part, and provided that a 

resolution is not reached that is 

consistent with the requirements of this 

part and acceptable to both the 

complainant(s) and the successor 

contractor, the Administrator will issue 

a written determination of whether a 

violation has occurred. The 

determination shall contain a statement 

of the investigation findings and 

conclusions. A determination that a 

violation occurred shall address 

appropriate relief and the issue of 

ineligibility sanctions where 

appropriate. The Administrator will 

notify any complainant(s); employee 

representative(s); contractor, including 

the prime contractor if a subcontractor 

is implicated; and contractor 

representative(s) by personal service or 

by registered or certified mail to the last 

known address, of the investigation 

findings. Where service by certified mail 

is not accepted by the party, the 

Administrator may exercise discretion 

to serve the determination by regular 

mail. 

(b) Notice to parties and effect. (1) 

Relevant facts in dispute. Except as 

provided in paragraph (b)(2) of this 

section, the determination of the 

Administrator shall advise the parties 

(ordinarily any complainant, the 

successor contractor, and any of their 

representatives) that the notice of 

determination shall become the final 

order of the Secretary and shall not be 

appealable in any administrative or 

judicial proceeding unless, postmarked 

within 20 days of the date of the 

determination of the Administrator, the 

Chief Administrative Law Judge 

receives a request for a hearing pursuant 

to § 9.32(b)(1) of this part. A detailed 

statement of the reasons why the 

Administrator’s ruling is in error, 

including facts alleged to be in dispute, 

if any, shall be submitted with the 

request for a hearing. The 

Administrator’s determination not to 

seek ineligibility sanctions shall not be 

appealable. 

(2) Relevant facts not in dispute. If the 

Administrator concludes that no 

relevant facts are in dispute, the parties 

and their representatives, if any, will be 

so advised and will be further advised 

that the determination shall become the 

final order of the Secretary and shall not 

be appealable in any administrative or 

judicial proceeding unless, postmarked 

within 20 days of the date of the 

determination of the Administrator, a 

petition for review is filed with the 

Administrative Review Board pursuant 

to § 9.32(b)(2) of this part. The 

determination will further advise that if 

an aggrieved party disagrees with the 

factual findings or believes there are 

relevant facts in dispute, the aggrieved 

party may advise the Administrator of 

the disputed facts and request a hearing 

by letter, which must be received within 

20 days of the date of the determination. 

The Administrator will either refer the 

request for a hearing to the Chief 

Administrative Law Judge, or notify the 

parties and their representatives, if any, 

of the determination of the 

Administrator that there is no relevant 

issue of fact and that a petition for 

review may be filed with the 

Administrative Review Board within 20 

days of the date of the notice, in 

accordance with the procedures at 

§ 9.32(b)(2) of this part. 

§ 9.32 Requesting appeals. 

(a) General. If any party desires 

review of the determination of the 

Administrator, including judicial 

review, a request for an Administrative 

Law Judge hearing or petition for review 

by the Administrative Review Board 

must first be filed in accordance with 

§ 9.31(b) of this part. 

(b) Process. (1) For Administrative 

Law Judge hearing. (i) General. Any 

aggrieved party may file a request for a 

hearing by an Administrative Law Judge 

within 20 days of the determination of 

the Administrator. The request for a 

hearing shall be accompanied by a copy 

of the determination of the 

Administrator and may be filed by U.S. 

mail, facsimile (FAX), telegram, hand 

delivery, next-day delivery, or a similar 

service. At the same time, a copy of any 

request for a hearing shall be sent to the 

complainant(s) or successor contractor, 

and their representatives, if any, as 

appropriate; the Administrator of the 

Wage and Hour Division; and the 


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Associate Solicitor, Division of Fair 

Labor Standards, U.S. Department of 

Labor, Washington, DC 20210. 

(ii) By the complainant. The 

complainant or any other interested 

party may request a hearing where the 

Administrator determines, after 

investigation, that there is no basis for 

a finding that a contractor has 

committed violation(s), or where the 

complainant or other interested party 

believes that the Administrator has 

ordered inadequate monetary relief. In 

such a proceeding, the party requesting 

the hearing shall be the prosecuting 

party and the contractor shall be the 

respondent; the Administrator may 

intervene as a party or appear as amicus 

curiae at any time in the proceeding, at 

the Administrator’s discretion. 

