```

[Federal Register Volume 76, Number 167 (Monday, August 29, 2011)]
[Rules and Regulations]
[Pages 53720-53762]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-21261]

[[Page 53719]]

Vol. 76

Monday,

No. 167

August 29, 2011

Part II

Department of Labor

-----------------------------------------------------------------------

29 CFR Part 9

Nondisplacement of Qualified Workers Under Service Contracts; Final 
Rule

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

[[Page 53720]]

-----------------------------------------------------------------------

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

[[Page 53721]]

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

[[Page 53722]]

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 Sec.  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 Sec.  9.1 as proposed, 
except with one additional sentence as discussed below.
    Specifically, Sec.  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

[[Page 53723]]

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

[[Page 53724]]

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 Sec.  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 Sec.  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 Sec.  9.4. No comments were 
received on this proposed section and the final rule adopts proposed 
Sec.  9.3 without change.

Section 9.4 Exclusions

    Proposed Sec.  9.4 would implement the exclusions contained in 
Sections 3 and 4 of Executive Order 13495. Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  9.4(a)(2) is sufficiently 
instructive; as no other comments were received on this paragraph, no 
revisions have been made to proposed Sec.  9.4(a) and it is implemented 
in the final rule without change.
    Proposed Sec.  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 Sec.  9.4(b)(4) clarified that the 
exclusions provided by Sec.  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 Sec.  9.4(b) without change.
    Proposed Sec.  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 
Sec.  9.4(c) without change. See Sec.  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

[[Page 53725]]

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 Sec.  9.4(d)(3) Written Notice to Affected 
Workers of Finding and Decision No Later Than Solicitation Date Using 
the Notification Method Specified in Sec.  9.11(b)
    Under Sec.  9.4(d)(2) and Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 53726]]

consider their employment options. (See Sec.  9.11(b); Sec.  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 
cost-savings 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

[[Page 53727]]

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 economically-reasonable 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 Sec.  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,

[[Page 53728]]

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 Sec.  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 Sec.  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

[[Page 53729]]

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 Sec.  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

[[Page 53730]]

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 long-established 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 Sec.  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 non-
predecessor 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

[[Page 53731]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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.

[[Page 53732]]

    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 DOL-administered 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 bright-line 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 Sec.  9.11(c) requires the Contracting Officer to provide 
the list of employees employed by the predecessor contractor, 
referenced in proposed Sec.  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 Sec.  9.12(e). No other comments were 
received on this provision and the final rule implements this paragraph 
as proposed.
    Proposed Sec.  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

[[Page 53733]]

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 Sec.  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 Sec.  9.21(a).
Section 9.12 Contractor Requirements and Prerogatives
General
    Proposed Sec.  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 Sec.  (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 Sec.  9.4 and the exceptions in 
proposed Sec.  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 Sec.  
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 Sec.  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 Sec.  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 non-predecessor employees in 
the period

[[Page 53734]]

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 non-predecessor employees 
would be contrary to the express language of the Executive Order.
    Proposed Sec.  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 Sec.  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 Sec.  9.12(b) discussed the method of the job offer. 
Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 53735]]

and conditions are not related to a desire that the employee refuse the 
offer or that other employees be hired. Lastly, proposed Sec.  
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 Sec.  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 Sec.  
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

[[Page 53736]]

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 Sec.  
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 Sec.  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 Sec.  
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 Sec.  
9.12(b) with the modification noted above. No other changes were made 
to the proposed provision.
Section 9.12(c) Exceptions
    In proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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

[[Page 53737]]

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 Sec.  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 Sec.  9.12(c). 
A Navy Labor Advisor requested that the final rule at Sec.  9.12(c)(2) 
include language concerning the eligibility of employees on leave. The 
HR Policy Association commented that proposed Sec.  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

[[Page 53738]]

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'' low-performing 
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 relied-upon 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 relied-upon 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 Sec.  
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 Sec.  9.12(c)(1). The Department declines the Navy 
Labor Advisor's request that Sec.  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, Sec.  9.12(c)(2) is also adopted as proposed.
    After careful review of the comments, the Department has also 
decided to adopt Sec.  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 Sec.  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

[[Page 53739]]

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 Sec.  
