42552 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

DEPARTMENT OF LABOR 

Wage and Hour Division 

29 CFR Part 9 

RIN 1235–AA42 

Nondisplacement of Qualified Workers 

Under Service Contracts 

AGENCY: Wage and Hour Division, 

Department of Labor. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Department of Labor 

(Department) proposes regulations to 

implement Executive Order 14055, 

Nondisplacement of Qualified Workers 

Under Service Contracts, signed by 

President Joseph R. Biden, Jr. on 

November 18, 2021. The order 

establishes a general policy of the 

Federal Government that service 

contracts which succeed contracts for 

the same or similar services, and 

solicitations for such contracts, shall 

include a non-displacement clause. The 

non-displacement clause requires the 

contractor and its subcontractors to offer 

qualified employees employed under 

the predecessor contract a right of first 

refusal of employment under the 

successor contract. The Executive order 

also directs the Secretary of Labor 

(Secretary) to issue regulations to 

implement the requirements of this 

order. The order further directs that 

within 60 days of the Secretary issuing 

final regulations, the Federal 

Acquisition Regulatory Council (FAR 

Council) shall amend the Federal 

Acquisition Regulation (FAR) to provide 

for inclusion of the clause in section 3 

of the order. Finally, the order requires 

the Director of the Office of 

Management and Budget (OMB) to issue 

guidance to implement section 6(c) of 

this order. 

DATES: Interested persons are invited to 

submit written comments on this notice 

of proposed rulemaking (NPRM) on or 

before August 15, 2022. 

ADDRESSES: You may submit comments, 

identified by Regulatory Information 

Number (RIN) 1235–AA42, by either of 

the following methods: 

• Electronic Comments: Submit 

comments through the Federal 

eRulemaking Portal at https://

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Address written submissions 

to: Division of Regulations, Legislation, 

and Interpretation, Wage and Hour 

Division, U.S. Department of Labor, 

Room S–3502, 200 Constitution Avenue 

NW, Washington, DC 20210. 

Instructions: Please submit only one 

copy of your comments by only one 

method. Of the two methods, the 

Department strongly recommends that 

commenters submit their comments 

electronically via https://

www.regulations.gov to ensure timely 

receipt prior to the close of the comment 

period, as the Department continues to 

experience delays in the receipt of mail. 

All comments must be received by 11:59 

p.m. ET on August 15, 2022, for 

consideration in this rulemaking; 

comments received after the comment 

period closes will not be considered. 

Commenters submitting file 

attachments on https://

www.regulations.gov are advised that 

uploading text-recognized documents— 

i.e., documents in a native file format or 

documents which have undergone 

optical character recognition (OCR)— 

enable staff at the Department to more 

easily search and retrieve specific 

content included in your comment for 

consideration. This recommendation 

applies particularly to mass comment 

submissions, when a single sponsoring 

individual or organization submits 

multiple comments on behalf of 

members or other affiliated third parties. 

The Wage and Hour Division (WHD) 

posts such comments as a group under 

a single document ID number on https:// 

www.regulations.gov. 

Anyone who submits a comment 

(including duplicate comments) should 

understand and expect that the 

comment will become a matter of public 

record and will be posted without 

change to https://www.regulations.gov, 

including any personal information 

provided. Accordingly, the Department 

requests that no business proprietary 

information, copyrighted information, 

or personally identifiable information be 

submitted in response to this NPRM. 

Docket: For access to the docket to 

read background documents or 

comments, go to the Federal 

eRulemaking Portal at https://

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Amy DeBisschop, Director, Division of 

Regulations, Legislation, and 

Interpretation, Wage and Hour Division, 

U.S. Department of Labor, Room S– 

3502, 200 Constitution Avenue NW, 

Washington, DC 20210; telephone: (202) 

693–0406 (this is not a toll-free 

number). Alternative formats are 

available upon request by calling 1– 

866–487–9243. If you are deaf, hard of 

hearing, or have a speech disability, 

please dial 7–1–1 to access 

telecommunications relay services. 

Questions of interpretation or 

enforcement of the agency’s existing 

regulations may be directed to the 

nearest WHD district office. Locate the 

nearest office by calling the WHD’s tollfree help line at (866) 4US–WAGE ((866) 

487–9243) between 8 a.m. and 5 p.m. in 

your local time zone, or log onto WHD’s 

website at https://www.dol.gov////localoffices for a nationwide listing of WHD 

district and area offices. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On November 18, 2021, President 

Joseph R. Biden, Jr. issued Executive 

Order 14055, ‘‘Nondisplacement of 

Qualified Workers Under Service 

Contracts.’’ 86 FR 66397 (Nov. 23, 

2021). This order explains that ‘‘when a 

service contract expires and a follow-on 

contract is awarded for the same or 

similar services, the Federal 

Government’s procurement interests in 

economy and efficiency are best served 

when the successor contractor or 

subcontractor hires the predecessor’s 

employees, thus avoiding displacement 

of these employees.’’ Id. Accordingly, 

Executive Order 14055 provides that 

contractors and subcontractors 

performing on covered Federal service 

contracts must in good faith offer 

service employees employed under the 

predecessor contract a right of first 

refusal of employment. Id. 

Section 1 of Executive Order 14055 

sets forth a general policy of the Federal 

Government that when a service 

contract expires, and a follow-on 

contract is awarded for the same or 

similar services, the Federal 

Government’s procurement interests in 

economy and efficiency are best served 

when the successor contractor or 

subcontractor hires the predecessor’s 

employees, thus avoiding displacement 

of these employees. 86 FR 66397. Using 

a carryover workforce reduces 

disruption in the delivery of services 

during the period of transition between 

contractors, maintains physical and 

information security, and provides the 

Federal Government with the benefits of 

an experienced and well-trained 

workforce that is familiar with the 

Federal Government’s personnel, 

facilities, and requirements. Id. Section 

1 explains that these same benefits are 

also often realized when a successor 

contractor or subcontractor performs the 

same or similar contract work at the 

same location where the predecessor 

contract was performed. Id. 

Section 2 of Executive Order 14055 

defines ‘‘service contract’’ or ‘‘contract’’ 

to mean any contract, contract-like 

instrument, or subcontract for services 

entered into by the Federal Government 

or its contractors that is covered by the 

Service Contract Act of 1965, as 

amended, (SCA) and its implementing 

regulations. 86 FR 66397. Section 2 also 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42553 

defines ‘‘employee’’ to mean a service 

employee as defined in the SCA, 41 

U.S.C. 6701(3). See 86 FR 66397. 

Finally, section 2 defines ‘‘agency’’ to 

mean an executive department or 

agency, including an independent 

establishment subject to the Federal 

Property and Administrative Services 

Act (Procurement Act), 40 U.S.C. 101 et 

seq. See 86 FR 66397 (citing 40 U.S.C. 

102(4)(A)). 

Section 3 of Executive Order 14055 

provides the wording for a required 

contract clause that each agency must, 

to the extent permitted by law, include 

in solicitations for service contracts and 

subcontracts that succeed a contract for 

performance of the same or similar 

work. 86 FR 66397–98. Specifically, the 

contract clause provides that the 

contractor and its subcontractors must, 

except as otherwise provided in the 

clause, in good faith offer service 

employees, as defined in the SCA, 

employed under the predecessor 

contract and its subcontracts whose 

employment would be terminated as a 

result of the award of the contract or the 

expiration of the predecessor contract 

under which the employees were hired, 

a right of first refusal of employment 

under the contract in positions for 

which those employees are qualified. Id. 

at 66397. The contractor and its 

subcontractors determine the number of 

employees necessary for efficient 

performance of the contract and may 

elect to employ more or fewer 

employees than the predecessor 

contractor employed in connection with 

performance of the work. Id. Except as 

otherwise provided by the contract 

clause, there is to be no employment 

opening under the contract or 

subcontract, and the contractor and any 

subcontractors may not offer 

employment under the contract to any 

employee prior to having complied fully 

with the obligation to offer employment 

to employees on the predecessor 

contract. Id. 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, 

and an employee must be provided at 

least 10 business days to accept the offer 

of employment. Id. at 66397–98. 

The contract clause also provides that, 

notwithstanding the obligation to offer 

employment to employees on the 

predecessor contract, the contractor and 

any subcontractors (1) 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 and (2) are not required to offer a 

right of first refusal to any employee(s) 

of the predecessor contractor for whom 

the contractor or any of its 

subcontractors reasonably believes, 

based on reliable evidence of the 

particular employee’s past performance, 

that there would be just cause to 

discharge the employee(s). 86 FR 66398. 

The contract clause also provides that 

a contractor must, not fewer than 10 

business days before the earlier of the 

completion of the contract or of its work 

on the contract, 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. 86 

FR 66398. 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. Id. 

The contracting officer must provide the 

list to the successor contractor, and the 

list must be provided on request to 

employees or their representatives, 

consistent with the Privacy Act and 

other applicable law. Id. The contract 

clause further provides that 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 the contract clause or 

any regulation or order of the Secretary 

of Labor, the Secretary may impose 

appropriate sanctions 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. Id. 

The contract clause also provides that 

in every subcontract entered into in 

order to perform services under the 

contract, the contractor will include 

provisions that ensure that each 

subcontractor will honor the 

requirements of the clause in the prime 

contract with respect to the employees 

of a predecessor subcontractor or 

subcontractors working under the 

contract, as well as of a predecessor 

contractor and its subcontractors. Id. 

The subcontract must also include 

provisions to ensure that the 

subcontractor will provide the 

contractor with the information about 

the employees of the subcontractor 

needed by the contractor to comply with 

the prime contractor’s requirements. Id. 

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. However, 

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. Id. Finally, the 

contract clause states that nothing in the 

order must be construed to require or 

recommend that agencies, contractors, 

or subcontractors pay the relocation 

costs of employees who exercise their 

right to work for a successor contractor 

or subcontractor pursuant to the 

Executive order. Id. 

Section 4 of Executive Order 14055 

provides that when an agency prepares 

a solicitation for a service contract that 

succeeds a contract for performance of 

the same or similar work, the agency 

will consider whether performance of 

the work in the same locality or 

localities in which the contract is 

currently being performed is reasonably 

necessary to ensure economical and 

efficient provision of services. 86 FR 

66398. If an agency determines that 

performance of the contract in the same 

locality or localities is reasonably 

necessary to ensure economical and 

efficient provision of services, section 4 

requires the agency, to the extent 

consistent with law, to include a 

requirement or preference in the 

solicitation for the successor contract 

that it be performed in the same locality 

or localities. 86 FR 66399. 

Section 5 of Executive Order 14055 

provides exclusions. Specifically, 

section 5 provides that the order does 

not apply to (a) contracts under the 

simplified acquisition threshold as 

defined in 41 U.S.C. 134 (i.e., currently 

contracts less than $250,000); and (b) 

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. 86 FR 66399. 

Section 6 of Executive Order 14055 

authorizes a senior official of an agency 

to grant an exception from the 

requirements of section 3 of the order 

for a particular contract under certain 

circumstances. In order to grant an 

exception from the requirements of 

section 3 of the order, the senior official 

must, by no later than the solicitation 

date, provide a specific written 

explanation of why at least one of the 

following circumstances exists with 

respect to the contract: (i) adhering to 

the requirements of section 3 would not 

advance the Federal Government’s 

interests in achieving economy and 

efficiency in Federal procurement; (ii) 

based on a market analysis, adhering to 

the requirements of section 3 of the 

order would: (A) substantially reduce 


jspears on DSK121TN23PROD with PROPOSALS2
42554 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

the number of potential bidders so as to 

frustrate full and open competition; and 

(B) not be reasonably tailored to the 

agency’s needs for the contract; or (iii) 

adhering to the requirements of section 

3 would otherwise be inconsistent with 

Federal statutes, regulations, Executive 

Orders, or Presidential Memoranda. 86 

FR 66399. The order also requires each 

agency to publish descriptions of the 

exceptions it has granted on a 

centralized public website, and any 

contractor granted an exception to 

provide written notice to affected 

workers and their collective bargaining 

representatives. Id. In addition, the 

Executive order requires each agency to 

report to OMB any exceptions granted 

on a quarterly basis. Id. 

Section 7 of Executive Order 14055 

provides that, consistent with 

applicable law, the Secretary will issue 

final regulations to implement the 

requirements of the order. 86 FR 66399. 

In addition, to the extent consistent 

with law, the FAR Council is to amend 

the FAR to provide for inclusion of the 

contract clause in Federal procurement 

solicitations and contracts subject to the 

order. Id. Additionally, the Director of 

OMB must, to the extent consistent with 

law, issue guidance to implement 

section 6(c) of the order, requiring each 

agency to report to OMB any exceptions 

granted on a quarterly basis. Id. 

Section 8 of Executive Order 14055 

assigns responsibility for investigating 

and obtaining compliance with the 

order to the Department. 86 FR 66399. 

This section authorizes the Department 

to issue final orders in such proceedings 

prescribing appropriate sanctions and 

remedies, including, but not limited to, 

orders requiring employment and 

payment of wages lost. Id. The 

Department may also provide that 

where a contractor or subcontractor has 

failed to comply with any order of the 

Secretary or has committed willful 

violations of the Executive order or its 

implementing regulations, the 

contractor or subcontractor, its 

responsible officers, and any firm in 

which the contractor or subcontractor 

has a substantial interest, may be 

ineligible to be awarded any contract of 

the United States for a period of up to 

3 years. 86 FR 66399–66400. Neither an 

order for debarment of any contractor or 

subcontractor from further Federal 

Government contracts 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 to present information 

and argument in opposition to the 

proposed debarment or inclusion on the 

list. 86 FR 66400. Section 8 also 

specifies that Executive Order 14055 

creates no rights under the Contract 

Disputes Act, and that disputes 

regarding the requirements of the 

contract clause prescribed by section 3 

of the order, to the extent permitted by 

law, will be disposed of only as 

provided by the Department in 

regulations issued under the order. Id. 

Section 9 of Executive Order 14055 

revokes Executive Order 13897 of 

October 31, 2019, which itself rescinded 

Executive Order 13495 of January 30, 

2009, Nondisplacement of Qualified 

Workers Under Service Contracts. 86 FR 

66400. See also 84 FR 59709 (Nov. 5, 

2019); 74 FR 6103 (Jan. 30, 2009). It also 

explains that Executive Order 13495 

remains rescinded. 86 FR 66400. 

Section 10 of Executive Order 14055 

provides that if any provision of the 

order, or the application of any 

provision of the order to any person or 

circumstance, is held to be invalid, the 

remainder of the order and its 

application to any other person or 

circumstance will not be affected. 86 FR 

66400. 

Section 11 of Executive Order 14055 

provides that the order is effective 

immediately and applies to solicitations 

issued on or after the effective date of 

the final regulations issued by the FAR 

Council under section 7 of the order. 86 

FR 66400. For solicitations issued 

between the date of Executive Order 

14055 and the date of the action taken 

by the FAR Council, or solicitations that 

were previously issued and were 

outstanding as of the date of Executive 

Order 14055, agencies are strongly 

encouraged, to the extent permitted by 

law, to include in the relevant 

solicitation the contract clause 

described in section 3 of the order. Id. 

Section 12 of Executive Order 14055 

specifies that nothing in the order is to 

be construed to impair or otherwise 

affect the authority granted by law to an 

executive department or agency, or the 

head thereof, or the functions of the 

Director of OMB relating to budgetary, 

administrative, or legislative proposals. 

86 FR 66400. In addition, the order is 

to be implemented consistent with 

applicable law and subject to the 

availability of appropriations. 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. 86 FR 

66401. 

Prior Relevant Executive Orders 

As indicated, section 9 of Executive 

Order 14055 revoked Executive Order 

13897, which itself rescinded Executive 

Order 13495, Nondisplacement of 

Qualified Workers Under Service 

Contracts. On August 29, 2011, after 

engaging in notice-and-comment 

rulemaking, the Department 

promulgated regulations, 29 CFR part 9 

(76 FR 53720), to implement Executive 

Order 13495, and per Executive Order 

13897, rescinded them in a Notice 

published in the Federal Register on 

January 31, 2020 (85 FR 5567). 

Executive Order 14055 is very similar 

to Executive Order 13495, but there are 

a few notable differences. For example, 

Executive Order 14055 requires that the 

contractor give an employee at least 10 

business days to accept an employment 

offer, whereas Executive Order 13495 

only required 10 calendar days. 86 FR 

66398, 74 FR 6104. Similarly, Executive 

Order 14055 requires that the contractor 

must provide the contracting officer a 

certified list of the names of all service 

employees working under the contract 

during the last month of contract 

performance at least 10 business days 

before contract completion, whereas 

Executive Order 13495 only required 10 

calendar days. Id. Executive Order 

13495 required that performance of the 

work be at the same location for the 

order’s requirements to apply to the 

successor contract, whereas Executive 

Order 14055 does not include a 

requirement that the successor contract 

be performed at the same location as the 

predecessor contract. Further, Executive 

Order 14055 directs an agency to 

consider, when preparing a solicitation 

for a service contract that succeeds a 

contract for performance of the same or 

similar work, whether performance of 

the contract in the same locality is 

reasonably necessary to ensure 

economical and efficient provision of 

services. If an agency determines that 

performance of the contract in the same 

locality or localities is reasonably 

necessary to ensure economical and 

efficient provision of services, then the 

agency will, to the extent consistent 

with law, include a requirement or 

preference in the solicitation for the 

successor contract that it be performed 

in the same locality. 

Executive Order 14055 also differs 

from Executive Order 13495 in its 

provisions regarding a contracting 

agency’s authority to grant an exception 

from the requirements of the order for 

a particular contract. Specifically, 

section 6 of Executive Order 14055 

provides that a senior official within an 

agency may except a particular contract 

from the requirements of section 3 of the 

order by, no later than the solicitation 

date, providing a specific written 

explanation of why at least one of the 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42555 

particular circumstances enumerated in 

the order exists with respect to that 

contract that would warrant exception 

from the requirements of the order. 86 

FR 66399. It also requires agencies to 

publish descriptions of each exception 

on a centralized public website and 

report exceptions to OMB on a quarterly 

basis. Id. Finally, agencies are required 

to ensure that the incumbent contractor 

notifies affected workers and their 

collective bargaining representatives, if 

any, in writing of the agency’s 

determination to grant an exception. Id. 

In contrast, Executive Order 13495 

provided that if the head of a 

contracting department or agency found 

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, the head 

of such department or agency could 

exempt its department or agency from 

the requirements of any or all of the 

provisions of the order with respect to 

a particular contract, subcontract, or 

purchase order or any class of contracts, 

subcontracts, or purchase orders. 74 FR 

6104. 

II. Discussion of Proposed Rule 

A. Legal Authority 

President Biden issued Executive 

Order 14055 pursuant to his authority 

under ‘‘the Constitution and the laws of 

the United States,’’ expressly including 

the Procurement Act, 40 U.S.C. 101 et 

seq. 86 FR 66397. The Procurement Act 

authorizes the President to ‘‘prescribe 

policies and directives that the 

President considers necessary to carry 

out’’ the statutory purposes of ensuring 

‘‘economical and efficient’’ government 

procurement and administration of 

government property. 40 U.S.C. 101, 

121(a). Executive Order 14055 directs 

the Secretary to issue regulations to 

‘‘implement the requirements of this 

order.’’ 86 FR 66399. The Secretary has 

delegated his authority to promulgate 

these types of regulations to the 

Administrator of the WHD 

(Administrator) and to the Deputy 

Administrator of the WHD if the 

Administrator position is vacant. 

Secretary’s Order 01–2014 (Dec. 19, 

2014), 79 FR 77527 (published Dec. 24, 

2014); Secretary’s Order 01–2017 (Jan. 

12, 2017), 82 FR 6653 (published Jan. 

19, 2017). 

B. Overview of the Proposed Rule 

This NPRM, which proposes to 

amend Title 29 of the CFR by adding 

part 9, proposes standards and 

procedures for implementing and 

enforcing Executive Order 14055. 

Proposed subpart A of part 9 relates to 

general matters, including the purpose 

and scope of the rule, as well as the 

definitions, coverage, exclusions, and 

exceptions that the rule provides 

pursuant to the Executive order. 

Proposed subpart B establishes 

requirements for contracting agencies 

and contractors to comply with the 

Executive order. Proposed subpart C 

specifies standards and procedures 

related to complaint intake, 

investigations, and remedies. Proposed 

subpart D specifies standards and 

procedures related to administrative 

enforcement proceedings. 

The following section-by-section 

discussion of this proposed rule 

presents the contents of each section in 

more detail. The Department invites 

comments on the issues addressed in 

this NPRM. 

Part 9 Subpart A—General 

Proposed subpart A of part 9 pertains 

to general matters, including the 

purpose and scope of the rule, as well 

as the definitions, coverage, exclusions, 

and exceptions that the rule provides 

pursuant to the Executive order. 

Section 9.1 Purpose and Scope 

Proposed § 9.1(a) explains that the 

purpose of the proposed rule is to 

implement Executive Order 14055. The 

paragraph emphasizes that the 

Executive order assigns enforcement 

responsibility for the nondisplacement 

requirements to the Department. 

Proposed § 9.1(b) explains the 

underlying policy of Executive Order 

14055. First, the paragraph repeats a 

statement from the Executive order that 

the Federal Government’s procurement 

interests in economy and efficiency are 

served when the successor contractor or 

subcontractor hires the predecessor’s 

employees. The proposed rule 

elaborates that a carryover workforce 

minimizes disruption in the delivery of 

services during a period of transition 

between contractors, maintains physical 

and information security, and provides 

the Federal Government the benefit of 

an experienced and well-trained 

workforce that is familiar with the 

Federal Government’s personnel, 

facilities, and requirements. It is for 

these reasons that the Executive order 

concludes that requiring successor 

service contractors and subcontractors 

performing on Federal contracts to offer 

a right of first refusal to suitable 

employment under the contract to 

service employees under the 

predecessor contract and its 

subcontracts whose employment would 

be terminated as a result of the award 

of the successor contract will lead to 

improved economy and efficiency in 

Federal procurement. 

Proposed § 9.1(b) further explains the 

general requirement established in 

section 3 of Executive Order 14055 that 

service contracts and subcontracts that 

succeed a contract for performance of 

the same or similar work, and 

solicitations for such contracts and 

subcontracts, include a clause that 

requires the contractor and its 

subcontractors to offer a right of first 

refusal of employment to service 

employees employed under the 

predecessor contract and its 

subcontracts whose employment would 

be terminated as a result of the award 

of the successor contract in positions for 

which the employees are qualified. 

Proposed § 9.1(b) also clarifies that 

nothing in Executive Order 14055 or 

part 9 is to be construed to excuse 

noncompliance with any applicable 

Executive order, regulation, or law of 

the United States. 

Proposed § 9.1(c) outlines the scope of 

this proposal and provides that neither 

Executive Order 14055 nor part 9 

creates or changes any rights under the 

Contract Disputes Act, 41 U.S.C. 7101 et 

seq., or any private right of action. The 

Department does not interpret the 

Executive order as limiting existing 

rights under the Contract Disputes Act. 

The provision also restates the 

Executive order’s directive that disputes 

regarding the requirements of the 

contract clause prescribed by the 

Executive order, to the extent permitted 

by law, shall be disposed of only as 

provided by the Secretary in regulations 

issued under the Executive order. This 

paragraph also clarifies that neither the 

Executive order nor the proposed rule 

would preclude review of final 

decisions by the Secretary in accordance 

with the judicial review provisions of 

the Administrative Procedure Act, 5 

U.S.C. 701 et seq. 

Section 9.2 Definitions 

Proposed § 9.2 defines terms for 

purposes of this rule implementing 

Executive Order 14055. Most defined 

terms follow common applications and 

are based on either Executive Order 

14055 itself or the definitions of 

relevant terms set forth in the text of 

related statutes and Executive orders or 

the implementing regulations for those 

statutes and orders. The Department 

notes that, while the proposed 

definitions discussed in this proposed 

rule would govern the implementation 

and enforcement of Executive Order 

14055, nothing in the proposed rule is 

intended to alter the meaning of or to be 

interpreted inconsistently with the 


jspears on DSK121TN23PROD with PROPOSALS2
42556 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

definitions set forth in the FAR for 

purposes of that regulation. 

Consistent with the definition 

provided in Executive Order 14055, the 

Department proposes to define agency 

to mean an executive department or 

agency, including an independent 

establishment subject to the 

Procurement Act. See 86 FR 66397. As 

used in its definition of agency, the 

Department proposes to define 

executive departments and agencies by 

adopting the definition of executive 

agency provided in section 2.101 of the 

FAR. 48 CFR 2.101. The proposed 

definition of agency therefore would 

include executive departments within 

the meaning of 5 U.S.C. 101, military 

departments within the meaning of 5 

U.S.C. 102, independent establishments 

within the meaning of 5 U.S.C. 104(1), 

and wholly owned Government 

corporations within the meaning of 31 

U.S.C. 9101. This proposed definition 

would include independent regulatory 

agencies. 

The Department proposes to adopt the 

definition of Associate Solicitor in 29 

CFR 6.2(b), which means the Associate 

Solicitor for Fair Labor Standards, 

Office of the Solicitor, U.S. Department 

of Labor, Washington, DC 20210. 

Consistent with section 2(a) of the 

Executive order, the Department 

proposes to define contract or service 

contract to mean any contract, contractlike instrument, or subcontract for 

services entered into by the Federal 

Government or its contractors that is 

covered by the SCA and its 

implementing regulations. 86 FR 66397. 

The Department proposes to 

substantially adopt the definition of 

contracting officer in section 2.101 of 

the FAR, which means an agency 

official with the authority to enter into, 

administer, and/or terminate contracts 

and make related determinations and 

findings. The term includes certain 

authorized representatives of the 

contracting officer acting within the 

limits of their authority as delegated by 

the contracting officer. See 48 CFR 

2.101. 

The Department proposes to define 

contractor to mean any individual or 

other legal entity that is awarded a 

Federal Government service contract or 

subcontract under a Federal 

Government service contract. The 

Department notes that, unless the 

context reflects otherwise, the term 

contractor refers collectively to both a 

prime contractor and all of its 

subcontractors of any tier on a service 

contract with the Federal Government. 

This proposed definition incorporates 

relevant aspects of the definitions of the 

term contractor in section 9.403 of the 

FAR, see 48 CFR 9.403, and the SCA’s 

regulations at 29 CFR 4.1a(f). 

Importantly, the Department notes 

that the fact that an individual or entity 

is a contractor under the Department’s 

definition does not mean that such an 

entity has legal obligations under the 

Executive order. A contractor only has 

obligations under the Executive order if 

it has a service contract with the Federal 

Government that is covered by the 

order. Thus, an entity that is awarded a 

service contract with the Federal 

Government will qualify as a 

‘‘contractor’’ pursuant to the 

Department’s definition, but that entity 

will only be subject to the 

nondisplacement requirements of the 

Executive order in connection with a 

particular contract if such contractor is 

awarded or otherwise enters into a 

covered contract for the same or similar 

services as an existing service contract, 

as described in proposed § 9.3, for a 

solicitation issued after the effective 

date of the FAR Council’s amendment of 

the FAR in accordance with section 7(b) 

of Executive Order 14055. 

The Department proposes to define 

business day as Monday through Friday, 

except Federal holidays declared under 

5 U.S.C. 6103 or by executive order. 

Consistent with the definition 

provided in Executive Order 14055, the 

Department proposes to define 

employee to mean a service employee as 

defined in the McNamara-O’Hara 

Service Contract Act of 1965, as 

amended, 41 U.S.C. 6701(3). 86 FR 

66397. Accordingly, employee ‘‘means 

an individual engaged in the 

performance of’’ an SCA-covered 

contract. 41 U.S.C. 6701(3)(A). The term 

employee ‘‘includes an individual 

without regard to any contractual 

relationship alleged to exist between the 

individual and a contractor or 

subcontractor,’’ and it therefore includes 

an individual who identified as an 

independent contractor on the contract. 

The term ‘‘does not include an 

individual employed in a bona fide 

executive, administrative, or 

professional capacity’’ as those terms 

are defined in 29 CFR part 541. 41 

U.S.C. 6701(3)(B)–(C). 

The Department proposes to define 

employment opening to mean any 

vacancy in a service employee position 

on the successor contract. This is 

consistent with the definition of 

employment opening in the regulations 

that implemented Executive Order 

13495. 

The Department proposes to define 

the term Federal Government as an 

agency or instrumentality of the United 

States that enters into a contract 

pursuant to authority derived from the 

Constitution or the laws of the United 

States. This proposed definition is based 

on the definition set forth in the 

regulations that implemented Executive 

Order 13495. Consistent with that 

definition and the SCA, the proposed 

definition of the term Federal 

Government includes nonappropriated 

fund instrumentalities under the 

jurisdiction of the Armed Forces or of 

other Federal agencies. See 29 CFR 

4.107(a). This proposed definition also 

includes independent agencies because 

such agencies are subject to the order’s 

requirements. See 86 FR 66397. For 

purposes of Executive Order 14055 and 

part 9, the Department’s proposed 

definition does not include the District 

of Columbia or any Territory or 

possession of the United States. 

The Department proposes to define 

month under the Executive order as a 

period of 30 consecutive calendar days, 

regardless of the day of the calendar 

month on which it begins. The 

Department believes defining the term 

will clarify how to address partial 

months and will balance calendar 

months of different lengths. This is 

consistent with the definition of month 

in the regulations that implemented 

Executive Order 13495. 

The Department proposes to define 

same or similar work to mean work that 

is either identical to or has primary 

characteristics that are alike in 

substance to work performed on a 

contract that is being replaced either by 

the Federal Government or by a prime 

contractor on a Federal service contract. 

This would require the work under the 

successor contract to, at a minimum, 

share the characteristics essential to the 

work performed under the predecessor 

contract. Accordingly, work under a 

successor contract would not be 

considered to be same or similar work 

where it only shares characteristics 

incidental to performance of the 

contract under the predecessor contract. 

The Department proposes to define 

the term Service Contract Act (SCA) to 

mean the McNamara-O’Hara Service 

Contract Act of 1965, as amended, 41 

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

implementing regulations. See 29 CFR 

4.1a(a). 

The Department proposes to define 

solicitation as any request to submit 

offers, bids, or quotations to the Federal 

Government. This definition is 

consistent with the definition of 

solicitation in both the regulations that 

implemented Executive Order 13495 

and in 48 CFR 2.101. The Department 

broadly interprets the term solicitation 

to apply to both traditional and 

nontraditional methods of solicitation, 

including informal requests by the 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42557 

Federal Government to submit offers or 

quotations. However, the Department 

notes that requests for information 

issued by Federal agencies and informal 

conversations with Federal workers are 

not ‘‘solicitations’’ for purposes of the 

Executive order. 

The Department proposes to define 

the term United States as the United 

States and all executive departments, 

independent establishments, 

administrative agencies, and 

instrumentalities of the United States, 

including corporations of which all or 

substantially all of the stock is owned 

by the United States, by the foregoing 

departments, establishments, agencies, 

instrumentalities, and including 

nonappropriated fund instrumentalities. 

When the term is used in a geographic 

sense, the Department proposes that the 

United States means the 50 States, the 

District of Columbia, Puerto Rico, the 

Virgin Islands, Outer Continental Shelf 

lands as defined in the Outer 

Continental Shelf Lands Act, American 

Samoa, Guam, the Commonwealth of 

the Northern Mariana Islands, Wake 

Island, and Johnston Island. The 

geographic scope component of this 

proposed definition is derived from the 

regulations implementing the SCA at 29 

CFR 4.112(a) and the SCA’s definition of 

the term ‘‘United States’’ at 41 U.S.C. 

6701(4). 