(iii) By the contractor. The contractor 

or any other interested party may 

request a hearing where the 

Administrator determines, after 

investigation, that the contractor has 

committed violation(s). In such a 

proceeding, the Administrator shall be 

the prosecuting party and the contractor 

shall be the respondent. 

(2) For Administrative Review Board 

review. (i) General. Any aggrieved party 

desiring review of a determination of 

the Administrator in which there were 

no relevant facts in dispute, or an 

Administrative Law Judge’s decision, 

shall file a written petition for review 

with the Administrative Review Board 

that must be postmarked within 20 days 

of the date of the determination or 

decision and shall be served on all 

parties and, where the case involves an 

appeal from an Administrative Law 

Judge’s decision, the Chief 

Administrative Law Judge. See also 

§ 9.32(b)(1) of this part. 

(ii) Contents and service. (A) A 

petition for review shall refer to the 

specific findings of fact, conclusions of 

law, or order at issue. 

(B) Copies of the petition and all 

briefs shall be served on the 

Administrator, Wage and Hour Division, 

and on the Associate Solicitor, Division 

of Fair Labor Standards, U.S. 

Department of Labor, Washington, DC 

20210. 

(c) Effect of filing. If a timely request 

for hearing or petition for review is 

filed, the determination of the 

Administrator or the decision of the 

Administrative Law Judge shall be 

inoperative unless and until the 

Administrative Review Board issues an 

order affirming the determination or 

decision, or the determination or 

decision otherwise becomes a final 

order of the Secretary. If a petition for 

review concerns only the imposition of 

ineligibility sanctions, however, the 

remainder of the decision shall be 

effective immediately. No judicial 

review shall be available unless a timely 

petition for review to the Administrative 

Review Board is first filed. 

§ 9.33 Mediation. 

(a) General. The parties are 

encouraged to resolve disputes in 

accordance with the conciliation 

procedures set forth at § 9.22 of this 

part, or, where such efforts have failed, 

to utilize settlement judges to mediate 

settlement negotiations pursuant to 29 

CFR 18.9 when those provisions apply. 

At any time after commencement of a 

proceeding, the parties jointly may 

move to defer the hearing for a 

reasonable time to permit negotiation of 

a settlement or an agreement containing 

findings and an order disposing of the 

whole or any part of the proceeding. 

(b) Appointing settlement judge for 

cases scheduled with the Office of 

Administrative Law Judges. Upon a 

request by a party or the presiding 

Administrative Law Judge, the Chief 

Administrative Law Judge may appoint 

a settlement judge. The Chief 

Administrative Law Judge has sole 

discretion to decide whether to appoint 

a settlement judge, except that a 

settlement judge shall not be appointed 

when a party objects to referral of the 

matter to a settlement judge. 

§ 9.34 Administrative Law Judge hearings. 

(a) Authority. (1) General. The Office 

of Administrative Law Judges has 

jurisdiction to hear and decide appeals 

pursuant to § 9.31(b)(1) of this part 

concerning questions of law and fact 

from determinations of the 

Administrator issued under § 9.31 of 

this part. In considering the matters 

within the scope of its jurisdiction, the 

Administrative Law Judge shall act as 

the authorized representative of the 

Secretary and shall act fully and, subject 

to an appeal filed under § 9.32(b)(2) of 

this part, finally on behalf of the 

Secretary concerning such matters. 

(2) Limit on scope of review. (i) The 

Administrative Law Judge shall not 

have jurisdiction to pass on the validity 

of any provision of this part. 

(ii) The Equal Access to Justice Act, 

as amended, does not apply to hearings 

under this part. Accordingly, an 

Administrative Law Judge shall have no 

authority to award attorney fees and/or 

other litigation expenses pursuant to the 

provisions of the Equal Access to Justice 

Act for any proceeding under this part. 

