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[Federal Register: March 19, 2010 (Volume 75, Number 53)]
[Proposed Rules]               
[Page 13381-13409]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19mr10-26]                         


[[Page 13381]]

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Part III





Department of Labor





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29 CFR Part 9



Nondisplacement of Qualified Workers Under Service Contracts; Proposed 
Rule


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DEPARTMENT OF LABOR

Office of the Secretary

29 CFR Part 9

RIN 1215-AB69; RIN 1235-AA02

 
Nondisplacement of Qualified Workers Under Service Contracts

AGENCY: Wage and Hour Division, Labor.

ACTION: Notice of proposed rulemaking, request for comments.

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SUMMARY: This document proposes regulations to implement Executive 
Order 13495, Nondisplacement of Qualified Workers Under Service 
Contracts, signed by President Obama on January 30, 2009. The Executive 
Order establishes a general policy of the Federal Government that 
service contracts and solicitations for such 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 
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. The Executive Order also directs the 
Department of Labor (DOL), in consultation with the Federal Acquisition 
Regulatory Council (FARC), to issue regulations, within 180 days of the 
date of the Order to the extent permitted by law, to implement the 
requirements of this Order. The Regulatory Information Number (RIN) 
identified for this rulemaking will change with publication of the 
Spring Regulatory Agenda due to an organizational restructuring. The 
old RIN was assigned to the Employment Standards Administration, which 
no longer exists; a new RIN has been assigned to the Wage and Hour 
Division.

DATES: Comments must be submitted on or before May 18, 2010.

ADDRESSES: You may submit comments, identified by RIN 1235-AA02, by 
either one of the following methods:
    Electronic comments: through the federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
    Mail: Regulatory Analysis Branch, Wage and Hour Division, U.S. 
Department of Labor, Room S-3502, 200 Constitution Avenue, NW., 
Washington, DC 20210.
    Instructions: Please submit one copy of your comments by only one 
method. All submissions received must include the agency name and RIN 
identified above for this rulemaking. Comments received will become a 
matter of public record and will be posted to http://www.regulations.gov, including any personal information provided. 
Because we continue to experience delays in receiving mail in the 
Washington, DC, area, commenters are strongly encouraged to transmit 
their comments electronically via the federal eRulemaking Portal at 
http://www.regulations.gov or to submit them by mail early. For 
additional information on submitting comments and the rulemaking 
process, see the ``Public Participation'' heading of the SUPPLEMENTARY 
INFORMATION section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to the federal eRulemaking Portal at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Michel Smyth, Chief, Regulatory 
Analysis Branch, Wage and Hour Division, U.S. Department of Labor, Room 
S-3506, 200 Constitution Avenue, NW., Washington, DC 20210; telephone: 
(202) 693-0406 (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: 

I. Electronic Access and Filing Comments

    Public Participation: This notice is available through the Federal 
Register and the http://www.regulations.gov Web site. You may also 
access this notice via the Wage and Hour Division home page at http://www.dol.gov/whd/regulations/EO13495_2010_NPRM.htm. To comment 
electronically on federal rulemakings, go to the federal eRulemaking 
Portal at http://www.regulations.gov, which will allow you to find, 
review, and submit comments on federal documents that are open for 
comment and published in the Federal Register. Please identify all 
comments submitted in electronic form by the RIN docket number (1235-
AA02). Because of delays in receiving mail in the Washington, DC, area, 
commenters should transmit their comments electronically via the 
federal eRulemaking Portal at http://www.regulations.gov, or submit 
them by mail early to ensure timely receipt prior to the close of the 
comment period. Submit one copy of your comments by only one method.
    Request for Comments: The DOL requests comments on all issues 
related to this notice of proposed rulemaking (NPRM).

II. 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). 74 FR 6103. 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 
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. 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. On some occasions, however, a successor 
contractor or its subcontractors hires a new work force, 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 
such 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.

[[Page 13383]]

    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. 351 et seq., and its implementing regulations. Section 2 also 
defines employee to mean a service employee as defined in the SCA. 74 
FR 6103. See 41 U.S.C. 357(b).
    Section 3 of the Order exempts from its terms: (a) Contracts or 
subcontracts under the simplified acquisition threshold as defined in 
41 U.S.C. 403 (i.e., currently contracts less than $100,000); (b) 
contracts or subcontracts awarded pursuant to the Javits-Wagner-O'Day 
Act, 41 U.S.C. 46-48c; (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.
    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.
    Section 5 of the Order provides the wording for a 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 work at the same 
location. 74 FR 6104-05. 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 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 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 contractor and 
its subcontractors must make an express offer of employment to each 
employee and must state the time within which the employee must accept 
such offer, which must be at least 10 days. The clause also provides 
that, notwithstanding the obligation to offer employment to employees 
on the predecessor contract, the 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. 357(b), 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. 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 this 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 
contract'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.
    Section 6 of the Order assigns responsibility for investigating and 
obtaining compliance with the Order to the DOL. In such proceedings, 
this section also authorizes the DOL to issue final orders prescribing 
appropriate sanctions and remedies, including, but not limited to, 
orders requiring employment and payment of wages lost. The DOL 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

[[Page 13384]]

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 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 DOL 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 DOL 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.
    Section 7 of Executive Order 13495 revokes Executive Order 13204 of 
February 17, 2001 (Bush Order), rescinding Executive Order 12933 of 
October 20, 1994, Nondisplacement of Qualified Workers Under Certain 
Contracts (Clinton Order). 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: 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 
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 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 DOL in accordance with the Administrative 
Procedure Act, 5 U.S.C. 701 et seq. 74 FR 6105-06.
    As indicated, Section 7 of Executive Order 13495 revoked the 2001 
Bush Order rescinding the 1994 Clinton Order, Nondisplacement of 
Qualified Workers Under Certain Contracts. More specifically, the 
rescinded Clinton and Bush 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).
    On May 22, 1997, the DOL promulgated regulations, 29 CFR part 9 (62 
FR 28185) to implement the Clinton Order and, per the Bush Order, 
rescinded them in a Notice appearing in the Federal Register on March 
23, 2001 (66 FR 16126). There are some notable differences between the 
current Order, Executive Order 13495, and the Clinton Order, Executive 
Order 12933. For example, Executive Order 13495 covers all contracts 
covered by the SCA above the simplified acquisition threshold 
(currently $100,000); the Clinton Order 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 the Clinton Order 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 or 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 the 
Clinton Order was determined at the prime contract level.

III. Discussion of Proposed Rule

    The DOL proposes to implement the current Order with regulations 
based on similar requirements to those issued under the Clinton Order. 
While the current Order is broader in scope as to the types of service 
contracts covered, both the current and Clinton Orders established a 
Federal policy for successor contractors to offer employment in most 
cases to the employees on the predecessor contract when the new 
contract award would otherwise displace those workers. The DOL proposes 
to change the format of the regulation from questions and answers to 
the more common format of a descriptive section title. In addition, the 
DOL proposes a number of minor modifications to the enforcement and 
administrative procedures contained in this rule to clarify 
responsibilities of various Federal officials as compared to the prior 
rule. The following section-by-section discussion of this proposed rule 
presents the contents of each section and highlights significant 
differences between this proposal and the prior version of part 9 
issued under the Clinton Order.
    Proposed subpart A of part 9 relates to general matters, including 
the purpose and scope of the rule, its definitions, coverage under the 
current Order, and the exclusions it provides. Proposed Sec.  9.1(a) 
explains that the purpose of the proposed rule is to implement E.O. 
13495 and reiterates statements from the E.O. that the Federal 
Government's procurement interests in economy and efficiency are served 
when the successor contractor hires the predecessor's employees and why 
this is the case.
    Proposed Sec.  9.1(b) explains the general Federal Government 
requirement for successor service contracts and their solicitations to 
include a clause that requires the contractor and its subcontractors to 
offer employment under the contract 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. This section also clarifies that nothing in Executive Order 
13495 or part 9 is to 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.
    Proposed Sec.  9.1(c) outlines the scope of this proposal and 
provides that neither Executive Order 13495 nor part 9 creates any 
rights under the Contract Disputes Act or any private right of action. 
The DOL does not interpret the E.O. as limiting existing rights under 
the Contract Disputes Act. The paragraph also restates the current 
Order's provision that disputes regarding the requirement of the 
prescribed contract clause, to the extent permitted by law, shall be 
disposed of only as provided by the Secretary of Labor in regulations 
issued under Executive Order 13495. This paragraph also restates the 
provision for DOL regulations to favor