Finally, the Department proposes to 

adopt the definitions of the terms 

Administrative Review Board, 

Administrator, Office of Administrative 

Law Judges, Secretary, and Wage and 

Hour Division set forth in the 

regulations that implemented Executive 

Order 13495. 

Section 9.3 Coverage 

Proposed § 9.3 addresses the coverage 

provisions of Executive Order 14055. 

Proposed § 9.3 explains the scope of the 

Executive order and its coverage of 

executive agencies and contracts. 

Executive Order 14055 provides that 

agencies must, to the extent permitted 

by law, ensure that service contracts and 

subcontracts that succeed a contract for 

performance of the same or similar 

work, and solicitations for such 

contracts and subcontracts, include a 

clause specifying that the successor 

contractor and its subcontractors must, 

except as otherwise provided in the 

order, in good faith offer service 

employees employed under the 

predecessor contract and its 

subcontracts, whose employment would 

be terminated as a result of the award 

of the successor contract or the 

expiration of the contract under which 

the employees were hired, a right of first 

refusal of employment under the 

successor contract in positions for 

which those employees are qualified. 

Section 2 states that ‘‘service contract’’ 

means any contract, contract-like 

instrument, or subcontract for services 

entered into by the Federal Government 

or its contractors that is covered by the 

SCA. Section 2 also defines ‘‘agency’’ to 

mean an executive department or 

agency of the Federal Government, 

including an independent establishment 

subject to the Procurement Act, 40 

U.S.C. 102(4)(A). Section 5 specifies that 

the order would not apply to contracts 

under the simplified acquisition 

threshold as defined in 41 U.S.C. 134. 

Proposed § 9.3 would implement 

these coverage provisions by stating in 

proposed § 9.3(a) that Executive Order 

14055 and part 9 would apply to any 

contract or solicitation for a contract 

with an executive department or agency 

of the Federal Government, provided 

that: (1) it is a contract for services 

covered by the SCA; and (2) the prime 

contract exceeds the simplified 

acquisition threshold as defined in 41 

U.S.C. 134. Proposed § 9.3(b) would 

require all contracts that satisfy the 

requirements of proposed § 9.3(a) to 

contain the contract clause set forth in 

Appendix A, and all contractors on such 

contracts to comply, without limitation, 

with the requirements of paragraphs (e), 

(f), and (g) of proposed § 9.12. Proposed 

§ 9.3(c) would require all contracts that 

satisfy the requirements of proposed 

§ 9.3(a) and that also succeed a contract 

for performance of the same or similar 

work, to contain the contract clause set 

forth at Appendix A, and all contractors 

on such contracts to comply, without 

limitation, with all the requirements of 

proposed § 9.12. Several issues relating 

to the coverage provisions of the 

Executive order and proposed § 9.3 are 

discussed below. 

Coverage of Executive Departments and 

Agencies 

Executive Order 14055 would apply 

to contracts and solicitations for 

contracts with the Federal Government 

that meet the requirements of § 9.3. The 

Department proposes to define Federal 

Government to include ‘‘an agency or 

instrumentality of the United States that 

enters into a contract pursuant to 

authority derived from the Constitution 

or the laws of the United States.’’ See 

§ 9.2. Consistent with section 2(c) of the 

Executive order, the Department 

proposes to define agency as all 

‘‘[e]xecutive department[s] and 

agenc[ies], including independent 

establishment[s] subject to the Federal 

Property and Administrative Services 

Act, 40 U.S.C. 102(4)(A).’’ As used in its 

definition of agency, the Department 

proposes to define executive 

departments and agencies by adopting 

the definition of executive agency 

provided in section 2.101 of the FAR. 48 

CFR 2.101. The proposed rule therefore 

would interpret the Executive order as 

applying to contracts entered into by 

executive departments within the 

meaning of 5 U.S.C. 101, military 

departments within the meaning of 5 

U.S.C. 102, independent establishments 

within the meaning of 5 U.S.C. 104(1), 

and wholly owned Government 

corporations within the meaning of 31 

U.S.C. 9101. This proposed definition 

would include independent regulatory 

agencies. 

The plain text of Executive Order 

14055 reflects that the order applies to 

executive departments and agencies, 

including independent establishments, 

but only when such establishments are 

subject to the Procurement Act, 40 

U.S.C. 121, et seq. Thus, for example, 

contracts awarded by the U.S. Postal 

Service would not be covered by the 

order or part 9 because the U.S. Postal 

Service is not subject to the 

Procurement Act. Finally, pursuant to 

the proposed definition of executive 

departments and agencies, contracts 

awarded by the District of Columbia and 

any Territory or possession of the 

United States would not be covered by 

the order. 

Coverage of Contracts 

Proposed § 9.3(a) provides that the 

requirements of the Executive order 

generally would apply to ‘‘any contract 

or solicitation for a contract with the 

Federal Government.’’ Section 2(a) of 

the Executive order defines contract to 

mean ‘‘any contract, contract-like 

instrument, or subcontract for services 

entered into by the Federal Government 

or its contractors that is covered by the 

Service Contract Act of 1965, as 

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

implementing regulations.’’ The 

Department proposes to set forth a 

broadly inclusive definition of the term 

contract that is consistent with the 

Executive order and how the term is 

used in the SCA. Consistent with the 

definition of the term ‘‘contract’’ in the 

Restatement (Second) of Contracts, 

which was in the process of being 

developed when Congress enacted the 

SCA, an agreement is a ‘‘contract’’ for 

SCA purposes if it amounts to ‘‘a 

promise or set of promises for the 

breach of which the law gives a remedy, 

or the performance of which the law in 

some way recognizes a duty.’’ In re 

Cradle of Forestry in Am. Interpretive 

Ass’n, No. 99–035, 2001 WL 32813, at 

*3 (ARB Mar. 30, 2001) (quoting 

Restatement (Second) of Contracts 


jspears on DSK121TN23PROD with PROPOSALS2
42558 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

section 1 (Am. L. Inst. 1979)). Licenses, 

permits, and similar instruments thus 

may qualify as contracts under the SCA, 

id., regardless of whether parties 

typically consider such instruments to 

be ‘‘contracts’’ and regardless of 

whether such instruments are 

characterized as ‘‘contracts’’ for 

purposes of the specific programs under 

which they are administered. Given the 

SCA’s coverage of a such a wide variety 

of service contracts and its broad 

definition of covered contracts, see, e.g., 

id.; 29 CFR 4.110, the Department views 

the term ‘‘contract-like instrument’’ as 

not expanding the scope of coverage 

under Executive Order 14055, but rather 

as simply reinforcing the breadth of 

contract coverage under the SCA. 

Proposed § 9.3(a) also provides that 

part 9 would apply to ‘‘any . . . 

solicitation for a contract’’ that meets 

the requirements of proposed § 9.3(a). 

The Department proposes to define 

solicitation in § 9.2 to mean ‘‘any 

request to submit offers, bids, or 

quotations to the Federal Government.’’ 

The Department broadly interprets the 

term solicitation to apply to both 

traditional and nontraditional methods 

of solicitation, including informal 

requests by the Federal Government to 

submit offers or quotations. However, 

requests for information issued by 

Federal agencies and informal 

conversations with Federal workers 

would not be ‘‘solicitations’’ for 

purposes of the Executive order. If the 

solicitation is for a contract that would 

be covered by part 9, then the 

solicitation would also be covered. 

Consistent with section 2(a) of 

Executive Order 14055, proposed 

§ 9.3(a)(1) clarifies that the contract 

must be a contract for services covered 

by the SCA in order to be covered by the 

Executive order and part 9. The SCA 

generally applies to every ‘‘contract or 

bid specification for a contract that . . . 

is made by the Federal Government or 

the District of Columbia’’ and that ‘‘has 

as its principal purpose the furnishing 

of services in the United States through 

the use of service employees.’’ 41 U.S.C. 

6702(a)(3). The SCA is intended to cover 

a wide variety of service contracts with 

the Federal Government, so long as the 

principal purpose of the contract is to 

provide services through the use of 

service employees. See, e.g., 29 CFR 

4.130(a). As reflected in the SCA’s 

regulations, where the principal 

purpose of the contract with the Federal 

Government is to provide services 

through the use of service employees, 

the contract is covered by the SCA. See 

29 CFR 4.133(a). Such coverage exists 

regardless of the direct beneficiary of 

the services or the source of the funds 

from which the contractor is paid for the 

service and irrespective of whether the 

contractor performs the work in its own 

establishment, on a Federal Government 

installation, or elsewhere. Id. Coverage 

of the SCA, however, does not extend to 

contracts for services to be performed 

exclusively by persons who are not 

service employees, i.e., persons who 

qualify as bona fide executive, 

administrative, or professional 

employees as defined in the Fair Labor 

Standards Act’s (FLSA) regulations at 29 

CFR part 541. Similarly, a contract for 

professional services performed 

essentially by bona fide professional 

employees, with the use of service 

employees being only a minor factor in 

contract performance, is not covered by 

the SCA and thus would not be covered 

by the Executive order or part 9. See 41 

U.S.C. 6702(a)(3); 29 CFR 4.113(a) and 

4.156; WHD Field Operations Handbook 

(FOH) ¶¶ 14b05, 14c07. 

Coverage of Contracts Above the 

Simplified Acquisition Threshold 

Proposed § 9.3(a)(2) provides that a 

prime contract must exceed the 

simplified acquisition threshold to be 

covered by part 9. This is consistent 

with section 5 of Executive Order 

14055, which provides that the order 

does not apply to contracts under the 

simplified acquisition threshold as 

defined in 41 U.S.C. 134. Unlike 

Executive Order 13495, which excluded 

‘‘contracts or subcontracts under the 

simplified acquisition threshold,’’ 

section 5 of Executive Order 14055 

expressly excludes only ‘‘contracts 

under the simplified acquisition 

threshold[.]’’Accordingly, the 

Department proposes that all 

subcontracts for services, regardless of 

size, would be covered by part 9 if the 

prime contract meets the coverage 

requirements of § 9.3. The Department 

notes, however, that the definitions 

sections of both Executive Order 13495 

and Executive Order 14055 define 

‘‘contract’’ to include ‘‘contract or 

subcontract,’’ which could support a 

continued exception for subcontracts 

under the simplified acquisition 

threshold. For this reason, the 

Department is seeking comment from 

the public on the potential impact, 

including any unintended 

consequences, of covering subcontracts 

below the simplified acquisition 

threshold. 

Coverage of Successor Contracts 

Proposed § 9.3(c) provides 

requirements that would apply only to 

contracts that satisfy the requirements of 

paragraph (a) of proposed § 9.3 and that 

‘‘succeed at contract for performance of 

the same or similar work[.]’’ (emphasis 

added). Pursuant to section 1 of 

Executive Order 14055, this successor 

contract relationship exists when an 

existing service contract ‘‘expires’’ and 

a follow-on contract is awarded. Under 

the Executive order, the Department 

views a service contract as expired 

when the contract ends after a fixed 

period of time or is terminated. In 

contrast, when a term of an existing 

contract is simply extended pursuant to 

an option clause, and no solicitation is 

issued for a follow-on contract, the 

original contract is not considered 

expired, the extended term of the 

contract is not a follow-on contract 

under the Executive order, and the 

requirements of the order and this part 

would not apply. 

In accordance with the terms of 

Executive Order 14055, if a contract 

expires, the Department would consider 

successor service contracts and 

subcontracts for performance of the 

same or similar work, and solicitations 

for such contracts and subcontracts, to 

be covered by the order, assuming the 

successor contracts meet the 

requirements of proposed § 9.3(a). Thus, 

for example, when the term of a contract 

ends and a follow-on contract is 

awarded as a result of a solicitation, a 

predecessor-successor relationship 

would exist for purposes of Executive 

Order 14055 if the two contracts were 

for the same or similar work. Similarly, 

if a contract is terminated, a solicitation 

for a follow-on contract is issued and 

the follow-on contract is awarded, a 

predecessor-successor relationship 

would exist for purposes of Executive 

Order 14055, again if the two contracts 

were for the same or similar work. The 

identity of the contractor awarded the 

successor contract would not impact the 

coverage determination. For example, 

when a contract expires and the same 

contractor is awarded the successor 

contract, the terms of the order and part 

9 would apply. Similarly, the successor 

contract would not need to be awarded 

by the same contracting agency as the 

predecessor contract in order to be 

covered by the Executive order and this 

part. 

Coverage of Contracts for Same or 

Similar Work 

Consistent with section 3 of Executive 

Order 14055, proposed § 9.3(c) would 

require successor contracts that satisfy 

the requirements of paragraph (a) of 

proposed § 9.3 and that are for 

‘‘performance of the same or similar 

work’’ to meet additional requirements 

of part 9. As explained in the discussion 

of proposed § 9.2, the Department 

proposes to define same or similar work 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42559 

as ‘‘work that is either identical to or 

has primary characteristics that are alike 

in substance to work performed on a 

contract that is being replaced by the 

Federal Government or a contractor on 

a Federal service contract.’’ This 

definition would require the work under 

the successor contract to, at a minimum, 

share the characteristics essential to the 

work to be performed under the 

predecessor contract. Accordingly, work 

under a successor contract would not be 

considered to be same or similar work 

where it only shares characteristics 

incidental to performance of the 

contract under the predecessor contract. 

In many instances, determining 

whether a contract involves the same or 

similar work as the predecessor contract 

will be straightforward. For example, 

when a contract for food service at a 

Federal building expires and a new 

contract for food service begins at the 

same location that requires many of the 

same job classifications as the 

predecessor contract, the work on the 

successor contract would be considered 

to be ‘‘same or similar work.’’ This 

would be true even where more limited 

food services are provided under the 

successor contract than the predecessor 

contract, or where work on the 

successor contract requires additional 

job classifications that were not required 

for work under the predecessor contract. 

In other instances, the particular facts 

and circumstances may need to be 

carefully scrutinized in order to 

determine whether a contract involves 

the same or similar work as the 

predecessor contract. For example, 

when a contract expires, specific 

requirements from the contract may be 

broken out and placed in a new contract 

or combined with requirements from 

other contracts into a consolidated new 

contract. In such circumstances, it will 

be necessary to evaluate the extent to 

which the prior and new contracts 

involve the same or similar functions of 

work and the same or similar job 

classifications in order to determine 

whether the prior and new contracts 

involve the same or similar services. 

Finally, in some instances, it will be 

evident that two contracts do not 

involve the same or similar work. For 

example, if an SCA-covered contract to 

operate a gift shop in a Federal building 

expires, and a new contract is awarded 

to operate a dry cleaning service in the 

same physical space as had been 

occupied by the gift shop, the two 

contracts would not involve the same or 

similar work because, even though the 

place of contract performance would be 

the same, the nature of the work 

performed under the contracts, and the 

job classifications performing the work, 

would not be the same or similar. 

Coverage of Subcontracts 

Consistent with sections 2 and 3 of 

Executive Order 14055, which specify 

that the nondisplacement requirements 

apply equally to subcontracts, the 

Department notes that where a prime 

contract is covered by the order and part 

9, any subcontracts for services are also 

covered and subject to the requirements 

of the order and part 9. However, the 

Executive order does not apply to nonservice subcontracts between a 

subcontractor and a prime contractor for 

use on a covered Federal contract. For 

example, a subcontract to supply 

napkins and utensils to a prime 

contractor as part of a covered contract 

to operate a cafeteria in a Federal 

building is not a covered subcontract for 

purposes of this order because it is a 

supply subcontract rather than a 

subcontract for services. 

Geographic Scope 

The Executive Order and this part 

would only apply to contracts with the 

Federal Government requiring 

performance in whole or in part within 

the United States, which is defined to 

mean, when used in a geographic sense, 

the 50 States, the District of Columbia, 

Puerto Rico, the Virgin Islands, Outer 

Continental Shelf lands as defined in 

the Outer Continental Shelf Lands Act, 

American Samoa, Guam, the 

Commonwealth of the Northern Mariana 

Islands, Wake Island, and Johnston 

Island. Under this approach—which is 

consistent with the geographic scope of 

coverage under the SCA—the Executive 

order and this part would not apply to 

contracts with the Federal Government 

to be performed in their entirety outside 

the geographical limits of the United 

States as thus defined. However, if a 

contract with the Federal Government is 

to be performed in part within and in 

part outside these geographical limits 

and is otherwise covered by the 

Executive order and this part, the order 

and this part would apply to the 

contract and require a right of first 

refusal for any workers that have 

performed work inside the geographical 

limits of the United States as defined. 

As noted previously, contracts awarded 

by the District of Columbia or any 

Territory or possession of the United 

States would not be covered by the 

order, as neither the District of 

Columbia nor any Territory or 

possession of the United States would 

constitute an executive department or 

agency under this part. 

Section 9.4 Exclusions 

Pursuant to section 5(a) of Executive 

Order 14055, proposed § 9.4(a) 

addresses the exclusion for contracts 

under the simplified acquisition 

threshold, as defined in 41 U.S.C. 134. 

The simplified acquisition threshold 

currently is $250,000. 41 U.S.C. 134. 

The proposed regulations would omit 

that amount from the regulatory text in 

the event that a future statutory 

amendment changes the amount. Any 

such change would automatically apply 

to contracts subject to part 9. 

Proposed § 9.4(a)(2) clarifies that the 

exclusion provision at § 9.4(a)(1) would 

apply only to prime contracts under the 

simplified acquisition threshold and 

that whether a subcontract is excluded 

from the requirements of part 9 is 

dependent on the prime contract 

amount. As discussed above, section 

5(a) of Executive Order 14055 excludes 

only ‘‘contracts under the simplified 

acquisition threshold[.]’’ This language 

differs from Executive Order 13495, 

which excluded ‘‘contracts or 

subcontracts under the simplified 

acquisition threshold’’ (emphasis 

added). Accordingly, proposed 

§ 9.4(a)(2) explains that subcontracts 

would be excluded under § 9.4(a)(1) 

only if the prime contract is under the 

simplified acquisition threshold, but, as 

explained above, the Department is 

seeking comment from the public on the 

potential impact, including any 

unintended consequences, of covering 

subcontracts below the simplified 

acquisition threshold. 

Proposed § 9.4(b) would implement 

the exclusion in section 5(b) of 

Executive Order 14055 relating to 

employment where Federal service 

work constitutes only part of the 

employee’s job. 

Proposed § 9.4 does not include an 

exclusion for contracts awarded for 

services produced or provided by 

persons who are blind or have severe 

disabilities. Executive Order 14055 

diverges from Executive Order 13495 

with respect to such contracts. Section 

3 of Executive Order 13495 specifically 

excluded ‘‘contracts or subcontracts 

awarded pursuant to the Javits-WagnerO’Day Act, 41 U.S.C. 46–48c;’’ ‘‘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;’’ and ‘‘agreements for vending 

facilities entered into pursuant to the 

preference regulations issued under the 


jspears on DSK121TN23PROD with PROPOSALS2
42560 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

1Section 4 of Executive Order 13495 also 

included the authority to grant a waiver of that 

order’s effect but limited the authority to the ‘‘head 

of a contracting department or agency.’’ 

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

107[.]’’ In contrast, section 5 of 

Executive Order 14055 does not 

enumerate any such exclusions. 

Accordingly, proposed § 9.4 does not 

exclude such contracts from the 

requirements of part 9. 

However, section 12 of Executive 

Order 14055 expressly provides that 

nothing in the order should be 

construed ‘‘to impair or otherwise affect 

. . . the authority granted by law’’ and 

directs that the order be ‘‘implemented 

consistent with applicable law.’’ The 

applicable law encompassed by these 

sections includes, for example, the 

Javits-Wagner-O’Day Act, 41 U.S.C. 

8501–8506, section 505 of the Treasury, 

Postal Services and General Government 

Appropriations Act, 1995, Public Law 

103–329, and the Randolph-Sheppard 

Act, 20 U.S.C. 107. Each of these laws 

establishes requirements for contracts 

awarded for services produced or 

provided by persons who are blind or 

have severe disabilities that may 

conflict with the requirements of 

Executive Order 14055 in that these 

laws may impose hiring requirements 

that preclude, in whole or in part, 

offering employment to the employees 

on the predecessor contract. Where 

direct legal conflicts squarely exist 

between the requirements of Executive 

Order 14055 and the requirements of 

another statute, regulation, Executive 

Order, or Presidential Memoranda 

under the particular factual 

circumstances of a specific situation, the 

requirements of this part would not 

apply. As with any determination to 

except a particular contract from the 

application of the nondisplacement 

requirements, a contracting agency 

would be obligated to follow the 

procedures proposed at § 9.5 to support 

a determination that the requirements of 

this part do not apply because of a 

direct legal conflict. 

The Department recognizes that 

contracting agencies award contracts 

under a wide variety of programs, 

including those mentioned above, many 

of which have, by law, specific 

processes and requirements. The 

Department understands that some of 

these requirements may make 

implementation of the requirements of 

Executive Order 14055 more 

challenging under certain programs than 

others. The Department invites 

comment on any specific programs with 

contracting requirements that may 

conflict with Executive Order 14055 or 

the provisions of this proposed rule. For 

example, the Department recognizes 

that applying the requirements of 

Executive Order 14055 to some 

contracts awarded pursuant the 

Randolph-Sheppard Act, specifically 

the Randolph-Sheppard Vending 

Facility Program (RSVFP), may present 

certain challenges. The Department 

invites interested parties to comment on 

the interaction of the requirements in 

the proposed rule with the provisions of 

the Randolph-Sheppard Act. 

Section 9.5 Exceptions Authorized by 

Agencies 

Exceptions Authorized by Agencies 

Section 6 of the order provides a 

procedure for Federal agencies to except 

particular contracts from the application 

of the nondisplacement requirements. 

The Department proposes to implement 

this procedure through language in § 9.5 

of the regulations. Under section 6 of 

the order, and in proposed § 9.5, an 

agency would be permitted to grant an 

exception from the requirements of 

section 3 of the order (the incorporation 

of the nondisplacement contract clause) 

for a particular contract under certain 

circumstances. The determination must 

be made no later than the solicitation 

date for the contract and must include 

a specific written explanation of why at 

least one of the qualifying 

circumstances exists with respect to that 

contract. 

In § 9.5(a), the Department proposes 

to list the qualifying circumstances for 

an agency exception based on the 

agency exceptions provision in section 

6(a) of the order. These include (1) 

where adhering to the requirements of 

the order or the implementing 

regulations would not advance the 

Federal Government’s interests in 

achieving economy and efficiency in 

Federal procurement; (2) where based 

on a market analysis, adhering to the 

requirements of the order or the 

implementing regulations would both 

substantially reduce the number of 

potential bidders so as to frustrate full 

and open competition and not be 

reasonably tailored to the agency’s 

needs for the contract; or (3) where 

adhering to the requirements of the 

order or the implementing regulations 

would otherwise be inconsistent with 

statutes, regulations, Executive orders, 

or Presidential Memoranda. 

The Department proposes to interpret 

section 6(a) of the order as allowing 

agencies to make exceptions only for 

prime contracts and not for individual 

subcontracts. As discussed above, 

whether a subcontract is covered by the 

order depends on whether the prime 

contract is covered. If the prime contract 

is covered, then the subcontracts under 

that prime contract will also be covered. 

If a prime contract is not covered 

(whether because it does not satisfy an 

element of coverage or because an 

agency has made an exception for that 

prime contract), then the subcontracts 

under that prime contract will also not 

covered. Under the Department’s 

interpretation of section 6(a), there 

would be no mechanism for a prime 

contract to be covered, but for an agency 

to exempt individual subcontracts for 

services under that prime contract. 

The Department’s proposed 

interpretation of section 6(a) follows 

from a comparison of this section with 

the agency exemption provision in 

Executive Order 13495. In Executive 

Order 13495, the agency exemption 

provision permitted agencies to exempt 

‘‘a particular contract, subcontract, or 

purchase order or any class of contracts, 

subcontracts, or purchase orders.’’ In 

Executive Order 14055, however, 

section 6(a) permits agencies to make 

exceptions only for ‘‘a particular 

contract.’’ Accordingly, the proposed 

regulatory text at § 9.5(a) only provides 

the authority for agencies to make an 

exception for ‘‘a prime contract.’’ 

However, the Department also 

recognizes that section 2(a) of the order 

defines the term ‘‘contract’’ as including 

‘‘subcontract,’’ which could support an 

interpretation of section 6(a) as allowing 

a continued case-by-case exception for 

subcontracts. For this reason, the 

Department is seeking comment from 

the public on the potential impact, 

including any unintended 

consequences, of not allowing agency 

exceptions for particular subcontracts or 

classes of subcontracts. 

Section 6(a) of Executive Order 14055 

limits contracting agency exception 

decisions by requiring that a decision to 

except a contract must be made by a 

‘‘senior official’’ within the agency. The 

Department interprets ‘‘senior official’’ 

to mean the senior procurement 

executive, as defined in 41 U.S.C. 

1702(c). Consistent with this 

interpretation, the Department proposes 

regulatory text at § 9.5(a) that identifies 

the senior procurement executive as the 

senior official who must make an 

exception decision. Because the order 

specifically requires the decision to be 

made by a senior official, the 

Department concludes that the decision 

cannot be delegated by the senior 

procurement executive to a lower-level 

official. See 77 FR 75773 (stating the 

same non-delegation principle applied 

to the FAR rule implementing Executive 

Order 13495).1


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42561 

Proposed § 9.5(b) reiterates the 

procedural requirements that section 

6(a) of the order states must be satisfied 

for an exception to be effective. The 

proposed language would require that 

the action to except a contract from 

some or all of the requirements of the 

Executive order or the regulations 

include a specific written explanation of 

the facts and reasoning supporting the 

determination. Following the text of 

section 6(a) of the order, the proposed 

language in § 9.5(b) would require that 

this written explanation be issued no 

later than the solicitation date, which is 

also the latest date that the action to 

except a contract may be taken. The 

proposed language in § 9.5(b) provides 

that any determination by an agency to 

exercise its exception authority that is 

made after the solicitation date or 

without the specific written explanation 

would be inoperative. In such a 

circumstance, the contract clause has 

been wrongly omitted and the agency 

would be required to take action 

consistent with paragraph (f) of § 9.11 of 

this part. 

Bases for Agency Exceptions 

The Department also proposes to 

provide additional guidance and 

requirements applicable to each of the 

three circumstances in which an agency 

may make an exception for a particular 

contract. 

Proposed § 9.5(c) would address the 

provision in section 6(a)(i) of Executive 

Order 14055 permitting an exception 

where adhering to the requirements of 

the order would not advance the Federal 

Government’s interests in achieving 

economy and efficiency in Federal 

procurement. Although the wording 

differs slightly, the Department 

interprets this circumstance to be 

effectively the same as the agency 

exemption that was included in section 

4 of Executive Order 13495, which 

authorized an exemption where the 

requirements ‘‘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.’’ Both 

provisions require consideration of 

whether, in the specific circumstances 

of the particular contract, economy and 

efficiency will not be served if the 

contract clause is incorporated. In 2011, 

the Department issued detailed 

regulations to implement the Executive 

Order 13495 exemption, including 

factors that could be considered and 

others that could not be considered. See 

76 FR 53726–29 (discussion of 

comments), 53754–55 (regulatory text); 

see also 29 CFR 9.4(d)(4) (2012). 

Because the exception authorized by 

section 6(a)(i) of Executive Order 14055 

requires a similar consideration of 

economy and efficiency, the Department 

proposes language in § 9.5(c) that would 

incorporate much of that previous 

regulatory language. 

In § 9.5(c), the Department also 

proposes to include language stating 

that the written analysis that 

accompanies the determination must, 

among other things, compare the 

anticipated outcomes of hiring 

predecessor contract employees with 

those of hiring a new workforce. In 

addition, the Department proposes to 

include the requirement that the 

consideration of cost and other factors 

in exercising the agency’s exception 

authority must reflect the general 

findings made in section 1 of the 

Executive order that the government’s 

procurement interests in economy and 

efficiency are normally served when the 

successor contractor hires the 

predecessor’s employees, and must 

specify how the particular 

circumstances support a contrary 

conclusion. 

In § 9.5(c)(1), the Department 

proposes to list factors that the 

contracting agency may consider in 

making its determination. These factors 

are the same factors that the Department 

adopted in the regulations that 

implemented Executive Order 13495. 

They would include circumstances 

where the use of the carryover 

workforce would greatly increase 

disruption to the delivery of services 

during the period of transition between 

contracts. This might occur where, for 

example, the entire predecessor 

workforce would require extensive 

training to learn new technology or 

processes that would not be required of 

a new workforce. They also could 

include emergency situations, such as a 

natural disaster or an act of war, that 

physically displace incumbent 

employees. Finally, they could include 

situations where the senior official at 

the contracting agency reasonably 

believes, based on the predecessor 

employees’ past performance, that the 

entire predecessor workforce failed, 

individually as well as collectively, to 

perform suitably—and it would not be 

economical or efficient to provide 

supplemental training to these workers. 

The determination that the entire 

workforce failed cannot be made lightly. 

A senior agency official that makes such 

a determination must demonstrate that 

their belief is reasonable and is based 

upon reliable evidence that has been 

provided by a knowledgeable source, 

such as department or agency officials 

responsible for monitoring performance 

under the contract. Absent an ability to 

demonstrate that this belief is based 

upon reliable evidence, such as written 

credible information provided by such a 

knowledgeable source, the employees 

working under the predecessor contract 

in the last month of performance would 

be presumed to have performed suitable 

work on the contract. The head of a 

contracting agency or department may 

demonstrate a reasonable belief that an 

entire workforce, in fact, failed to 

perform suitably on the predecessor 

contract through written evidence that 

all of the employees, collectively and 

individually, did not perform suitably. 

Alone, information regarding the 

general performance of the predecessor 

contractor is not sufficient to justify an 

exception. It is also less likely that the 

agency would be able to make this 

showing where the predecessor 

employed a large workforce. 

In § 9.5(c)(2), the Department 

proposes to list factors that the 

contracting agency may not consider in 

making an exception determination 

related to economy and efficiency. 

These include any general presumptions 

that directly contravene the purpose and 

findings of the order, such as any 

general presumption—without some 

contract-specific facts—that the use of a 

carryover workforce would increase (as 

opposed to decrease) disruption of 

services during the transition between 

contracts. While, as described above, 

contract-specific factors demonstrating a 

potential for disruption are a potential 

factor that may be considered, any 

general presumption as to such 

disruption would be contrary to and 

inconsistent with the purpose and 

findings of the order. Similarly, it would 

not be permissible to consider 

hypothetical cost savings that a 

contractor might attempt to achieve by 

hiring a workforce with less seniority, 

given the critical benefits that an 

experienced contractor workforce 

provides to the government. 

The Department proposes, as it did in 

the regulations that implemented 

Executive Order 13495, to preclude 

agencies from using any potential 

reconfiguration of the contract 

workforce by the successor contractor as 

a factor in supporting an exception. 

Successor contractors are permitted to 

reconfigure the staffing pattern to 

increase the number of employees 

employed in some positions while 

decreasing the number of employees in 

others. In such cases, providing a right 

of first refusal does not affect the 

contractor’s ability to do so, except that 

proposed § 9.12(c)(3) would require the 

contractor to examine the qualifications 

of each employee so as to minimize 

displacement. Thus, any potential for 


jspears on DSK121TN23PROD with PROPOSALS2
42562 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

reconfiguration cannot justify excepting 

the entire contract from coverage. 

The Department also proposes, as it 

did in the regulations that implemented 

Executive Order 13495, to prohibit any 

exception decision based solely on the 

contract performance by the predecessor 

contractor. This would include the 

termination of a service contract for 

default, which, standing alone, would 

not satisfy the exception standards of 

section 6(a)(i) of the Executive order. 