(b) Scheduling. If the case is not 

stayed to attempt settlement in 

accordance with § 9.33(a) of this part, 

the Administrative Law Judge to whom 

the case is assigned shall, within 15 

calendar days following receipt of the 

request for hearing, notify the parties 

and any representatives, of the day, 

time, and place for hearing. The date of 

the hearing shall not be more than 60 

days from the date of receipt of the 

request for hearing. 

(c) Dismissing challenges for failure to 

participate. The Administrative Law 

Judge may, at the request of a party or 

on his/her own motion, dismiss a 

challenge to a determination of the 

Administrator upon the failure of the 

party requesting a hearing or his/her 

representative to attend a hearing 

without good cause; or upon the failure 

of said party to comply with a lawful 

order of the Administrative Law Judge. 

(d) Administrator’s participation. At 

the Administrator’s discretion, the 

Administrator has the right to 

participate as a party or as amicus 

curiae at any time in the proceedings, 

including the right to petition for review 

of a decision of an Administrative Law 

Judge in a case in which the 

Administrator has not previously 

participated. The Administrator shall 

participate as a party in any proceeding 

in which the Administrator has found 

any violation of this part, except where 

the complainant or other interested 

party challenges only the amount of 

monetary relief. See also 

§ 9.32(b)(2)(i)(C) of this part. 

(e) Agency participation. A Federal 

agency that is interested in a proceeding 

may participate, at the agency’s 

discretion, as amicus curiae at any time 

in the proceedings. At the request of 

such Federal agency, copies of all 

pleadings in a case shall be served on 

the Federal agency, whether or not the 

agency is participating in the 

proceeding. 

(f) Requesting documents. Copies of 

the request for hearing and documents 

filed in all cases, whether or not the 

Administrator is participating in the 

proceeding, shall be sent to the 

Administrator, Wage and Hour Division, 

and to the Associate Solicitor, Division 

of Fair Labor Standards, U.S. 

Department of Labor, Washington, DC 

20210. 

(g) Rules of practice. (1) The rules of 

practice and procedure for 

administrative hearings before the 

Office of Administrative Law Judges at 

29 CFR part 18, subpart A, shall be 

applicable to the proceedings provided 

by this section. This part is controlling 

to the extent it provides any rules of 

special application that may be 

inconsistent with the rules in 29 CFR 

part 18, subpart A. The Rules of 

Evidence at 29 CFR 18, subpart B, shall 

not apply. Rules or principles designed 

to assure production of the most 


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probative evidence available shall be 

applied. The Administrative Law Judge 

may exclude evidence that is 

immaterial, irrelevant, or unduly 

repetitive. 

(h) Decisions. The Administrative 

Law Judge shall issue a decision within 

60 days after completion of the 

proceeding at which evidence was 

submitted. The decision shall contain 

appropriate findings, conclusions, and 

an order and be served upon all parties 

to the proceeding. 

(i) Orders. Upon the conclusion of the 

hearing and the issuance of a decision 

that a violation has occurred, the 

Administrative Law Judge shall issue an 

order that the successor contractor take 

appropriate action to abate the violation, 

which may include hiring each affected 

employee in a position on the contract 

for which the employee is qualified, 

together with compensation (including 

lost wages), terms, conditions, and 

privileges of that employment. Where 

the Administrator has sought 

ineligibility sanctions, the order shall 

also address whether such sanctions are 

appropriate. 

(j) Costs. If an order finding the 

successor contractor violated this part is 

issued, the Administrative Law Judge 

may assess against the contractor a sum 

equal to the aggregate amount of all 

costs (not including attorney fees) and 

expenses reasonably incurred by the 

aggrieved employee(s) in the 

proceeding. This amount shall be 

awarded in addition to any unpaid 

wages or other relief due under § 9.24(b) 

of this part. 

(k) Finality. The decision of the 

Administrative Law Judge shall become 

the final order of the Secretary, unless 

a petition for review is timely filed with 

the Administrative Review Board as set 

forth in § 9.32(b)(2) of this part. 

§ 9.35 Administrative Review Board 

proceedings. 