[[Page 13385]]

the resolution of disputes by efficient and informal alternative 
dispute resolution methods to the extent practicable. Finally, the 
paragraph applies the provision in Sec.  9(c) of Executive Order 13495 
that neither the current Order nor this proposed rule would preclude 
judicial review of final decisions by the Secretary in accordance with 
the Administrative Procedure Act, 5 U.S.C. 701 et seq.
    Proposed Sec.  9.2 defines terms for purposes of this rule. Most 
defined terms follow common applications and are based on either the 
current Order, the prior version of part 9, or other regulations. The 
definition of day, taken from the meaning given to the term in the FAR, 
is a calendar day, unless otherwise specified. 48 CFR 2.101; see also 
--.201.
    The NPRM would adopt the FAR definition of service employee to 
define employee or service employee and refer to the SCA, in order to 
preclude any ambiguity, because the Executive Order defers to the 
statutory definition of service employee in the SCA at 41 U.S.C. 
357(b). The DOL also proposes to adopt the definition of service 
contract or contract provided in section 2(a) of Executive Order 13495. 
74 FR 6103. In addition, the DOL proposes substantially to adopt the 
definitions for the terms Administrator, Contracting Officer, Federal 
Government, Secretary, and United States from the prior version of part 
9, as the current Order does not define those terms. See 62 FR 28192 
(May 22, 1997). The DOL proposes to define employment opening to mean 
any vacancy in a position on the contract, including any vacancy caused 
by replacing an employee or service employee from the predecessor 
contract with a different employee.
    The DOL also proposes to add a definition of managerial and 
supervisory employee. The general policy stated in section 1 of the 
current Order and in the contract clause parenthetically excludes 
managerial and supervisory employees from its requirements; however, 
the current Order does not define the term. See 74 FR 6103. The DOL 
notes that the job offer requirements of the Clinton Order also did not 
apply to management and supervisory workers, and it did not define the 
term either. See 59 FR 53559 (Oct. 24, 1994). The SCA definition of 
employee already excludes any person employed in a bona fide executive, 
administrative, or professional capacity, as those terms are defined in 
29 CFR part 541. 41 U.S.C. 357(b). The prior version of part 9, while 
not including managerial and supervisory employee in the definitions 
section, implemented the exception by excluding persons engaged in the 
performance of services under the contract who are employed in a bona 
fide executive, administrative, or professional capacity--as those 
terms are defined in 29 CFR part 541--from the job offer requirements. 
62 FR 28188 (May 22, 1997). The definition in proposed Sec.  9.2(9) 
adopts this exclusionary concept in a new freestanding definition of 
managerial and supervisory employee that excludes from the requirements 
of this part managerial and supervisory employees, as discussed further 
in this NPRM. While the DOL does not believe the managerial and 
supervisory exception to the nondisplacement provisions was intended to 
apply to any person who performs managerial or supervisory tasks either 
infrequently or as an incident to their primary duties and 
responsibilities, the DOL welcomes specific comments on whether another 
definition should be adopted and requests supporters of an alternative 
definition to provide specific recommendations for the definition.
    The DOL proposes to define month under the Executive Order as a 
period of 30 consecutive days, regardless of the day of the calendar 
month on which it begins. This definition was not included in the prior 
version of part 9; however, the DOL believes defining the term will 
clarify how to address partial months and will balance calendar months 
of different lengths. In order to eliminate confusion caused by 
similarly named components of various Departments and larger agencies 
(e.g., Office of Administrative Law Judges), proposed Sec.  9.2 defines 
certain agencies. The NPRM would define same or similar service to mean 
a service that is either identical to or has characteristics that are 
alike in substance and essentials to another service. Solicitation 
would be defined to mean any request to submit offers or quotations to 
the Government.
    Proposed Sec. Sec.  9.3 and 9.4 address the coverage and 
exclusionary provisions of the current Order. See 74 FR 6103-04. 
Specifically, proposed Sec.  9.3 applies coverage under part 9 to all 
service contracts and their solicitations, except those excluded by 
Sec.  9.4. Section 9.4 would implement the exclusions contained in 
sections 3 and 4 of Executive Order 13495. Id.
    Proposed Sec.  9.4(a) addresses the exclusion for contracts or 
subcontracts under the simplified acquisition threshold, as defined in 
41 U.S.C. 403(11). 74 FR 6103. The simplified acquisition threshold 
currently is $100,000. 41 U.S.C. 403(11). The proposed regulations do 
not state that amount in the regulatory text, in contrast to the prior 
version of part 9, 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) explains how the 
exclusion applies to subcontracts, including when a successor 
contractor discontinues the services of a subcontractor.
    Proposed appendix A establishes an employee nondisplacement 
contract clause to implement section 5 of Executive Order 13495. 74 FR 
6105. Paragraph (e) of the nondisplacement contract clause requires the 
contractor to include, in every subcontract entered into in order to 
perform services under the prime contract, provisions to ensure each 
subcontractor honors the requirements of paragraphs (a) through (b) of 
the employee nondisplacement clause with respect to the employees of a 
predecessor subcontractor or subcontractors working under the successor 
contract as well as of a predecessor contractor and its subcontractors. 
Id. The subcontract must also include provisions ensuring 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. The DOL 
interprets the exclusion for contracts and subcontracts under the 
simplified acquisition threshold as applying to subcontracts of less 
than $100,000, 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 in such cases, the covered prime contractor 
or higher tier subcontractor would still have to comply with the 
requirements of this part. Were a covered contractor that is subject to 
the nondisplacement requirements to discontinue the services of a 
subcontractor at any time during the contract and perform those 
services itself at the same location, the contractor would have to 
offer employment 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. The DOL notes the Clinton 
Order excluded prime contracts under the simplified acquisition 
threshold and did not mention subcontracts. 59 FR 53560.
    Proposed Sec.  9.4(b) implements the exclusions applicable to 
certain contracts or subcontracts awarded for services produced or 
provided by

[[Page 13386]]

persons who are blind or have severe disabilities. 74 FR 6103-4. 
Specifically, this paragraph excludes contracts or subcontracts awarded 
pursuant to the Javits-Wagner-O'Day Act, 41 U.S.C. 46-48c, from the 
requirements of part 9. Proposed Sec.  9.4(b)(2) provides that the 
requirements of part 9 do not apply to 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. Proposed Sec.  9.4(b)(3) specifies that the 
requirements of part 9 do not apply to agreements for vending 
facilities entered into pursuant to the preference regulations issued 
under the Randolph-Sheppard Act, 20 U.S.C. 107.
    Proposed Sec.  9.4(b)(4) clarifies 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 predecessor contract employees would 
defeat the purpose of these programs that allow people to participate 
in the workforce who otherwise would not be able to do so. Proposed 
Sec.  9.4(c) implements 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.
    Proposed Sec.  9.4(d) implements the section 4 exclusion in 
Executive Order 13495, which provides that, if the head of a 
contracting department or agency finds that the application of any of 
the requirements of Executive Order 13495 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 head of such department or agency may exempt its department or 
agency from the requirements of any or all of the provisions of 
Executive Order 13495 with respect to a particular contract, 
subcontract, or purchase order or any class of contracts, subcontracts, 
or purchase orders. Id. The DOL proposes to limit the time in which an 
agency may decide to exempt contracts to no later than the solicitation 
date. This limitation is needed to ensure the contract clause is 
included in the solicitation, if applicable, as required by the 
Executive Order. In addition, when an agency exercises its exemption 
authority, the DOL proposes to require the contracting agency to notify 
affected workers in writing, either in an individual notice given to 
each worker or through a posting at the location where the work is 
performed, of the finding and decision no later than the award date. 
The notification would need to include facts supporting the decision. 
This notification to the workers is consistent with and supports 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.
    As with other exemptions applicable to labor standards, the DOL 
interprets the exemption authority of the agencies 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. It is predicated on the 
determination 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. Given the 
Executive Order's underlying assumptions, the Executive Order creates a 
presumption that nondisplacement is in the interest of the Federal 
Government for each contract, class of contracts, subcontract, or 
purchase order. However, the presumption can be overcome based on a 
finding that nondisplacement 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. DOL believes 
that the basis for such a finding must be reasoned and transparent; 
therefore, the NPRM would require a written analysis to support the 
decision to claim the exemption. For example, where the decision to 
claim the exemption is based on a finding that the nondisplacement 
requirements would impair the ability of the Federal Government to 
procure the services on an economical and efficient basis, the DOL 
believes an agency would need to support a decision to claim the 
exemption with a written analysis that explains how application of the 
Executive Order's requirements would impair the ability of the agency 
to procure services on an economical and efficient basis.
    In addition, the reasons provided for the exemption in the agency's 
analysis must be consistent with the Executive Order. The DOL proposes 
that such a written analysis would, inter alia, compare the anticipated 
outcomes of hiring predecessor contract employees against those of 
hiring a new workforce. At the same time, the DOL specifically seeks 
comments on what, if any, specific guidance the regulation should 
provide regarding the consideration of cost and other factors in 
exercising the agency's exemption authority, including guidance 
regarding what information should be included in the agency's analysis 
supporting a decision to exercise exemption authority. What costs 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? How much weight 
should be given to such costs? Should the regulation 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 hiring new employees? If so, how should the restriction 
be applied (e.g., the exemption cannot be exercised based solely on a 
showing of marginal cost savings; or the exemption cannot be exercised 
based solely on a showing of cost savings in any amount unless such 
determination is coupled with an additional determination that the non-
cost benefits of hiring new employees outweigh the benefits of 
retaining the predecessor's workers)? Should the guidance place any 
restrictions on how an agency projects cost savings? The EO leaves it 
to the contractor to determine the number of employees needed to 
perform the work and the SCA establishes the minimum wage rates to be 
paid workers. Therefore, should a contracting agency be prohibited from 
making projections based on how it believes a successor contractor may 
reconfigure the contract or wages to be paid? 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? How much weight 
should be given to such non-cost factors? What factual information and 
analysis should be required to be included in an agency's written 
finding underlying its exemption decision, and in what level