Such defaults, as well as other 

performance problems not leading to 

default, may result from poor 

management decisions of the 

predecessor contractor that have been 

addressed by awarding the contract to 

another entity. Even where contract 

problems can be traced to specific poor 

performing service employees, that is 

not necessarily sufficient to justify 

invocation of the exception, as, 

consistent with section 3(a) of the 

Executive order, the successor 

contractor can decline to offer the right 

of first refusal to employees for whom 

the contractor reasonably believes, 

based on reliable evidence of the 

particular employees’ past performance, 

that there would be just cause to 

discharge the employee. 

Finally, the Department limits 

contracting agencies from considering 

wage rates and fringe benefit rates of 

services employees in most 

circumstances. Minimum wage and 

fringe benefit rates are set by the SCA 

and will apply regardless of whether the 

predecessor workforce is re-hired. Thus, 

as a general matter, cost savings from a 

reduction in wage or fringe benefits is 

not an appropriate basis for making an 

exception for a contract from the order’s 

requirements. Moreover, even where 

cost savings may be achieved 

theoretically by lowering wages and 

fringe benefits, such savings would be 

an inappropriate basis alone for an 

exception from the order because higher 

wages and benefits allow for the 

employment of workers with more skills 

and experience. Cf. 48 CFR 52.222–46 

(stating, with regard to professional 

contracts not subject to the SCA, that 

‘‘[p]rofessional compensation that is 

unrealistically low or not in reasonable 

relationship to the various job 

categories, since it may impair the 

Contractor’s ability to attract and retain 

competent professional service 

employees, may be viewed as evidence 

of failure to comprehend the complexity 

of the contract requirements’’). While 

barring the consideration of wage costs 

in most circumstances, the proposed 

language in § 9.5(c)(2) would allow such 

costs to be considered in exceptional 

circumstances. These exceptional 

circumstances would be limited to 

emergency situations; where the entire 

workforce would need significant 

training; or in other similar situations in 

which the cost of employing a carryover 

workforce on the successor contract 

would be prohibitive. 

Proposed § 9.5(d) would address the 

provision in section 6(a)(ii) of Executive 

Order 14055 providing that an 

exception may be appropriate where 

application of the nondisplacement 

requirements would substantially 

reduce the number of potential bidders 

so as to frustrate full and open 

competition and not be reasonably 

tailored to the agency’s needs for the 

contract. The proposed language of 

§ 9.5(d) would clarify that a reduction in 

the number of potential bidders is not, 

alone, sufficient to except a contract 

from coverage under this authority; the 

senior official at the contracting agency 

must also find that inclusion of the 

contract clause would frustrate full and 

open competition and would not be 

reasonably tailored to the agency’s 

needs for the contract. The proposed 

language states that on finding that 

inclusion of the contract clause would 

not be reasonably tailored to the 

agency’s needs, the agency must specify 

in its written explanation how it intends 

to more effectively achieve the benefits 

that would have been provided by a 

carryover workforce, including physical 

and information security and a 

reduction in disruption of services. 

The order, and the proposed 

regulatory language, requires that any 

exercise of this authority must be based 

on a market analysis. As a general 

matter, during the acquisition process 

for FAR-covered procurements, an 

agency must ‘‘conduct market research 

appropriate to the circumstances.’’ 48 

CFR 10.001. Thus, the extent of market 

research conducted for any acquisition 

‘‘will vary, depending on such factors as 

urgency, estimated dollar value, 

complexity, and past experience.’’ 48 

CFR 10.002. The market analysis must 

be an objective, contemporary, and 

proactive examination of these factors. 

To justify the exception from the 

nondisplacement requirements, the 

market analysis would have to show 

that adherence to the requirements 

would ‘‘substantially’’ reduce the 

number of potential bidders so as to 

frustrate full and open competition. The 

likely reduction in the number of 

potential offerors indicated by market 

analysis is not, by itself, sufficient to 

except a contract from coverage under 

this authority unless the agency 

concludes that adhering to the 

nondisplacement requirements would 

diminish the number of potential 

offerors to such a degree that adequate 

competition at a fair and reasonable 

price could not be achieved and 

adhering to the nondisplacement 

requirements would not be reasonably 

tailored to the agency’s needs. 

Consistent with section 6(a) of 

Executive Order 14055, as with any of 

the exceptions, where an agency seeks 

to except a particular contract under 

this competition-related analysis, the 

agency would be required to provide a 

‘‘specific written explanation’’ of why 

the circumstance exists. Thus, the 

agency’s market analysis—and 

consideration of whether the 

requirements are nonetheless reasonably 

tailored to its needs—would need to be 

documented in a manner sufficient to 

provide and support such an 

explanation. See also 48 CFR 4.801(b) 

(requiring sufficient documentation in 

contract files to support actions taken). 

Proposed § 9.5(e) would address the 

provision in section 6(a)(iii) of 

Executive Order 14055 providing that 

an exception may be appropriate where 

adhering to the requirements of the 

order would otherwise be inconsistent 

with statutes, regulations, Executive 

orders, or Presidential Memoranda. In 

§ 9.5(e), the Department proposes to 

require that contracting agencies consult 

with the Department prior to excepting 

contracts on this basis, unless: (1) the 

governing statute at issue is one for 

which the contracting agency has 

regulatory authority, or (2) the 

Department has already issued guidance 

finding an exception on the basis of the 

specific statute, rule, order, or 

memorandum to be appropriate. The 

Department proposes this requirement 

in order to provide consistency, to the 

extent possible, in the application of the 

order. 

Reconsideration of Agency Exceptions 

The Department proposes language at 

§ 9.4(f) to provide a procedure for 

interested parties to request 

reconsideration of agency exception 

determinations. This proposed language 

mirrors the procedure that was included 

in the regulations that implemented 

Executive Order 13495. See 29 CFR 

9.4(d)(5) (2012). In using the term 

‘‘interested parties,’’ the Department 

intends to extend the opportunity to 

request reconsideration to affected 

workers or their representatives, in 

addition to actual or prospective 

bidders. The Department does not 

intend that the term be limited to actual 

or prospective bidders as it is under the 

Competition in Contracting Act. See 31 

U.S.C. 3551(2). The Department seeks 

input from commenters on whether 

there should be a time limit within 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42563 

which interested parties would have to 

request reconsideration, or whether the 

request for reconsideration instead 

should just have to be made before the 

contract is awarded. 

Notification, Publication, and Reporting 

of Agency Exceptions 

Section 6(b) of the order requires 

agencies, to the extent permitted by law 

and consistent with national security 

and executive branch confidentiality 

interests, to publish, on a centralized 

public website, descriptions of the 

exceptions it has granted under that 

section, and to ensure that the 

contractor notifies affected workers and 

their collective bargaining 

representatives, if any, in writing of the 

agency’s determination to grant an 

exception. Section 6(c) of the order also 

requires that, on a quarterly basis, each 

agency must report to the OMB 

descriptions of the exceptions granted 

under this section. In § 9.5(g), the 

Department proposes to include a 

recitation of these notification, 

publication, and reporting requirements. 

Subpart B—Requirements 

Proposed subpart B of part 9 

establishes the requirements that 

contracting agencies and contractors 

will undertake to comply with the 

nondisplacement provisions. 

Section 9.11 Contracting Agency 

Requirements 

Proposed § 9.11 would implement 

section 3 of Executive Order 14055, 

which directs agencies to ensure that 

covered contracts and solicitations 

include the nondisplacement contract 

clause. The proposed section specifies 

contracting agency responsibilities to 

incorporate the nondisplacement 

contract clause in covered contracts, 

provide notice to employees on 

predecessor contracts of their possible 

right to an offer of employment, and to 

consider whether performance of the 

work in the same locality or localities in 

which a predecessor contract is 

currently being performed is reasonably 

necessary to ensure economical and 

efficient provision of services. The 

proposed section also specifies 

contracting agency responsibilities to 

provide the list of employees on the 

predecessor contract to the successor, to 

forward complaints and other pertinent 

information to WHD when there are 

allegations of contractor noncompliance with the Executive order 

and this part, and to retroactively 

incorporate the contract clause when it 

was not initially incorporated. 

Section 3 of Executive Order 14055 

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. 86 FR 66397. Proposed § 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 

work, except for procurement contracts 

subject to the FAR. For procurement 

contracts subject to the FAR, contracting 

agencies will use the clause set forth in 

the FAR developed to implement this 

rule; that clause must both accomplish 

the same purposes as the clause set forth 

in Appendix A and be consistent with 

the requirements set forth in this rule. 

Including the full contract clause in a 

covered contract is an effective and 

practical means of ensuring that 

contractors receive notice of their 

obligations under Executive Order 

14055. Therefore, the Department 

prefers that covered contracts include 

the contract clause in full. However, the 

Department notes that there could be 

instances in which a contracting agency, 

or a contractor, does not include the 

entire contract clause verbatim in a 

covered contract or solicitation for a 

covered contract, but the facts and 

circumstances establish that the 

contracting agency, or contractor, 

sufficiently apprised a prime or lowertier contractor that the Executive order 

and its requirements apply to the 

contract. In such instances, the 

Department believes it would be 

appropriate to find that the full contract 

clause has been properly incorporated 

by reference. See Nat’l Electro-Coatings, 

Inc. v. Brock, Case No. C86–2188, 1988 

WL 125784 (N.D. Ohio 1988); In re 

Progressive Design & Build, Inc., WAB 

Case No. 87–31, 1990 WL 484308 (WAB 

Feb. 21, 1990). The Department 

specifically notes that the full contract 

clause will be deemed to have been 

incorporated by reference in a covered 

contract if the contract provides that 

‘‘Executive Order 14055 

(Nondisplacement of Qualified Workers 

Under Service Contracts), and its 

implementing regulations, including the 

applicable contract clause, are 

incorporated by reference into this 

contract as if fully set forth in this 

contract,’’ with a citation to a web page 

that contains the contract clause in full 

or to the provision of the Code of 

Federal Regulations containing the 

contract clause set forth at Appendix A. 

Contract clause paragraphs (a) 

through (e) of proposed Appendix A 

repeat the clause in paragraphs (a) 

through (e) of the Executive Order 

verbatim, with one exception. The 

proposed modification of the contract 

clause would insert the number of the 

Executive order, 14055, 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. 

Proposed contract clause paragraph 

(a) would require the successor 

contractor and its subcontractors to 

provide the service employees 

employed under the predecessor 

contract (including its subcontracts) the 

right of first refusal of employment in 

positions for which the employees are 

qualified. Proposed contract clause 

paragraph (b) would create two 

exceptions to the right of first refusal. 

One is for employees who are not 

service employees and the other is for 

any employee for whom there would be 

just cause to discharge based on 

evidence of the particular employee’s 

past performance. Proposed contract 

clause paragraph (c) would require 

contractors to furnish the contracting 

officer with a list of employees that the 

contracting officer will provide to the 

successor contractor to ensure the 

successor contractor has the information 

necessary to provide the employees 

with the right of first refusal. Proposed 

contract clause paragraph (d) provides 

that the Secretary may pursue sanctions 

against a contractor for its failure to 

comply with Executive Order 14055. 

Proposed contract clause paragraph (e) 

would require contractors to include 

provisions in their subcontracts that 

ensure that each subcontractor will 

honor the requirements of paragraphs 

(a) through (c), and require contractors 

to take any 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. 

Proposed Appendix A 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 Appendix A to part 9. 

Specifically, proposed contract clause 

paragraph (f)(1) provides notice that the 

contractor must furnish the contracting 

officer with a certified list of names of 

all service employees working under the 

contract (including its subcontracts) at 

the time the list is submitted. The list 

must also include 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. Proposed paragraph 

(f)(1) further explains that if there are 

changes to the workforce made after the 


jspears on DSK121TN23PROD with PROPOSALS2
42564 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

submission of this certified list, the 

contractor must, in accordance with 

proposed paragraph (c), furnish the 

contracting officer with an updated 

certified list of all service employees 

employed within the last month of 

contract performance, including 

anniversary dates of employment and 

dates of separation, if applicable. 

Proposed contract clause paragraph 

(f)(2) provides notice that under certain 

circumstances the contracting officer 

will, upon their own action or upon 

written request of the Administrator, 

withhold or cause to be withheld as 

much of the accrued payments due on 

either the contract or any other contract 

between the contractor and the 

Government that the Administrator 

requests or that the contracting officer 

decides may be necessary to pay unpaid 

wages or to provide other appropriate 

relief due under part 9. 

Proposed contract clause paragraph 

(g) would require the contractor to 

maintain certain records to demonstrate 

compliance with the substantive 

requirements of part 9. This proposed 

paragraph would enable contractors to 

understand their obligations and 

provide a readily accessible list of 

records that contractors would be 

required to maintain. The proposed 

paragraph specifies that the contractor 

would be required to maintain the 

particular records (regardless of format, 

e.g., paper or electronic) for 3 years. The 

specified records would 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 exception claimed 

under part 9; a copy of the employee 

list(s) provided to or 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 WHD Administrator, 

the period covered by such payment, 

the date of payment, along with a copy 

of any receipt form provided by or 

authorized by WHD. The proposed 

clause also states that the contractor is 

to deliver a copy of the receipt form 

provided by or authorized by WHD to 

the employee and, as evidence of 

payment by the contractor, file the 

original receipt signed by the employee 

with the Administrator within 10 

business days after payment is made. 

Proposed contract clause paragraph 

(h) would require the contractor, as a 

condition of the contract award, to 

cooperate in any investigation by the 

contracting agency or the Department 

into possible violations of the 

provisions of the nondisplacement 

clause and to make records requested by 

such official(s) available for inspection, 

copying, or transcription upon request. 

Proposed contract clause paragraph (i) 

provides that disputes concerning the 

requirements of the nondisplacement 

clause would not be subject to the 

general disputes clause of the contract. 

Instead, such disputes would be 

resolved in accordance with the 

procedures in part 9. 

Proposed § 9.11(b) specifies that when 

a contract will be awarded to a 

successor for the same or similar work, 

the contracting officer must take steps to 

ensure that the predecessor contractor 

provides written notice to service 

employees employed under the 

predecessor contract of their possible 

right to an offer of employment, 

consistent with the requirements in 

§ 9.12(e)(3). 

Proposed § 9.11(c) would implement 

the location continuity requirements in 

section 4 of the order. In § 9.11(c)(1), the 

proposed regulatory language restates 

the requirement in section 4(a) of the 

order that, in preparing covered 

solicitations, contracting agencies 

‘‘consider whether performance of the 

work in the same locality or localities in 

which the contract is currently being 

performed is reasonably necessary to 

ensure economical and efficient 

provision of services.’’ In § 9.11(c)(2), 

the proposed regulatory language also 

restates the requirement in section 4(b) 

of the order, that, if a contracting agency 

determines that performance in the 

same locality is reasonably necessary, 

then the agency must, ‘‘to the extent 

consistent with law, include a 

requirement or preference in the 

solicitation for the successor contract 

that it be performed in the same locality 

or localities.’’ 

In § 9.11(c)(3), the Department 

proposes procedural safeguards for the 

required location continuity 

determination. The Department 

proposes to require that agencies 

complete the location continuity 

analysis prior to the date of issuance of 

the solicitation. The Department also 

proposes to require that any agency 

determination not to include a location 

continuity requirement or preference 

must be made in writing by the agency’s 

senior procurement executive. The 

requirement that the determination be 

made in writing is consistent with 48 

CFR 4.801(b) of the FAR, which requires 

sufficient documentation in contract 

files to support actions taken. The 

Department seeks input from 

commenters regarding these proposed 

procedural safeguards and any 

alternative safeguards that might assist 

agencies in ensuring that the location 

continuity determination is carried out 

as required by the order. 

Proposed § 9.11(c)(3) includes 

safeguards to ensure that interested 

parties are able to request 

reconsideration of a determination not 

to include a location continuity 

requirement or preference. Where an 

agency has conducted the location 

continuity analysis and determined that 

no such requirement or preference is 

warranted, the proposed language 

would require that the agency include a 

statement to that effect in the 

solicitation. The statement in the 

solicitation would assist interested 

parties by clarifying that the agency 

conducted the location continuity 

analysis and determined not to include 

the requirement or preference, and did 

not simply fail to conduct the analysis 

at all. The agency would also be 

required to ensure that the incumbent 

contractor notifies affected workers and 

their collective bargaining 

representatives, if any, in writing of the 

agency’s determination not to include a 

location continuity requirement or 

preference and of the workers’ right to 

request reconsideration. This 

notification, and the contractor’s 

confirmation to the agency that the 

notification has been made, would need 

to occur within 5 business days after the 

solicitation is issued. The Department 

has proposed language in the 

nondisplacement contract clause set 

forth in Appendix A that would require 

contractors to agree to provide this 

notification. Finally, § 9.11(c)(3) would 

provide that any request by an 

interested party for reconsideration of 

an agency’s decision to include, or not 

to include, a location continuity 

requirement or preference must be 

directed to the head of the contracting 

department or agency. This provision 

for requesting reconsideration is similar 

to the approach the Department 

proposes with regard to agency 

exceptions in § 9.5 of the regulations. As 

in that section, the use of the term 

‘‘interested parties’’ is intended to 

include workers and worker 

representatives in addition to 

contractors and prospective bidders. 

The Department seeks input from 

commenters on an appropriate time 

limit within which interested parties 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42565 

would have to request reconsideration, 

or whether the request for 

reconsideration instead should just have 

to be made before the contract is 

awarded. 

In § 9.11(c)(4), the Department 

proposes language that restates, in part, 

the language from section 3(b) of the 

order, which clarifies that nothing in the 

order should be interpreted as requiring 

or recommending that contractors, 

subcontractors, or contracting agencies 

must pay relocation costs for employees 

of predecessor contractors hired 

pursuant to their exercise of their rights 

under the order. The Department 

proposes similar language, directed at 

contractors and subcontractors 

specifically, in § 9.12(b)(6). 

The location continuity provision in 

the order and the proposed 

implementing regulations serve an 

important purpose. Like Executive 

Order 13495, Executive Order 14055 

reflects that there is a relationship 

between the effectiveness of the 

nondisplacement order and the location 

of a successor contract. In sections 1 and 

5 of Executive Order 13495, the order 

limited coverage only to contracts for 

similar services at the ‘‘same location.’’ 

While Executive Order 14055 does not 

contain a similar limitation to contracts 

at the ‘‘same location,’’ it contains the 

provision at section 4 that requires 

contracting agencies to consider 

requiring location continuity for all 

covered contracts. 

Executive 14055 also contains 

additional interrelated provisions 

governing how the order will apply 

related to the location of covered 

contracts. As an initial matter, because 

there is no ‘‘same location’’ 

requirement, the order applies 

regardless of the location of the 

successor contract. Thus, even if the 

place of performance for a successor 

contract will be in a different locality 

from the predecessor contract, the 

successor contract would still be 

required to include the 

nondisplacement contract clause and 

the successor contractor would still be 

required to provide workers on the 

predecessor contract with a right of first 

refusal for positions on the new 

contract. Section 3(b) of the order, 

however, clarifies that it should not be 

construed to require or recommend the 

payment of relocation costs to workers 

who exercise their right to take a new 

position under those circumstances. 

The central location continuity 

provisions, in section 1 and section 4 of 

Executive Order 14055, reflect the basic 

conclusion that the right of first refusal 

in the contract clause may have a more 

limited effect if a contract is moved 

beyond commuting distance from the 

predecessor contract. Section 1 states 

that location continuity can often 

provide the same benefits that stem 

from the core nondisplacement 

requirement—which, the order explains, 

includes reducing disruption in the 

delivery of services between contracts, 

maintaining physical and information 

security, and providing experienced and 

well-trained workforces that are familiar 

with the Federal Government’s 

personnel, facilities, and requirements. 

The benefits of using a carryover 

workforce and location continuity are 

intertwined because, for many contracts, 

moving performance to a different 

locality will mean that most (or all) of 

the incumbent contractor’s workers will 

ultimately not be able or willing to 

relocate and therefore will not provide 

a carryover workforce. In such 

circumstances, imposing a location 

continuity requirement or preference 

may be the best way to ensure the 

effectiveness of Executive Order 14055. 

For that reason, section 4 of the order 

requires that for each covered contract, 

the contracting officer consider whether 

to include a requirement or preference 

for location continuity. 

In many cases, contracts may already 

require location continuity for reasons 

other than those stated in the Executive 

order. For example, where the services 

are related to the physical security or 

maintenance of a specific Federal 

facility, the location of the contract 

performance will not be in question. In 

other circumstances, where the Federal 

employees who receive services from or 

provide oversight for the contract at 

issue are located at a specific Federal 

facility, location continuity or a related 

geographic limitation may be 

appropriate to ensure continuity of 

services or facilitate site visits to the 

contractor’s facilities for oversight or 

collaboration purposes. See, e.g., Matter 

of: Novad Mgmt. Consulting, LLC, B– 

419194.5 (July 1, 2021) (finding 

geographic limitation to locate 

contracted loan services within 50 miles 

of Tulsa to be appropriate to facilitate 

oversight and monitoring of contractor 

facility by agency’s Tulsa office). In still 

other cases, however, where the place of 

performance would otherwise be 

unspecified, a location continuity 

requirement may be reasonably 

necessary to secure the economy and 

efficiency benefits identified by 

Executive Order 14055. 

Executive Order 14055 does not 

suggest that a location continuity 

requirement is appropriate in all 

circumstances. Rather, it instructs 

contracting agencies to consider 

whether to impose such a requirement 

or preference on a case-by-case basis. In 

some cases, location continuity may be 

particularly important because the use 

of a carryover workforce provides 

critical benefits. This may be 

particularly true, for example, where the 

incumbent workforce on the contract 

handles classified information or 

sensitive information, such as personal 

financial or identifiable information. For 

such workforces, the contracting agency 

may have an overriding interest in 

keeping the contract’s incumbent 

employees—whose dependability and 

trust have already been tested—rather 

than starting over with a new set of 

contractor employees. In other cases, the 

contracting agency’s basic interest in a 

carryover workforce may be outweighed 

by an agency re-organization that creates 

different location needs. If, for example, 

an agency moves the Federal facility 

that will be providing oversight for the 

contract from one state to another, it 

may make sense not to require or prefer 

location continuity but instead to move 

the preferred contract locality along 

with the related Federal facility even if 

it may have a detrimental effect on 

contract-employee retention. 

Given the order’s requirement that 

contracting agencies consider these 

questions, the Department is 

contemplating whether the proposed 

regulatory provision at § 9.11(c) should 

provide additional guidance on the 

relevant factors that an agency should 

consider when it is considering location 

continuity. The Department seeks 

comment on whether the factors should 

be provided in the regulatory text, and, 

if so, which factors to include and 

whether to provide guidance regarding 

any particular weight that should be 

given to each of them. In this regard, the 

Department notes that the ultimate 

question here—of economy and 

efficiency—may also be at issue in the 

determination of whether a contract 

should be excepted entirely from the 

application of the order, as detailed in 

proposed § 9.5. The location continuity 

determination thus presents some of the 

same questions as those exception 

determinations. For example, given the 

purpose and policy of the order, to what 

extent should contracting agencies be 

required to start with a presumption in 

favor of location continuity in order to 

secure the full benefits of the 

nondisplacement clause on workforce 

retention? When, if ever, is it 

appropriate for contracting officers to 

consider costs—such as the potential to 

reduce labor costs by moving operations 

to a lower-cost locality—as a reason to 

decline to require location continuity? 

What other factors may weigh in favor 


jspears on DSK121TN23PROD with PROPOSALS2
42566 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

of location continuity? For example, 

where there have been significant 

training investments in the incumbent 

contract workforce, or where the 

incumbent workforce has been 

particularly successful in achieving 

contract objectives? How might the 

HUBZone program or other 

procurement-related programs factor 

into a location continuity analysis? How 

should an agency weigh the history of 

remote work or telework by incumbent 

contractor employees in the importance 

of location continuity? Are there 

circumstances in which the contracting 

agency should indicate in the 

solicitation that telework is permitted or 

require the successor contractor to allow 

workers to telework? 

Finally, as discussed further in 

proposed § 9.5 regarding exceptions 

authorized by agencies, the Department 

is proposing regulatory language that 

would make an exception determination 

ineffective as a matter of law if the 

agency does not follow the procedural 

requirements for such an exception. The 

Department seeks comment on whether 

a similar provision is appropriate for 

addressing agency failures to follow 

location continuity procedures. The 

Department also seeks comment on 

whether the regulations should include 

specific remedies for workers or 

sanctions for contractors in the 

circumstances in which a contractor 

fails to timely provide the workers or 

workers’ representative the required 

notice that a contracting agency has 

determined not to include location 

continuity requirements or preferences 

in the solicitation for a successor 

contract. 

Proposed § 9.11(d) would require the 

contracting officer to provide the 

predecessor contractor’s list of 

employees referenced in proposed 

§ 9.12(e)(1) to the successor contractor 

and that, on request, the list will be 

provided to employees or their 

representatives, consistent with the 

Privacy Act, 5 U.S.C. 552a, and other 

applicable law. The predecessor 

contractor’s list of employees must be 

provided no later than 21 calendar days 

prior to the beginning of performance on 

the contract, and if an updated list is 

provided by the predecessor contractor 

pursuant to § 9.12(e)(2), the updated list 

must be provided within 7 calendar 

days of the beginning of performance on 

the contract. However, if the contract is 

awarded less than 30 days before the 

beginning of performance, then the 

predecessor contractor and the 

contracting agency must transmit the 

list as soon as practicable. 

Although the Department anticipates 

that contracting officers typically will be 

able to provide the successor contractor 

with the seniority list almost 

immediately after receiving it from the 

predecessor contractor, there may be 

circumstances (such as if the contracting 

officer has questions about the accuracy 

of the list) in which the contracting 

officer needs several days to check or 

verify the list before transmitting it to 

the successor contractor. The proposed 

deadlines set forth in § 9.11(d) take such 

circumstances into account while also 

providing specific deadlines by which 

the seniority list must be transmitted to 

the successor contractor in order to 

ensure the successor has sufficient time 

to provide the workers with the right of 

first refusal and to ensure continuity of 

performance on the contract. 

Proposed § 9.11(e) addresses 

contracting officers’ responsibilities 

regarding complaints of alleged 

violations of part 9. The proposal states 

that the contracting officer would be 

responsible for reporting complaint 

information to the WHD within 15 

calendar days of WHD’s request for such 

information. The Department believes 

15 calendar days is an appropriate 

timeframe within which to require 

production of information necessary to 

evaluate the complaint. The proposed 

section elaborates that the contracting 

officer must provide to WHD any 

complaint of contractor noncompliance 

with this part; available statements by 

the employee or the contractor regarding 

the alleged violation; evidence that a 

seniority list was issued by the 

predecessor and provided to the 

successor; a copy of the seniority list; 

evidence that the nondisplacement 

contract clause was included in the 

contract or that the contract was 

excepted by the agency; information 

concerning known settlement 

negotiations between the parties (if 

applicable); and other pertinent 

information the contracting officer 

chooses to disclose. 

When the nondisplacement contract 

clause is erroneously excluded from the 

contract, proposed § 9.11(f) would 

require a contracting agency to 

retroactively incorporate the 

nondisplacement contract clause on its 

own initiative or within 15 calendar 

days of notification by an authorized 

representative from the Department. 

There may be limited circumstances 

where only prospective, rather than 

retroactive, application of the contract 

clause is warranted. For example, solely 

prospective relief might be warranted 

where the contracting officer omitted 

the clause in good faith because, based 

on the available information at the time, 

a predecessor-successor relationship 

was not evident. Proposed § 9.11(f) 

acknowledges this and permits the 

Administrator, at their discretion, to 

determine that the circumstances 

warrant prospective, rather than 

retroactive, incorporation of the contract 

clause. The requirements for successor 

contractors on how to proceed when the 

nondisplacement clause is retroactively 

incorporated into a contract after the 

successor contractor already has begun 

performance on the contract are detailed 

in § 9.12(b)(8). If the erroneous omission 

of the contract clause from a solicitation 

is discovered before contract award, 

proposed § 9.11(f) would also require 

the contracting agency to amend the 

solicitation. 

Section 9.12 Contractor Requirements 

and Prerogatives 

Proposed § 9.12 would implement 

contractors’ requirements and 

prerogatives under the nondisplacement 

requirements. The proposed section 

would consist 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 § 9.12(a)(1) would 

implement the requirement that the 

successor contractor and any 

subcontractors offer employment to the 

employees on the predecessor contract 

prior to filling employment openings. 

Specifically, the proposal provides that, 

except as provided under the exclusion 

listed in proposed § 9.4(b) or the 

exceptions listed in paragraph (c) of 

proposed § 9.12, a successor contractor 

or subcontractor must 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. Because the 

term employee ‘‘includes an individual 

without regard to any contractual 

relationship alleged to exist between the 

individual and a contractor or 

subcontractor,’’ the obligation to make 

good faith offers of employment extends 

to independent contractor service 

employees performing work under the 

predecessor contract. In making such an 

offer, a successor contractor may hire as 

an employee a worker who was an 

independent contractor under the 

predecessor contract. To the extent 

necessary to meet its anticipated staffing 

pattern and in accordance with the 

requirements described at 9.12(d), the 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42567 

successor contractor and its 

subcontractors would be required to 

make a bona fide, express offer of 

employment to each employee to a 

position for which the employee is 

qualified and state the time within 

which the employee must accept such 

offer. Although the offer must be for a 

position for which the employee is 

qualified, it does not necessarily need to 

be for the same or similar position as the 

employee held on the predecessor 

contract, as discussed in proposed 

§ 9.12(b)(4). In no case may the 

contractor or subcontractor give an 

employee fewer than 10 business days 

to consider and accept the offer of 

employment. 

Proposed § 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 

were not provided a list of the 

predecessor contractor’s employees or if 

the list did not contain the names of all 

employees employed during the final 

month of contract performance. 

Proposed § 9.12(a)(3) discusses how a 

successor contractor should determine 

employee eligibility for a job offer. 

Under this proposal, an employee 

would be entitled to a job offer if the 

employee’s 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. In 

addition, a successor contractor would 

also be required to accept other reliable 

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 an employee’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 or that 

otherwise reflects that the employee 

worked on the predecessor contract 

during the last month of performance. 

The successor contractor could verify 

the claim with the contracting agency, 

the predecessor, or another person who 

worked at the facility, though if the 

successor contractor is unable to verify 

the claim, the paycheck stub would be 

considered sufficient to demonstrate 

eligibility absent evidence from the 

predecessor employer indicating 

otherwise. 

Proposed § 9.12(a)(4) proposes to 

clarify that contractors and 

subcontractors have an affirmative 

obligation to ensure that any covered 

contracts they hold contain the contract 

clause. The contractor or subcontractor 

must notify the contracting officer as 

soon as possible if the contracting 

officer did not incorporate the required 

contract clause into a covered contract. 

Proposed § 9.12(b) discusses the 

method of the job offer. Proposed 

§ 9.12(b)(1) would require that, except 

as otherwise provided in part 9, a 

contractor must make a bona fide, 

express offer of employment to each 

qualified employee on the predecessor 

contract before offering employment on 

the contract to any other employee. To 

determine whether an employee is 

entitled to a bona fide, express offer of 

employment, a contractor may consider 

the exceptions set forth in proposed 

§ 9.12(c) and the conditions detailed in 

§ 9.12(d). Proposed § 9.12(b)(1) would 

clarify that a contractor may only use 

employment screening processes, such 

as drug tests, background checks, 

security clearance checks, and similar 

pre-employment screening mechanisms 

under certain circumstances. These 

employment screening processes may 

only be used when they are specifically 

provided for by the contracting agency, 

are conditions of the service contract, 

and are consistent with Executive Order 

14055 and applicable local, state, and 

Federal laws. Proposed § 9.12(b)(1) also 

would clarify that while the results of 

such screenings may show that an 

employee is unqualified for a position 

and thus not entitled to an offer of 

employment, a contractor may not use 

the requirement of an employment 

screening process by itself to conclude 

an employee is unqualified because they 

have not yet completed that screening 

process. For example, a successor 

contractor that requires all employees to 

undergo a background check cannot 

deem predecessor employees 

unqualified solely because they have 

not completed the specific background 

check the successor contractor requires 

before receiving a job offer. 