(a) Authority. (1) General. The 

Administrative Review Board has 

jurisdiction to hear and decide in its 

discretion appeals pursuant to 

§ 9.31(b)(2) concerning questions of law 

and fact from determinations of the 

Administrator issued under § 9.31 of 

this part and from decisions of 

Administrative Law Judges issued under 

§ 9.34 of this part. In considering the 

matters within the scope of its 

jurisdiction, the Board shall act as the 

authorized representative of the 

Secretary and shall act fully and finally 

on behalf of the Secretary concerning 

such matters. 

(2) Limit on scope of review. (i) The 

Board shall not have jurisdiction to pass 

on the validity of any provision of this 

part. The Board is an appellate body and 

shall decide cases properly before it on 

the basis of substantial evidence 

contained in the entire record before it. 

The Board shall not receive new 

evidence into the record. 

(ii) The Equal Access to Justice Act, 

as amended, does not apply to 

proceedings under this part. 

Accordingly, for any proceeding under 

this part, the Administrative Review 

Board shall have no authority to award 

attorney fees and/or other litigation 

expenses pursuant to the provisions of 

the Equal Access to Justice Act for any 

proceeding under this part. 

(b) Decisions. The Board’s final 

decision shall be issued within 90 days 

of the receipt of the petition for review 

and shall be served upon all parties by 

mail to the last known address and on 

the Chief Administrative Law Judge (in 

cases involving an appeal from an 

Administrative Law Judge’s decision). 

(c) Orders. If the Board concludes that 

the contractor has violated this part, the 

final order shall order action to abate 

the violation, which may include hiring 

each affected employee in a position on 

the contract for which the employee is 

qualified, together with compensation 

(including lost wages), terms, 

conditions, and privileges of that 

employment. Where the Administrator 

has sought imposition of ineligibility 

sanctions, the Board shall also 

determine whether an order imposing 

ineligibility sanctions is appropriate. 

(d) Costs. If a final order finding the 

successor contractor violated this part is 

issued, the Board may assess against the 

contractor a sum equal to the aggregate 

amount of all costs (not including 

attorney fees) and expenses reasonably 

incurred by the aggrieved employee(s) 

in the proceeding. This amount shall be 

awarded in addition to any unpaid 

wages or other relief due under § 9.24(b) 

of this part. 

(e) Finality. The decision of the 

Administrative Review Board shall 

become the final order of the Secretary. 

Appendix A to Part 9—Contract Clause 

Nondisplacement of Qualified Workers 

(a) Consistent with the efficient 

performance of this contract, the contractor 

and its subcontractors shall, except as 

otherwise provided herein, in good faith offer 

those employees (other than managerial and 

supervisory employees) employed under the 

predecessor contract whose employment will 

be terminated as a result of award of this 

contract or the expiration of the contract 

under which the employees were hired, a 

right of first refusal of employment under 

this contract in positions for which 

employees are qualified. The contractor and 

its subcontractors shall determine the 

number of employees necessary for efficient 

performance of this contract and may elect to 

employ fewer employees than the 

predecessor contractor employed in 

connection with performance of the work. 

Except as provided in paragraph (b) there 

shall be no employment opening under this 

contract, and the contractor and any 

subcontractors shall not offer employment 

under this contract, to any person prior to 

having complied fully with this obligation. 

The contractor and its subcontractors shall 

make a bona fide, express offer of 

employment to each employee as provided 

herein and shall state the time within which 

the employee must accept such offer, but in 

no case shall the period within which the 

employee must accept the offer of 

employment be less than 10 days. 

(b) Notwithstanding the obligation under 

paragraph (a) above, the contractor and any 

subcontractors (1) may employ under this 

contract any employee who has worked for 

the contractor or subcontractor for at least 3 

months immediately preceding the 

commencement of this contract and who 

would otherwise face lay-off or discharge, (2) 

are not required to offer a right of first refusal 

to any employee(s) of the predecessor 

contractor who are not service employees 

within the meaning of the Service Contract 

Act of 1965, as amended, 41 U.S.C. 6701(3), 

and (3) are not required to offer a right of first 

refusal to any employee(s) of the predecessor 

contractor whom the contractor or any of its 

subcontractors reasonably believes, based on 

the particular employee’s past performance, 

has failed to perform suitably on the job. 