[[Page 13387]]

of detail? The DOL also specifically invites comments regarding the 
worker notification requirement, including what recourse might exist if 
an agency fails timely to provide the written notification to the 
workers or what specific requirements should be imposed.
    Proposed Sec.  9.4(e) implements the parenthetical exclusion for 
managerial and supervisory employees included in section 1 of Executive 
Order 13495, stating that the Order does not apply to employees who are 
managerial or supervisory employees of Federal service contractors or 
subcontractors. 74 FR 6103. While not included in the exclusions listed 
in section 3 of Executive Order 13495, the DOL believes including this 
proposed paragraph provides important compliance assistance to 
contractors and employees. The DOL notes this proposal is not different 
in substance from how the same parenthetical exception was implemented 
under the Clinton Order. 59 FR 53559; 62 FR 28188, (formerly 29 CFR 
9.8(b)(1)).
    Proposed subpart B of part 9 establishes the requirements that 
contracting agencies and contractors will undertake to comply with the 
nondisplacement provisions.
    Proposed Sec.  9.11 addresses contracting agency requirements, and 
proposed Sec.  9.12 explains contractor requirements and prerogatives 
under the nondisplacement requirements.
    Proposed Sec.  9.11 specifies contracting agency responsibilities 
to incorporate the nondisplacement clause in applicable contracts, to 
inform service contract employees of when a contract has been awarded 
to a successor, to provide the list of employees on the predecessor 
contract to the successor, and to forward complaints and other 
pertinent information to the Wage and Hour Division when there are 
allegations of contractor non-compliance with this part.
    Section 5 of Executive Order 13495 specifies a contract clause that 
must be included in solicitations and contracts for services that 
succeed contracts for the performance of the same or similar work at 
the same location. 74 FR 6104-05. Proposed Sec.  9.11(a) provides 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. Contract clause paragraphs (a) 
through (e) of proposed appendix A repeat the clause in paragraphs (a) 
through (e) of the Executive Order verbatim, with three exceptions.
    The first proposed modification would spell out the number three, 
instead of using the numeral 3 (as was done in the Executive Order). 
The second proposed modification would insert the number of the Order, 
13495, to replace the blank line that appears in paragraph (d) of the 
contract clause contained in the Order, as its number was not known at 
the time the President signed the Order.
    The final proposed modification is an alteration to accommodate the 
numbering scheme of contracts. Specifically, the internal contract 
clause paragraph (e) cross-reference to paragraph 5(c) is replaced 
simply with a (c). This modification will allow contracting agencies to 
implement the substantive requirements of the Order through the 
required contract language while adjusting to the numbering structure 
of the Federal Acquisition Regulation.
    Proposed appendix A also sets forth additional provisions that are 
necessary to implement the Order. The additional paragraphs would 
appear in paragraphs (f) through (i) of the contract clause contained 
in part 9. With the exception of a paragraph addressing recordkeeping, 
similar contract clause paragraphs appeared in the earlier version of 
part 9. See 62 FR 28188 (May 22, 1997).
    Specifically, proposed clause paragraph (f) provides 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. The withholding amount would equal sums an 
authorized official of the DOL requests, upon a determination by the 
Administrator, the Administrative Law Judge (ALJ), or the 
Administrative Review Board that the prime contractor failed to comply 
with the terms of the employee nondisplacement clause and that wages 
lost as a result of the violations are due or that other monetary 
relief is appropriate.
    Proposed contract clause paragraph (g) requires the contractor to 
maintain certain records to demonstrate compliance with the substantive 
requirements of part 9. This proposed paragraph was not included in the 
prior part 9; however, including it in the contract will better enable 
contractors to understand their obligations and provide an easy 
reference. The proposed paragraph specifies that the contractor is 
required to maintain the particular records (regardless of format, 
e.g., paper or electronic) for three years. The specified records 
include 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; a copy of any 
record that forms the basis for any exclusion or exemption claimed 
under part 9; a copy of the employee list received from the contracting 
agency, and an entry on the pay records for an employee of the amount 
of any retroactive payment of wages or compensation under the 
supervision of the Administrator of the Wage and Hour Division, 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 proposed clause also states that the contractor is to 
deliver a copy of the receipt to the employee and, as evidence of 
payment by the contractor, file the original receipt signed by the 
employee with the Administrator or an authorized representative within 
10 days after payment is made.
    Proposed contract clause paragraph (h) requires the contractor, as 
a condition of the contract award, to cooperate in any investigation by 
the contracting agency or the DOL 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. Proposed contract clause paragraph (i) provides that 
disputes concerning the requirements of the nondisplacement clause will 
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.
    Proposed Sec.  9.11(b) specifies a notice that contracting agencies 
must provide when a contract will be awarded to a successor. A similar 
requirement existed in the prior version of part 9 (see 62 FR 28189, 
28192), but it did not require agencies to provide both English 
language and translated notices where a significant portion of the 
predecessor's workforce is not fluent in English. Proposed Sec.  
9.11(b) requires the Contracting Officer to provide written notice to 
service employees of the incumbent contractor 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

[[Page 13388]]

the employees individually. The text of the notice is set forth in the 
appendix B to part 9. The DOL intends to translate the notice into 
several common foreign languages and make the English and translated 
versions available in a poster format to contracting agencies via the 
Internet, in order to allow easy access. Another form with the same 
information may be used. Multiple foreign language notices will 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 speaks Korean and another 
significant portion of the same workforce speaks Spanish, then the 
contracting agency would need to provide the information in English, 
Korean, and Spanish. Giving 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. While electronic 
communications were not part of the earlier part 9, the DOL recognizes 
that reliance on electronic communication will increase in the future 
and e-mail often may provide an inexpensive and reliable way to 
communicate information quickly. The DOL seeks 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, especially 
when contract work is performed at a location that is remote from 
procurement staff, without sacrificing the quality of the information 
provided to workers. For example, should the rule allow notices by e-
mail from the contracting agency to service employees who routinely 
receive information from the agency by e-mail to meet the notification 
requirement, provided the notice otherwise meets the requirements of 
proposed Sec.  9.11? If an e-mail option were allowed, would additional 
guidance for such communications need to be considered, and if so, what 
should that guidance be? Of course, minimally, 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.
    Proposed Sec.  9.11(c) requires the Contracting Officer to provide 
the predecessor contractor's list of employees referenced in proposed 
Sec.  9.12(e) to the successor contractor and, on request, to employees 
or their representatives.
    Proposed Sec.  9.11(d) addresses Contracting Officers' 
responsibilities regarding complaints of alleged violations of part 9. 
As under the prior version of part 9, 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 contractor about their 
rights and responsibilities under the employee nondisplacement 
provision of the contract. Contracting agencies would not be obligated 
to forward to the Wage and Hour Division any complaint that is 
withdrawn because of this compliance assistance; thus, a Contracting 
Officer need not forward to the Wage and Hour Division 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 will forward certain information that the DOL must 
have in order to determine compliance. The DOL believes this proposal 
strikes a balance that allows compliance concerns to be resolved as 
expeditiously as possible without undue burdens on all parties. The 
proposal requires the Contracting Officer, within 30 days of receipt of 
a complaint, to forward to the headquarters of the Wage and Hour 
Division any complaint alleging 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 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 would require the Contracting Officer to 
provide copies to the contractor and the complainant. To assist the 
agency in providing information to the Wage and Hour Division or to 
protect the interests of the agency, the proposal would allow the 
contracting agency to conduct an initial review of any nondisplacement 
complaint. As part of the contracting agency's initial review, the 
Contracting Officer may obtain statements of the positions of the 
parties and 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 
has occurred. The Contracting Officer may provide information about the 
contract clause to the complainant(s) and successor contractor, and 
would not be required to forward any complaint or related information 
when a complaint is withdrawn because of compliance assistance provided 
by the contracting agency. Contracting agencies would be obligated to 
refer questions of interpretations regarding part 9 to the nearest 
local office of the Wage and Hour Division. The DOL particularly seeks 
comments on whether the 30-day period for Contracting Officers to 
forward information to the Wage and Hour Division is necessary and 
appropriate, given the responsibilities envisioned if this proposed 
rule were adopted.
    Proposed Sec.  9.12 implements contractors' requirements and 
prerogatives under the nondisplacement requirements. The proposed 
section consists of the general obligation to offer employment, the 
method of the job offer, exceptions, reduced staffing, obligations near 
the end of the contract, recordkeeping, and obligations to cooperate 
with reviews and investigations.
    Proposed Sec.  9.12(a)(1) implements the requirement that there be 
no employment openings prior to the contractor offering employment to 
the employees on the predecessor contract. 74 FR 6103. Specifically, 
the proposal provides that, except as provided under the exclusions 
listed in proposed Sec.  9.4 or paragraphs (c) and (d) of proposed 
Sec.  9.12, a successor contractor or subcontractor could not fill any 
employment openings under the contract prior to making good faith 
offers of employment, in positions for which the employees are 
qualified, to those 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. The contractor and its subcontractors would be required to 
make an 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. Proposed Sec.  9.12(a)(2) would 
clarify 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