Proposed § 9.12(b)(2) discusses the 

time limit in which the employee has a 

right to accept the offer, which the 

contractor determines, but which in no 

case can be fewer than 10 business days. 

The obligation to offer employment to a 

particular employee would cease upon 

the employee’s first refusal of a bona 

fide offer to employment on the 

contract. 

Proposed § 9.12(b)(3) provides the 

process for making the job offer. As 

proposed, the successor contractor 

would be required to make a specific 

oral or written employment offer to each 

employee. An invitation to apply for a 

job, for example, is not a bona fide offer. 

In order to ensure that the offer is 

effectively communicated, the successor 

contractor must take reasonable efforts 

to make the offer in a language that each 

worker understands. The proposed rule 

contains an example of how if the 

successor contractor holds a meeting for 

a group of employees on the predecessor 

contract, it could satisfy this provision 

by having a co-worker or other person 

translate for employees who are not 

fluent in English. Where offers are not 

made in person, the offers should be 

sent by registered or certified mail to the 

employees’ last known address or by 

any other means normally ensuring 

delivery. Examples of such other means 

include, but are not limited to, email to 

the last known email address, delivery 

to the last known address by 

commercial courier or express delivery 

services, or by personal service to the 

last known address. 

Proposed § 9.12(b)(4) would clarify 

that the employment offer may be for 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 

it were not for a position similar to the 

one the employee previously held, if it 

were for a position for which the 

employee were qualified. If a question 

arises concerning an employee’s 

qualifications, that question would be 

decided based upon the employee’s 

education and employment history, 

with particular emphasis on the 

employee’s experience on the 

predecessor contract. A contractor 

would have to base its decision 

regarding an employee’s qualifications 

on reliable 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 relevant 

certificates and diplomas all would be 

credible information. 

Proposed § 9.12(b)(5) would allow for 

an offer of employment to a position 

providing different employment terms 

and conditions than the employee held 

with the predecessor contractor, 

provided the offer is still bona fide, i.e., 

the different employment terms and 

conditions are not offered to discourage 

the employee from accepting the offer. 

This would include changes to pay or 

benefits. The Department also proposes 


jspears on DSK121TN23PROD with PROPOSALS2
42568 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

language in § 9.12(b)(5) that addresses 

how this principle would apply to 

telework or remote work. If a successor 

contractor places limitations on 

telework or remote work for predecessor 

employees that it does not consistently 

place on other, similarly situated 

workers, that may reflect that those 

limitations are intended to cause the 

predecessor employees to refuse the 

offer. Therefore, such a difference likely 

would be impermissible under the 

order. Accordingly, under this proposed 

language, where the successor 

contractor has had or will have any 

employees who work or will work 

entirely in a remote capacity, and the 

successor contractor has employment 

openings on the successor contract in 

the same or similar occupational 

classifications as the positions held by 

those successor employees, the 

successor contractor’s employment offer 

to qualified predecessor employees for 

such openings must include the option 

of remote work under terms and 

conditions that are reasonably similar to 

those afforded to the other employees of 

the successor contractor. Such 

employment, where it is permitted on a 

successor contract and is consistent 

with security and privacy requirements, 

would generally assist with workforce 

carryover even in circumstances where 

the location of contract performance is 

changing. 

In § 9.12(b)(6), the Department 

proposes to repeat, in part, the 

statement in section 3(b) of Executive 

Order 14055 that nothing in the order 

should be interpreted as requiring or 

recommending that contractors, 

subcontractors, or contracting agencies 

must pay relocation costs for employees 

of predecessor contractors hired 

pursuant to their exercise of their rights 

under the order. The Department 

proposes similar language, directed at 

contracting agencies specifically, in 

§ 9.11(c)(3). The Department notes that 

this language does not forbid the 

voluntary payment of relocation 

expenses or the payment of any such 

expenses if they are otherwise required 

by contract or law. Proposed § 9.12(b)(7) 

would provide 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 would be closely examined 

to determine whether the offer was bona 

fide. 

Proposed § 9.12(b)(8) would provide 

requirements for successor contractors 

for proceeding when the contracting 

agency retroactively incorporates the 

nondisplacement clause into a contract 

after the successor contractor has 

already begun performance on the 

contract. Pursuant to proposed § 9.11(f), 

when the nondisplacement contract 

clause has been erroneously excluded 

from a contract, contracting agencies 

would be required to retroactively 

incorporate it. Upon retroactive 

incorporation, the successor contractor 

would be required to offer a right of first 

refusal of employment to the employees 

on the predecessor contract in 

accordance with the requirements of 

Executive Order 14055 and this part. 

Consistent with proposed § 9.11(f), 

proposed § 9.12(b)(8) acknowledges that 

the Administrator may exercise their 

discretion and require only prospective 

application of the contract clause in 

certain circumstances. In such cases, the 

successor contractor and its 

subcontractors would be required to 

provide employees on the predecessor 

contract a right of first refusal for any 

positions that remain open. In the event 

of a vacancy within 90 calendar days of 

the first date of contract performance, 

under proposed § 9.12(b)(8), the 

successor contractor and its 

subcontractors would be required to 

provide the employees under the 

predecessor contract the right of first 

refusal as well, regardless of whether 

incorporation of the contract clause is 

retroactive or prospective. The 

Department believes these requirements 

strike an appropriate balance between 

the interests of the employees on the 

predecessor and successor contracts. 

Proposed § 9.12(c) addresses the 

exceptions to the general obligation to 

offer employment under Executive 

Order 14055. The exceptions would be 

included in the contract clause 

established in section 3 of the Order and 

are distinct from the exclusions and 

agency exceptions discussed in 

proposed § 9.4. The exclusions and 

agency exceptions specify both certain 

classes of contracts and certain 

employees that either would be or may 

be excluded from the provisions of 

Executive Order 14055. In contrast, the 

exceptions in proposed § 9.12(c)— 

exceptions from the successor 

contractor’s obligation to offer 

employment on a contract to employees 

on the predecessor contract prior to 

making an offer to anyone else—would 

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). Under this proposal, the 

exceptions in proposed § 9.12(c) would 

be construed narrowly and the 

contractor would bear the burden of 

proof regarding the applicability of any 

exception. 

Under proposed § 9.12(c)(1), a 

successor contractor or subcontractor 

would not be required to offer 

employment to any employee of the 

predecessor whom the predecessor 

contractor will retain. The successor 

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, unless 

the successor contractor can 

demonstrate a reasonable belief to the 

contrary, based upon reliable 

information provided by a 

knowledgeable source, such as the 

predecessor contractor, the employee, or 

the contracting agency. 

Under proposed § 9.12(c)(2), the 

successor contractor or subcontractor 

would not be required to offer 

employment to any worker on the 

predecessor contract who is not a 

service employee. Consistent with the 

definition of service employee in 

proposed § 9.2, this exception would 

apply to a person employed on the 

predecessor contract in a bona fide 

executive, administrative, or 

professional capacity, as those terms are 

defined in 29 CFR part 541. The 

successor contractor would be required 

to presume that all workers appearing 

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

have demonstrated they should have 

been included on the list were service 

employees, unless the successor 

contractor can demonstrate a reasonable 

belief to the contrary, based upon 

reliable 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 this exception. 

Under proposed § 9.12(c)(3), a 

successor contractor or subcontractor 

would not be required to offer 

employment to any employee on the 

predecessor contract if the successor 

contractor or any of its subcontractors 

reasonably believes, based on reliable 

evidence of the particular employee’s 

past performance, that there would be 

just cause to discharge the employee if 

employed by the successor contractor or 

any subcontractors. Again, the successor 

contractor would be required to 

presume that there is no just cause to 

discharge any employees working under 

the predecessor contract in the last 

month of performance, unless the 

successor contractor can demonstrate a 

reasonable belief to the contrary, based 

upon reliable evidence provided by a 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42569 

knowledgeable source, such as the 

predecessor contractor, the local 

supervisor, the employee, or the 

contracting agency. For example, a 

successor contractor could demonstrate 

its reasonable belief that there would be 

just cause to discharge an employee 

through reliable evidence that the 

predecessor contractor initiated a 

process to terminate the employee for 

conduct warranting termination prior to 

the expiration of the contract, but the 

termination process was not completed 

before the contract expired. Similarly, 

conclusive evidence that an employee 

on the predecessor contract engaged in 

misconduct warranting discharge, such 

as sexual harassment or serious safety 

violations, would provide the successor 

contractor with a reasonable belief that 

there would be just cause to discharge 

the employee, even if the predecessor 

contractor elected to impose discipline 

rather than discharge the employee. 

However, evidence that the predecessor 

contractor took disciplinary action 

against an employee for poor 

performance but stopped short of 

recommending termination would not 

generally constitute sufficient evidence 

of just cause to discharge the employee. 

The determination that this exception 

applies must be made on an individual 

basis for each employee. Information 

regarding the general performance of the 

predecessor contractor or any 

subcontractors, or their respective 

workforces, would not be sufficient for 

purposes of this exception. The 

Department is seeking comment on 

whether there are other instances that 

would constitute just cause to discharge 

an employee that the Department 

should take into consideration to 

support the policy laid out in the 

Executive Order. 

Under proposed § 9.12(c)(4), a 

successor contractor or subcontractor 

would not be required to offer 

employment to a service employee that 

provided services under both 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 would be 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 reliable 

evidence provided by a knowledgeable 

source, such as the predecessor 

contractor, the local supervisor, the 

employee, or the contracting agency. In 

making such a reasonable 

determination, the successor must also 

reasonably determine that the 

predecessor did not deploy workers to 

both Federal and non-federal 

contractors purposely to evade the 

requirements of this part. Information 

regarding the general business practices 

of the predecessor contractor or the 

industry would not be sufficient for 

purposes of this exception. 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. 

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 other 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 

would be served when the successor 

hires the predecessor’s employees. 

Conversely, where the employees on the 

predecessor contract were traditionally 

deployed to Federal and nonfederal 

service work as part of their job, the 

successor would not be required to offer 

employment to the workers. 

Proposed § 9.12(d) addresses the 

provision in paragraph (a) of Executive 

Order 14055’s contract clause that 

allows the successor contractor to 

reduce staffing. Proposed § 9.12(d)(1) 

recognizes that the contractor or 

subcontractor may determine the 

number of employees necessary for 

efficient performance of the contract 

and, for bona fide staffing or work 

assignment reasons, permits the 

successor contractor or subcontractor to 

elect to employ fewer employees than 

the predecessor contractor employed in 

performance of the work. Thus, 

generally, the successor contractor or 

subcontractor would not be required to 

offer employment on the contract to all 

employees on the predecessor contract, 

but must offer employment to the 

number of eligible employees the 

successor contractor believes would be 

necessary to meet its anticipated staffing 

pattern. However, where a successor 

contractor does not offer employment to 

all the predecessor contract employees, 

the obligation to offer employment 

would continue for 90 calendar days 

after the successor contractor’s first date 

of performance on the contract. The 

contractor’s obligation under this part 

would end either when all of the 

predecessor contract employees have 

received a bona fide job offer or when 

90 calendar days have passed from the 

successor contractor’s first date of 

performance on the contract. The 

proposed regulation provides several 

examples to demonstrate the principle. 

A successor prime contractor may 

choose to use a different configuration 

of subcontractors than the predecessor 

prime contractor, but any change in the 

number of subcontracts or the scope of 

work that particular subcontractors 

perform does not by itself constitute 

reduced staffing under proposed 

§ 9.12(d) or otherwise alter the 

requirements of Executive Order 14055 

and this part. Consistent with proposed 

§ 9.13, a prime contractor is responsible 

for ensuring that all qualified service 

employees working under the 

predecessor contract (whether they were 

employed directly by the predecessor 

prime contractor or by any 

subcontractors working under the 

predecessor contract) receive an offer of 

employment under the successor 

contract in accordance with the 

requirements of Executive Order 14055 

and this part. Where a prime successor 

contractor chooses to use 

subcontractors, the prime contractor is 

responsible for ensuring that any of its 

subcontractors and lower-tier 

subcontractors offer employment to 

employees employed under the 

predecessor contract (including the 

predecessor subcontracts) in accordance 

with the requirements of Executive 

Order 14055 and this part. Where a 

prime successor contractor chooses to 

use fewer subcontractors than the 

predecessor prime contractor used, and 

instead chooses to employ more workers 

directly, the prime successor contractor 

must offer direct employment to the 

number of eligible employees employed 

under the predecessor contract 

(including workers employed by 

predecessor subcontractors) necessary to 

meet the prime successor contractor’s 

anticipated staffing pattern and as 

otherwise required by Executive Order 

14055 and this part. 

Proposed § 9.12(d)(2) acknowledges 

that in some cases a successor 

contractor may reconfigure the staffing 

pattern to increase the number of 

employees employed in some positions 

while decreasing the number of 

employees in others. In such cases, 

proposed § 9.12(d)(2) would require the 

successor contractor to examine the 

qualifications of each employee in order 

to offer the greatest possible number of 

predecessor contract employees 

positions equivalent to those they held 

under the predecessor contract, thereby 


jspears on DSK121TN23PROD with PROPOSALS2
42570 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

minimizing displacement. The proposed 

regulation provides examples to 

demonstrate this principle. 

Proposed § 9.12(d)(3) clarifies that 

subject to provisions of this part and 

other applicable restrictions (including 

non-discrimination laws and 

regulations), the successor contractor 

may determine to which employees it 

will offer employment. Consistent with 

proposed § 9.1(b), this paragraph is not 

to be construed to excuse 

noncompliance with any applicable 

Executive order, regulation, or Federal, 

state, or local laws. For example, a 

contractor could not use this provision 

to justify unlawful discrimination 

against any worker. While WHD would 

not make determinations regarding 

Federal contractors’ compliance with 

nondiscrimination requirements 

administered by other agencies, a 

finding by the Department’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. 

Proposed § 9.12(e) specifies an 

incumbent contractor’s obligations near 

the end of the contract. Proposed 

§ 9.12(e)(1) would require a contractor 

to, no less than 30 calendar days before 

completion of the contractor’s 

performance of services on a contract, 

furnish the contracting officer a list of 

the names of all service employees 

under the contract and its subcontracts 

at that time. This list must also contain 

the anniversary dates of employment for 

each service employee under the 

contract and its predecessor contracts 

with either the current or predecessor 

contractors or their subcontractors. A 

service employee is considered 

employed under the contract if they are 

in a leave status with the predecessor 

prime contractor or any of its 

subcontractors, whether paid or unpaid, 

and whether for medical or other 

reasons, during the last month of 

contract performance. Proposed 

§ 9.12(e)(1) would allow a contractor to 

satisfy these requirements using the list 

it submits or that it plans to submit to 

satisfy the requirements of the SCA 

contract clause specified at 29 CFR 

4.6(l)(2), assuming there are no changes 

to the workforce before the contract is 

completed. 

Where changes to the workforce are 

made after the submission of this 

certified list pursuant to proposed 

§ 9.12(e)(1), proposed § 9.12(e)(2) would 

require a contractor 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 not less than 10 business 

days before completion of the contract. 

This list must include the anniversary 

dates of employment with either the 

current or predecessor contractors or 

their subcontractors, and, where 

applicable, dates of separation of each 

service employee. 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. 

Proposed § 9.12(e)(3) requires the 

predecessor contractor to, before 

contract completion, provide written 

notice to service employees employed 

under the predecessor contractor of 

their possible right to an offer of 

employment on the successor contract. 

Such notice must be either posted in a 

conspicuous place at the worksite or 

delivered to the employees individually. 

The text of the proposed notice is set 

forth in the Appendix B to part 9. The 

Department intends to translate the 

notice into several common foreign 

languages and make the English and 

translated versions available online in a 

poster format to allow easy access. 

Another form with the same information 

may be used. Proposed § 9.12(e)(3) 

further explains that where the 

predecessor contractor’s workforce is 

comprised of a significant portion of 

workers who are not fluent in English, 

the notice must be provided in both 

English and a language in which the 

employees are fluent. Multiple foreign 

language notices would be required to 

be provided 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 information must be provided in 

English, Korean, and Spanish. If there is 

a question of whether a portion of the 

workforce is significant and the 

Department has a poster in the language 

common to those workers, the notice 

should be posted in that language. The 

Department solicits comments on 

whether it should establish a percentage 

threshold for determining what 

constitutes a ‘‘significant portion of the 

workforce.’’ 

Proposed § 9.12(f) addresses 

recordkeeping requirements. Proposed 

§ 9.12(f)(1) clarifies that this part 

prescribes no particular order or form of 

records for contractors, and that 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. 

Proposed § 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, and the 

names of the employees from the 

predecessor contract to whom an offer 

was made. Proposed § 9.12(f)(2) also 

requires contractors to maintain a copy 

of any record that forms the basis for 

any exclusion or exception 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 that makes retroactive 

payment of wages or compensation 

under the supervision of WHD pursuant 

to proposed § 9.23(b) would be required 

to record and preserve as an entry in the 

pay records the amount of such 

payment to each employee, the period 

covered by the payment, and the date of 

payment to each employee, and to 

report each such payment on a receipt 

form authorized by WHD. Finally, 

proposed § 9.12(f)(2) requires 

contractors to maintain evidence of any 

notices that they have provided to 

workers, or workers’ collective 

bargaining representatives, to satisfy the 

requirements of the order or these 

regulations. These would include 

records of notices of the possibility of 

employment on the successor contract 

that are required under § 9.12(e)(3) of 

the regulations; notices of agency 

exceptions that a contracting agency 

requires a contractor to provide under 

§ 9.5(g) of the regulations and section 

6(b) of the order; and notices that a 

contracting agency has declined to 

include location continuity 

requirements or preferences in a 

solicitation, pursuant to § 9.11(c)(3) of 

the regulations. WHD will use the 

records that are retained pursuant to 

§ 9.12(f)(2) in determining a contractor’s 

compliance and whether debarment is 

warranted. All contractors must retain 

the records listed in proposed 

§ 9.12(f)(2) for at least 3 years from the 

date the records were created and must 

provide copies of such records upon 

request of any authorized representative 

of the contracting agency or the 

Department. 

Proposed § 9.12(g) outlines the 

contractor’s obligations to cooperate 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42571 

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 would not be limited to 

investigations of the contractor’s own 

actions, but would also include 

investigations related to other 

contractors (e.g., predecessor and 

subsequent contractors) and 

subcontractors. 

Section 9.13 Subcontracts 

Proposed § 9.13(a) discusses the 

responsibilities and liabilities of prime 

contractors and subcontractors with 

respect to subcontractor compliance 

with the nondisplacement clause. The 

proposed section would require prime 

contractors to ensure the inclusion of 

the nondisplacement clause contained 

in Appendix A in any subcontracts and 

would require any subcontractors to 

include the nondisplacement clause in 

Appendix A in any lower-tier 

subcontracts. Requiring that the contract 

clause be inserted in all subcontracts, 

including lower-tier subcontracts, 

notifies subcontractors of their 

obligation to provide employees the 

right of first refusal and of the 

enforcement methods WHD may use 

when subcontractors are found to be in 

violation of the Executive order, 

including the withholding of contract 

funds. 

Proposed § 9.13(a) also clarifies that 

prime contractors would be responsible 

for the compliance of any subcontractor 

or lower-tier subcontractor with the 

contract clause in Appendix A. In the 

event of a violation of the contract 

clause, both the prime contractor and 

any subcontractor(s) responsible would 

be held jointly and severally liable. The 

prime contractors’ contractual liability 

for subcontractor violations would be a 

strict liability that would not require 

that the prime contractor knew of or 

should have known of the 

subcontractors’ violations. The 

requirements of this proposed section 

would ensure contractors cannot avoid 

the requirements of part 9 by 

subcontracting the work to other 

contractors. Thus, this section helps to 

ensure that all covered contractors and 

subcontractors of any tier are subject to 

the requirements of Executive Order 

14055 and this part, and that employees 

receive the protections of the order and 

this part regardless of whether they are 

employed by the prime contractor or a 

subcontractor of any tier. 

Proposed § 9.13(b) explains a prime 

contractor’s responsibility to a 

subcontractor’s employees when it 

discontinues the services of a 

subcontractor at any time during the 

contract and performs those services 

itself. Specifically, under this proposed 

section, the prime contractor must offer 

employment to qualified employees of 

the subcontractor who would otherwise 

be displaced. 

Subpart C—Enforcement 

Section 8 of Executive Order 14055, 

titled ‘‘Enforcement,’’ grants the 

Secretary ‘‘authority to investigate 

potential violations of, and obtain 

compliance with, this order.’’ 86 FR 

66399. This proposed subpart addresses 

the process for filing complaints, 

investigations, and remedies and 

penalties for violations. 

Section 9.21 Complaints 

The Department proposes a procedure 

for filing complaints in § 9.21. Section 

9.21(a) outlines the procedure to file a 

complaint with any office of WHD. It 

additionally provides that a complaint 

may be filed orally or in writing and 

that WHD will accept a complaint in 

any language. Section 9.21(b) states the 

well-established policy of the 

Department with respect to confidential 

sources. See 29 CFR 4.191(a); 29 CFR 

5.6(a)(5). 

Section 9.22 Wage and Hour Division 

Investigation 

Proposed § 9.22(a), which outlines 

WHD’s investigative authority, would 

permit the Administrator to initiate an 

investigation either as the result of a 

complaint or at any time on the 

Administrator’s own initiative. As part 

of the investigation, the Administrator 

would be able to inspect the relevant 

records of the relevant contractors (and 

make copies or transcriptions thereof) as 

well as interview representatives and 

employees of those contractors. The 

Administrator would additionally be 

able to interview any of the contractors’ 

workers at the worksite during normal 

work hours and require the production 

of any documents or other evidence 

deemed necessary for inspection to 

determine whether a violation of this 

part (including conduct warranting 

imposition of debarment pursuant to 

§ 9.23(d) of this part) has occurred. The 

section would also require Federal 

agencies and contractors to cooperate 

with authorized representatives of the 

Department in the inspection of records, 

in interviews with workers, and in all 

aspects of investigations. This section is 

consistent with WHD’s investigative 

authority under the acts administered 

by WHD. 

Proposed § 9.22(b) addresses 

subsequent investigations and allows 

the Administrator to conduct a new 

investigation or issue a new 

determination if the Administrator 

concludes the circumstances warrant 

additional action. Situations where 

additional action may be warranted 

include, for example, situations where 

proceedings before an Administrative 

Law Judge (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. 

Section 9.23 Remedies and Sanctions 

for Violations of This Part 

Proposed § 9.23 discusses remedies 

and sanctions for violations of Executive 

Order 14055 and this part. Proposed 

§ 9.23(a) reiterates the authority granted 

to the Secretary in section 8 of 

Executive Order 14055, providing the 

Secretary the authority to issue orders 

prescribing appropriate sanctions and 

remedies, including, but not limited to, 

requiring the contractor to offer 

employment to employees from the 

predecessor contract and payment of 

wages lost. 

Proposed § 9.23(b) provides that, in 

addition to satisfying any costs imposed 

by an administrative order under 

proposed §§ 9.34(j) or 9.35(d), a 

contractor that violates part 9 would be 

required to take appropriate action to 

remedy 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 and 

interest) and other terms, conditions, 

and privileges of that employment. 

Proposed § 9.23(b) would also require 

the contractor to pay interest on any 

underpayment of wages. A payment of 

interest is consistent with the 

instruction in section 8 of the Executive 

order that the Secretary will have the 

authority to issue final orders 

prescribing appropriate sanctions and 

remedies. The payment of interest is an 

appropriate remedial measure to make a 

worker fully whole with a back-pay 

award. The proposed language provides 

that interest would be calculated from 

the date of the underpayment or loss, 

using the interest rate applicable to 

underpayment of taxes under 26 U.S.C. 

6621, and would be compounded daily. 

Various OSHA whistleblower 

regulations use the tax underpayment 

rate and daily compounding because 

that accounting best achieves the makeVerDate Sep<11>2014 20:03 Jul 14, 2022 Jkt 256001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4702 E:\FR\FM\15JYP2.SGM 15JYP2

jspears on DSK121TN23PROD with PROPOSALS2
42572 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

whole purpose of a back-pay award. See 

Procedures for the Handling of 

Retaliation Complaints Under Section 

806 of the Sarbanes-Oxley Act of 2002, 

as Amended, Final Rule, 80 FR 11865, 

11872 (Mar. 5, 2015). The Department 

believes that a similar approach is 

warranted in implementing Executive 

Order 14055. 

Proposed § 9.23(c) addresses the 

withholding of contract funds for noncompliance. Under proposed 

§ 9.23(c)(1), the Administrator may 

direct that payments due on the contract 

or any other contract between the 

contractor and the Federal Government 

be withheld in such amounts as may be 

necessary to pay unpaid wages or to 

provide other appropriate relief. 

Proposed § 9.23(c)(1) permits the crosswithholding of monies due. Crosswithholding is a procedure through 

which contracting agencies withhold 

monies due a contractor from contracts 

other than those on which the alleged 

violations occurred, and it applies to 

require withholding regardless of 

whether the contract on which monies 

are to be withheld is held by a different 

agency from the agency that held the 

contract on which the alleged violations 

occurred. The provision further 

provides that where monies are 

withheld, upon final order of the 

Secretary that unpaid wages or other 

monetary relief are due, the 

Administrator may direct that withheld 

funds be transferred to the Department 

for disbursement. Withholding is a longestablished remedy for a contractor’s 

failure to fulfill its labor standards 

obligations under the SCA. The SCA 

provides for withholding to ensure the 

availability of monies for the payment of 

back wages to covered workers when a 

contractor or subcontractor has failed to 

pay the full amount of required wages. 

29 CFR 4.6(i). The Department believes 

that withholding will be an important 

enforcement tool to effectively enforce 

the requirements of Executive Order 

14055. 

Proposed § 9.23(c)(2) similarly 

provides for the suspension of the 

payment of funds if the contracting 

officer or the Administrator finds that 

the predecessor contractor has failed to 

provide the required list of service 

employees working under the contract 

and its subcontracts as required by 

§ 9.12(e). Proposed § 9.23(c)(3) clarifies 

that if the Administrator directs a 

contracting agency to withhold funds 

from a contractor pursuant to § 9.23(c), 

the Administrator or contracting agency 

must notify the affected contractor. 

Proposed § 9.23(d) provides for 

debarment from Federal contract work 

for up to 3 years for noncompliance 

with any order of the Secretary or for 

willful violations of Executive Order 

14055 or the regulations in this part. 

The proposed provision provides that a 

contractor would have the opportunity 

for a hearing before an order of 

debarment is carried out and before the 

contractor is included on a published 

list of contractors subject to debarment. 

Like withholding, debarment is a longestablished remedy for a contractor’s 

failure to fulfill its labor standard 

obligations under the SCA. 41 U.S.C. 

6706(b); 29 CFR 4.188(a). The 

possibility that a contractor will be 

unable to obtain government contracts 

for a fixed period of time due to 

debarment promotes contractor 

compliance with the SCA, and the 

Department expects such a remedy 

would enhance contractor compliance 

with Executive Order 14055 as well. 

Proposed § 9.23(e) states that the 

Administrator may require a contractor 

to provide any relief appropriate, 

including employment, reinstatement, 

promotion, and the payment of lost 

wages, including interest, when the 

Administrator finds that a contractor 

has interfered with the Administrator’s 

investigation or has in any manner 

discriminated against any person 

because they cooperated in the 

Administrator’s investigation or 

attempted to exercise any rights 

afforded them under this part. The 

Department believes that such a 

provision would help ensure effective 

enforcement of Executive Order 14055, 

as effective enforcement requires worker 

cooperation. Consistent with the 

Supreme Court’s observation in 

interpreting the scope of the FLSA’s 

antiretaliation provision, enforcement of 

Executive Order 14055 will depend 

‘‘upon information and complaints 

received from employees seeking to 

vindicate rights claimed to have been 

denied.’’ Kasten v. Saint-Gobain 

Performance Plastics Corp., 563 U.S. 1, 

11 (2011) (internal quotation marks 

omitted). The antiretaliation provision 

is to be construed broadly to effectuate 

its remedial purpose. Importantly, and 

consistent with the Supreme Court’s 

interpretation of the FLSA’s 

antiretaliation provision, the 

Department’s proposed rule would 

protect workers who file oral as well as 

written complaints. See Kasten, 563 

U.S. at 17. The Department’s proposed 

rule also would protect workers from 

retaliation for filing complaints 

regardless of whether they are filed with 

their employer, a higher-tier 

subcontractor or prime contractor, with 

the Department or another federal 

agency, or from retaliation for otherwise 

taking reasonable action with the intent 

to seek compliance with or enforcement 

of the order. 

While Section 8 of the order 

authorizes the Secretary to prescribe 

appropriate sanctions and remedies, the 

Department does not interpret this 

affirmative direction to the Secretary to 

limit contracting agencies from 

employing any sanctions or remedies 

otherwise available to them under 

applicable law or to limit contracting 

agencies from including noncompliance 

with nondisplacement contractual or 

regulatory provisions in past 

performance reports. 

Subpart D—Administrator’s 

Determination, Mediation, and 

Administrative Proceedings 

Proposed subpart D addresses 

informal and formal proceedings to 

determine compliance with the 

requirements of part 9 and resolution of 

disputes. 

Section 9.31 Determination of the 

Administrator 

Proposed § 9.31(a) provides that when 

an investigation is completed, the 

Administrator would issue a written 

determination of whether a violation 

occurred. A written determination 

would contain a statement of the 

investigation findings and would 

address the appropriate relief and the 

issue of debarment where appropriate. 

Notice of the determination would be 

sent by registered or certified mail to the 

parties’ last known address or by any 

other means normally ensuring delivery. 

Examples of such other means include, 

but are not limited to, email to the last 

known email address, delivery to the 

last known address by commercial 

courier or express delivery services, or 

by personal service to the last known 

address. As has been recently 

highlighted during the COVID–19 

pandemic, while registered or certified 

mail may generally be a reliable means 

of delivery, in some circumstances other 

delivery methods may be just as reliable 

or even more successful at assuring 

delivery. This flexibility would allow 

the Department to choose methods to 

ensure that the necessary notifications 

are effectively delivered to the parties. 

Proposed § 9.31(b)(1) explains that 

where the Administrator has concluded 

that relevant facts are in dispute, the 

notice of determination would advise 

that the Administrator’s 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 sent 

within 20 calendar days of the date of 

the Administrator’s determination, in 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42573 

accordance with proposed § 9.32(b)(1). 

Determining when a request for a 

hearing or any other notification under 

this section was sent will depend on the 

means of delivery, such as by the date 

stamp on an email or the delivery 

confirmation provided by a commercial 

delivery service. The proposed section 

also states that such a request may be 

sent by letter or by any other means 

normally assuring delivery, and that a 

detailed statement of the reasons why 

the Administrator’s determination is in 

error, including the facts alleged to be 

in dispute, if any, must be submitted 

with the request for hearing. The 

proposed regulation further explains 

that the Administrator’s determination 

not to seek debarment is not appealable. 