(c) In accordance with Federal Acquisition 

Regulation 52.222–41(n), the contractor shall, 

not less than 10 days before completion of 

this contract, furnish the Contracting Officer 

a certified list of the names of all service 

employees working under this contract and 

its subcontracts during the last month of 

contract performance. The list shall also 

contain anniversary dates of employment of 

each service employee under this contract 

and its predecessor contracts either with the 

current or predecessor contractors or their 

subcontractors. The Contracting Officer will 

provide the list to the successor contractor, 

and the list shall be provided on request, to 

employees or their representatives. 

(d) If it is determined, pursuant to 

regulations issued by the Secretary of Labor 

(Secretary), that the contractor or its 

subcontractors are not in compliance with 

the requirements of this clause or any 

regulation or order of the Secretary, 

appropriate sanctions may be imposed and 

remedies invoked against the contractor or its 

subcontractors, as provided in Executive 

Order 13495, the regulations, and relevant 

orders of the Secretary, or as otherwise 

provided by law. 

(e) In every subcontract entered into in 

order to perform services under this contract, 

the contractor will include provisions that 

ensure that each subcontractor will honor the 

requirements of paragraphs (a) through (b) 

with respect to the employees of a 

predecessor subcontractor or subcontractors 

working under this contract, as well as of a 

predecessor contractor and its 

subcontractors. The subcontract shall also 

include provisions to ensure that the 


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subcontractor will provide the contractor 

with the information about the employees of 

the subcontractor needed by the contractor to 

comply with paragraph (c), above. The 

contractor will take such action with respect 

to any such subcontract as may be directed 

by the Secretary as a means of enforcing such 

provisions, including the imposition of 

sanctions for noncompliance: provided, 

however, that if the contractor, as a result of 

such direction, becomes involved in 

litigation with a subcontractor, or is 

threatened with such involvement, the 

contractor may request that the United States 

enter into such litigation to protect the 

interests of the United States. 

(f)(1) The contractor shall, not less than 30 

days before completion of the contractor’s 

performance of services on a contract, furnish 

the Contracting Officer with a list of the 

names of all service employees working 

under the contract and its subcontracts at the 

time the list is submitted. The list shall also 

contain anniversary dates of employment of 

each service employee under the contract 

and its predecessor contracts with either the 

current or predecessor contractors or their 

subcontractors. Where changes to the 

workforce are made after the submission of 

the certified list described in this paragraph 

(f) (1), the contractor shall, in accordance 

with paragraph (c), not less than 10 days 

before completion of the contractor’s 

performance of services on a contract, furnish 

the Contracting Officer with an updated 

certified list of the names of all service 

employees employed within the last month 

of contract performance. The updated list 

shall also contain anniversary dates of 

employment and, where applicable, dates of 

separation of each service employee under 

the contract and its predecessor contracts 

with either the current or predecessor 

contractors or their subcontractors. Only 

contractors experiencing a change in their 

workforce between the 30- and 10-day 

periods will have to submit a list in 

accordance with paragraph (c). 

(2) The Contracting Officer shall withhold 

or cause to be withheld from the prime 

contractor under this or any other 

Government contract with the same prime 

contractor such sums as an authorized 

official of the Department of Labor requests, 

upon a determination by the Administrator, 

the Administrative Law Judge, or the 

Administrative Review Board that there has 

been a failure to comply with the terms of 

this clause and that wages lost as a result of 

the violations are due to employees or that 

other monetary relief is appropriate. If the 

Contracting Officer or the Administrator, 

upon final order of the Secretary, finds that 

the contractor has failed to provide a list of 

the names of employees working under the 

contract, the Contracting Officer may in his 

or her discretion, or upon request by the 

Administrator, take such action as may be 

necessary to cause the suspension of the 

payment of contract funds until such time as 

the list is provided to the Contracting Officer. 

(g) The contractor and subcontractor shall 

maintain the following records (regardless of 

format, e.g., paper or electronic, provided the 

records meet the requirements and purposes 

of this subpart and are fully accessible) of its 

compliance with this clause for not less than 

a period of three years from the date the 

records were created: 

(1) Copies of any written offers of 

employment or a contemporaneous written 

record of any oral offers of employment, 

including the date, location, and attendance 

roster of any employee meeting(s) at which 

the offers were extended, a summary of each 

meeting, a copy of any written notice that 

may have been distributed, and the names of 

the employees from the predecessor contract 

to whom an offer was made. 