[[Page 13389]]

contract performance. Proposed Sec.  9.12(a)(3) discusses determining 
eligibility for the job offer and provides guidance that did not appear 
in the earlier part 9. While a person's entitlement to a job offer 
under this proposal 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 contractor would also be required to accept 
other credible evidence of an employee's entitlement to a job offer. 
The successor contractor would be allowed to verify the information as 
a condition of accepting it. 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 that identifies 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 guidance will provide 
more clarity to contractors and employees as to the level of proof 
needed to determine entitlement to a job offer.
    Proposed Sec.  9.12(b) discusses the method of the job offer, with 
Sec.  9.12(b)(1) requiring 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 offer to 
employment on the contract. Proposed Sec.  9.12(b)(2) discusses the 
time limit in which the employee has to accept the offer, which the 
contractor determines, but in no case can be less than 10 days. 
Proposed Sec.  9.12(b)(3) provides the process for making the job 
offer. As proposed, the successor contractor is required 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. 
The proposed rule contains an example of how the contractor could 
satisfy this provision by having a co-worker or other person who can 
fluently translate for employees who are not fluent in English, if the 
contractor holds a meeting for a group of employees on the predecessor 
contract. Proposed Sec.  9.12(b)(4) clarifies that the employment offer 
may be to a different job position on the contract. More specifically, 
an offer of employment on the successor's contract would generally be 
presumed to be a bona fide offer of employment, even if not for a 
position similar to the one the employee previously held but one for 
which the employee were qualified. If a question arises concerning an 
employee's qualifications, that question will 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 
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. 
Proposed Sec.  9.12(b)(5) allows for an offer of employment to a 
position providing different terms and conditions of employment than 
those the employee held with the predecessor contractor, where the 
reasons for the offer are not related to a desire that the employee 
refuse the offer or that other employees be hired. Proposed Sec.  
9.12(b)(6) provides 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.
    Proposed Sec.  9.12(c) addresses the exceptions to the general 
obligation to offer employment under Executive Order 13495, which are 
included in the contract clause established in section 5 of the Order 
and are distinct from the exclusions discussed in proposed Sec.  9.4. 
The exclusions specify both certain classes of contracts and certain 
employees excluded from the provisions of Executive Order 13495. The 
exemptions 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 do 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 is required to presume that all employees hired to work 
under a predecessor's Federal service contract would 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.
    Under proposed Sec.  9.12(c)(2), a contractor or subcontractor 
would be allowed to employ under the contract any employee who has 
worked for the contractor or subcontractor for at least three months 
immediately preceding the commencement, i.e., the first date of 
performance, of the contract and who would otherwise face lay-off or 
discharge. As would be the case with any exception to the 
nondisplacement requirements, a contractor bears the burden of showing 
how the exception applies. For example, a contractor would have to 
demonstrate through a preponderance of the evidence that an employee 
who it has employed for at least three months would face discharge were 
a position on the contract not offered because the employee's work on 
another contract has expired and there are no other openings for which 
the employee is qualified within the commuting area. A successor could 
not claim this exception to reemploy an employee who was already 
terminated or laid off, because such a person has already faced a 
discharge and such person has not been employed for the three months 
preceding the commencement of the successor contract. Of course, a 
person 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 who is not a service employee. Typically, this exemption 
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

[[Page 13390]]

on the list required by Sec.  9.12(e) as employees hired to work under 
a predecessor's Federal service contract or who have demonstrated they 
should have been included on the list were service employees, 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 
exemption.
    Under proposed Sec.  9.12(c)(4), 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. Again, the 
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 
information provided by a knowledgeable source such as the predecessor 
contractor, the local supervisor, the employee, or the contracting 
agency. A 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 
can use performance appraisal information in determining whether an 
employee failed to perform suitably on the job; however, the DOL notes 
that this NPRM would 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 DOL seeks comments as to whether there should be 
any requirement that the information supporting the contractor's or 
subcontractor's reasonable belief be in writing and relatively 
contemporaneous with the 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 could 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 exemption. 
For example, claims from several employees who state 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 purposes of the nondisplacement provisions, which 
include Federal interests in economy and efficiency that are served 
when the successor hires the predecessor's employees. Conversely, were 
the employees on the predecessor contract traditionally deployed to 
Federal and other buildings as part of their job, the successor 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 to claim the exception, 
because such general practices may not have been observed on the 
particular predecessor contract.
    Proposed Sec.  9.12(d) addresses the provision in paragraph (a) of 
Executive Order 13495's contract clause that allows the successor 
contractor to reduce staffing. 74 FR 6104. Proposed Sec.  9.12(d)(1) 
allows for 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 must 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 three months after the successor 
contractor's first date of performance on the contract. In some cases a 
successor contractor may reconfigure the staffing pattern to increase 
the number of persons employed in some positions while decreasing the 
number of employees in others, and in such cases Sec.  9.12(d)(3) would 
require the contractor to examine the qualifications of each employee 
so as to minimize displacement. Of course, as already provided in Sec.  
9.1(b), this exception is not to 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 Wage and Hour Division would not make compliance 
determinations regarding Federal contractors' compliance with 
nondiscrimination requirements administered by other regulatory 
agencies, a finding by the DOL's Office of Federal Contract Compliance 
Programs, another agency, or by 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. The DOL invites comments on whether the 
rule should provide additional guidance in this regard and what any 
additional guidance should be. The 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 provides several examples to demonstrate the principle.
    Proposed Sec.  9.12(e) specifies an incumbent contractor's 
obligations near the end of the contract, not less than 10 days before 
completion of the contract, to 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, including their anniversary dates of employment with 
either the current or predecessor contractors or their subcontractors. 
The 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 this 
provision. The earlier version of part 9 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;

[[Page 13391]]

however, the DOL believes specifying this option in the regulations may 
help clarify that there is no duplication of effort in order 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 reflects the 
time frame used in the current Order and is identical to when the list 
must be provided under 29 CFR 4.6(l)(2).
    Proposed Sec.  9.12(f) addresses recordkeeping requirements. 
Proposed Sec.  9.12(f)(1) clarifies that this part prescribes no 
particular order or form of records for contractors, 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) specifies 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, every contractor who makes retroactive payment of 
wages or compensation under the supervision of the Wage and Hour 
Division 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 each 
such payment on a receipt form authorized by the Wage and Hour 
Division. Contracting agency and Wage and Hour Division staff will use 
these records in determining a contractor's compliance and the 
propriety of any further sanctions.
    Proposed Sec.  9.12(g) outlines 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.
    Proposed Subpart C pertains to enforcement activities under this 
part and provides for disputes to be resolved only as provided in 
regulations by the Secretary of Labor. Executive Order 13495 directs 
that the regulations, to the extent practicable, favor the resolution 
of disputes by efficient and informal alternative dispute resolution 
methods. This proposed subpart addresses the process for filing 
complaints, informal resolution attempts by the Wage and Hour Division, 
investigations, and remedies and penalties for violations.
    Proposed Sec.  9.21 establishes the procedure for filing complaints 
and adopts the complaint process used in the earlier version of part 9, 
with the exception of now establishing time frames in which complaints 
are to be filed. Proposed Sec.  9.21(a) outlines the procedure for 
filing a complaint with the Contracting Officer of the appropriate 
Federal agency within 120 days of the alleged violation. As provided 
under the prior rule, the DOL believes that filing complaints first 
with the contracting agency creates the best avenue for displaced 
workers to begin the process of obtaining expeditious review of their 
rights. The proposal includes a time limit for filing a complaint, in 
order to assure that concerns are addressed promptly and the Federal 
Government's procurement interests in economy and efficiency are 
preserved. Proposed Sec.  9.21(b) outlines the procedure for filing a 
complaint with the Wage and Hour Division if the complainant has not 
been able timely to file the complaint with the Contracting Officer or 
has not received, within 30 days of filing the complaint with the 
Contracting Officer, a copy of the report forwarded to the Wage and 
Hour Division under proposed Sec.  9.11(d)(1). The complainant would be 
allowed to file the complaint directly with the Wage and Hour Division 
within 180 days of the alleged violation.
    Proposed Sec.  9.22 establishes the informal complaint resolution 
process for complaints referred to the Wage and Hour Division. After 
obtaining the necessary information from the Contracting Officer 
regarding the alleged violations, the Wage and Hour Division could 
contact the successor contractor about the complaint and attempt to 
conciliate and reach an acceptable resolution that is consistent with 
all applicable requirements.
    Proposed Sec.  9.23 outlines the authority for the Wage and Hour 
Division to investigate complaints under part 9. Proposed Sec.  9.23(a) 
addresses initial investigations and provides 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) 
addresses subsequent investigations and allows the Administrator to 
conduct a new investigation or issue a new determination if the 
Administrator concludes 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 has failed to comply with an order of the Secretary.
    Proposed Sec.  9.24 discusses remedies and sanctions for 
violations. The Secretary will 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 payment of wages lost. Proposed Sec.  9.24(b) 
provides 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) addresses the withholding of contract funds 
for non-compliance. 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