Proposed § 9.31(b)(2) would apply to 

situations where the Administrator has 

concluded that there are no relevant 

facts in dispute. The Administrator 

would advise the parties and their 

representatives, if any, that the 

Administrator has concluded that no 

relevant facts are in dispute and that the 

determination will become the final 

order of the Secretary and will not be 

appealable in any administrative or 

judicial proceeding unless a petition for 

review is properly filed within 20 days 

of the date of the determination with the 

Administrative Review Board (ARB). 

The Administrator’s determination 

would also advise that if an aggrieved 

party disagrees with the Administrator’s 

factual findings or believes there are 

relevant facts in dispute, the party may 

advise the Administrator of the disputed 

facts and request a hearing by letter or 

by any other means normally assuring 

delivery, sent within 20 calendar days 

of the date of the Administrator’s 

determination. Upon such a request, the 

Administrator will either refer the 

request for a hearing to the Chief 

Administrative Law Judge or notify the 

parties and their representatives of the 

Administrator’s determination that there 

are still no relevant issues of fact and 

that a petition for review may be filed 

with the ARB in accordance with 

proposed § 9.32(b)(2). 

Section 9.32 Requesting Appeals 

Proposed § 9.32 provides procedures 

for requesting appeals. Proposed 

§ 9.32(a) provides that any party 

desiring review of the Administrator’s 

determination, including judicial 

review, must first request a hearing with 

an ALJ or file a petition for review with 

the ARB, as appropriate, in accordance 

with the requirements of proposed 

§ 9.31(b) of this part. 

Proposed § 9.32(b)(1)(i) states that any 

aggrieved party may request a hearing 

by an ALJ within 20 days of the date of 

the determination of the Administrator. 

To request a hearing, the aggrieved party 

must send the request to the Chief 

Administrative Law Judge (ALJ) of the 

Office of Administrative Law Judges 

(OALJ) by letter or by any other means 

normally assuring delivery and the 

request must include a copy of the 

Administrator’s determination. The 

proposed section further requires that 

the party send a copy of the request for 

hearing to the complainant(s) or 

successor contractor, and their 

representatives, if any, and to the 

Administrator and the Associate 

Solicitor. 

Proposed § 9.32(b)(1)(ii) provides that 

a complainant or any other interested 

party may request a hearing where the 

Administrator determines that there is 

no basis for a finding that the employer 

has committed violations(s), or where 

the complainant or other interested 

party believes that the Administrator 

has ordered inadequate monetary relief. 

The proposed section explains that in 

such a proceeding, the party requesting 

the hearing would be the prosecuting 

party and the employer would be the 

respondent. The Administrator may 

intervene in the proceeding as a party or 

as amicus curiae at any time at the 

Administrator’s discretion. Proposed 

§ 9.32(b)(1)(iii) provides that the 

employer or any other interested party 

may request a hearing where the 

Administrator determines, after 

investigation, that the employer has 

committed violation(s). The proposed 

section provides that in such a 

proceeding, the Administrator would be 

the prosecuting party and the employer 

would be the respondent. 

Proposed § 9.32(b)(2)(i) explains that 

any aggrieved party desiring a review of 

the Administrator’s determination in 

which there were no relevant facts in 

dispute, or of an ALJ’s decision, must 

file a petition for review with the ARB 

within 20 calendar days of the date of 

the determination or decision. The 

petition must be served on all parties, 

including the Chief ALJ if the case 

involves an appeal from an ALJ’s 

decision. Proposed § 9.32(b)(2)(ii)(A) 

and (B) state that a petition for review 

must refer to the specific findings of 

fact, conclusions of law, or order at 

issue and that copies of the petition and 

all briefs filed by the parties must be 

served on the Administrator and the 

Associate Solicitor. Proposed 

§ 9.32(b)(2)(ii)(C) further provides that if 

a timely request for a hearing or petition 

for review is filed, the Administrator’s 

determination or the ALJ’s decision, as 

appropriate, would be inoperative 

unless and until the ARB 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 

debarment, however, the remainder of 

the decision would be immediately 

effective. The proposed section clarifies 

that no judicial review would be 

available to parties unless a petition for 

review to the ARB is first filed. 

Section 9.33 Mediation 

In order to resolve disputes by 

efficient and informal alternative 

dispute resolution methods to the extent 

practicable, proposed § 9.33 generally 

encourages parties to use settlement 

judges to mediate settlement 

negotiations pursuant to the procedures 

and requirements of 29 CFR 18.13. 

Proposed § 9.33 also provides that the 

assigned administrative law judge must 

approve any settlement agreement 

reached by the parties consistent with 

the procedures and requirements of 29 

CFR 18.71. 

Section 9.34 Administrative Law Judge 

Hearings 

Proposed § 9.34(a) provides for the 

OALJ to hear and decide in its 

discretion appeals concerning questions 

of law and fact from determinations of 

the Administrator issued under 

proposed § 9.31. The ALJ assigned to the 

case would act fully and finally as the 

authorized representative of the 

Secretary, subject to any appeal filed 

with the ARB, and subject to certain 

limits. 

Proposed § 9.34(a)(2) details the limits 

on the scope of review for proceedings 

before the ALJ. Proposed § 9.34(a)(2)(i) 

would exclude from the ALJ’s authority 

any jurisdiction to pass on the validity 

of any provision of part 9. Proposed 

§ 9.34(a)(2)(ii) provides that the Equal 

Access to Justice Act (EAJA), as 

amended, 5 U.S.C. 504, would not apply 

to proceedings under part 9. The 

proceedings proposed in subpart D are 

not required by an underlying statute to 

be determined on the record after an 

opportunity for an agency hearing. 

Therefore, an ALJ has no authority to 

award attorney fees and/or other 

litigation expenses pursuant to the 

provisions of the EAJA for any 

proceeding under part 9. 

Proposed § 9.34(b) states that absent a 

stay to attempt settlement, the ALJ 

would 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. The hearing would be held 

within 60 days from the date of receipt 

of the hearing request under proposed 

§ 9.34(b). 


jspears on DSK121TN23PROD with PROPOSALS2
42574 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

Proposed § 9.34(c) provides that the 

ALJ may dismiss a party’s challenge to 

a determination of the Administrator if 

the party or the party’s representative 

requests a hearing and fails to attend the 

hearing without good cause. Proposed 

§ 9.34(c) also provides that the ALJ may 

dismiss a challenge to a determination 

of the Administrator if a party fails to 

comply with a lawful order of the ALJ. 

Under proposed § 9.34(d), the 

Administrator would have the right, at 

the Administrator’s discretion, to 

participate as a party or as amicus 

curiae at any time in the proceedings. 

This would include the right to petition 

for review of an ALJ’s decision in a case 

in which the Administrator has not 

previously participated. The 

Administrator would be required to 

participate as a party in any proceeding 

in which the Administrator has 

determined that part 9 has been 

violated, except where the proceeding 

only concerns a challenge to the amount 

of monetary relief awarded. 

Under proposed § 9.34(e), a Federal 

agency that is interested in a proceeding 

would be able to participate as amicus 

curiae at any time in the proceedings. 

The proposed section also states that 

copies of all pleadings in a proceeding 

must be served on the interested Federal 

agency at the request of such Federal 

agency, even if the Federal agency is not 

participating in the proceeding. 

Proposed § 9.34(f) provides that 

copies of the request for hearing under 

this part would be sent to the WHD 

Administrator and the Associate 

Solicitor, regardless of whether the 

Administrator is participating in the 

proceeding. 

With certain exceptions, proposed 

§ 9.34(g) would apply the rules of 

practice and procedure for 

administrative hearings before the OALJ 

at 29 CFR part 18, subpart A, to 

administrative proceedings under this 

part 9. The exceptions 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. In addition, 

proposed § 9.34(g) provides that the 

Rules of Evidence at 29 CFR part 18, 

subpart B, would be inapplicable to 

administrative proceedings under this 

part. This proposed section clarifies that 

rules or principles designed to assure 

production of the most probative 

evidence available would be applied, 

and that the ALJ may exclude 

immaterial, irrelevant, or unduly 

repetitive evidence. 

Proposed § 9.34(h) would require ALJ 

decisions (containing appropriate 

findings, conclusions, and an order) to 

be issued within 60 days after 

completion of the proceeding and to be 

served upon all parties to the 

proceeding. 

Under proposed § 9.34(i), upon the 

issuance of a decision that a violation 

has occurred, the ALJ would order the 

successor contractor to take appropriate 

action to remedy the violation. The 

remedies may include ordering the 

successor contractor to hire each 

affected employee in a position on the 

contract for which the employee is 

qualified, together with compensation 

(including lost wages), terms, 

conditions, and privileges of that 

employment. If the Administrator has 

sought debarment, the order would also 

be required to address whether 

debarment is appropriate. 

Proposed § 9.34(j) would allow the 

ALJ to assess against a successor 

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 when an order finding 

the successor contractor violated part 9 

is issued. This amount would be 

awarded in addition to any unpaid 

wages or other relief due. 

Proposed § 9.34(k) provides that the 

ALJ’s decision would become the final 

order of the Secretary, unless a timely 

appeal is filed with the ARB. 

Section 9.35 Administrative Review 

Board Proceedings 

Proposed § 9.35 describes the ARB’s 

jurisdiction and provides the 

procedures for appealing an ALJ 

decision to the ARB under Executive 

Order 14055. 

Proposed § 9.35(a)(1) states the ARB 

has jurisdiction to hear and decide in its 

discretion appeals from the 

Administrator’s determinations issued 

under § 9.31, and from ALJ decisions 

issued under § 9.34. 

Proposed § 9.35(a)(2) identifies the 

limitations on the ARB’s scope of 

review, including a restriction on 

passing on the validity of any provision 

of part 9, a general prohibition on 

receiving new evidence in the record 

(because the ARB is an appellate body 

and must decide cases before it based on 

substantial evidence in the existing 

record), and a bar on granting attorney 

fees or other litigation expenses under 

the EAJA. 

Proposed § 9.35(b) provides that the 

ARB would issue a final decision within 

90 days following receipt of the petition 

for review and would serve the decision 

by mail on all parties at their last known 

address, and on the Chief ALJ, if the 

case involves an appeal from an ALJ’s 

decision. 

Proposed § 9.35(c) requires the ARB’s 

order to mandate action to remedy the 

violation if the ARB concludes a 

violation occurred. Such action 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. If the Administrator has 

sought debarment, the ARB would be 

required to determine whether 

debarment is appropriate. Proposed 

§ 9.35(c) also provides that the ARB’s 

order is subject to discretionary review 

by the Secretary as provided in 

Secretary’s Order 01–2020 or any 

successor to that order. See Secretary of 

Labor’s Order, 01–2020 (Feb. 21, 2020), 

85 FR 13186 (Mar. 6, 2020). 

Proposed § 9.35(d) allows the ARB to 

assess against a successor 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 would be 

awarded in addition to any unpaid 

wages or other relief due under § 9.23(b) 

of this part. 

Proposed § 9.35(e) provides that the 

ARB’s decision will become the 

Secretary’s final order in the matter in 

accordance with Secretary’s Order 01– 

2020 (or any successor to that order), 

which provides for discretionary review 

of such orders by the Secretary. See id. 

Section 9.36 Severability 

Section 10 of Executive Order 14055 

states that if any provision of the order, 

or the application of any such provision 

to any person or circumstance, is held 

to be invalid, the remainder of the order 

and the application shall not be 

affected. See 86 FR 66400. Consistent 

with this directive, the Department 

proposes to include a severability clause 

in part 9. Proposed § 9.36 explains that 

each provision would be capable of 

operating independently from one 

another. If any provision of part 9 is 

held to be invalid or unenforceable by 

its terms, or as applied to any person or 

circumstance, or stayed pending further 

agency action, the Department intends 

that the remaining provisions would 

remain in effect. 

III. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA), 44 U.S.C. 3501 et seq., and its 

attendant regulations, 5 CFR part 1320, 

require the Department to consider the 

agency’s need for its information 

collections, their practical utility, the 

impact of paperwork and other 

information collection burdens imposed 

on the public, and how to minimize 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42575 

those burdens. 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. 

This rulemaking would require the 

creation of a new information collection 

as well as modification to the burdens 

for an existing collection. As required 

by the PRA, the Department has 

submitted information collections, 

including a new information collection 

and a revision of an existing collection, 

to OMB for review to reflect new 

burdens and changes to existing 

burdens that will result from the 

implementation of Executive Order 

14055. 

Summary: This rulemaking proposes 

to enact regulations implementing 

Executive Order 14055, which generally 

requires Federal service contracts, 

subcontracts, and their solicitations to 

include a clause requiring the successor 

contractor, and its subcontractors, under 

a contract that succeeds a contract for 

performance of the same or similar 

services, to offer service 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 in positions for 

which they are qualified. Section 5 of 

Executive Order 14055 contains 

exclusions, directing that the order will 

not apply to contracts under the 

simplified acquisition threshold or 

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 Executive order. Section 

6 of the order permits agencies to except 

certain contracts from the requirements 

of the Executive Order in certain 

circumstances. Section 8 of Executive 

Order 14055 grants the Secretary of 

Labor authority to investigate potential 

violations of, and obtain compliance 

with, the order. 

Purpose and use: This proposed rule, 

which would implement Executive 

Order 14055, contains the following 

provisions that could be considered to 

entail collections of information: (1) The 

requirement in proposed § 9.12(e) that 

contractors submit a list of the names of 

all service employees working under the 

contract and it subcontractors to the 

contracting officer before contract 

completion; (2) disclosure and 

recordkeeping requirements for covered 

contractors described in proposed 

§ 9.12(f); (3) the complaint process 

described in proposed § 9.21; (4) 

disclosure and records requirements 

under proposed § 9.5; and (5) the 

administrative proceedings described in 

proposed subpart D. 

Proposed § 9.12 states compliance 

requirements for contractors covered by 

Executive Order 14055. Proposed § 9.12 

would require, with certain exceptions, 

a successor contractor and its 

subcontractors to make good faith 

employment offers to qualified service 

employees employed on the predecessor 

contract whose employment will be 

terminated as a result of award of the 

successor contract or the expiration of 

the predecessor contract. Proposed 

§ 9.12(e) would require a predecessor 

contractor 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. 

Additionally, proposed § 9.12(e)(3) 

would require a contractor to provide 

service employees with written notice of 

their possible right to an offer of 

employment on a successor contract. 

Proposed § 9.11 would require the 

contracting officer to furnish that list to 

the successor contractor prior to the 

start of performance of the successor’s 

contract. The successor contractor 

would then use that list to aid in 

satisfying the requirements of § 9.12(a). 

Proposed § 9.12(e)(2) permits the 

contractor to submit and retain the list 

submitted to satisfy the requirements of 

29 CFR 4.6(l)(2) (see OMB Control 

Number 1235–0007) to meet these 

provisions. As contractors are already 

required to develop this list to comply 

with the SCA, the Department believes 

that this requirement does not impose 

any additional information collection 

requirements on contractors. However, 

under proposed § 9.11(c)(3), when an 

agency decides not to include a location 

continuity requirement, the agency must 

ensure that the contractor notifies 

affected workers in writing of the 

agency determination and the right of 

interested parties to request 

reconsideration. The contractor is 

required to confirm to the contracting 

agency that such notice was provided. 

In order to verify compliance with the 

requirements in part 9, proposed 

§ 9.12(f) would require contractors to 

maintain for 3 years copies of certain 

records that are subject to OMB 

clearance under the PRA, 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 

exception claimed from the 

nondisplacement requirements; and (3) 

a copy of the employee list received 

from the contracting agency and the 

employee list provided to the 

contracting agency. See 44 U.S.C. 

3502(3), 3518(c)(1); 5 CFR 1320.3(c), 

–.4(a)(2), –.4(c). Additionally, proposed 

§ 9.12(f)(2) requires contractors to 

maintain evidence of any notices that 

they have provided to workers, or 

workers’ collective bargaining 

representatives, to satisfy the 

requirements of the order or these 

regulations. These would include 

records of notices of the possibility of 

employment on the successor contract 

that are required under § 9.12(e)(3) of 

the regulations; notices of agency 

exceptions that a contracting agency 

requires a contractor to provide under 

section 6(b) of the order, and as 

described in § 9.5(g) of the regulations; 

and notices that a contracting agency 

has declined to include location 

continuity requirements or preferences 

in a solicitation, pursuant to § 9.11(c)(3) 

of the regulations. 

WHD obtains PRA clearance under 

control number 1235–0021 for an 

information collection covering 

complaints alleging violations of various 

labor standards that the agency already 

administers and enforces. An 

Information Collection Request (ICR) 

has been submitted to revise the 

approval to incorporate the regulatory 

citations in this proposed rule 

applicable to complaints and adjust 

burden estimates to reflect any increase 

in the number of complaints filed. 

Proposed subpart D establishes 

administrative proceedings to resolve 

investigation findings. Particularly with 

respect to hearings, the rule would 

impose information collection 

requirements. The Department notes 

that information exchanged between the 

target of a civil or an administrative 

action and the agency in order to resolve 

the action would be exempt from PRA 

requirements. See 44 U.S.C. 

3518(c)(1)(B); 5 CFR 1320.4(a)(2). This 

exemption applies throughout the civil 

or administrative action (such as an 

investigation and any related 

administrative hearings). Therefore, the 

Department has determined the 

administrative requirements contained 

in subpart D of this proposed rule are 

exempt from needing OMB approval 

under the PRA. 

Information and technology: There is 

no particular order or form of records 

prescribed by the proposed regulations. 


jspears on DSK121TN23PROD with PROPOSALS2
42576 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

2See 58 FR 51735, 51741 (Oct. 4, 1993). 

A contractor may meet the requirements 

of this proposed rule using paper or 

electronic means. WHD, in order to 

reduce burden caused by the filing of 

complaints that are not actionable by 

the agency, uses a complaint filing 

process in which complainants discuss 

their concerns with WHD professional 

staff. This process allows agency staff to 

refer complainants raising concerns that 

are not actionable under wage and hour 

laws and regulations to an agency that 

may be able to offer assistance. 

Public comments: The Department 

seeks comments on its analysis that this 

NPRM creates a slight increase in 

paperwork burden associated with ICR 

1235–0021 and creates a new collection 

and supporting burdens on the 

regulated community in 1235–ONEW. 

Commenters may send their views on 

the Department’s PRA analysis in the 

same way they send comments in 

response to the NPRM as a whole (e.g., 

through the www.regulations.gov 

website), including as part of a comment 

responding to the broader NPRM. 

Alternatively, commenters may submit a 

comment specific to this PRA analysis 

by sending an email to 

WHDPRAComments@dol.gov. While 

much of the information provided to 

OMB in support of the information 

collection request appears in the 

preamble, interested parties may obtain 

a copy of the supporting statements for 

the new recordkeeping collection and 

revised complaint process collection by 

sending a written request to the mail 

address shown in the ADDRESSES section 

at the beginning of this preamble. 

Alternatively, a copy of the new ICR 

with applicable supporting 

documentation; including a description 

of the likely respondents, proposed 

frequency of response, and estimated 

total burden may be obtained free of 

charge from the RegInfo.gov website. 

Similarly, the complaint process ICR is 

available by visiting http://

www.reginfo.gov/public/do/PRAMain 

website. As previously indicated, 

written comments directed to the 

Department may be submitted within 30 

days of publication of this notification. 

OMB and the Department are 

particularly interested in comments 

that: 

• Evaluate whether the proposed 

collections of information are 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 submission of 

responses. 

Total burden for the new and 

complaint process information 

collections, including the burdens that 

will be unaffected by this proposed rule 

and any changes are summarized as 

follows: 

Type of review: Revision to currently 

approved information collections. 

Agency: Wage and Hour Division, 

Department of Labor. 

Title: Employment Information Form. 

OMB Control Number: 1235–0021. 

Affected public: Private sector, 

businesses or other for-profits and 

Individuals or Households. 

Estimated number of respondents: 

38,254 (10 from this rulemaking). 

Estimated number of responses: 

38,254 (10 from this rulemaking). 

Frequency of response: On occasion. 

Estimated annual burden hours: 

12,751 (3 burden hours due to this 

NPRM). 

Estimated annual burden costs 

(capital/startup): $0 ($0 from this 

rulemaking). 

Estimated annual burden costs 

(operations/maintenance): $0 ($0 from 

this rulemaking). 

Estimated annual burden costs: 

$559,896 ($132 from this rulemaking). 

Type of Review: New Collection. 

Title: Nondisplacement of Qualified 

Workers Under Service Contracts. 

OMB Control Number: 1235–0NEW. 

Affected public: Private sector, 

businesses or other for-profits and 

Individuals or Households. 

Estimated number of respondents: 

249,400. 

Estimated number of responses: 

4,257,000. 

Frequency of response: Various. 

Estimated annual burden hours: 

230,050. 

Estimated annual burden costs: 

$14,237,795. 

IV. Executive Order 12866, Regulatory 

Planning and Review; Executive Order 

13563, Improved Regulation and 

Regulatory Review 

Under Executive Order 12866, OMB’s 

Office of Information and Regulatory 

Affairs (OIRA) determines whether a 

regulatory action is significant and, 

therefore, subject to the requirements of 

the Executive Order and OMB review.2

Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ 

as a regulatory action that is likely to 

result in a rule that may: (1) have an 

annual effect on the economy of $100 

million or more, or adversely affect in 

a material way a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

state, local, or tribal governments or 

communities (also referred to as 

economically significant); (2) create 

serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel 

legal or policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. OIRA has determined that this 

proposed rule is a ‘‘significant 

regulatory action’’ under section 3(f) of 

Executive Order 12866 and is 

economically significant. 

Executive Order 13563 directs 

agencies to, among other things, propose 

or adopt a regulation only upon a 

reasoned determination that its benefits 

justify its costs; that it is tailored to 

impose the least burden on society, 

consistent with obtaining the regulatory 

objectives; and that, in choosing among 

alternative regulatory approaches, the 

agency has selected those approaches 

that maximize net benefits. Executive 

Order 13563 recognizes that some costs 

and benefits are difficult to quantify and 

provides that, when appropriate and 

permitted by law, agencies may 

consider and discuss qualitatively 

values that are difficult or impossible to 

quantify, including equity, human 

dignity, fairness, and distributive 

impacts. The analysis below outlines 

the impacts that the Department 

anticipates may result from this 

proposed rule and was prepared 

pursuant to the above-mentioned 

executive orders. 

A. Introduction 

On November 18, 2021, President 

Joseph R. Biden, Jr. issued Executive 

Order 14055, ‘‘Nondisplacement of 

Qualified Workers Under Service 

Contracts.’’ 86 FR 66397 (Nov. 23, 

2021). This order explains that ‘‘[w]hen 

a service contract expires, and a followon contract is awarded for the same or 

similar services, the Federal 

Government’s procurement interests in 

economy and efficiency are best served 

when the successor contractor or 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42577 

3The Department recognizes that some SCAcovered contracts that would be covered by this 

rule are not reflected in USASpending.gov (i.e., they 

are SCA-covered contracts that are not procuring 

services directly for the Federal Government, 

including certain licenses, permits, cooperative 

agreements, and concessions contracts, such as, for 

example, delegated leases of space on a military 

base from an agency to a contractor whereby the 

contractor operates a barber shop). However, the 

Department estimates that the number of firms 

holding such SCA-covered nonprocurement 

contracts is a small fraction of the number of firms 

identified based on USASpending.gov. 

4The Department also acknowledges that prime 

contracts that are less than $250,000 and their 

subcontracts would not be covered by this 

regulation but has not made an adjustment for these 

contracts in the estimation of covered contractors. 

Therefore, this estimate may be an overestimate of 

the number of contractors that are actually affected. 

5The Department estimated the number of prime 

contractors using the 2021 USASpending data and 

found that there were fewer contractors in 2021 

than in 2019. The number of prime contractors in 

2019 was 85,987 and the number of prime 

contractors in 2021 was 78,347. This finding is in 

line with our hypothesis that remote work for 

federal employees could have reduced the demand 

for SCA contractors in 2021. 

6For example, the government purchases pencils; 

however, a contract solely to purchase pencils is 

not covered by the SCA and so would not be 

covered by the Executive order. Contracts for goods 

were identified in the USASpending.gov data if the 

product or service code begins with a number (the 

code for services begins with a letter). 

7Contracts covered by DBA were identified in the 

USASpending.gov data where the ‘‘Construction 

Wage Rate Requirements’’ element for a contract is 

marked ‘‘Y,’’ meaning that the contracting agency 

flagged that the contract is covered by the DBA. 

8For subcontractors, the Department was unable 

to make restrictions to limit the data to SCA 

contracts because none of the necessary variables 

are available in the USASpending database (i.e., the 

Labor Standards variable, the Construction Wage 

Rate Requirements variable, or the product or 

service code variable). 

9The North American Industry Classification 

System (NAICS) is a method by which Federal 

statistical agencies classify business establishments 

in order to collect, analyze, and publish data about 

certain industries. Each industry is categorized by 

a sequence of codes ranging from 2 digits (most 

aggregated level) to 6 digits (most granular level). 

https://www.census.gov/naics/. 

10 In the data, a NAICS code is assigned to the 

contract and identifies the industry in which the 

contract work is typically performed. If a firm has 

contracts in several NAICS, the Department has 

assigned it to only one NAICS based on the ordering 

of the contracts in the data (this approximates a 

random assignment to one NAICS). 

subcontractor hires the predecessor’s 

employees, thus avoiding displacement 

of these employees.’’ Accordingly, 

Executive Order 14055 provides that 

contractors and subcontractors 

performing on covered Federal service 

contracts must in good faith offer 

service employees employed under the 

predecessor contract a right of first 

refusal of employment. The order 

applies to all contracts that are covered 

by the SCA. 

This proposed rule requires that 

contracting agencies incorporate into 

every covered Federal service contract 

the contract clause included in 

Executive Order 14055. That clause 

requires a successor contractor and its 

subcontractors to make bona fide, 

express offers of employment to service 

employees employed under the 

predecessor contract whose 

employment would be terminated with 

the change of contract. The required 

contract clause also forbids successor 

contractors or subcontractors from 

filling any contract employment 

openings prior to making such good 

faith offers of employment to employees 

of the predecessor contractor or 

subcontractor. See section II.B. for an indepth discussion of the provisions of 

the Executive order. 

B. Number of Potentially Affected 

Contractor Firms and Workers 

1. Number of Potentially Affected 

Contractor Firms 

To determine the number of firms that 

could potentially be affected by this 

rulemaking, the Department estimated a 

range of potentially affected firms. The 

more narrowly defined population 

(firms actively holding SCA-covered 

contracts) includes 119,700 firms (Table 

1). The broader population (including 

those bidding on SCA contracts but 

without active contracts, or those 

considering bidding in the future) 

includes 449,200 firms. 

i. Firms Currently Holding SCA 

Contracts 

USASpending.gov—the official source 

for spending data for the U.S. 

Government—contains Government 

award data from the Federal 

Procurement Data System Next 

Generation (FPDS–NG), which is the 

system of record for Federal 

procurement data. The Department used 

these data to identify the number of 

firms that currently hold SCA 

contracts.3 4 Although more recent data 

are available, the Department used data 

from 2019 to avoid any shifts in the data 

associated with the COVID–19 

pandemic in 2020. Because many 

Federal employees were working 

remotely throughout 2020 and 2021, 

reliance on service contracts for Federal 

buildings may have been reduced 

during those years and may not reflect 

the level of employment on and 

incidence of SCA contracts going 

forward.5 The Department welcomes 

comments and data on how the COVID– 

19 pandemic has impacted firms and 

workers on SCA contracts. 

To identify firms with SCA contracts, 

the Department included all firms with 

the ‘‘Labor Standards’’ element equal to 

‘‘Y’’ for any of their contracts, meaning 

that the contracting agency flagged the 

contract as covered by the SCA. 

However, because this flag is often 

listed as ‘‘not applicable’’ and appears 

to be reported with error, the 

Department also included some other 

firms. Of the contracts not flagged as 

SCA, the Department excluded (1) those 

for the purchase of goods 6 and (2) those 

covered by the DBA.7 The Department 

also excluded (1) awards for financial 

assistance such as direct payments, 

loans, and insurance; and (2) contracts 

performed outside the U.S. because SCA 

coverage is limited to the 50 states, the 

District of Columbia, and the U.S. 

territories. The firms for the remaining 

contracts are included as potentially 

impacted by this rulemaking. 

In 2019, there were 86,000 unique 

prime contractors in USASpending that 

fit the parameters discussed above, and 

the Department has used this number as 

an estimate of prime contractors with 

active SCA contracts. However, 

subcontractors are also impacted by this 

proposed rule. The Department 

examined 5 years of USASpending data 

(2015 through 2019) and identified 

33,700 unique subcontractors that did 

not hold contracts as prime contractors 

in 2019.8 The Department used 5 years 

of data for the count of subcontractors 

to compensate for lower-tier 

subcontractors that may not be included 

in USASpending.gov. 

In total, the Department estimates 

119,700 firms currently hold SCA 

contracts and could potentially be 

affected by this rulemaking under the 

narrow definition. Table 1 shows these 

firms by 2-digit NAICS code.9 10

ii. All Potentially Affected Contractors 

The Department also cast a wider net 

to identify other potentially affected 

contractors, both those directly affected 

(i.e., holding contracts) and those that 

plan to bid on SCA-covered contracts in 

the future. To determine the number of 

these firms, the Department identified 

firms registered in the General Services 

Administration’s (GSA) System for 

Award Management (SAM) since all 

entities bidding on Federal procurement 

contracts as a prime or grants must 

register in SAM. The Department 

believes that firms registered in SAM 

represent those that may be affected if 

they decide to bid on an SCA contract 

as a prime in the future. However, it is 

also possible that some firms that are 

not already registered in SAM could 

decide to bid on SCA-covered contracts 

after this proposed rulemaking; these 

firms are not included in the 

Department’s estimate. The proposed 


jspears on DSK121TN23PROD with PROPOSALS2
42578 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

11 Data released in monthly files. Available at: 

https://www.sam.gov/SAM/pages/public/extracts/ 

samPublicAccessData.jsf. 

12Entities registering in SAM are asked if they 

wish to bid on contracts. If the firm answers ‘‘yes,’’ 

then they are included as ‘‘All Awards’’ in the 

‘‘Purpose of Registration’’ column in the SAM data. 

The Department included only firms with a value 

of ‘‘Z2,’’ which denotes ‘‘All Awards.’’ 

13While there are certain circumstances in which 

state and local government entities act as 

contractors that enter into contracts covered by the 

SCA, the number of such entities is minimal and 

including all government entities would result in an 

inappropriate overestimation. 

14See 86 FR 38816, 38816–38898. 

15See 81 FR 9591, 9591–9671 and 79 FR 60634– 

60733. 

rule could also impact such firms if they 

are awarded a future contract. 

Because SAM provides a more recent 

snapshot of data, the Department used 

February 2022 SAM data and identified 

415,500 registered firms.11 The 

Department excluded firms with 

expired registrations, firms only 

applying for grants,12 government 

entities (such as city or county 

governments),13 foreign organizations, 

and companies that only sell products 

and do not provide services. SAM 

includes all prime contractors and some 

subcontractors (those that are also prime 

contractors or that have otherwise 

registered in SAM). However, the 

Department is unable to determine the 

number of subcontractors that are not in 

the SAM database. Therefore, the 

Department added the subcontractors 

identified in USASpending to this 

estimate. Adding these 33,700 firms 

identified in USASpending to the 

number of firms in SAM results in 

449,200 potentially affected firms. 