9.12(c)(5) without change.
Section 9.12(d) Reduced Staffing
    Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.12(d) and it is adopted as proposed.
Section 9.12(e) Contract Obligations Near End of Contract Performance
    Proposed Sec.  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

[[Page 53740]]

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 Sec.  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 Sec.  9.12(f) established record keeping requirements for 
contractors under Executive Order 13495. Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  9.12(f), and it is adopted as proposed.
Section 9.12(g) Investigations
    Proposed Sec.  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 Sec.  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 Sec.  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 
Sec.  9.21 allow employees and their collectively bargained 
representatives to file a complaint against a contracting agency that 
fails to provide notice to incumbent

[[Page 53741]]

employees of a right to an offer of employment, as required by proposed 
Sec.  9.11(b), or fails to provide notice of a decision to exempt a 
contract from the nondisplacement requirements, as required by proposed 
Sec.  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 Sec.  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 Sec.  9.21 as proposed 
provides sufficient guidance on filing complaints directly with the 
WHD.
    The final rule adopts proposed Sec.  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 Sec.  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 Sec.  9.22. It is 
adopted in the final rule without revision.
Section 9.23 Wage and Hour Division Investigation
    Proposed Sec.  9.23 outlined the authority for the WHD to 
investigate complaints under Part 9. Proposed Sec.  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 Sec.  
9.24(d)) has occurred. Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  
9.24(b) provided that, in addition to satisfying any costs imposed by 
an administrative order under proposed Sec. Sec.  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 Sec.  9.24(c) 
concerned the withholding of contract funds for non-compliance. 
Proposed Sec.  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 Sec.  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 Sec.  
9.12(e). Proposed Sec.  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 Sec.  9.24 and it is implemented in the final rule 
without revisions.

[[Page 53742]]

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 
Sec.  9.4(d)(5). The Department notes that proposed Sec.  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 Sec.  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 Sec.  9.31(b) 
required notice of the determination to be sent by certified mail to 
the parties. Under proposed Sec.  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 Sec.  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 fact-intensive 
investigations by the Wage and Hour Division. Section 9.31 therefore is 
adopted as proposed.
Section 9.32 Requesting Appeals
    Proposed Sec.  9.32 addressed appeals of the Department's 
administrative decisions. Under proposed Sec.  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 Sec.  9.32(b) provided procedures for 
requesting review of the Administrator's determination. Proposed Sec.  
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 Sec.  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 Sec.  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 
Sec.  9.33(a) generally encouraged parties to resolve disputes in 
accordance with the conciliation procedures set forth at Sec.  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

[[Page 53743]]

move to defer the hearing for a reasonable time to permit negotiation 
of a settlement or an agreement disposing of the proceeding. Proposed 
Sec.  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 Sec.  9.33, and it is 
adopted without change.
Section 9.34 Administrative Law Judge Hearings
    Proposed Sec.  9.34 provided procedures and rules applicable to ALJ 
hearings. Proposed Sec.  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 Sec.  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 Sec.  9.34(c) 
allowed an ALJ to dismiss challenges for the failure to participate.
    Proposed Sec.  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 Sec.  9.34(e), a Federal agency that is 
interested in a proceeding may participate as amicus curiae at any time 
in the proceedings.
    Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.34 and it is implemented in the final rule 
without change.
Section 9.35 Administrative Review Board Proceedings
    Proposed Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  
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 Sec.  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 Sec.  9.24(b) 
of this part. Proposed Sec.  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 Sec.  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 Sec.  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

[[Page 53744]]

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 Sec.  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 Sec.  9.11(b), or fails to 
provide notice of a decision to exempt a contract from the 
nondisplacement requirements, as required by proposed Sec.  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 Sec. Sec.  
9.12(a), (b), (e) and (f); the information collections related to the 
filing of complaints appear in Sec.  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

[[Page 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 
Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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

[[Page 53746]]

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 x 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 x 15 third-party 
disclosures x 2 minutes).
    The information collection requirement for contractors specified in 
proposed Sec.  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 x .5 percent of contracts x 15 
employees x 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 x 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, Sec.  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 x .20 x 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

[[Page 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 Sec. Sec.  9.12(a), (b), (f), and 9.21)]; 1235-0007, 
nonmaterial change to an information collection for Sec.  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 Sec. Sec.  9.12(a), (b), (f), 
and 9.21; 1235-0007 for Sec.  9.12(e).