[[Page 13392]]

withheld as necessary to pay the moneys due. Upon final order of the 
Secretary, the Administrator may direct that withheld funds be 
transferred to DOL for disbursement.
    Proposed Sec.  9.24(c)(2) provides 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 Sec.  9.12(e). As 
reflected in the earlier version of part 9, these proposed withholding 
provisions would mirror the withholding standards of other labor 
standards laws such as the Davis-Bacon Act and SCA.
    Proposed Sec.  9.24(d) provides 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.
    Proposed subpart D addresses informal and formal proceedings to 
determine compliance with the requirements of part 9 and resolution of 
disputes. The proposal substantially reinstates provisions from the 
prior part 9, but proposes minor changes to accommodate the format of 
the proposed rule and to clarify various authorities of the 
Administrator, Office of Administrative Law Judges, and Administrative 
Review Board, and the effects of various notices and filings.
    Proposed Sec.  9.31 provides that when an investigation is 
completed and 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 occurred. A written determination 
will contain a statement of the investigation findings that will 
address the appropriate relief and the issue of ineligibility sanctions 
where appropriate, with notice of the determination sent by certified 
mail to the parties. The notice of determination becomes the final 
order of the Secretary and is not appealable in any administrative or 
judicial proceeding unless a request for a hearing is filed within 20 
days or, where relevant facts are not in dispute, a petition for review 
is filed within 20 days with the Administrative Review Board.
    Proposed Sec.  9.32(b) provides procedures for requesting appeals. 
The proposed time limits are the same as under the earlier version of 
part 9, and the proposed language provides due process rights for those 
seeking appeals without needlessly delaying decisions from taking 
effect.
    Executive Order 13495 provides for its implementing regulations to 
favor alternative dispute resolution methods to the extent practicable, 
and proposed Sec.  9.33 generally encourages parties to resolve 
disputes in accordance with the conciliation procedures set forth at 
Sec.  9.22 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 could 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) establishes the procedure for 
appointing a settlement judge to mediate cases scheduled with the 
Office of Administrative Law Judges.
    Proposed Sec.  9.34(a) provides for the Office of Administrative 
Law Judges to hear and decide in its discretion appeals concerning 
questions of law and fact from determinations of the Administrator. The 
ALJ would act fully and finally as the authorized representative of the 
Secretary, subject to any appeal filed to the Administrative Review 
Board, and subject to certain limits. Specifically, the regulations 
exclude from the ALJ's authority any jurisdiction to pass on the 
validity of any provision of part 9. In addition, as the proceedings 
are not required by an underlying statute to be determined on the 
record after an opportunity for an agency hearing, the Equal Access to 
Justice Act (EAJA), as amended (5 U.S.C. 504) does not apply to them; 
therefore, an ALJ would have no authority to award attorney fees and/or 
other litigation expenses pursuant to the provisions of the EAJA for 
any proceeding under this part.
    Absent a stay to attempt settlement, the ALJ will 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 under proposed Sec.  9.34(b).
    Under proposed Sec.  9.34(d), the Administrator may 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 ALJ in a case in 
which the Administrator has not previously participated. The 
Administrator would participate as a party in any proceeding in which 
the Administrator has determined that this part 9 has been violated. 
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(g) applies, with certain exceptions, the rules 
of practice and procedure for administrative hearings before the Office 
of Administrative Law Judges at 29 CFR part 18, subpart A to 
administrative proceedings under this part 9. The exceptions declare 
inapplicable the Rules of Evidence at 29 CFR part 18, subpart B, and 
provide 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) requires ALJ decisions 
(containing appropriate findings, conclusions, and an order) to be 
issued within 60 days after completion of the proceeding. Upon the 
issuance of a decision that a violation has occurred, the ALJ may order 
appropriate relief, which may 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. If the 
Administrator has sought ineligibility sanctions, the order would also 
be required to address whether debarment is appropriate. The ALJ may 
assess against the contractor 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.  9.35 provides the procedures for appealing an ALJ decision to the 
Administrative Review Board.
    Finally, appendix A to part 9 contains the text of the contract 
clause required by Sec.  9.11(a), and appendix B contains 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. If the final rule adopts this or a similar notice provision, 
the DOL intends to make the text of appendix B available in a poster 
format that will be available to contracting agencies on the Internet. 
In addition to or as an alternative to posting, this proposal would 
allow the text to be provided to affected employees electronically.

IV. Paperwork Reduction Act

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Department conducts a preclearance consultation program to 
provide the general public and federal agencies with an opportunity to 
comment on proposed and continuing collections of information in 
accordance with the Paperwork Reduction Act of

[[Page 13393]]

1995 (PRA), 44 U.S.C. 3506(c)(2)(A). This program helps to ensure that 
requested data can be provided in the desired format, reporting burden 
(time and financial resources) is minimized, collection instruments are 
clearly understood, and the impact of collection requirements on 
respondents can be properly assessed. 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. Persons are not required to respond to the 
information collection requirements as contained in this proposal 
unless and until they are approved by the OMB under the PRA at the 
final rule stage. The Department has submitted the identified 
information collections contained in the proposed rule to the OMB for 
review under the PRA. See 44 U.S.C. 3507(d); 5 CFR 1320.11.
    Purpose and Use: As previously explained, Executive Order 13495 
applies to contracts or subcontracts at or above the simplified 
acquisition threshold of $100,000 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 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 an 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, excepted as noted. The DOL has strived to make the 
information disclosures intuitive.
    Proposed Sec.  9.12 describes the contractor's requirements and 
prerogatives under the proposed rule, which include third party 
disclosures and recordkeeping requirements that are subject to the PRA. 
Proposed Sec.  9.12(a) and (b) requires the contractor to make a bona-
fide express offer of employment to each employee individually, either 
in writing or orally. Proposed Sec.  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 meet 
contractor obligations near the end of a contract.
    The DOL notes that the proposed 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. In addition, while the proposed rule also 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, 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.
    Proposed Sec.  9.21 outlines the procedures for filing complaints 
under this part. This NPRM imposes 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 proposed regulations. A contractor may meet 
the requirements of this proposed rule using paper or electronic means.
    Public Burden Estimates: The proposed rule contains information 
collection requirements for contractors and complainants. 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 DOL, 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 DOL has not found a 
reliable source on which to estimate the number of subcontracts per SCA 
prime contract. Based on consultations with Federal procurement 
officials, the DOL assumes that for PRA purposes a typical SCA contract 
has one prime contractor and three subcontractors; 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). Of course, some lesser number of contractors would perform 
work on contracts subject to the nondisplacement requirements; the DOL 
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 DOL estimates that each service contract covered by this 
information collection would involve an average of approximately 15 
employees. Moreover, the DOL 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

[[Page 13394]]