TABLE 1—RANGE OF NUMBER OF POTENTIALLY AFFECTED FIRMS

Industry NAICS 

Lower-bound estimate Upper-bound estimate 

Total Primes from 

USASpending 

Subcontractors 

from 

USASpending 

Total Firms from 

SAM 

Subcontractors 

from 

USASpending 

Agriculture, forestry, fishing and hunting ...... 11 2,482 2,482 0 5,389 5,389 0 

Mining ............................................................ 21 145 102 43 1,010 967 43 

Utilities ........................................................... 22 1,596 1,541 55 2,470 2,415 55 

Construction .................................................. 23 13,708 5,457 8,251 57,587 49,336 8,251 

Manufacturing ................................................ 31–33 13,958 5,637 8,321 52,331 44,010 8,321 

Wholesale trade ............................................ 42 1,205 564 641 18,804 18,163 641 

Retail trade .................................................... 44–45 344 317 27 8,467 8,440 27 

Transportation and warehousing .................. 48–49 3,387 2,998 389 17,473 17,084 389 

Information .................................................... 51 4,061 3,735 326 13,515 13,189 326 

Finance and insurance .................................. 52 475 429 46 3,577 3,531 46 

Real estate and rental and leasing ............... 53 2,822 2,821 1 19,482 19,481 1 

Professional, scientific, and technical services ............................................................ 54 37,739 26,103 11,636 116,120 104,484 11,636 

Management of companies and enterprises 55 3 3 0 598 598 0 

Administrative and waste services ................ 56 15,120 11,509 3,611 37,613 34,002 3,611 

Educational services ..................................... 61 3,609 3,359 250 17,433 17,183 250 

Health care and social assistance ................ 62 7,004 6,987 17 36,376 36,359 17 

Arts, entertainment, and recreation .............. 71 916 915 1 5,562 5,561 1 

Accommodation and food services ............... 72 3,037 3,031 6 11,170 11,164 6 

Other services ............................................... 81 8,084 7,997 87 24,191 24,104 87 

Total private ........................................... ........................ 119,695 85,987 33,708 449,168 415,460 33,708 

2. Number of Potentially Affected 

Workers 

There are no readily available data on 

the number of workers working on SCA 

contracts; therefore, to estimate the 

number of these workers, the 

Department employed the approach 

used in the 2021 final rule, ‘‘Increasing 

the Minimum Wage for Federal 

Contractors,’’ which implements 

Executive Order 14026.14 That 

methodology is based on the 2016 

rulemaking implementing Executive 

Order 13706’s (Establishing Paid Sick 

Leave for Federal Contractors) paid sick 

leave requirements, which contained an 

updated version of the methodology 

used in the 2014 rulemaking for 

Executive Order 13658 (Establishing a 

Minimum Wage for Contractors).15

Using this methodology, the Department 

estimated the number of workers who 

work on SCA contracts, representing the 

number of ‘‘potentially affected 

workers,’’ is 1.4 million potentially 

affected workers. This number is likely 

an overestimate because some workers 

will be in positions not covered by this 

rule (e.g., high-level management, nonservice employees). 

The Department estimated the 

number of potentially affected workers 

in two parts. First, the Department 

estimated employees and self-employed 

workers working on SCA contracts in 

the 50 States and the District of 

Columbia. Second, the Department 

estimated the number of SCA workers in 

the U.S. territories. 

iii. Workers on SCA Contracts in the 50 

States and the District of Columbia 

SCA contract employees on covered 

contracts were estimated by taking the 

ratio of covered Federal contracting 

expenditures to total output, by 

industry. Total output is the market 

value of the goods and services 

produced by an industry. This ratio is 

then applied to total private 

employment in that industry (Table 2). 

To estimate SCA contracting 

expenditures, the Department used 

USASpending.gov data and the same 

methodology as used above for 

estimating affected firms. The 

Department included all contracts with 


jspears on DSK121TN23PROD with PROPOSALS2EP15JY22.007</GPH>
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42579 

16 Identified when the ‘‘Construction Wage Rate 

Requirements’’ element is ‘‘Y,’’ meaning that the 

contracting agency flagged that the contract is 

covered by DBA. 

17Bureau of Economic Analysis (BEA) (2020). 

Table 8. Gross Output by Industry Group. https:// 

www.bea.gov/news/2020/gross-domestic-productindustry-fourth-quarter-and-year-2019. The BEA 

provides the definition: ‘‘Gross output of an 

industry is the market value of the goods and 

services produced by an industry, including 

commodity taxes. The components of gross output 

include sales or receipts and other operating 

income, commodity taxes, plus inventory change. 

Gross output differs from value added, which 

measures the contribution of the industry’s labor 

and capital to its gross output.’’ 18Bureau of Labor Statistics. OEWS. May 2019. 

Available at: http://www.bls.gov/oes/. 

19 GDP is limited to personal consumption 

expenditures and gross private domestic 

investment. 

20For example, in Puerto Rico, personal 

consumption expenditures plus gross private 

domestic investment equaled $73.4 billion. 

Therefore, Puerto Rico gross output was calculated 

as $73.4 billion × 1.5 = $110.1 billion. 

21For the U.S. territories, the unincorporated selfemployed are excluded because CPS data are not 

available on the number of unincorporated selfemployed workers in U.S. territories. 

the ‘‘Labor Standards’’ element equal to 

‘‘Y,’’ meaning that the contracting 

agency flagged the contract as covered 

by SCA. Of the contracts not flagged as 

SCA, the Department excluded (1) those 

for the purchase of goods and (2) those 

covered by DBA.16 The firms for the 

remaining contracts are also included as 

potentially impacted by this 

rulemaking. The Department also 

excluded (1) awards for financial 

assistance such as direct payments, 

loans, and insurance; and (2) contracts 

performed outside the U.S. because SCA 

coverage is limited to the 50 states, the 

District of Columbia, and the U.S. 

territories. 

To determine the share of all output 

associated with SCA contracts, the 

Department divided contracting 

expenditures by gross output, in each 2- 

digit NAICS code.17 This results in 0.93 

percent of output being covered by SCA 

contracts (Table 2). The Department 

then multiplied the ratio of covered-togross output by private sector 

employment for each NAICS to estimate 

the share of employees working on SCA 

contracts. The Department’s private 

sector employment number is primarily 

comprised of employment from the May 

2019 Occupational Employment and 

Wage Statistics (OEWS), formerly the 

Occupational Employment Statistics.18

However, the OEWS excludes 

unincorporated self-employed workers, 

so the Department supplemented OEWS 

data with data from the 2019 Current 

Population Survey Merged Outgoing 

Rotation Group (CPS MORG) to include 

unincorporated self-employed workers 

in the estimate of workers. 

According to this methodology, the 

Department estimated there are 1.4 

million workers on SCA covered 

contracts in the 50 States and the 

District of Columbia (see Table 2 below). 

This methodology represents the 

number of year-round-equivalent 

potentially affected workers who work 

exclusively on SCA contracts. Thus, 

when the Department refers to 

potentially affected employees in this 

analysis, the Department is referring to 

this conceptual number of people 

working exclusively on covered 

contracts. The total number of 

potentially affected workers will likely 

exceed this number because not all 

workers work exclusively on SCA 

contracts. However, some of the total 

number of potentially affected workers 

may not be covered by this rulemaking. 

iv. Workers on SCA Contracts in the 

U.S. Territories 

The methodology used to estimate 

potentially affected workers in certain 

U.S. territories (American Samoa, the 

Commonwealth of the Northern Mariana 

Islands, Guam, Puerto Rico, and the U.S. 

Virgin Islands) is similar to the 

methodology used above for the 50 

States and the District of Columbia. The 

primary difference is that data on gross 

output in the U.S. territories are not 

available, and so the Department had to 

make some additional assumptions. The 

Department approximated gross output 

in the U.S. territories by calculating the 

ratio of gross output to Gross Domestic 

Product (GDP) for the U.S. (1.5), then 

multiplying that ratio by GDP in each 

territory to estimate total gross 

output.19 20 The other difference is the 

analysis is not performed by NAICS 

because the GDP data are not available 

at that level of disaggregation. 

The rest of the methodology follows 

the methodology for the 50 States and 

the District of Columbia. To determine 

the share of all output associated with 

SCA contracts, the Department divided 

contract expenditures from 

USASpending.gov, for each territory, by 

gross output. The Department then 

multiplied the ratio of covered contract 

spending to gross output by private 

sector employment (from the OEWS) to 

estimate the number of workers working 

on covered contracts (9,900).21

TABLE 2—NUMBER OF POTENTIALLY AFFECTED WORKERS

NAICS 

Total private 

output 

(billions) a

Covered contracting output 

(millions) b

Share output 

from covered 

contracting 

(percent) 

Private sector 

workers 

(1,000s) c

Workers on 

SCA contracts 

(1,000s) d

11 ......................................................................................... $450 $431 0.10 1,168 1 

21 ......................................................................................... 577 104 0.02 699 0 

22 ......................................................................................... 498 2,350 0.47 547 3 

23 ......................................................................................... 1,662 7,218 0.43 9,100 40 

31–33 ................................................................................... 6,266 42,023 0.67 12,958 87 

42 ......................................................................................... 2,098 183 0.01 5,955 1 

44–45 ................................................................................... 1,929 331 0.02 16,488 3 

48–49 ................................................................................... 1,289 14,288 1.11 6,215 69 

51 ......................................................................................... 1,942 10,308 0.53 2,971 16 

52 ......................................................................................... 3,161 12,474 0.39 6,180 24 

53 ......................................................................................... 4,143 968 0.02 2,699 1 

54 ......................................................................................... 2,487 151,809 6.10 10,581 646 

55 ......................................................................................... 675 0 0.00 2,470 0 

56 ......................................................................................... 1,141 36,238 3.18 10,158 323 

61 ......................................................................................... 381 4,140 1.09 3,271 36 

62 ......................................................................................... 2,648 11,130 0.42 20,791 87 

71 ......................................................................................... 382 82 0.02 2,949 1 

72 ......................................................................................... 1,192 1,019 0.09 14,303 12 

81 ......................................................................................... 772 2,699 0.35 5,260 18 


jspears on DSK121TN23PROD with PROPOSALS2
42580 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

22This includes the median base wage of $30.83 

from the 2021 OEWS plus benefits paid at a rate of 

46 percent of the base wage, as estimated from the 

BLS’s Employer Costs for Employee Compensation 

(ECEC) data, and overhead costs of 17 percent. 

OEWS data available at: https://www.bls.gov/ 

news.release/ocwage.t01.htm. 

TABLE 2—NUMBER OF POTENTIALLY AFFECTED WORKERS—Continued 

NAICS 

Total private 

output 

(billions) a

Covered contracting output 

(millions) b

Share output 

from covered 

contracting 

(percent) 

Private sector 

workers 

(1,000s) c

Workers on 

SCA contracts 

(1,000s) d

Territories ............................................................................. 156 1,501 e 963 9.9 

Total .............................................................................. 33,691 297,794 0.88% 134,761 1,376 

aBureau of Economic Analysis, NIPA Tables, Gross output. 2019. For territories, gross output is estimated by multiplying total GDP for the territory by the ratio of total gross output to total GDP for the U.S. b USASpending.gov. Contracting expenditures for covered contracts in 2019. cOEWS May 2019. Excludes Federal U.S. Postal service employees, employees of government hospitals, and employees of government educational institutions. For non-territories, added to the OWES employee estimates were unincorporated self-employed workers from the 2019 CPS 

MORG data. dAssumes share of expenditures on contracting is same as share of employment. Assumes employees work exclusively, year-round on Federal contracts. Thus, this may be an underestimate if some employees are not working entirely on Federal contracts. eVaries based on U.S. territory. 

Because there is no readily available 

data source on workers on SCA 

contracts, and employment is spread 

throughout many industries, the 

Department was unable to provide any 

estimates of demographic information 

for potentially affected workers. The 

Department welcomes any data sources 

that would allow it to analyze the 

demographic composition of SCA 

contract workers, so that it can better 

assess any equity impacts of this 

rulemaking. 

C. Costs 

1. Rule Familiarization Costs 

The proposed rule would impose 

direct costs on some covered contractors 

that will review the regulations to 

understand their responsibilities. Both 

firms that currently hold contracts that 

may be awarded to a successor 

contractor in the future and firms that 

are considering bidding on an SCA 

contract may be interested in reviewing 

this rule, so the Department used the 

upper-bound estimate of 449,168 

potentially affected firms to calculate 

rule familiarization costs. This is an 

overestimate, because not all of the 

firms that are registered in SAM are 

predecessor contractors or will bid on 

an SCA contract. Those that are not 

interested in bidding would not need to 

review the rule. 

The Department estimates that, on 

average, 30 minutes of a human 

resources staff member’s time will be 

spent reviewing the rulemaking. Some 

firms will spend more time reviewing 

the rule, but as discussed above, many 

others will spend less or no time 

reviewing the rule, so the Department 

believes that this average estimate is 

appropriate. Many firms will also just 

rely on third-party summaries of the 

rule or the comprehensive compliance 

assistance materials published by the 

Department. This rule is also 

substantially similar to the 2011 final 

rule implementing Executive Order 

13495 (Nondisplacement of Qualified 

Workers Under Service Contracts), with 

which many firms were already 

familiar. Thus, this proposed regulation 

would not introduce an entirely novel 

policy that would require substantively 

more time for rule familiarization. This 

time estimate only represents the cost of 

reviewing the rule; any implementation 

costs are calculated separately below. 

The cost of this time is the median 

loaded wage for a Compensation, 

Benefits, and Job Analysis Specialist of 

$50.25 per hour.22 Therefore, the 

Department has estimated regulatory 

familiarization costs to be $11,285,346 

($50.25 per hour × 0.5 hour × 449,168 

contractors). The Department has 

included all regulatory familiarization 

costs in Year 1. The Department 

welcomes comments on these rule 

familiarization estimates. 

2. Implementation Costs 

This proposed rule contains various 

requirements for contractors. The 

proposal includes a contract clause 

provision requiring contracting agencies 

to ensure that service contracts and 

subcontracts that succeed a contract for 

performance of the same or similar 

work, and solicitations for such 

contracts and subcontracts, include the 

nondisplacement contract clause. This 

provision comes directly from Executive 

Order 14055, and the Department 

estimates that it will take an average of 

30 minutes total for contractors to 

incorporate the contract clause into 

their covered subcontracts. This 

estimate is similar to the one used in the 

Executive Order 13495 final rule. 

Additionally, a contractor must notify 

affected workers and their collective 

bargaining representatives, if any, in 

writing of the agency’s determination to 

grant an exception. When an agency 

decides not to include a location 

continuity requirement or preference, 

the contractor must notify affected 

workers and their collective bargaining 

representatives, if any, in writing of the 

agency’s determination and the right of 

interested parties to request 

reconsideration. Additionally, 

predecessor contractors are required to 

provide written notice to service 

employees employed under the contract 

of their possible right to an offer of 

employment on the successor contract. 

The Department estimates that these 

requirements would take an average of 

30 minutes for each contractor. The 

Department believes that this average 

estimate is appropriate because these 

requirements would not apply to all 

potentially affected contractors; they 

would only apply when an agency 

grants an exception or when the agency 

decides not to include a location 

continuity requirement or preference. 

For these cost estimates, the 

Department used the lower-bound of 

potentially affected firms (119,695), 

because only the firms that will have a 

covered contract would incur these 

implementation costs. The cost of this 

time is the median loaded wage for a 

Compensation, Benefits, and Job 

Analysis Specialist of $50.25 per hour. 

Therefore, the Department has estimated 

the cost of these requirements to be 

$6,014,674 ($50.25 per hour × 1 hour × 

119,695 contractors). This estimate is 

likely an overestimate, because many 

SCA contracts can last for several years. 

Therefore, only a fraction of these firms 

would need to include the required 

contract clause each year since firms 

only need to include the clause in new 

contracts (which under Executive Order 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42581 

23Because the contracting agency may be split 

amongst different positions, the Department has 

used the wage of a more senior position for the 

estimate. 

24The Department has used the 2021 Rest of 

United States salary table to estimate salary 

expenses. See https://www.opm.gov/policy-dataoversight/pay-leave/salaries-wages/salary-tables/ 

21Tables/html/RUS_h.aspx. 

25Based on a 2017 study from CBO. 

Congressional Budget Office, ‘‘Comparing the 

Compensation of Federal and Private-Sector 

Employees, 2011 to 2015,’’ April 25, 2017, https:// 

www.cbo.gov/publication/52637. 

14055 and this rule do not include 

options or other extensions). The 

Department does not have data on the 

average length of SCA contracts but 

welcomes comments and data to help 

inform this estimate. 

Under this proposed rule, contracting 

agencies would, among other things, be 

required to ensure contractors provide 

notice to employees on predecessor 

contracts of their possible right to an 

offer of employment, and consider 

whether performance of the work in the 

same locality or localities in which a 

predecessor contract is currently being 

performed is reasonably necessary to 

ensure economical and efficient 

provision of services. Contracting 

agencies would also be required to 

provide the list of employees on the 

predecessor contract to the successor 

contractor, to forward complaints and 

other pertinent information to WHD, 

and to retroactively incorporate the 

contract clause when it was not initially 

incorporated. Please see section II.B. for 

a more in-depth discussion of 

contracting agency requirements. The 

Department estimates that it will take 

the contracting agencies an extra 2.5 

hours of work on average on each 

covered contract, and that the work will 

be performed by a GS 14, Step 1 Federal 

employee contracting officer, with a 

fully loaded hourly wage of $97.04.23

This includes the median base wage of 

$52.17 from Office of Personnel 

Management salary tables,24 plus 

benefits paid at a rate of 69 percent of 

the base wage,25 and overhead costs of 

17 percent. Using the USASpending 

data mentioned above, the Department 

estimated that there were 576,122 

contracts. In order to estimate the share 

of these contracts that are new in a 

given year, the Department has used 20 

percent (115,224), because SCA 

contracts tend to average about 5 years. 

The Department welcomes comments 

and data on the appropriate contract 

length to use in this estimate. Therefore, 

the estimated cost to contracting 

agencies is $27,953,342 ($97.04 per hour 

× 2.5 hours × 115,224). 

3. Recordkeeping Costs 

This proposed rule would require a 

predecessor contractor to, no less than 

30 calendar days before completion of 

the contractor’s performance of services 

on a contract, furnish the contracting 

officer a list of the names of all service 

employees under the contract and its 

subcontracts at that time. This list must 

also contain the anniversary dates of 

employment for each service employee 

under the contract and its predecessor 

contracts with either the current or 

predecessor contractors or their 

subcontractors. If changes to the 

workforce are made after the submission 

of this certified list, this proposed rule 

would also require a contractor 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 not less 

than 10 business days before completion 

of the contract. 

This NPRM also specifies the records 

successor contractors would be required 

to maintain, including copies of or 

documentation of any written or oral 

offers of employment, 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. 

The NPRM would also require 

contractors to maintain a copy of any 

record that forms the basis for any 

exclusion or exception claimed, the 

employee list provided to the 

contracting agency, and the employee 

list received from the contracting 

agency. 

The Department estimates that the 

extra time associated with keeping and 

providing these records, including the 

list of employees, to be an average of 1 

hour per firm per year, and that the 

work will be completed by a 

Compensation, Benefits, and Job 

Analysis Specialist, at a rate of $50.25 

per hour. The estimated recordkeeping 

cost is $6,014,674 ($50.25 per hour × 1 

hour × 119,695). 

4. Summary of Costs 

Costs in Year 1 consist of $11,285,346 

in rule familiarization costs, 

$33,968,016 in implementation costs 

($6,014,674 for contractors and 

$27,953,342 for contracting agencies), 

and $6,014,674 in recordkeeping costs. 

Therefore, total Year 1 costs are 

$51,268,036. Costs in the following 

years consist only of implementation 

and recordkeeping costs and amount to 

$39,982,690. Average annualized costs 

over 10 years are $41.5 million using a 

7 percent discount rate, and $50.1 

million using a 3 percent discount rate. 

5. Other Potential Impacts 

This proposed rule requires successor 

contractors and subcontractors to make 

a bona fide, express offer of employment 

to each employee to a position for 

which the employee is qualified, and to 

state the time within which the 

employee must accept such offer. To 

match employees with suitable jobs 

under this proposed rule, successor 

contractors would have to spend time 

evaluating the predecessor contract 

employees and available positions. 

However, those successor contractors 

that currently hire new employees for a 

contract already must recruit workers 

and evaluate their qualifications for 

positions on the contract; thus, 

successor contractors would likely 

spend an equal amount of time 

determining job suitability under the 

proposed rule as under current 

practices. If, in the absence of this rule, 

a successor contractor would need to 

hire an entirely new workforce when it 

is awarded a contract, the requirement 

for it to make offers of employment to 

the predecessor contractor’s workforce 

could save the contractor time if the 

predecessor contract employees hold 

the same positions that the successor 

contractor is looking to fill. It may be 

easier to determine job suitability for 

workers already working in those 

positions on the contract than it would 

be for workers who are new to both the 

contract and the successor contractor. 

The Department welcomes comments 

and data on these assumptions, 

specifically if time spent allocating 

employees to available positions would 

change as a result of this proposed rule. 

Many successor contractors may 

already be keeping the predecessor 

contractor’s employees on the contract, 

so the Executive Order and this 

proposed rule would not impact any 

existing hiring practices for these firms. 

The Department welcomes comments 

with data on how prevalent it is for 

successor contractors to keep the 

employees of the predecessor 

contractor. 

There may be some limited cases in 

which the successor contractor had 

existing employees that it planned to 

assign to a newly-awarded contract, but 

the requirement to offer employment to 

predecessor contract workers would 


jspears on DSK121TN23PROD with PROPOSALS2
42582 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

26https://www.govtech.com/data/ibmgovernment-data-breaches-becoming-lesscostly.html. 

27 Kuhn, Peter and Lizi Yu. 2021. ‘‘How Costly is 

Turnover? Evidence from Retail.’’ Journal of Labor 

Economics 39(2), 461–496. https://

www.journals.uchicago.edu/doi/10.1086/710359. 

28Bahn, Kate and Carmen Sanchez Cumming. 

2020. ‘‘Improving U.S. labor standards and the 

quality of jobs to reduce the costs of employee 

turnover to U.S. companies.’’ Washington Center for 

Equitable Growth Issue Brief. https://

equitablegrowth.org/improving-u-s-labor-standardsand-the-quality-of-jobs-to-reduce-the-costs-ofemployee-turnover-to-u-s-companies/. 

29The Department also acknowledges that prime 

contracts that are less than $250,000 and their 

subcontracts would not be covered by this 

regulation but has not made an adjustment for these 

contracts in the estimation of covered contractors. 

Therefore, this estimate may be an overestimate of 

the number of contractors that are actually affected. 

make the successor contractor’s existing 

employees redundant. In this situation, 

if the successor contractor truly could 

not find another position for the 

employee on the new contract or on any 

of their other existing projects, the 

continued employment of a predecessor 

contract worker could be offset by the 

successor contract worker being laid off. 

While this could potentially happen in 

certain circumstances immediately 

following the publication of this 

regulation, the Department expects that 

this situation would become relatively 

uncommon in the future once 

contractors are familiar with the 

requirements of the rule and can plan 

their staffing accordingly. Furthermore, 

these workers may themselves also be 

protected by the Executive Order. If the 

contract on which they are currently 

working is awarded to another 

contractor, they would also receive 

offers of employment from the successor 

contractor. The Department welcomes 

comments on the staffing practices of 

contractors, and to what extent that they 

have existing employees that they 

would not be able to find positions for 

if they are required to make offers of 

employment to predecessor contract 

employees following the award of a new 

contract. 

This proposed rule would not affect 

wages that contractors will pay 

employees, because other applicable 

laws already establish the minimum 

wage rate for each occupation to be 

incorporated into the contract. This rule 

does not require successor contractors to 

pay wages higher than the rate required 

by the SCA. Executive Order 14055 and 

this proposed rule also do not require 

the successor contractor to pay workers 

the same wages that they were paid on 

the predecessor contract. Although 

workers’ wages may increase or 

decrease with the changing of contracts, 

any change would not be a result of this 

proposed rule. What this rule would do 

is ensure that these workers have 

continued employment, saving them the 

costs of finding a new job. The 

requirement for successor contracts to 

make bona fide offers of employment 

could also prevent unemployment and 

increase job security for predecessor 

contract workers. This, in turn, could 

reduce reliance on social safety net 

programs and improve well-being for 

such workers. As discussed above, this 

impact could be offset in limited shortterm cases in which the successor 

contractor has existing employees for 

which it is are unable to find positions 

because of the requirements of this 

proposed rule. 

D. Benefits 

Executive Order 14055 states that 

using a carryover workforce reduces 

disruption in the delivery of services 

during the period of transition between 

contractors, maintains physical and 

information security, and provides the 

Federal Government with the benefits of 

an experienced and well-trained 

workforce that is familiar with the 

Federal Government’s personnel, 

facilities, and requirements. A 2020 

report from IBM estimated that data 

breaches in the public sector cost about 

$1.6 million per breach, and about 28 

percent of data breaches are due to 

human error.26 Maintaining the same 

staff on a Federal Government contract 

could reduce the occurrence of these 

costly data breaches. The Department 

welcomes data on the impact of contract 

employee turnover on data security. 

The requirements of the Executive 

Order and this proposed rule also would 

help reduce training costs, which can be 

costly for firms, and therefore for the 

agency that contracts with them. 

Training costs are a component of 

turnover costs. One study found a 

modest cost associated with employee 

turnover, finding 10 percent turnover is 

about as costly as a 0.6 percent wage 

increase.27 Another paper conducted an 

analysis of case studies and found that 

turnover costs represent 39.6 percent of 

a position’s annual wage.28

V. Initial Regulatory Flexibility Act 

(IRFA) Analysis 

The Regulatory Flexibility Act of 1980 

(RFA), 5 U.S.C. 601 et seq., as amended 

by the Small Business Regulatory 

Enforcement Fairness Act of 1996, 

Public Law 104–121 (March 29, 1996), 

requires Federal agencies engaged in 

rulemaking to consider the impact of 

their proposals on small entities, 

consider alternatives to minimize that 

impact, and solicit public comment on 

their analyses. The RFA requires the 

assessment of the impact of a regulation 

on a wide range of small entities, 

including small businesses, not-for 

profit organizations, and small 

governmental jurisdictions. Agencies 

must perform a review to determine 

whether a proposed or final rule would 

have a significant economic impact on 

a substantial number of small entities. 5 

U.S.C. 603, 604. 

A. Why the Department Is Considering 

Action 

On November 18, 2021, President 

Joseph R. Biden, Jr. issued Executive 

Order 14055, ‘‘Nondisplacement of 

Qualified Workers Under Service 

Contracts.’’ 86 FR 66397 (Nov. 23, 

2021). This order explains that when a 

service contract expires, and a follow-on 

contract is awarded for the same or 

similar services, the Federal 

Government’s procurement interests in 

economy and efficiency are best served 

when the successor contractor or 

subcontractor hires the predecessor’s 

employees, thus avoiding displacement 

of these employees. The Department is 

issuing this proposed rule to comply 

with the directives of the Executive 

Order. 

B. Objectives of and the Legal Basis for 

the Proposed Rule 

President Biden issued Executive 

Order 14055 pursuant to his authority 

under ‘‘the Constitution and the laws of 

the United States,’’ expressly including 

the Procurement Act. 86 FR 66397. The 

Procurement Act authorizes the 

President to ‘‘prescribe policies and 

directives that the President considers 

necessary to carry out’’ the statutory 

purposes of ensuring ‘‘economical and 

efficient’’ government procurement and 

administration of government property. 

40 U.S.C. 101, 121(a). Executive Order 

14055 directs the Secretary to issue 

regulations to ‘‘implement the 

requirements of this order.’’ 86 FR 

66399. 

C. Estimating the Number of Small 

Businesses Affected by the Rulemaking 

In order to determine the number of 

small businesses that would be affected 

by the rulemaking, the Department 

followed the same methodology laid out 

in section V.B.1. of the economic 

analysis.29 For the data from 

USASpending.gov, the business 

determination was based on the 

inclusion of ‘‘small’’ or ‘‘SBA’’ in the 

business type. For GSA’s System for 

Award Management (SAM) for February 

2022, if a company qualified as a small 

business in any reported NAICS, they 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42583 

30This includes the median base wage of $32.30 

from the 2020 OEWS plus benefits paid at a rate of 

46 percent of the base wage, as estimated from the 

BLS’s Employer Costs for Employee Compensation 

(ECEC) data, and overhead costs of 17 percent. 

OEWS data available at: http://www.bls.gov/oes/ 

current/oes131141.htm. 

were classified as small. Table 3 shows 

the range of potentially affected small 

firms by industry. The total number of 

potentially affected small firms ranges 

from 74,097 to 329,470. 

TABLE 3—RANGE OF POTENTIALLY AFFECTED SMALL FIRMS

Industry NAICS 

Lower-bound estimate Upper-bound estimate 

Total 

Small primes 

from 

USASpending 

Small 

subcontractors 

from 

USASpending 

Total Small firms 

from SAM 

Small 

subcontractors 

from 

USASpending 

Agriculture, forestry, fishing and hunting ...... 11 2,198 2,198 0 3,849 3,849 0 

Mining ............................................................ 21 94 72 22 888 866 22 

Utilities ........................................................... 22 374 358 16 1,601 1,585 16 

Construction .................................................. 23 8,290 4,348 3,942 45,683 41,741 3,942 

Manufacturing ................................................ 31–33 6,621 4,243 2,378 39,631 37,253 2,378 

Wholesale trade ............................................ 42 516 411 105 15,810 15,705 105 

Retail trade .................................................... 44–45 227 222 5 7,500 7,495 5 

Transportation and warehousing .................. 48–49 2,120 1,989 131 14,854 14,723 131 

Information .................................................... 51 2,352 2,218 134 11,208 11,074 134 

Finance and insurance .................................. 52 179 154 25 2,299 2,274 25 

Real estate and rental and leasing ............... 53 2,068 2,068 0 7,654 7,654 0 

Professional, scientific, and technical services ............................................................ 54 24,371 20,164 4,207 90,547 86,340 4,207 

Management of companies and enterprises 55 0 0 0 290 290 0 

Administrative and waste services ................ 56 10,251 9,060 1,191 30,932 29,741 1,191 

Educational services ..................................... 61 2,224 2,123 101 11,800 11,699 101 

Health care and social assistance ................ 62 4,060 4,054 6 16,904 16,898 6 

Arts, entertainment, and recreation .............. 71 546 546 0 3,944 3,944 0 

Accommodation and food services ............... 72 2,102 2,098 4 9,321 9,317 4 

Other services ............................................... 81 5,504 5,479 25 14,755 14,730 25 

Total private ........................................... ........................ 74,097 61,805 12,292 329,470 317,178 12,292 

D. Compliance Requirements of the 

Proposed Rule, Including Reporting and 

Recordkeeping 

The proposed rule includes a contract 

clause provision requiring contracting 

agencies to ensure that service contracts 

and subcontracts that succeed a contract 

for performance of the same or similar 

work, and solicitations for such 

contracts and subcontracts, include the 

non-displacement contract clause. The 

rule also requires contracting agencies 

to incorporate the non-displacement 

contract clause in applicable contracts, 

ensure contractors provide notice to 

employees on predecessor contracts of 

their possible right to an offer of 

employment, and to consider whether 

performance of the work in the same 

locality or localities in which a 

predecessor contract is currently being 

performed is reasonably necessary to 

ensure economical and efficient 

provision of services. Contracting 

agencies would also be required, among 

other things, to provide the list of 

employees on the predecessor contract 

to the successor, to forward complaints 

and other pertinent information to 

WHD, and to retroactively incorporate 

the contract clause when it was not 

initially incorporated. See Section II.B. 

for a more in-depth discussion of 

contracting agency requirements. 