(2) A copy of any record that forms the 

basis for any exclusion or exemption claimed 

under this part. 

(3) A copy of the employee list provided 

to or received from the contracting agency. 

(4) An entry on the pay records of the 

amount of any retroactive payment of wages 

or compensation under the supervision of the 

Administrator of the Wage and Hour Division 

to each employee, the period covered by such 

payment, and the date of payment, and a 

copy of any receipt form provided by or 

authorized by the Wage and Hour Division. 

The contractor shall also deliver a copy of the 

receipt to the employee and file the original, 

as evidence of payment by the contractor and 

receipt by the employee, with the 

Administrator or an authorized 

representative within 10 days after payment 

is made. 

(h) The contractor shall cooperate in any 

review or investigation by the contracting 

agency or the Department of Labor into 

possible violations of the provisions of this 

clause and shall make records requested by 

such official(s) available for inspection, 

copying, or transcription upon request. 

(i) Disputes concerning the requirements of 

this clause shall not be subject to the general 

disputes clause of this contract. Such 

disputes shall be resolved in accordance with 

the procedures of the Department of Labor set 

forth in 29 CFR part 9. Disputes within the 

meaning of this clause include disputes 

between or among any of the following: the 

contractor, the contracting agency, the U.S. 

Department of Labor, and the employees 

under the contract or its predecessor 

contract. 

Appendix B to Part 9—Notice to Service 

Contract Employees 

The contract for (insert type of service) 

services currently performed by (insert name 

of predecessor contractor) has been awarded 

to a new (successor) contractor (insert name 

of successor contractor). The new 

contractor’s first date of performance on the 

contract will be (insert first date of successor 

contractor’s performance). If the work is to be 

performed at the same location, the new 

contractor is generally required to offer 

employment to the employees who worked 

on the contract during the last 30 days of the 

current contract, except as follows: 

Employees who will not be laid off or 

discharged as a result of the new contract 

award are not entitled to an offer of 

employment. 

Managerial, supervisory, or non-service 

employees on the current contract are not 

entitled to an offer of employment. 

The new contractor may reduce the size of 

the current workforce; therefore, only a 

portion of the existing workforce may receive 

employment offers. However, the new 

contractor must offer employment to the 

displaced employees for which they are 

qualified if any openings occur during the 

first 90 days of performance on the new 

contract. 

The new contractor may employ its current 

employee on the new contract before offering 

employment to the existing contractor’s 

employees only if the new contractor’s 

current employee has worked for the new 

contractor for at least 3 months immediately 

preceding the first date of performance on the 

new contract and would otherwise face layoff 

or discharge if not employed under the new 

contract. 

Where the new contractor has reason to 

believe, based on written credible 

information from a knowledgeable source, 

that an employee’s job performance while 

working on the current contract has been 

unsuitable, the employee is not entitled to an 

offer of employment on the new contract. 

An employee hired to work under the 

current Federal service contract and one or 

more nonfederal service contracts as part of 

a single job is not entitled to an offer of 

employment on the new contract, provided 

that the existing contractor did not deploy 

the employee in a manner that was designed 

to avoid the purposes of this part. 

Time limit to accept offer: If you are 

offered employment on the new contract, you 

will have at least 10 days to accept the offer. 

Complaints: Any employee(s) or 

authorized employee representative(s) of the 

predecessor contractor who believes that he 

or she is entitled to an offer of employment 

with the new contractor and who has not 

received an offer, may file a complaint, 

within 120 days from the first date of 

contract performance, with the Branch of 

Government Contracts Enforcement, Wage 

and Hour Division, U.S. Department of Labor, 

Washington, DC 20210. 

For additional information: 1–866–4US– 

WAGE (1–866–487–9243) TTY: 1–877–889– 

5627, http://www.wagehour.dol.gov. 

[FR Doc. 2011–21261 Filed 8–26–11; 8:45 am] 

BILLING CODE 4510–27–P 


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