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 DOL 
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 \1/2\ 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 DOL 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)--the seniority list--is cleared under the SCA 
regulations, 29 CFR 4.6(l)(2), OMB control number 1215-0150, and that 
burden is not duplicated in these estimates.
    Estimates prepared for the nondisplacement rules promulgated 
pursuant to the Clinton Order suggested it 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 DOL 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 DOL estimates it will receive 170 nondisplacement 
complaints per year, half of which may include supplemental information 
filed directly with the Wage and Hour Division for a total number of 
complainant responses of 255. The DOL estimates that each complaint 
filing will take about 20 minutes; therefore, the DOL estimates the 
total burden for filing complaints to be about 85 hours. 255 responses 
x 20 minutes.
    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; 900,255 
responses; and 30,085 burden hours.
    Public Comments: The DOL specifically seeks public comments 
regarding the burdens imposed by information collections contained in 
this proposed rule. In particular, the Department seeks comments that: 
evaluate whether the proposed collection of information is necessary 
for the proper performance of the functions of the agency, including 
whether the information will 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. 
Commenters may send their views about these information collections to 
the Department in the same way as all other comments (e.g., through the 
regulations.gov Web site). While much of the information provided to 
the OMB in support of the information collection request appears in 
this preamble, interested parties may obtain a copy of the full 
supporting statement by sending a written request to the mail address 
shown in the ADDRESSES section at the beginning of this preamble or by 
visiting the http://www.reginfo.gov/public/do/PRAMain Web site. In 
addition to having an opportunity to file comments with the Department, 
comments about the paperwork implications of the proposed regulations 
may be addressed to the OMB. Comments to the OMB should be directed to: 
Office of Information and Regulatory Affairs, Attention OMB Desk 
Officer for the Wage and Hour Division (WHD), Office of Management and 
Budget, Room 10235, Washington, DC 20503, Telephone: 202-395-7316/Fax: 
202-395-6974 (these are not toll-free numbers).
    These paperwork burden estimates are summarized as follows:
    Type of Review: Reinstatement with change of a previously approved 
collection.
    Agency: Wage and Hour Division, Department of Labor.
    Title: Nondisplacement of Qualified Workers Under Service 
Contracts.
    OMB Control Number: 1215-0190.
    Affected Public: Business or other for-profit and Individuals or 
Households.
    Estimated Number of Respondents: 40,170.
    Estimated Number of Responses: 900,255.
    Frequency of Response: On occasion.
    Estimated Annual Burden Hours: 30,085.
    Estimated Annual Burden Costs (Operation and Maintenance): $0.

V. Executive Order 12866, Regulatory Flexibility

    This NPRM is considered to be a significant regulatory action 
within the meaning of Executive Order 12866, and was submitted to OMB 
for review before publication, because the proposed rule may raise 
novel legal or policy issues arising out of legal mandates, the 
President's priorities, or the principles set forth in Executive Order 
12866. The first sentence of Executive Order 13495 recognizes that 
successor contractors often hire most of the employees who worked on 
predecessor contract, if the contract work will continue at the same 
location. The DOL believes the NPRM will not have a significant 
economic impact, because the proposal would simply require contractors 
to follow a practice currently used in most cases as a good business 
practice. The DOL expects that, as further explained in this section, 
there will be virtually no change 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 DOL 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 an additional 
burden but do assure compliance with the NPRM. In addition, the DOL 
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 
impair the ability of the agency to procure services on an economical 
and efficient basis.
    In estimating the costs on contractors, the DOL 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 NPRM,

[[Page 13395]]

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 
NPRM as under current practices. The costs for documenting these 
employment decisions will also be similar under both the NPRM and 
status quo.
    For purposes of this analysis, the DOL also believes the time 
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). This NPRM 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, 
successors must pay. See 41 U.S.C. 353(c); 29 CFR 4.6(b)(1). This NPRM 
does not require successor contractors to pay wages higher than the 
rate required by the SCA, even when the predecessor paid a higher rate. 
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 predecessor contractor must provide a list of persons employed 
on the contract no less than 10 days before the end of the contractor's 
performance. The clause makes clear that this is the same list as the 
seniority list provided under the Service Contract Act clauses. Sec.  
9.12(e). As this list already exists and is used by contractors in 
hiring decisions under the status quo, the DOL baseline to calculate 
additional costs accounts for the current business practice among 
contractors to receive the employee list and make hiring decisions from 
there.
    The proposal does include 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 DOL 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).
    While 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 DOL estimates 15 percent of covered contractors each will 
incur additional costs averaging $5,000 because of the NPRM 
requirements, for a total of $30,000,000. 40,000 contractors x 15% x 
$5,000. The DOL believes ten 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. 6,000 contractors x 
10% x $10,000. The DOL estimates total costs contractors will incur to 
comply with this NPRM to be $39,758,400. The DOL expects some of these 
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.
    Executive Order 13495 and this proposal 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 DOL estimates 20 percent of all SCA 
covered contract actions in 2006 would be subject to this NPRM. 
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 DOL estimates the total value of contracts 
subject to the nondisplacement provisions to be $23,000,000,000. 
$115,000,000,000 x 0.2. As also previously stated, nothing will change 
in a majority of these successor contracts; thus the Federal Government 
will not realize an increase in economy or efficiency from a reduced 
disruption in the delivery of services during the transition period 
between contractors or from the benefits of already experienced and 
trained service contract employees who are familiar with the Federal 
Government's personnel, facilities, and requirements. Assuming, 
however, an improvement in economy and efficiency that is equal to 1 
percent on forty percent of the value of SCA covered contracts (i.e., 
four tenths of a percent of all SCA contracts) the DOL estimates the 
nondisplacement provisions that are the subject of this NPRM will 
result in a gross savings of $92,000,000. $23,000,000,000 x 0.4 x 0.01.
    Some of these savings will be absorbed by the expenses contracting 
agencies will incur to inform employees of their possible right to a 
job offer and costs to administer the requirements. The DOL has used 
the 2010 Rest of United States salary table to estimate salary 
expenses. http://www.opm.gov/oca/10tables/html/RUS_h.asp. The DOL 
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 DOL 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 DOL 
estimates contracting agencies will spend an average of 2 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 either their possible right to a job 
offer or of the decision to exempt the contract. The DOL believes this 
notification will take about 30 minutes per contract and that the work 
will be performed by a GS-9,

[[Page 13396]]

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 NPRM also requires Contracting Officers to accept complaints 
from predecessor employees or their authorized representatives and to 
forward the complaints, along with other supporting documentation, to 
the Wage and hour Division within 30 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 to 
photocopy them for both the complainant and the contractor and the 
reproduction and mailing cost to forward the copies. 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 
DOL 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.

170 complaints x 10 minutes review time = 28 hours (rounded)
28 hours x $43.13 = $1208 (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 = $1725 (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 = 3400 hours
3400 hours x $36.27 = $123,318
Printing 60,000 notices x $0.05 per notice = $3000
Enforcement Subtotal $129,961
Total Gross Annual Federal Cost estimate = $6,282,811

    After offsetting the costs of administering the nondisplacement 
requirements from the savings, the DOL estimates economies and 
efficiencies arising from this NPRM would result in Federal cost 
savings equaling $85,717,189. $92,000,000 gross savings-$6,282,811 
gross costs. 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 overall 
savings attributed to the Federal government from the overall 
additional costs attributed to contractors, the nondisplacement 
provisions covered by this NPRM will result in a net change to the 
economy of $45,958,789 in overall cost savings. $85,717,189 overall 
Federal savings-$39,758,400 contractor costs. The DOL 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 overall savings are 
likely to transfer to contractors. In any event, this NPRM will result 
in an effect on the economy that is less than the $100,000,000 
threshold for a rule to be considered economically significant.
    In addition, this NPRM would not be expected (1) To adversely 
affect in a material way the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities; (2) to 
create a serious inconsistency or otherwise interfere with an action 
taken or planned by another agency; (3) materially to alter the 
budgetary impact of entitlements, grants, user fees, or loan programs 
or the rights and obligations of recipient.

VI. Initial Regulatory Flexibility Analysis

    The Regulatory Flexibility Act of 1980, as amended (RFA) 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. For the reasons explained in this section, 
the DOL believes this NPRM is not likely to have a significant economic 
impact on a substantial number of small entities, and therefore an 
initial regulatory flexibility analysis is not required by the RFA. 
However, in the interest or transparency and to provide an opportunity 
for public comment, DOL has prepared the following analysis to assess 
the impact of this regulation on small entities (as defined by the 
applicable SBA size standards). The DOL specifically requests comments 
on the following burden estimates, including the number of small 
entities affected by the nondisplacement requirements, and whether 
alternatives exist that will reduce burden on small entities while 
still meeting the requirements of Executive Order 13495. The Chief 
Counsel for Advocacy of the Small Business Administration was notified 
of a draft of this rule upon submission of the rule to the Office of 
Management and Budget under E.O. 12866, as amended, ``Regulatory 
Planning and Review.'' 58 FR 51735, 67 FR 9385, 72 FR 2763.
    Why agency is considering action: The DOL has published this NPRM 
to implement the enforcement provisions of Executive Order 13495, 
``Nondisplacement of Qualified Workers Under Service Contracts.'' The 
Executive Order assigns enforcement responsibility for the 
nondisplacement requirements to the DOL.
    Objectives of and Legal Basis for Rule: This rule will provide 
guidance on how to comply with the nondisplacement requirements of 
Executive Order 13495 and how the DOL intends to administer and enforce 
them. Section 6(a) of the Executive Order assigns the responsibility of 
investigating and obtaining compliance with the nondisplacement 
requirements to the DOL. 74 FR 6105. Section 6(b) directs the Secretary 
of Labor, in consultation with the FARC, to issue regulations to 
implement the requirements of the Order. Id.
    Description and number of small entities covered by the NPRM: This 
NPRM would apply to small entities that perform work for the Federal 
Government on contracts or subcontracts subject to the SCA of $100,000 
or more. The DOL has found no precise data with which to measure the 
precise number of small entities that would be covered by this NPRM; 
however, certain available data allow for estimates. As already 
discussed in the Paperwork Reduction Act portion of this preamble, 
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