This proposed rule would require a 

contractor to, no less than 30 calendar 

days before completion of the 

contractor’s performance of services on 

a contract, furnish the contracting 

officer a list of the names of all service 

employees under the contract and its 

subcontracts at that time. This list must 

also contain the anniversary dates of 

employment for each service employee 

under the contract and its predecessor 

contracts with either the current or 

predecessor contractors or their 

subcontractors. If changes to the 

workforce are made after the submission 

of this certified list, this proposed rule 

would also require a contractor 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 not less 

than 10 business days before completion 

of the contract. See section II.B. for a 

more in-depth discussion of 

requirements for contractors. 

E. Calculating the Impact of the 

Proposed Rule on Small Business Firms 

This proposed rule could result in 

costs for small business firms in the 

form of rule familiarization costs, 

implementation costs, and 

recordkeeping costs. See section V.C. for 

an in-depth discussion of these costs. 

For rule familiarization costs, the 

Department estimates that on average, 

30 minutes of a human resources staff 

member’s time will be spent reviewing 

the rulemaking. Some firms will spend 

more time reviewing the rule, but many 

others will spend less or no time 

reviewing the rule, so the Department 

believes that this average estimate is 

appropriate. This rule is also 

substantially similar to the 2011 final 

rule implementing Executive Order 

13495, with which many firms were 

already familiar. The cost of this time is 

the median loaded wage for a 

Compensation, Benefits, and Job 

Analysis Specialist of $50.25 per hour.30

Therefore, the Department has estimated 

regulatory familiarization costs to be 

$25.13 per small firm ($50.25 per hour 

× 0.5 hour). The Department welcomes 

comments on these rule familiarization 

estimates. 

For implementation costs, the 

Department estimates that it will take an 

average of 30 minutes total for 

contractors to incorporate the contract 

clause into their covered subcontracts, 

and another 30 minutes for the other 

contractor requirements discussed in 

Section IV.C.2. The cost of this time is 

the median loaded wage for a 

Compensation, Benefits, and Job 

Analysis Specialist of $50.25 per hour. 

Therefore, the Department has estimated 

the cost of including the required 


jspears on DSK121TN23PROD with PROPOSALS2
42584 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

contract clause to be $50.25 per small 

firm ($50.25 per hour × 1 hour). 

For recordkeeping costs, the 

Department estimates that the extra time 

associated with keeping and providing 

these records to be an average of 1 hour 

and be completed by Compensation, 

Benefits, and Job Analysis Specialist of 

$50.25 per hour. The estimated 

recordkeeping cost is $50.25 per firm. 

Therefore, the small firms that are 

impacted by this proposed rule could 

each have additional costs of $125.63 in 

Year 1 ($25.13 + $50.25 + $50.25). 

As discussed in section V.C.5., the 

Department does not expect there to be 

additional costs for successor contracts 

associated with evaluating predecessor 

contract employees and available 

positions beyond what they already 

would have incurred. In absence of this 

proposed rule, the successor contractor 

would incur costs associated with hiring 

a new workforce and assigning them to 

positions on the contract. The benefits 

discussed in section IV.D. would also 

apply to small firms. 

F. Relevant Federal Rules Duplicating, 

Overlapping, or Conflicting With the 

Proposed Rule 

The Department is not aware of any 

relevant Federal rules that conflict with 

this NPRM. 

G. Alternatives to the Proposed Rule 

The Department is issuing a proposed 

rulemaking to implement Executive 

Order 14055 and cannot deviate from 

the language of the Executive order, 

therefore, there are limited instances in 

which there is discretion to offer 

regulatory alternatives. However, the 

Department has discussed a few specific 

provisions here in which limited 

alternatives are possible. 

First, in cases where a prime contract 

is above the simplified acquisition 

threshold, but their subcontract falls 

below this threshold, the Department 

could potentially have discretion to 

exclude these subcontracts from the 

requirements of this proposed rule. 

However, the Department believes that 

based on the way the Executive Order 

is worded, the intent was not to exclude 

these subcontracts. 

Second, the Department has some 

discretion in defining the specific 

analysis that must be completed by 

contracting agencies regarding location 

continuity. The Department is 

considering whether to require 

contracting officers to analyze 

additional factors when determining 

whether to decline to require location 

continuity. Any requirement of a more 

in-depth analysis could potentially 

increase costs for contracting agencies. 

There are also a few places in this 

proposed rule where the Department 

has developed additional requirements 

beyond what is laid out in Executive 

Order 14055. For example, Executive 

Order 14055 does not address the issue 

of remote work or telework, including 

whether it is permissible for a successor 

contractor to allow its incumbent 

employees in similar positions to use 

remote work or telework but not offer 

remote work or telework to predecessor 

employees in similar positions. 

However, based on the Department’s 

previous enforcement experience, lack 

of clarity on this issue leads to 

confusion on the part of stakeholders 

and difficulties in enforcement when 

trying to determine whether the 

successor contractor has offered 

different employment terms and 

conditions to predecessor employees to 

discourage them from accepting 

employment offers. Accordingly, the 

Department has proposed the additional 

requirement that the successor 

contractor must offer employees of the 

predecessor contractor the option of 

remote work under reasonably similar 

terms and conditions, where the 

successor contractor has or will have 

any employees in the same or similar 

occupational classifications who work 

or will work entirely in a remote 

capacity. The Department has also 

proposed specific procedural guidelines 

for the location continuity analysis that 

is generally required by the text of the 

Executive order. Although an alternative 

would be to issue a proposed rule 

without these types of more-specific 

requirements, the Department believes 

that they are reasonably necessary to 

effectively implement the Executive 

order. 

VI. Unfunded Mandates Reform Act of 

1995 

The Unfunded Mandates Reform Act 

of 1995, 2 U.S.C. 1532, requires agencies 

to prepare a written statement, which 

includes an assessment of anticipated 

costs and benefits, before proposing any 

unfunded Federal mandate that may 

result in excess of $100 million 

(adjusted annually for inflation) in 

expenditures in any one year by State, 

local, and tribal governments in the 

aggregate, or by the private sector. This 

rulemaking is not expected to impose 

unfunded mandates that exceed that 

threshold. See section V. for an 

assessment of anticipated costs and 

benefits. 

VII. Executive Order 13132, Federalism 

The Department has reviewed this 

proposed rule in accordance with 

Executive Order 13132 regarding 

federalism and determined that it does 

not have federalism implications. The 

proposed rule would not have 

substantial direct effects on the States, 

on the relationship between the 

National Government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. 

VIII. Executive Order 13175, Indian 

Tribal Governments 

This proposed rule would not have 

tribal implications under Executive 

Order 13175 that would require a tribal 

summary impact statement. The 

proposed rule would not have 

substantial direct effects on one or more 

Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

List of Subjects 

Employment, Federal buildings and 

facilities, Government contracts, Law 

enforcement, Labor. 

Signed this 8th day of July, 2022. 

Jessica Looman, 

Acting Administrator, Wage and Hour 

Division. 

■ For the reasons set out in the 

preamble, the Department of Labor 

proposes to amend Title 29 of the Code 

of Federal Regulations by adding part 9. 

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. 

9.5 Exceptions authorized by Federal 

agencies. 

Subpart B—Requirements 

9.11 Contracting agency requirements. 

9.12 Contractor requirements and 

prerogatives. 

9.13 Subcontracts. 

Subpart C—Enforcement 

9.21 Complaints. 

9.22 Wage and Hour Division investigation. 

9.23 Remedies and sanctions for violations 

of this part. 

Subpart D—Administrator’s Determination, 

Mediation, and Administrative Proceedings 

9.31 Determination of the Administrator. 

9.32 Requesting appeals. 

9.33 Mediation. 

9.34 Administrative Law Judge hearings. 

9.35 Administrative Review Board 

proceedings. 

9.36 Severability. 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42585 

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. 

14055, 86 FR 66397; Secretary of Labor’s 

Order 01–2014 (Dec. 19, 2014), 79 FR 77527 

(Dec. 24, 2014). 

Subpart A—General 

§ 9.1 Purpose and scope. 

(a) Purpose. This part contains the 

Department of Labor’s (Department) 

rules relating to the administration of 

Executive Order 14055 (Executive order 

or the order), ‘‘Nondisplacement of 

Qualified Workers Under Service 

Contracts,’’ and implements the 

enforcement provisions of the Executive 

order. The Executive order assigns 

enforcement responsibility for the 

nondisplacement requirements to the 

Department. 

(b) Policy. (1) The Executive order 

states that the Federal Government’s 

procurement interests in economy and 

efficiency are served when the successor 

contractor or subcontractor hires the 

predecessor’s employees. A carryover 

workforce minimizes disruption in the 

delivery of services during a period of 

transition between contractors, 

maintains physical and information 

security, and provides the Federal 

Government the benefit of an 

experienced and well-trained workforce 

that is familiar with the Federal 

Government’s personnel, facilities, and 

requirements. Accordingly, Executive 

Order 14055 sets forth a general position 

of the Federal Government that 

requiring successor service contractors 

and subcontractors performing on 

Federal contracts to 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 and its 

subcontracts whose employment will be 

terminated as a result of the award of 

the successor contract will lead to 

improved economy and efficiency in 

Federal procurement. 

(2) The Executive order provides that 

executive departments and agencies, 

including independent establishments 

subject to the Federal Property and 

Administrative Services Act, shall, to 

the extent permitted by law, ensure that 

service contracts and subcontracts that 

succeed a contract for performance of 

the same or similar work, and 

solicitations for such contracts and 

subcontracts, include a clause that 

requires the contractor and its 

subcontractors to offer a right of first 

refusal of employment to service 

employees employed under the 

predecessor contract and its 

subcontracts whose employment would 

be terminated as a result of the award 

of the successor contract in positions for 

which the employees are qualified. 

Nothing in Executive Order 14055 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 

14055 nor this part creates or changes 

any rights under the Contract Disputes 

Act, 41 U.S.C. 7101 et seq., or any 

private right of action that may exist 

under other applicable laws. The 

Executive order provides that disputes 

regarding the requirement of the 

contract clause prescribed by section 3 

of the order, to the extent permitted by 

law, shall be disposed of only as 

provided by the Secretary of Labor 

(Secretary) in regulations issued under 

the order. The order, however, does not 

preclude review of final decisions by 

the Secretary in accordance with the 

judicial review provisions of the 

Administrative Procedure Act, 5 U.S.C. 

701 et seq. Additionally, the Executive 

order also provides that it is to be 

implemented consistent with applicable 

law and subject to the availability of 

appropriations. 

§ 9.2 Definitions. 

For purposes of this part: 

Administrative Review Board (ARB) 

means the Administrative Review 

Board, U.S. Department of Labor. 

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. 

Agency means an executive 

department or agency, including an 

independent establishment subject to 

the Federal Property and Administrative 

Services Act. 

Associate Solicitor means the 

Associate Solicitor for Fair Labor 

Standards, Office of the Solicitor, U.S. 

Department of Labor, Washington, DC 

20210. 

Contract or service contract means 

any contract, contract-like instrument, 

or subcontract for services entered into 

by the Federal Government or its 

contractors that is covered by the 

Service Contract Act (SCA). Contract or 

contract-like instrument means an 

agreement between two or more parties 

creating obligations that are enforceable 

or otherwise recognizable at law. This 

definition includes, but is not limited 

to, a mutually binding legal relationship 

obligating one party to furnish services 

and another party to pay for them. The 

term contract includes all contracts and 

any subcontracts of any tier thereunder, 

whether negotiated or advertised, 

including any procurement actions, 

cooperative agreements, provider 

agreements, intergovernmental service 

agreements, service agreements, 

licenses, permits, or any other type of 

agreement, regardless of nomenclature, 

type, or particular form, and whether 

entered into verbally or in writing, to 

the extent such contracts and 

subcontracts are subject to the SCA. 

Contracts may be the result of 

competitive bidding or awarded to a 

single source under applicable authority 

to do so. In addition to bilateral 

instruments, contracts include, but are 

not limited to, awards and notices of 

awards; job orders or task letters issued 

under basic ordering agreements; letter 

contracts; orders, such as purchase 

orders, under which the contract 

becomes effective by written acceptance 

or performance; exercised contract 

options; and bilateral contract 

modifications. 

Contracting officer means an agency 

official with the authority to enter into, 

administer, and/or terminate contracts 

and make related determinations and 

findings. This term includes certain 

authorized representatives of the 

contracting officer acting within the 

limits of their authority as delegated by 

the contracting officer. 

Contractor means any individual or 

other legal entity that is awarded a 

Federal Government service contract or 

subcontract under a Federal 

Government service contract. Unless the 

context of the provision reflects 

otherwise, the term ‘‘contractor’’ refers 

collectively to a prime contractor and all 

of its subcontractors of any tier on a 

service contract with the Federal 

Government. The term ‘‘employer’’ is 

used interchangeably with the terms 

‘‘contractor’’ and ‘‘subcontractor’’ in 

various sections of this part. The U.S. 

Government, its agencies, and 

instrumentalities are not contractors, 

subcontractors, employers, or joint 

employers for purposes of compliance 

with the provisions of the Executive 

order. 

Business day means Monday through 

Friday, except the legal public holidays 

specified in 5 U.S.C. 6103, any day 

declared to be a holiday by federal 

statute or executive order, or any day 

with respect to which the U.S. Office of 

Personnel Management has announced 

that Federal agencies in the Washington, 

DC, area are closed. 

Employee or service employee means 

a service employee as defined in the 

Service Contract Act, 41 U.S.C. 6701(3), 

and its implementing regulations. 


jspears on DSK121TN23PROD with PROPOSALS2
42586 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

Employment opening means any 

vacancy in a position on the contract, 

including any vacancy caused by 

replacing an employee from the 

predecessor contract with a different 

employee. 

Federal Government means an agency 

or instrumentality of the United States 

that enters into a contract pursuant to 

authority derived from the Constitution 

or the laws of the United States. This 

definition does not include the District 

of Columbia or any Territory or 

possession of the United States. 

Month means a period of 30 

consecutive calendar days, regardless of 

the day of the calendar month on which 

it begins. 

Office of Administrative Law Judges 

means the Office of Administrative Law 

Judges, U.S. Department of Labor. 

Secretary means the U.S. Secretary of 

Labor or an authorized representative of 

the Secretary. 

Same or similar work means work 

that is either identical to or has primary 

characteristics that are alike in 

substance to work performed on a 

contract that is being replaced by the 

Federal Government or a contractor on 

a Federal service contract. 

Service Contract Act means the 

McNamara-O’Hara Service Contract Act 

of 1965, as amended, 41 U.S.C. 6701 et 

seq., and the implementing regulations 

in this subtitle. 

Solicitation means any request to 

submit offers, bids, or quotations to the 

Federal Government. 

United States means the United States 

and all executive departments, 

independent establishments, 

administrative agencies, and 

instrumentalities of the United States, 

including corporations of which all or 

substantially all of the stock is owned 

by the United States, by the foregoing 

departments, establishments, agencies, 

instrumentalities, and including nonappropriated fund instrumentalities. 

When used in a geographic sense, the 

United States means the 50 States, the 

District of Columbia, Puerto Rico, the 

Virgin Islands, Outer Continental Shelf 

lands as defined in the Outer 

Continental Shelf Lands Act, American 

Samoa, Guam, the Commonwealth of 

the Northern Mariana Islands, Wake 

Island, and Johnston Island. 

Wage and Hour Division means the 

Wage and Hour Division, U.S. 

Department of Labor. 

§ 9.3 Coverage. 

(a) This part applies to any contract or 

solicitation for a contract with an 

agency, provided that: 

(1) It is a contract for services covered 

by the Service Contract Act; and 

(2) The prime contract exceeds the 

simplified acquisition threshold as 

defined in 41 U.S.C. 134. 

(b) Contracts that satisfy the 

requirements of paragraph (a) of this 

section must contain the contract clause 

set forth at Appendix A, and all 

contractors on such contracts must 

comply, unless otherwise excluded or 

excepted under this part, with the 

requirements of §§ 9.12(e), (f), and (g). 

(c) Contracts and solicitations that 

satisfy the requirements of paragraph (a) 

of this section, and that succeed a 

contract for performance of the same or 

similar work, must contain the contract 

clause set forth at Appendix A, and 

contractors on such contracts must 

comply, unless otherwise excluded or 

excepted under this part, with all the 

requirements of § 9.12. 

§ 9.4 Exclusions. 

(a) Small contracts—(1) General. The 

requirements of this part do not apply 

to prime contracts under the simplified 

acquisition threshold set by the Office of 

Federal Procurement Policy Act, as 

amended (41 U.S.C. 134), and any 

subcontracts of any tier under such 

prime contracts. 

(2) Application to subcontracts. The 

amount of the prime contract 

determines whether a subcontract is 

excluded from the requirements of this 

part. If a prime contract is under the 

simplified acquisition threshold, then 

each subcontract under that prime 

contract will also be excluded from the 

requirements of this part. If a prime 

contract meets or exceeds the simplified 

acquisition threshold and meets the 

other coverage requirements of § 9.3, 

then each subcontract for services under 

that prime contract will also be subject 

to the requirements of this part, even if 

the value of an individual subcontract is 

under the simplified acquisition 

threshold. 

(b) 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 14055. 

§ 9.5 Exceptions authorized by Federal 

agencies. 

(a) A contracting agency may waive 

the application of some or all of the 

provisions of this part as to a prime 

contract if the senior procurement 

executive within the agency issues a 

written determination that at least one 

of the following circumstances exists 

with respect to that contract: 

(1) Adhering to the requirements of 

the order or this part would not advance 

the Federal Government’s interest in 

achieving economy and efficiency in 

Federal procurement; 

(2) Based on a market analysis, 

adhering to the requirements of the 

order or this part would: 

(i) Substantially reduce the number of 

potential bidders so as to frustrate full 

and open competition, and 

(ii) Not be reasonably tailored to the 

agency’s needs for the contract; or 

(3) Adhering to the requirements of 

the order or this part would otherwise 

be inconsistent with statutes, 

regulations, Executive Orders, or 

Presidential Memoranda. 

(b) Any agency determination to 

exercise its exception authority under 

section 6 of the Executive order and 

paragraph (c)(1) of this section must 

include a specific written explanation, 

including the facts and reasoning 

supporting the determination, and must 

be issued no later than the solicitation 

date. Any agency determination to 

exercise its exception authority under 

section 6 of the Executive order and 

paragraph (c)(1) of this section made 

after the solicitation date or without a 

specific written explanation will be 

inoperative. In such a circumstance, the 

agency must take action, consistent with 

§ 9.11(f), to incorporate the contract 

clause set forth in Appendix A of this 

part into the relevant solicitation or 

contract. 

(c) In exercising the authority to grant 

an exception for a contract because 

adhering to the requirements of the 

order or this part would not advance 

economy and efficiency, the agency’s 

written analysis must, among other 

things, compare the anticipated 

outcomes of hiring predecessor contract 

employees with those of hiring a new 

workforce. The consideration of cost 

and other factors in exercising the 

agency’s exception authority must 

reflect the general findings in section 1 

of the Executive order that the Federal 

Government’s procurement interests in 

economy and efficiency are normally 

served when the successor contractor 

hires the predecessor’s employees and 

must specify how the particular 

circumstances support a contrary 

conclusion. General assertions or 

presumptions of an inability to procure 

services on an economical and efficient 

basis using a carryover workforce are 

insufficient. 

(1) Factors that the agency may 

consider include, but are not limited to, 

the following: 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42587 

(i) Whether factors specific to the 

contract at issue suggest that the use of 

a carryover workforce would greatly 

increase disruption to the delivery of 

services during the period of transition 

between contracts (e.g., the carryover 

workforce in its entirety would not be 

an experienced and trained workforce 

that is familiar with the Federal 

Government’s personnel, facilities, and 

requirements as pertinent to the contract 

at issue and would require extensive 

training to learn new technology or 

processes that would not be required of 

a new workforce). 

(ii) Emergency situations, such as a 

natural disaster or an act of war, that 

physically displace incumbent 

employees from the location of the 

service contract work and make it 

impossible or impracticable to extend 

offers to hire as required by the 

Executive order. 

(iii) Situations where the senior 

procurement executive reasonably 

believes, based on the predecessor 

employees’ past performance, that the 

entire predecessor workforce failed, 

individually as well as collectively to 

perform suitably on the job and that it 

is not in the interest of economy and 

efficiency to provide supplemental 

training to the predecessor’s workers. 

(2) Factors the senior procurement 

executive may not consider in making 

an exception determination related to 

economy and efficiency include any 

general assumption that the use of 

carryover workforces usually or always 

greatly increase disruption to the 

delivery of services during the period of 

transition between contracts; the job 

performance of the predecessor 

contractor (unless a determination has 

been made that the entire predecessor 

workforce failed, individually as well as 

collectively); the seniority of the 

workforce; and the reconfiguration of 

the contract work by a successor 

contractor. The agency also may not 

consider wage rates and fringe benefits 

of service employees in making an 

exception determination except in the 

following exceptional circumstances: 

(i) In emergency situations, such as a 

natural disaster or an act of war, that 

physically displace incumbent 

employees from the locations of the 

service contract work and make it 

impossible or impracticable to extend 

offers to hire as required by the 

Executive order; 

(ii) When a carryover workforce in its 

entirety would not constitute an 

experienced and trained workforce that 

is familiar with the Federal 

Government’s personnel, facilities, and 

requirements but rather would require 

extensive training to learn new 

technology or processes that would not 

be required of a new workforce; or 

(iii) Other, similar circumstances in 

which the cost of employing a carryover 

workforce on the successor contract 

would be prohibitive. 

(d) In exercising the authority to grant 

an exception to a contract because 

adhering to the requirements of the 

order or this part would substantially 

reduce the number of potential bidders 

so as to frustrate full and open 

competition, the contracting agency 

must carry out a market analysis. A 

likely reduction in the number of 

potential offerors indicated by market 

analysis is not, by itself, sufficient to 

except a contract from coverage under 

this authority unless the agency 

concludes that adhering to the 

nondisplacement requirements would 

diminish the number of potential 

offerors to such a degree that adequate 

competition requirements at a fair and 

reasonable price could not be achieved 

and adhering to the requirements of the 

order would not be reasonably tailored 

to the agency’s needs. In finding that 

inclusion of the contract clause would 

not be reasonably tailored to the 

agency’s needs, the agency must specify 

how it intends to more effectively 

achieve the benefits that would have 

been provided by a carryover workforce, 

including physical and information 

security and a reduction in disruption of 

services. 

(e) Before exercising the authority to 

grant an exception to a contract because 

adhering to the requirements of the 

order or this part would otherwise be 

inconsistent with statutes, regulations, 

Executive orders, or Presidential 

Memoranda, the contracting agency 

must consult with the Department of 

Labor, unless the agency has regulatory 

authority for implementing and 

interpreting the statute at issue, or the 

Department has already issued guidance 

finding an exception on the basis at 

issue to be appropriate. 

(f) Any request by interested parties 

for reconsideration of an agency’s 

determination to exercise its exception 

authority under section 6 of the 

Executive order shall be directed to the 

head of the contracting department or 

agency. 

(g) Section 6 of Executive Order 14055 

requires that, to the extent permitted by 

law and consistent with national 

security and executive branch 

confidentiality interests, each agency 

must publish, on a centralized public 

website, descriptions of the exceptions 

it has granted under this section. Each 

agency must also ensure that the 

contractor notifies affected workers and 

their collective bargaining 

representatives, if any, in writing of the 

agency’s determination to grant an 

exception. Each agency also must, on a 

quarterly basis, report to the Office of 

Management and Budget descriptions of 

the exceptions granted under this 

section. 

Subpart B—Requirements 

§ 9.11 Contracting agency requirements. 

(a) Contract Clause. The contract 

clause set forth in Appendix A of this 

part must be included in covered 

service contracts, and solicitations for 

such contracts, that succeed contracts 

for performance of the same or similar 

work, except for procurement contracts 

subject to the FAR. The contract clause 

in Appendix A affords employees who 

worked on the prior contract a right of 

first refusal pursuant to Executive Order 

14055. For procurement contracts 

subject to the FAR, contracting agencies 

must use the clause set forth in the FAR 

developed to implement this section. 

Such clause will accomplish the same 

purposes as the clause set forth in 

appendix A of this part and be 

consistent with the requirements set 

forth in this section. 

(b) Notice. Where a contract will be 

awarded to a successor for the same or 

similar work, the contracting officer 

must take steps to ensure that the 

predecessor contractor provides written 

notice to service employees employed 

under the predecessor contract of their 

possible right to an offer of employment, 

consistent with the requirements in 

§ 9.12(e)(3). 

(c) Location Continuity. (1) When an 

agency prepares a solicitation for a 

service contract that succeeds a contract 

for performance of the same or similar 

work, the agency must consider whether 

performance of the work in the same 

locality or localities in which the 

contract is currently being performed is 

reasonably necessary to ensure 

economical and efficient provision of 

services. 

(2) If an agency determines that 

performance of the contract in the same 

locality or localities is reasonably 

necessary to ensure economical and 

efficient provision of services, then the 

agency must, to the extent consistent 

with law, include a requirement or 

preference in the solicitation for the 

successor contract that it be performed 

in the same locality or localities. 

(3) Agencies must complete the 

location continuity analysis required 

under paragraph (c)(1) of this section 

prior to the date of issuance of the 

solicitation. Any agency determination 

to decline to include a requirement or 

preference for location continuity in the 


jspears on DSK121TN23PROD with PROPOSALS2
42588 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

solicitation must be made in writing by 

the agency’s senior procurement 

executive, and the agency must include 

in the solicitation a statement that the 

analysis required by paragraph (c)(1) of 

this section has been conducted and 

that the agency has determined that no 

such requirement or preference is 

warranted. When an agency decides not 

to include a location continuity 

requirement or preference, the agency 

must ensure that the contractor notifies 

affected workers and their collective 

bargaining representatives, if any, in 

writing of the agency’s determination 

and the right of interested parties to 

request reconsideration. The contracting 

agency must ensure that the contractor 

provides this notice within 5 business 

days after the solicitation is issued and 

confirms to the agency that such notice 

has been provided. Any request by 

interested parties for reconsideration of 

an agency’s decision regarding a 

location continuity requirement or 

preference must be directed to the head 

of the contracting department or agency. 

(4) If the successor contract will be 

performed in a new locality, nothing in 

this part requires the contracting agency 

or the successor contractor to pay the 

relocation costs of employees who 

exercise their right to work for the 

successor contractor or subcontractor 

under the contract clause. 

(d) Disclosures. The contracting 

officer must provide the incumbent 

contractor’s list of employees referenced 

in § 9.12(e) to the successor contractor 

no later than 21 calendar days prior to 

the start of performance on the 

successor’s contract and, on request, the 

predecessor contractor must provide the 

employee list to employees or their 

representatives, consistent with the 

Privacy Act, 5 U.S.C. 552a, and other 

applicable law When the incumbent 

contractor provides the contracting 

agency with an updated employee list 

pursuant to § 9.12(e)(2), the contracting 

agency will provide the updated list to 

the successor contractor no later than 7 

calendar days prior to the start of 

performance on the successor contract. 

However, if the contract is awarded less 

than 30 days before the beginning of 

performance, then the predecessor 

contractor and the contracting agency 

must transmit the list as soon as 

practicable. 

(e) Actions on complaints—(1) 

Reporting—(i) Reporting time frame. 

Within 15 calendar days of receiving a 

complaint or being contacted by the 

Wage and Hour Division with a request 

for the information in paragraph 

(e)(1)(ii) of this section, the contracting 

officer will forward all information 

listed in paragraph (e)(1)(ii) of this 

section to the local Wage and Hour 

office. 

(ii) Report contents: The contracting 

officer will forward to the Wage and 

Hour Division 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 excepted by the 

contracting agency; 

(F) Information concerning known 

settlement negotiations between the 

parties, if applicable; 

(G) Any other relevant facts known to 

the contracting officer or other 

information requested by the Wage and 

Hour Division. 

(2) [Reserved] 

(f) Incorporation of omitted contract 

clause. Where the Department or the 

contracting agency discovers or 

determines, whether before or 

subsequent to a contract award, that a 

contracting agency made an erroneous 

determination that Executive Order 

14055 or this part did not apply to a 

particular contract and/or failed to 

include the applicable contract clause in 

a contract to which the Executive order 

applies, the contracting agency will 

incorporate the contract clause in the 

contract retroactive to commencement 

of performance under the contract 

through the exercise of any and all 

authority that may be needed 

(including, where necessary, its 

authority to negotiate or amend, its 

authority to pay any necessary 

additional costs, and its authority under 

any contract provision authorizing 

changes, cancellation and termination). 

Such incorporation must happen either 

on the initiative of the contracting 

agency or within 15 calendar days of 

notification by an authorized 

representative of the Department of 

Labor. Where the circumstances so 

warrant, the Administrator may, at their 

discretion, require solely prospective 

incorporation of the contract clause 

from the date of incorporation. 

§ 9.12 Contractor requirements and 

prerogatives. 

(a) General—(1) No filling of 

employment openings prior to right of 

first refusal. Except as provided under 

the exclusion listed in § 9.4(b) or the 

exceptions listed in paragraph (c) of this 

section, a successor contractor or 

subcontractor must not fill any 

employment openings for positions 

subject to the SCA 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 successor contract 

or the expiration of the contract under 

which the employees were hired. To the 

extent necessary to meet its anticipated 

staffing pattern and in accordance with 

the requirements described at 9.12(d), 

the contractor and its subcontractors 

must make a bona fide, express offer of 

employment to each employee to a 

position for which the employee is 

qualified and must state the time within 

which the employee must accept such 

offer. In no case may the contractor or 

subcontractor give an employee fewer 

than 10 business days to consider and 

accept the offer of employment. 

(2) Right of first refusal exists when no 

seniority list is 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 and 

subcontractor(s)’ employees or if 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 the person 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 

reliable 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 the predecessor contract 

during the predecessor’s last month of 

performance, coupled with contracting 

agency staff verification, could 

constitute reliable evidence of an 

employee’s entitlement to a job offer 

under this part. Similarly, an employee 

could demonstrate eligibility by 

producing a paycheck stub identifying 

the work location and dates worked or 

otherwise reflecting that the employee 

worked on the predecessor contract 

during the last month of performance. 

(4) Obligation to ensure proper 

placement of contract clause. A 

contractor or subcontractor has an 

affirmative obligation to ensure its 

covered contract contains the contract 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42589 

clause. The contractor or subcontractor 

must notify the contracting officer as 

soon as possible if the contracting 

officer did not incorporate the required 

contract clause into a contract. 

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

offers to qualified employees. Except as 

otherwise provided in this part, a 

contractor must make a bona fide, 

express offer of employment to each 

qualified employee on the predecessor 

contract before offering employment on 

the contract to any other person. In 

determining whether an employee is 

entitled to a bona fide, express offer of 

employment, a contractor may consider 

the exceptions set forth in paragraph (c) 

of this section and the conditions 

detailed in paragraph (d) of this section. 

A contractor may only use employment 

screening processes (i.e., drug tests, 

background checks, security clearance 

checks, and similar pre-employment 

screening mechanisms) when such 

processes are provided for by the 

contracting agency, are conditions of the 

service contract, and are consistent with 

the Executive order. While the results of 

such screenings may show that an 

employee is unqualified for a position 

and thus not entitled to an offer of 

employment, a contractor may not use 

the requirement of an employment 

screening process by itself to conclude 

an employee is unqualified because they 

have not yet completed that screening 

process. 