    Affected Public: Businesses or other for-profit institutions for 
paragraphs 9.12(a), (b), (e), and (f); individuals for Sec.  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 
Sec.  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 Sec.  9.12(b)(5).

[[Page 53748]]

    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 x 2 hours x $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 Sec.  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 x 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 x $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 
x 15% x $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 x 10% x $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 x 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 x 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 x $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 x 2 hours x $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 x 0.5 hours x 
$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. Sec.  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:

[[Page 53749]]

170 complaints x 10 minutes review time = 28 hours (rounded)
28 hours x $43.13 = $1,208 (rounded)

    GS-11, step 4 to compile and review the complaint and supplemental 
documents for forwarding:

170 complaints x 20 minutes = 57 hours (rounded)
57 hours x $30.26 = $1,725 (rounded)

    GS-3, step 4 to photocopy & assemble complaint documents:

170 complaints x 10 minutes = 28 hours (rounded)
28 hours x $13.14 = $368 (rounded)

    Printing costs:

170 complaints x 4 pages x 3 copies x $0.05 per page = $102

    Postage:

170 complaints x 3 mailings (DOL, contractor, and complainant) x $0.47 
($0.44 each + $0.03 per envelope) = $240 (rounded)

    GS 12, step 4 to investigate complaints

170 complaints x 20 hours = 3,400 hours
3400 hours x $36.27 = $123,318
Printing 60,000 notices x $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

[[Page 53750]]

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 x 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

[[Page 53751]]

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.
---------------------------------------------------------------------------

    \1\ See 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.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  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 x 2 hours x $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 x 1.5 contracts x 2 hours x $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 Sec.  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 x 1.5 contracts x .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

[[Page 53752]]

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 x 15 employees x 1 
minute = 5,400 hours. 5,400 hours x $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 x 15% x 
$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 x 10% x $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.

[[Page 53753]]

    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

Sec.  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.

Sec.  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 non-appropriated fund instrumentalities.
    Wage and Hour Division means the Wage and Hour Division, U.S. 
Department of Labor.

Sec.  9.3  Coverage.

    This part applies to all service contracts and their solicitations, 
except those excluded by Sec.  9.4 of this part, that succeed contracts 
for the same or similar service at the same location.

Sec.  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 Sec.  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

[[Page 53754]]

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 Sec.  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 Sec.  
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:

[[Page 53755]]

    (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 Sec.  9.2(9) of this part, 
definition of managerial employee and supervisory employee.

Subpart B--Requirements

Sec.  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 Sec.  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]

Sec.  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 Sec.  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

[[Page 53756]]

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 pre-employment 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 co-worker 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 non-service 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 Sec.  
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

[[Page 53757]]

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 
non-discrimination laws and regulations), will determine to which 
employees it will offer employment. See Sec.  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,

[[Page 53758]]

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 Sec.  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 Sec.  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

Sec.  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.

Sec.  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.

Sec.  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 
Sec.  9.24(d) of this part) has occurred.
    (b) Subsequent investigations. The Administrator may conduct a new

[[Page 53759]]

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.

Sec.  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 Sec. Sec.  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 Sec.  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

Sec.  9.31  Determination of the Administrator.

    (a) Written determination. Upon completion of an investigation 
under Sec.  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 
Sec.  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 Sec.  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 Sec.  
9.32(b)(2) of this part.

Sec.  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 
Sec.  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

[[Page 53760]]

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 
Sec.  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.

Sec.  9.33  Mediation.

    (a) General. The parties are encouraged to resolve disputes in 
accordance with the conciliation procedures set forth at Sec.  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.

Sec.  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 Sec.  
9.31(b)(1) of this part concerning questions of law and fact from 
determinations of the Administrator issued under Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 53761]]

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 Sec.  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 
Sec.  9.32(b)(2) of this part.

Sec.  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 
Sec.  9.31(b)(2) concerning questions of law and fact from 
determinations of the Administrator issued under Sec.  9.31 of this 
part and from decisions of Administrative Law Judges issued under Sec.  
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 Sec.  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

[[Page 53762]]

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
```