[[Page 13397]]

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 DOL, 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. Subcontracts are not reported in the FPDS, 
and the DOL has not found a reliable source on which to estimate the 
number of subcontracts per SCA prime contract. Based on consultations 
with Federal procurement officials, the DOL assumes 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, 
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). Of course, some lesser number of contractors 
would perform work on contracts subject to the nondisplacement 
requirements; the DOL 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 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 
$100,000) the NPRM 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. Applying the same percentage (72 percent) to 
the total estimated value of $23,000,000,000 for all service contracts 
subject to this rule, suggests the value of those contracts held by 
small entities would equal $16,560,000,000. 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 DOL 
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 NPRM is expected to apply to no more than 
43,200 successor contracts awarded to small contractors.
    Compliance requirements, including reporting and recordkeeping: 
This NPRM would impose a general requirement on 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 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. Specifically, the proposal 
provides that, except as provided under specific exclusions listed in 
proposed Sec.  9.4 or paragraphs (c) and (d) of proposed Sec.  9.12, a 
successor contractor or subcontractor could not fill any employment 
openings under the contract prior to making good faith offers of 
employment, in positions for which the employees are qualified, to 
those 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. 
The contractor and its subcontractors would be required to make an 
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 employment offer may be to a different job 
position on the contract for which the employee is qualified.
    The NPRM also addresses the exceptions to the general obligation to 
offer employment under Executive Order 13495. The exclusions specify 
both certain classes of contracts and certain employees excluded from 
the provisions of Executive Order 13495. The exemptions 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 do 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). 
Specifically, a contractor or subcontractor (1) Would not be required 
to offer employment to any employee of the predecessor who will be 
retained by the predecessor contractor; (2) would be allowed to employ 
under the contract any employee who has worked for the contractor or 
subcontractor for at least three months immediately preceding the 
commencement, i.e., the first date of performance, of the contract and 
who would otherwise face lay-off or discharge; (3) would not be 
required to offer employment to any employee of the predecessor who is 
not a service employee; (4) would not be 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; (5) would not be 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; (6) would be required 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.
    The NPRM would also require the contractor, not less than 10 days 
before completion of the contract, to 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, including their anniversary dates of employment with 
either the current or predecessor contractors or their subcontractors. 
The

[[Page 13398]]

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 this 
provision.
    The NPRM prescribes no particular order or form of records for 
contractors, and the recordkeeping requirements apply to all records 
regardless of their format (e.g., paper or electronic). A contractor 
would be 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. Contractors must 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, 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, every contractor who makes retroactive payment of 
wages or compensation under the supervision of the Wage and Hour 
Division 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 each 
such payment on a receipt form authorized by the Wage and Hour 
Division.
    Contractors would be obligated to cooperate during any 
investigation to determine compliance with the nondisplacement 
requirements as a condition of the contract award 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.
    All small entities subject to the nondisplacement requirements 
would be required to comply with all the provisions of the NPRM, and 
the work can be performed by a combination of management officials 
(e.g., staff authorized to make job offers) and clerical staff (e.g., 
staff to maintain the list of persons offered employment and file 
records). The compliance requirements are more fully described above in 
other portions of this preamble.
    Executive Order 13495 mandates a practice that successor 
contractors already typically follow. As with other contractors, the 
DOL expects there will be virtually no change in the way most small 
contractors currently conduct business, with the exception that they 
will need to ensure the appropriate contract language appears in 
subcontracts. The DOL expects that a majority of small contractors 
making changes to their business operations will comply with the new 
requirements by simply replacing aspects of their existing staffing 
practices with similar practices that do not entail an additional 
burden but do assure compliance with the NPRM.
    In estimating the costs on small contractors, the DOL 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 NPRM, 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 NPRM as under 
current practices. The costs for documenting these employment decisions 
will also be similar under both the NPRM and status quo.
    For purposes of this analysis, the DOL also believes the time small 
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). As previously mentioned, this NPRM 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, successors must pay. See 41 U.S.C. 353(c); 29 CFR 4.6(b)(1). 
This NPRM 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 predecessor contractor must provide a list of persons employed 
on the contract no less than 10 days before the end of the contractor's 
performance. The clause makes clear that this is the same list as the 
seniority list provided under the Service Contract Act clauses. Sec.  
9.12(e). As this list already exists and is used by contractors in 
hiring decisions under the status quo, the DOL baseline to calculate 
additional costs for small entities accounts for the current business 
practice among contractors to receive the employee list and make hiring 
decisions from there.
    The proposal does include 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 DOL 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 NPRM. 
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 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 with other contractors, most small contractors will obtain 
information about the nondisplacement requirements primarily from the 
contract clause, and Wage and Hour

[[Page 13399]]

Division offices throughout the country are available to provide 
compliance assistance at no charge to employers. While the DOL believes 
this rule has been drafted in a way that the vast majority of 
contractors should be able to comply with the nondisplacement 
requirements without the need of professional assistance from an 
attorney or accountant, the DOL recognizes some contractors will seek 
such assistance in the course of researching compliance options within 
the context of specific business needs. In recognition of this latter 
fact, for purposes of this analysis, the DOL estimates 15 percent of 
covered contractors each will incur additional costs averaging $5000 
because of the NPRM requirements, for a total of $21,600,000 spent by 
4320 small contractors. 28,800 contractors x 15% x $5000. The DOL 
believes ten percent of these 4320 contractors will face complex issues 
that will require each spending an average of $10,000 additional 
dollars, totaling $4,320,000 spent by 432 small contractors. 4320 
contractors x 10% x $10,000. The DOL estimates total compliance costs 
that the 28,800 small contractors subject to this NPRM 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. Using the assumptions 
already discussed, this NPRM would impose additional costs equaling 
less than 3 percent of the combined estimated $248,400,000 value of 
contracts awarded to the 432 small contractors who will bear the 
greatest costs to comply with the nondisplacement requirements. 
$16,560,000,000 value of contracts subject to NPRM awarded to small 
contracts x 1.5 percent (percentage of contractors facing greatest 
costs 432/28,800) = $248,400,000. $6,520,591 total estimated compliance 
costs/$248,400,000 estimated compliance costs = 2.6 percent. As with 
other contractors, the DOL 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.
    The DOL specifically requests comments on these burden estimates, 
including the number of small entities affected by the nondisplacement 
requirements, and on how the final rule can reduce burden on small 
entities while still meeting the requirements of Executive Order 13495.
    Relevant Federal rules duplicating, overlapping or conflicting with 
the rule: Section 6(b) of the Executive Order requires the FARC to 
issue regulations to provide for inclusion of the applicable contract 
clause in Federal solicitations and contracts subject to the 
nondisplacement requirements; thus, the contract clause and some 
requirements applicable to contracting agencies will appear in both 
this part and in the FARC regulations. As noted above, the certified 
list of all service employees working under the contract and its 
subcontracts during the last month of contract performance is the same 
list a contractor covered by the SCA is already required to submit 
pursuant to 29 CFR 4.6(l). See also, section 5, contract clause 
paragraph (c) of Executive Order 13495. 74 FR 6104. The DOL is not 
aware of any relevant Federal rules that conflict with this NPRM.
    Differing Compliance and Reporting Requirements for Small Entities: 
This NPRM provides for no differing compliance requirements and 
reporting requirements for small entities. The DOL has strived to have 
this proposal implement the nondisplacement requirements of Executive 
Order 13495 with the least possible burden for small entities. The NPRM 
provides a number of efficient and informal alternative dispute 
mechanisms to resolve concerns about contractor compliance, including 
allowing for complaints initially to be filed with the contracting 
agency and having the contracting agency provide compliance assistance 
to the contractor about the nondisplacement requirements and allowing 
for the Wage and Hour Division to attempt an informal conciliation of 
complaints instead of engaging in extensive investigations. These tools 
will provide contractors with an opportunity to resolve inadvertent 
errors rapidly and before significant liabilities develop.
    Clarification, consolidation, and simplification of compliance and 
reporting requirements for small entities: This NPRM was drafted to 
clearly state the compliance and reporting requirements for all 
contractors subject to the nondisplacement provisions. The only 
reporting requirement is the 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 current or predecessor contractors or 
their subcontractors. The 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 this provision.
    Use of Performance Rather Than Design Standards: This NPRM was 
written to provide clear guidelines to ensure compliance with the 
nondisplacement requirements. Many of the features incorporate 
standards geared to performance. For example, the NPRM would provide 
for the successor contractor to determine the number of employees 
needed to perform the work and allow the successor contractor to decide 
which predecessor contract employees would receive an offer of 
employment on the contract, provided the offers resulted in the least 
displacement possible.
    Exemption from Coverage of the Rule for Small Entities: Executive 
Order 13495 establishes its own coverage and exemption requirements; 
therefore, the DOL has no authority to exempt additional small 
businesses from the nondisplacement requirements beyond the express 
language of Executive Order 13495.

VII. Unfunded Mandates Reform Act

    For purposes of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532, this NPRM 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.

VIII. Executive Order 13132 (Federalism)

    The DOL has (1) reviewed this rule in accordance with Executive 
Order 13132 regarding federalism and (2) determined that it does not 
have federalism implications. The NPRM 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.

IX. Executive Order 13175, Indian Tribal Governments

    This NPRM would not have tribal implications under Executive Order 
13175 that would require a tribal summary impact statement. The NPRM 
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.

X. Effects on Families

    The undersigned hereby certifies that the NPRM would not adversely 
affect the well-being of families, as discussed under section 654 of 
the Treasury and General Government Appropriations Act, 1999.

[[Page 13400]]

XI. Executive Order 13045, Protection of Children

    This NPRM would have no environmental health risk or safety risk 
that may disproportionately affect children.

XII. Environmental Impact Assessment

    A review of this NPRM 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 
1500 et seq.; and the Departmental NEPA procedures, 29 CFR part 11, 
indicates the NPRM 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.

XIII. Executive Order 13211, Energy Supply

    This NPRM is not subject to Executive Order 13211. It will not have 
a significant adverse effect on the supply, distribution, or use of 
energy.

XIV. Executive Order 12630, Constitutionally Protected Property Rights

    This NPRM 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.

XV. Executive Order 12988, Civil Justice Reform Analysis

    This NPRM was drafted and reviewed in accordance with Executive 
Order 12988 and will not unduly burden the Federal court system. The 
NPRM 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.

XVI. Dates of Applicability

    This is a proposed rule, and any regulations to administer the 
nondisplacement requirements would only become effective upon issuance 
of a final rule. E.O. 13495 provides that its nondisplacement 
provisions will apply to solicitations issued on or after the effective 
date of the contract clause regulations to be implemented by the FARC.

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 DOL proposes to amend 
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 hearings.
Appendix A to Part 9--Contract Clause
Appendix B to Part 9--Notice to Service Contract Employees

    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 DOL. 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 work force 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 work force 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.


Sec.  9.2  Definitions.

    For purposes of this part:
    (1) 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.
    (2) Administrative Review Board means the Administrative Review 
Board, U.S. Department of Labor.

[[Page 13401]]

    (3) Contractor means a prime contractor and all of its first or 
lower tier subcontractors on a Federal service contract.
    (4) 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.
    (5) Day means, unless otherwise specified, a calendar day.
    (6) 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.
    (7) 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.
    (8) 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.
    (9) 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.
    (10) Month means a period of 30 consecutive days, regardless of the 
day of the calendar month on which it begins.
    (11) Office of Administrative Law Judges means the Office of 
Administrative Law Judges, U.S. Department of Labor.
    (12) Secretary means the U.S. Secretary of Labor or an authorized 
representative of the Secretary.
    (13) Same or similar service means a service that is either 
identical to or has characteristics that are alike in substance and 
essentials 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.
    (14) 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.
    (15) Solicitation means any request to submit offers or quotations 
to the Government.
    (16) 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.
    (17) 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 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) through (b)(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 if 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) The agency determination shall be made no later than the 
solicitation date. As an alternative to waiving all provisions of this 
part, the head of a contracting department or agency may waive one or 
more individual provisions no later than the contract solicitation 
date.
    (2) When an agency exercises its exemption authority, the 
contracting agency will notify affected workers in writing of the 
finding and decision no later than the award date. The notification 
shall include facts supporting the conclusion 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. 
Where a contracting agency exempts a class of contracts, subcontracts, 
or purchase orders, the agency will provide the notice to incumbent 
workers for each individual award.
    (3) The agency shall use the notification method specified in

[[Page 13402]]

Sec.  9.11(b) of this part to inform workers of the decision.
    (4) In exercising the authority to exempt contracts under this 
section, based on a finding that any of the nondisplacement provisions 
would not serve the purposes of Executive Order 13495, 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.
    (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 (or designee) will 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 provide the notice set forth in appendix B to this part in either a 
physical posting at the job site or another format (e.g., individual 
paper notices or e-mail notification to the affected employees).
    (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) 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.
    (ii) Additional distribution. The Contracting Officer shall provide 
copies of the report to the contractor, including the prime contractor 
when the complaint alleges violations by a subcontractor, and the 
complainant. See Sec.  9.21(a) of this part regarding filing complaints 
with the contracting agency.
    (iii) Reporting time frame. All information shall be forwarded by 
the Contracting Officer to the Wage and Hour Division within 30 days of 
receipt of the complaint. See also Sec.  9.21 of this part, Complaints.
    (2) Initial review. The contracting agency may conduct an initial 
review of any complaint the agency receives under this part. As part of 
the contracting agency's initial review, the Contracting Officer may 
obtain statements of the positions of the parties and 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 has occurred.
    (3) Compliance assistance. The Contracting Officer (or designee) 
shall provide information about the contract clause provisions of this 
part to the complainant(s) and successor contractor. Questions of 
interpretations of this part shall be referred to the nearest local 
office of the Wage and Hour Division. Contracting Officers need not 
refer to the Wage and Hour Division any complaint that is withdrawn 
because of compliance assistance provided by the contracting agency.


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 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 
an 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

[[Page 13403]]

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 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(6), (9), respectively, 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 
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 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, 
and 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

[[Page 13404]]

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 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, 
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. 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 working under the 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 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.

[[Page 13405]]

    (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.

    (a) With contracting agency. Any former 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 Contracting Officer of the appropriate Federal agency within 
120 days of the alleged violation. See also, Sec.  9.11(d) of this 
part, Contracting agency actions on complaints.
    (b) With Wage and Hour Division. The complainant may file the 
complaint directly with the Branch of Government Contracts Enforcement, 
Wage and Hour Division, U.S. Department of Labor, Washington, DC 20210, 
if the complainant has not been able to timely file the complaint with 
the Contracting Officer or has not received, within 30 days of filing 
the complaint with the Contracting Officer, a copy of the report 
forwarded to the Wage and Hour Division under Sec.  9.11(d)(1) of this 
part. The complaint must be filed with the Wage and Hour Division 
within 180 days of the alleged violation.


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 
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 payment of wages lost.
    (b) Unpaid wages or other relief due. In addition to satisfying any 
costs imposed under Sec. Sec.  9.34(j), 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

[[Page 13406]]

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 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

[[Page 13407]]

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 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

[[Page 13408]]

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 an 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 three 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. 357(b), 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 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) 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.

[[Page 13409]]

    (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 successor contractor, (insert name of successor 
contractor). The successor 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, a 
successor contractor is generally required to offer employment to 
the employees who worked on the contract during the last 30 days of 
the predecessor performance, except in the following situations:
    Employees who will not face layoff or discharge by 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 successor contractor may reduce the size of the current work 
force; therefore, only a portion of the existing work force may 
receive employment offers. However, the successor contractor must 
offer employment to the displaced employees if any openings occur 
during the first 90 days of performance on the successor contract.
    The successor contractor may employ its current employee on the 
successor contract before offering employment to the predecessor 
contract's employees only if the successor contractor's current 
employee has worked for the successor contractor for at least three 
months immediately preceding the first date of performance on the 
successor contract and would otherwise face layoff or discharge if 
not employed under the new contract.
    Where the successor contractor has reason to believe, based on 
credible information from a knowledgeable source, that an employee's 
job performance has been unsuitable, the employee is not entitled to 
an offer of employment on the successor contract.
    An employee hired to work under a predecessor's 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 
successor contract, provided that the employee was not deployed 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 or authorized employee representative 
who believes that he or she is entitled to an offer of employment 
with the successor contractor and who has not received an offer, may 
file a complaint with (insert Contracting Officer or representative 
name, address and telephone number). Any complaint must be filed 
with the contracting agency within 120 days of the alleged 
violation. The Contracting Officer will inform the parties of their 
rights and obligations regarding the nondisplacement of employees 
and, forward a report to the U.S. Department of Labor, Wage and Hour 
Division within 30 days. The employee may also file the complaint 
directly with the Administrator, Wage and Hour Division, U.S. 
Department of Labor, Washington, DC 20210, if the complainant has 
not been able timely to file the complaint with the Contracting 
Officer or received a copy of the information to be forwarded to the 
Wage and Hour Division within 30 days of the original filing. The 
complaint must be filed with the Wage and Hour Division within 180 
days of the alleged violation.
    For additional information: 1-866-4US-WAGE (1-866-487-9243) TTY: 
1-877-889-5627, http://www.wagehour.dol.gov.

[FR Doc. 2010-5781 Filed 3-18-10; 8:45 am]
BILLING CODE 4510-27-P
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