(2) Establishing time limit for 

employee response. The contractor must 

state the time within which an 

employee must accept an employment 

offer. In no case may the period in 

which the employee has to accept the 

offer be less than 10 business days. The 

obligation to offer employment under 

this part will cease upon the employee’s 

first refusal of a bona fide offer of 

employment on the contract. 

(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 make 

reasonable efforts to make the offer in a 

language that each worker understands. 

For example, if the successor 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. Where 

offers are not made in person, the offers 

should be sent by registered or certified 

mail to the employees’ last known 

address or by any other means normally 

ensuring delivery. Examples of such 

other means include, but are not limited 

to, email to the last known email 

address, delivery to the last known 

address by commercial courier or 

express delivery services, or by personal 

service to the last known address. 

(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, 

so long as it is one for which the 

employee is qualified. If a question 

arises concerning an employee’s 

qualifications, that question must 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 than 

the employee held with the predecessor 

contractor is permitted provided that 

the offer is still bona fide, i.e., the 

different employment terms and 

conditions are not offered to discourage 

the employee from accepting the offer. 

This would include changes to pay or 

benefits. Where the successor contractor 

has or will have any employees in the 

same or similar occupational 

classifications during the course of the 

contract who work or will work entirely 

in a remote capacity, the successor 

contractor must offer employees of the 

predecessor contractor the option of 

remote work under reasonably similar 

terms and conditions. 

(6) Relocation costs. If the successor 

contract will be performed in a new 

locality, nothing in this part requires or 

recommends that contractors or 

subcontractors pay the relocation costs 

of employees who exercise their right to 

work for the successor contractor or 

subcontractor under this part. 

(7) Termination after contract 

commencement. Where an employee is 

terminated by the successor contractor 

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 determine whether 

the offer was bona fide. 

(8) Retroactive incorporation of 

contract clause modifies contractor’s 

obligations. Pursuant to § 9.11(f), in a 

situation where the contracting agency 

retroactively incorporates the contract 

clause, if the successor contractor 

already hired employees to perform on 

the contract at the time the clause was 

retroactively incorporated, the successor 

contractor will be required to offer a 

right of first refusal of employment to 

the predecessor’s employees in 

accordance with the requirements of 

Executive Order 14055 and this part. 

Where, pursuant to § 9.11(f), the 

Administrator has exercised their 

discretion and required only 

prospective incorporation of the 

contract clause from the date of 

incorporation, the successor contractor 

must provide the employees on the 

predecessor contract a right of first 

refusal for any positions that remain 

open. In the event any positions become 

vacant within 90 calendar days of the 

first date of contract performance, the 

successor contractor must provide the 

employees of the predecessor contractor 

the right of first refusal as well, 

regardless of whether incorporation of 

the contract clause is retroactive or 

prospective. 

(c) Exceptions. The successor 

contractor is responsible for 

demonstrating the applicability of the 

following exceptions to the 

nondisplacement provisions subject to 

this part. 

(1) Nondisplaced employees—(i) A 

successor 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 successor 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, unless it can demonstrate a 

reasonable belief to the contrary based 

upon reliable information provided by a 

knowledgeable source, such as the 

predecessor contractor, the employee, or 

the contracting agency. 

(2) Predecessor contract’s non-service 

workers—(i) A successor contractor or 

subcontractor is not required to offer 

employment to any person working on 

the predecessor contract who is not a 

service employee as defined in § 9.2 of 

this part. 

(ii) The successor contractor must 

presume that all employees hired to 

work under a predecessor’s federal 

service contract are service employees, 

unless it can demonstrate a reasonable 

belief to the contrary based upon 

reliable information provided by a 


jspears on DSK121TN23PROD with PROPOSALS2
42590 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

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 

exception. 

(3) Employee’s past performance—(i) 

A successor contractor or subcontractor 

is not required to offer employment to 

an employee of the predecessor 

contractor if the successor contractor or 

any of its subcontractors reasonably 

believes, based on reliable evidence of 

the particular employee’s past 

performance, that there would be just 

cause to discharge the employee if 

employed by the successor contractor or 

any subcontractor. 

(ii) A successor contractor must 

presume that there would be no just 

cause to discharge any employees 

working under the predecessor contract 

in the last month of performance, unless 

it can demonstrate a reasonable belief to 

the contrary that is based upon reliable 

evidence provided by a knowledgeable 

source, such as the predecessor 

contractor and its subcontractors, the 

local supervisor, the employee, or the 

contracting agency. 

(A) For example, a successor 

contractor may demonstrate its 

reasonable belief that there would be 

just cause to discharge an employee 

through reliable written evidence that 

the predecessor contractor initiated a 

process to terminate the employee for 

conduct warranting termination prior to 

the expiration of the contract, but the 

termination process was not completed 

before the contract expired. Conversely, 

written evidence of disciplinary action 

taken for poor performance without a 

recommendation of termination would 

generally not constitute reliable 

evidence of just cause to discharge the 

employee. This determination must be 

made on an individual basis for each 

employee. Information regarding the 

general performance of the predecessor 

contractor is not sufficient to claim this 

exception. 

(B) [Reserved]. 

(4) Nonfederal work—(i) A successor 

contractor or subcontractor is not 

required to offer employment to any 

employee working 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 who worked 

under a predecessor’s federal service 

contract also worked on one or more 

nonfederal service contracts as part of a 

single job, unless the successor can 

demonstrate a reasonable belief based 

on reliable evidence to the contrary. The 

successor contractor must demonstrate 

that its belief is reasonable and is based 

upon reliable evidence 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 successor 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 reliable evidence that 

has been provided by a knowledgeable 

source, such as the employee or the 

contracting agency. 

(d) Reduced staffing—(1) Contractor 

determines how many employees. (i) A 

successor contractor or subcontractor 

will 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 will continue for 90 

calendar 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, as 

described in § 9.12(b), or when 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 

calendar days of the first date of 

contract performance, the contractor 

must first offer that employment 

opening 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 5 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 calendar 

days have passed since the successor 

contractor’s first date of performance on 

the contract. 

(2) 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 must scrutinize each 

employee’s qualifications in order to 

offer the greatest possible number of 

predecessor contract employees 

positions equivalent to those they held 

under the predecessor contract. 

Example: A successor contract is 

awarded for a food preparation and 

services contract with Cook II, Cook I, 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42591 

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 of persons employed as Cook IIs 

and Dishwashers and reducing the 

number of Cook I employees. The 

successor contractor must examine the 

qualifications of each Cook I to 

determine whether they are qualified for 

either a Cook II or Dishwasher position. 

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 higherlevel occupation. 

(3) Contractor determines which 

employees. The contractor, subject to 

provisions of this part and other 

applicable restrictions (including nondiscrimination laws and regulations), 

will determine to which employees it 

will offer employment. See § 9.1(b) 

regarding compliance with requirements 

of other Executive orders, regulations, or 

Federal, state, or local laws. 

(e) Contractor obligations near end of 

contract performance—(1) Certified list 

of employees provided 30 calendar days 

before contract completion. The 

contractor will, not less than 30 

calendar days before completion of the 

contractor’s performance of services on 

a contract, furnish the contracting 

officer with a list of the names of all 

service employees working under the 

contract and its subcontracts at the time 

the list is submitted. The list must also 

contain anniversary dates of 

employment of each service employee 

under the contract and its predecessor 

contracts with either the current or 

predecessor contractors or their 

subcontractors. Assuming there are no 

changes to the workforce before the 

contract is completed, the contractor 

may use the list submitted, or to be 

submitted, to satisfy the requirements of 

the contract clause specified at 29 CFR 

4.6(l)(2) to meet this provision. 

(2) Certified list of employees 

provided 10 days before contract 

completion. Where changes to the 

workforce are made after the submission 

of the certified list described in 

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

contractor will, not less than 10 days 

before completion of the contractor’s 

performance of services on a contract, 

furnish the contracting officer with a 

certified list of the names of all service 

employees employed within the last 

month of contract performance. The list 

must also contain anniversary dates of 

employment and, where applicable, 

dates of separation of each service 

employee under the contract and its 

predecessor contracts with either the 

current or predecessor contractors or 

their subcontractors. The contractor may 

use the list submitted to satisfy the 

requirements of the contract clause 

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

provision. 

(3) Notices. Before contract 

completion, the contractor must provide 

written notice to service employees 

employed under the contract of their 

possible right to an offer of employment 

on the successor contract. Such notice 

will be either posted in a conspicuous 

place at the worksite or delivered to the 

employees individually. Where the 

workforce on the predecessor contract is 

comprised of a significant portion of 

workers who are not fluent in English, 

the notice will be provided in both 

English and a language in which the 

employees are fluent. Multiple language 

notices are required where significant 

portions of the workforce speak 

different languages and there is no 

common language. Contractors may 

provide the notice set forth in Appendix 

B to this part in either a physical 

posting at the job site, or in another 

manner that effectively provides 

individual notice such as individual 

paper notices or effective email 

notification to the affected employees. 

To be effective, email notification must 

result in an electronic delivery receipt 

or some other reliable confirmation that 

the intended recipient received the 

notice. Any particular determination of 

the adequacy of a notification, 

regardless of the method used, will be 

fact-dependent and made on a case-bycase basis. 

(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 will apply to 

all records regardless of their format 

(e.g., paper or electronic). 

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

contractor 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, 

and the names of the employees from 

the predecessor contract to whom an 

offer was made. 

(ii) The contractor must maintain a 

copy of any record that forms the basis 

for any exclusion or exception claimed 

under this part. 

(iii) The contractor must maintain a 

copy of the employee list received from 

the contracting agency and the 

employee list provided to the 

contracting agency. See paragraph (e) of 

this section, contractor obligations near 

end of contract performance. 

(iv) Every contractor that makes 

retroactive payment of wages or 

compensation under the supervision of 

the Administrator of the Wage and Hour 

Division pursuant to § 9.23(b), must: 

(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 within 10 business days 

after payment is made. 

(v) The contractor must maintain 

evidence of any notices that they have 

provided to workers, or workers’ 

collective bargaining representatives, to 

satisfy the requirements of the order or 

these regulations, including notices of 

the possibility of employment on the 

successor contract as required under 

§ 9.12(e)(3); notices of agency 

exceptions that a contracting agency 

requires a contractor to provide under 

§ 9.5(g) and section 6(b) of the order; 

and notices that a contracting agency 

has declined to include location 

continuity requirements or preferences 

in a solicitation pursuant to § 9.11(c)(3). 

(3) Records retention period. The 

contractor must retain records 

prescribed by § 9.12(f)(2) of this part for 

not less than a period of 3 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 must 

cooperate in any review or investigation 

conducted pursuant to this part and 

must not interfere with the investigation 

or intimidate, blacklist, discharge, or in 

any other manner discriminate against 

any person because such person has 


jspears on DSK121TN23PROD with PROPOSALS2
42592 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

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, and also 

includes investigations related to other 

contractors (e.g., predecessor and 

successor contractors) and 

subcontractors. 

§ 9.13 Subcontracts. 

(a) Subcontractor liability. The 

contractor or subcontractor must insert 

in any subcontracts the clause contained 

in Appendix A. The contractor or 

subcontractor must also insert a clause 

in any subcontracts to require the 

subcontractor to include the clause in 

Appendix A in any lower tier 

subcontracts. The prime contractor is 

responsible for the compliance of any 

subcontractor or lower tier 

subcontractor with the contract clause 

in Appendix A. In the event of any 

violations of the clause in Appendix A, 

the prime contractor and any 

subcontractor(s) responsible will be 

jointly and severally liable for any 

unpaid wages and pre-judgment and 

post-judgment interest, and may be 

subject to debarment, as appropriate. 

(b) Discontinuation of subcontractor 

services. When a prime 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, the prime 

contractor must 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. 

Subpart C—Enforcement 

§ 9.21 Complaints. 

(a) Filing a complaint. Any employee 

of the predecessor contractor who 

believes the successor contractor has 

violated this part, or their authorized 

representative, may file a complaint 

with the Wage and Hour Division 

within 120 days from the first date of 

contract performance. The employee or 

authorized representative may file a 

complaint directly with any office of the 

Wage and Hour Division. No particular 

form of complaint is required. A 

complaint may be filed orally or in 

writing. The Wage and Hour Division 

will accept the complaint in any 

language. 

(b) Confidentiality. It is the policy of 

the Department of Labor to protect the 

identity of its confidential sources and 

to prevent an unwarranted invasion of 

personal privacy. Accordingly, the 

identity of any individual who makes a 

written or oral statement as a complaint 

or in the course of an investigation, as 

well as portions of the statement which 

would tend to reveal the individual’s 

identity, will not be disclosed in any 

manner to anyone other than Federal 

officials without the prior consent of the 

individual. Disclosure of such 

statements will be governed by the 

provisions of the Freedom of 

Information Act (5 U.S.C. 552, see 29 

CFR part 70) and the Privacy Act of 

1974 (5 U.S.C. 552a). 

§ 9.22 Wage and Hour Division 

investigation. 

(a) Initial investigation. The 

Administrator of the Wage and Hour 

Division (Administrator) may initiate an 

investigation under this part either as 

the result of a complaint or at any time 

on the Administrator’s own initiative. 

The Administrator may investigate 

potential violations of, and obtain 

compliance with, the Executive Order. 

As part of the investigation, the 

Administrator may conduct interviews 

with the predecessor and successor 

contractors, as well as confidential 

interviews with the relevant contractors’ 

workers at the worksite during normal 

work hours; inspect the relevant 

contractors’ records; make copies and 

transcriptions of such records; and 

require the production of any 

documents or other evidence deemed 

necessary to determine whether a 

violation of this part, including conduct 

warranting imposition of debarment 

pursuant to § 9.23(d), has occurred. 

Federal agencies and contractors shall 

cooperate with any authorized 

representative of the Department of 

Labor in the inspection of records, in 

interviews with workers, and in all 

aspects of investigations. 

(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 

debarment is appropriate, or where the 

contractor has failed to comply with an 

order of the Secretary. 

§ 9.23 Remedies and sanctions for 

violations of this part. 

(a) Authority. Executive Order 14055 

provides that the Secretary will have the 

authority to issue final orders 

prescribing appropriate sanctions and 

remedies, including but not limited to 

requiring the contractor to offer 

employment, in positions for which the 

employees are qualified, to employees 

from the predecessor contract and the 

payment of wages lost. 

(b) Unpaid wages or other relief due. 

In addition to satisfying any costs 

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

this part, a contractor that violates any 

provision of this part must 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) and other terms, conditions, 

and privileges of that employment. The 

contractor will pay interest on any 

underpayment of wages and on any 

other monetary relief due under this 

part. Interest on any back wages or 

monetary relief provided for in this part 

will be calculated using the percentage 

established for the underpayment of 

taxes under 26 U.S.C. 6621 and will be 

compounded daily. 

(c) Withholding of funds—(1) Unpaid 

wages or other relief. The Administrator 

may additionally direct that payments 

due on the contract or any other 

contract between the contractor and the 

Federal Government be withheld in 

such amounts as may be necessary to 

pay unpaid wages or to provide other 

appropriate relief due under this part. 

Upon the final order of the Secretary 

that such monies are due, the 

Administrator may direct the relevant 

contracting agency to transfer the 

withheld funds to the Department of 

Labor for disbursement. 

(2) List of employees. If the 

contracting officer or the Administrator 

finds that the predecessor contractor has 

failed to provide a list of the names of 

service employees working under the 

contract and its subcontracts during the 

last month of contract performance in 

accordance with § 9.12(e), the 

contracting officer will, at their own 

discretion or as directed 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. 

(3) Notification to a contractor of the 

withholding of funds. If the 

Administrator directs a contracting 

agency withhold funds from a 

contractor pursuant to § 9.23(c)(1), the 

Administrator or contracting agency 

must notify the affected contractor. 

(d) Debarment. Where the Secretary 

finds that a contractor has failed to 

comply with any order of the Secretary 

or has committed willful violations of 

Executive Order 14055 or this part, the 

Secretary may order that the contractor 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42593 

and its responsible officers, and any 

firm in which the contractor has a 

substantial interest, will be ineligible to 

be awarded any contract or subcontract 

of the United States for a period of up 

to 3 years. Neither an order for 

debarment of any contractor or 

subcontractor from further government 

contracts under this section nor the 

inclusion of a contractor or 

subcontractor on a published list of 

noncomplying contractors will be 

carried out without affording the 

contractor or subcontractor an 

opportunity for a hearing. 

(e) Antiretaliation. When the 

Administrator finds that a contractor 

has interfered with an investigation of 

the Administrator under this part or has 

in any manner discriminated against 

any person because such person has 

cooperated in such an investigation or 

has attempted to exercise any rights 

afforded under this part, the 

Administrator may require the 

contractor to provide any relief to the 

affected person as may be appropriate, 

including employment, reinstatement, 

promotion, and the payment of lost 

wages, including interest. 

Subpart D—Administrator’s 

Determination, Mediation, and 

Administrative Proceedings 

§ 9.31 Determination of the Administrator. 

(a) Written determination. Upon 

completion of an investigation under 

§ 9.22, the Administrator will issue a 

written determination of whether a 

violation has occurred. The 

determination will contain a statement 

of the investigation findings and 

conclusions. A determination that a 

violation occurred will address 

appropriate relief and the issue of 

debarment where appropriate. The 

Administrator will notify any 

complainant(s); employee 

representative(s); contractor(s), 

including the prime contractor if a 

subcontractor is implicated; contractor 

representative(s); and contracting officer 

by registered or certified mail to the last 

known address or by any other means 

normally assuring delivery, of the 

investigation findings. 

(b) Notice to parties and effect—(1) 

Relevant facts in dispute. If the 

Administrator concludes that relevant 

facts are in dispute, the Administrator’s 

determination will so advise the parties 

and their representatives, if any. It will 

further advise that the notice of 

determination will become the final 

order of the Secretary and will not be 

appealable in any administrative or 

judicial proceeding unless an interested 

party requests a hearing within 20 

calendar days of the date of the 

Administrator’s determination, in 

accordance with § 9.32(b)(1). Such a 

request may be sent by mail or by any 

other means normally assuring delivery 

to the Chief Administrative Law Judge 

of the Office of the Administrative Law 

Judges. A detailed statement of the 

reasons why the Administrator’s 

determination is in error, including facts 

alleged to be in dispute, if any, must be 

submitted with the request for a hearing. 

The Administrator’s determination not 

to seek debarment will 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. They will also be advised 

that the determination will become the 

final order of the Secretary and will not 

be appealable in any administrative or 

judicial proceeding unless an interested 

party files a petition for review with the 

Administrative Review Board pursuant 

to § 9.32(b)(2) within 20 calendar days 

of the date of the determination of the 

Administrator. 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 mail or by any 

other means normally assuring delivery. 

The request must be sent within 20 

calendar 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 calendar days of the date of the 

notice, in accordance with the 

procedures at § 9.32(b)(2). 

§ 9.32 Requesting appeals. 

(a) General. If any party desires 

review of the determination of the 

Administrator, including judicial 

review, a request for an Administrative 

Law Judge hearing or petition for review 

by the Administrative Review Board 

must first be filed in accordance with 

§ 9.31(b) of this part. 

(b) Process—(1) For Administrative 

Law Judge hearing—(i) General. Any 

aggrieved party may request a hearing 

by an Administrative Law Judge by 

sending a request to the Chief 

Administrative Law Judge of the Office 

of the Administrative Law Judges within 

20 calendar days of the determination of 

the Administrator. The request for a 

hearing may be sent by mail or by any 

other means normally assuring delivery 

and will be accompanied by a copy of 

the determination of the Administrator. 

At the same time, a copy of any request 

for a hearing will be sent to the 

complainant(s) or successor contractor, 

and their representatives, if any, as 

appropriate; the contracting officer; the 

Administrator of the Wage and Hour 

Division; and the Associate Solicitor. 

(ii) By the complainant. The 

complainant or any other interested 

party may request a hearing where the 

Administrator determines, after 

investigation, that the employer has not 

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 will be the prosecuting party 

and the employer will 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 employer 

or any other interested party may 

request a hearing where the 

Administrator determines, after 

investigation, that the employer has 

committed violation(s). In such a 

proceeding, the Administrator will be 

the prosecuting party and the employer 

will 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 of an 

Administrative Law Judge’s decision, 

must file a petition for review with the 

Administrative Review Board within 20 

calendar days of the date of the 

determination or decision. The petition 

must be served on all parties and, where 

the case involves an appeal from an 

Administrative Law Judge’s decision, 

the Chief Administrative Law Judge. See 

also § 9.32(b)(1). 

(ii) Contents and service—(A) 

Contents. A petition for review shall 

refer to the specific findings of fact, 

conclusions of law, or order at issue. 

(B) Service. Copies of the petition and 

all briefs shall be served on the 

Administrator, Wage and Hour Division, 

and on the Associate Solicitor. 

(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 will 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 


jspears on DSK121TN23PROD with PROPOSALS2
42594 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

order of the Secretary. If a petition for 

review concerns only the imposition of 

debarment, however, the remainder of 

the decision shall be effective 

immediately. No judicial review will be 

available unless a timely petition for 

review to the Administrative Review 

Board is first filed. 

§ 9.33 Mediation. 

The parties are encouraged to resolve 

disputes by using settlement judges to 

mediate settlement negotiations 

pursuant to the procedures and 

requirements of 29 CFR 18.13 or any 

successor to the regulation. Any 

settlement agreement reached must be 

approved by the assigned 

Administrative Law Judge consistent 

with the procedures and requirements 

of 29 CFR 18.71. 

§ 9.34 Administrative Law Judge hearings. 

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

of Administrative Law Judges has 

jurisdiction to hear and decide appeals 

pursuant to § 9.31(b)(1) concerning 

questions of law and fact from 

determinations of the Administrator 

issued under § 9.31. In considering the 

matters within the scope of its 

jurisdiction, the Administrative Law 

Judge will act as the authorized 

representative of the Secretary and shall 

act fully and, subject to an appeal filed 

under § 9.32(b)(2), finally on behalf of 

the Secretary concerning such matters. 

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

Administrative Law Judge will 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 will have no 

authority to award attorney fees and/or 

other litigation expenses pursuant to the 

provisions of the Equal Access to Justice 

Act for any proceeding under this part. 

(b) Scheduling. If the case is not 

stayed to attempt settlement in 

accordance with § 9.33(a), the 

Administrative Law Judge to whom the 

case is assigned will, 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 will 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 their own motion, dismiss a 

challenge to a determination of the 

Administrator upon the failure of the 

party requesting a hearing or their 

representative to attend a hearing 

without good cause; or upon the failure 

of the 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 which the Administrator has 

not previously participated. The 

Administrator will participate as a party 

in any proceeding in which the 

Administrator has found any violation 

of this part, except where the 

complainant or other interested party 

challenges only the amount of monetary 

relief. See also § 9.32(b)(2)(i)(C). 

(e) Agency participation. A Federal 

agency that is interested in a proceeding 

may participate 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) Hearing documents. Copies of the 

request for hearing under this part 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. 

(g) Rules of practice. 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 will issue a decision within 

60 days after completion of the 

proceeding. The decision will 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 will issue an 

order that the successor contractor take 

appropriate action to remedy the 

violation. This may 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. Where the Administrator 

has sought debarment, 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 will be 

awarded in addition to any unpaid 

wages or other relief due under 

§ 9.23(b). 

(k) Finality. The decision of the 

Administrative Law Judge will become 

the final order of the Secretary, unless 

a petition for review is timely filed with 

the Administrative Review Board as set 

forth in § 9.32(b)(2) of this part. 

§ 9.35 Administrative Review Board 

proceedings. 

(a) Authority—(1) General. The 

Administrative Review Board (ARB) has 

jurisdiction to hear and decide in its 

discretion appeals pursuant to 

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

and fact from determinations of the 

Administrator issued under § 9.31 and 

from decisions of Administrative Law 

Judges issued under § 9.34. In 

considering the matters within the 

scope of its jurisdiction, the ARB acts as 

the authorized representative of the 

Secretary and acts fully on behalf of the 

Secretary concerning such matters. 

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

ARB will not have jurisdiction to pass 

on the validity of any provision of this 

part. The ARB is an appellate body and 

will decide cases properly before it on 

the basis of substantial evidence 

contained in the entire record before it. 

The ARB will 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 will have no authority to award 

attorney fees and/or other litigation 

expenses pursuant to the provisions of 

the Equal Access to Justice Act. 

(b) Decisions. The ARB’s final 

decision will be issued within 90 days 

of the receipt of the petition for review 

and will 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). 


jspears on DSK121TN23PROD with PROPOSALS2
Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 42595 

(c) Orders. If the ARB concludes that 

the contractor has violated this part, the 

final order will order action to remedy 

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 debarment, the 

ARB will determine whether an order 

imposing debarment is appropriate. The 

ARB’s order under this section is subject 

to discretionary review by the Secretary 

as provided in Secretary’s Order 01– 

2020 (or any successor to that order). 

(d) Costs. If a final order finding the 

successor contractor violated this part is 

issued, the ARB 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 will be 

awarded in addition to any unpaid 

wages or other relief due under 

§ 9.23(b). 

(e) Finality. The decision of the 

Administrative Review Board will 

become the final order of the Secretary 

in accordance with Secretary’s Order 

01–2020 (or any successor to that order), 

which provides for discretionary review 

of such orders by the Secretary. 

§ 9.36 Severability. 

If any provision of this part is held to 

be invalid or unenforceable by its terms, 

or as applied to any person or 

circumstance, or stayed pending further 

agency action, the provision shall be 

construed so as to continue to give the 

maximum effect to the provision 

permitted by law, unless such holding 

shall be one of utter invalidity or 

unenforceability, in which event the 

provision shall be severable from this 

part and shall not affect the remainder 

thereof. 

Appendix A to Part 9—Contract Clause 

The following clause shall be included by 

the contracting agency in every contract, 

contract-like instrument, and solicitation to 

which Executive Order 14055 applies, except 

for procurement contracts subject to the 

Federal Acquisition Regulation (FAR): 

Nondisplacement of Qualified Workers 

(a) The contractor and its subcontractors 

shall, except as otherwise provided herein, in 

good faith offer service employees (as defined 

in the Service Contract Act of 1965, as 

amended, 41 U.S.C. 6701(3)) employed under 

the predecessor contract and its subcontracts 

whose employment would be terminated as 

a result of the 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 those 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 more or fewer employees than the 

predecessor contractor employed in 

connection with performance of the work 

solely on the basis of that determination. 

Except as provided in paragraph (b), there 

shall be no employment opening under this 

contract or subcontract, and the contractor 

and any subcontractors shall not offer 

employment under this contract to any 

person prior to having complied fully with 

the obligations described in this clause. 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 business days. 

(b) Notwithstanding the obligation under 

paragraph (a) above, the contractor and any 

subcontractors: 

(1) Are not required to offer a right of first 

refusal to any employee(s) of the predecessor 

contractor who are not service employees 

within the meaning of the Service Contract 

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

and 

(2) Are not required to offer a right of first 

refusal to any employee(s) of the predecessor 

contractor for whom the contractor or any of 

its subcontractors reasonably believes, based 

on reliable evidence of the particular 

employees’ past performance, that there 

would be just cause to discharge the 

employee(s) if employed by the contractor or 

any subcontractors. 

(c) The contractor shall, not less than 10 

business days before the earlier of the 

completion of this contract or of its work on 

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 shall 

provide the list to the successor contractor, 

and the list shall be provided on request to 

employees or their representatives, consistent 

with the Privacy Act, 5 U.S.C. 552(a), and 

other applicable law. 

(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, the 

Secretary may impose appropriate sanctions 

against the contractor or its subcontractors, as 

provided in Executive Order 14055, the 

regulations implementing that order, 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 shall include provisions that 

ensure that each subcontractor shall honor 

the requirements of paragraphs (a) and (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 shall provide the contractor 

with the information about the employees of 

the subcontractor needed by the contractor to 

comply with paragraph (c) of this clause. The 

contractor shall take such action with respect 

to any such subcontract as may be directed 

by the Secretary as a means of enforcing such 

provisions, including the imposition of 

sanctions for noncompliance: provided, 

however, that if the contractor, as a result of 

such direction, becomes involved in 

litigation with a subcontractor, or is 

threatened with such involvement, the 

contractor may request that the United States 

enter into such litigation to protect the 

interests of the United States. 

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

calendar 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 at the time the list is 

submitted. The list shall also contain 

anniversary dates of employment of each 

service employee under the contract and its 

predecessor contracts with either the current 

or predecessor contractors or their 

subcontractors. Where changes to the 

workforce are made after the submission of 

the certified list described in this paragraph 

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

paragraph (c), not less than 10 business days 

before completion of the contractor’s 

performance of services on a contract, furnish 

the contracting officer with an updated 

certified list of the names of all service 

employees employed within the last month 

of contract performance. The updated list 

shall also contain anniversary dates of 

employment and, where applicable, dates of 

separation of each service employee under 

the contract and its predecessor contracts 

with either the current or predecessor 

contractors or their subcontractors. Only 

contractors experiencing a change in their 

workforce between the 30- and 10-day 

periods shall have to submit a list in 

accordance with paragraph (c). 

(2) The contracting officer shall upon their 

own action or upon written request of the 

Administrator withhold or cause to be 

withheld as much of the accrued payments 

due on either the contract or any other 

contract between the contractor and the 

Government that the Department of Labor 

representative requests or that the contracting 

officer decides may be necessary to pay 

unpaid wages or to provide other appropriate 

relief due under 29 CFR part 9. Upon the 

final order of the Secretary that such moneys 

are due, the Administrator may direct the 

relevant contracting agency to transfer the 

withheld funds to the Department of Labor 

for disbursement. If the contracting officer or 

the Administrator finds that the predecessor 

contractor has failed to provide a list of the 

names of service employees working under 

the contract and its subcontracts during the 


jspears on DSK121TN23PROD with PROPOSALS2
42596 Federal Register / Vol. 87, No. 135 / Friday, July 15, 2022 / Proposed Rules 

last month of contract performance in 

accordance with 29 CFR part 9, the 

contracting officer may in their 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. 

(3) The contractor agrees to provide 

notifications to employees under the 

contract, and their representatives, if any, in 

the timeframes requested by the contracting 

agency, to notify employees of any agency 

determination to except a successor contract 

from the nondisplacement requirements of 29 

CFR part 9, or to decline to include location 

continuity requirements or preferences in a 

successor contract. The notice must include 

a statement explaining that any request by 

interested parties for reconsideration of an 

agency’s determination regarding the matter 

must be directed to the head of the agency 

or the head of the agency’s contracting 

department. 

(g) The contractor and subcontractors shall 

maintain records of their compliance with 

this clause for not less than a period of 3 

years from the date the records were created. 

These records may be maintained in any 

format, paper or electronic, provided the 

records meet the requirements and purposes 

of 29 CFR part 9 and are fully accessible. The 

records maintained must include the 

following: 

(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 to covered 

employees, 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 exception claimed 

under this part. 

(3) A copy of the employee list(s) 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 within 10 days after payment 

is made. 

(h) The contractor shall cooperate in any 

review or investigation by the contracting 

agency or the Department of Labor into 

possible violations of the provisions of this 

clause and shall make records requested by 

such official(s) available for inspection, 

copying, or transcription upon request. 

(i) Disputes concerning the requirements of 

this clause shall not be subject to the general 

disputes clause of this contract. Such 

disputes shall be resolved in accordance with 

the procedures of the Department of Labor set 

forth in 29 CFR part 9. Disputes within the 

meaning of this clause include disputes 

between or among any of the following: the 

contractor, the contracting agency, the U.S. 

Department of Labor, and the employees 

under the contract or its predecessor 

contract. 

Appendix B to Part 9—Notice to Service 

Contract Employees 

Service contract employees entitled to 

nondisplacement: The contract for (insert 

type of service) services currently performed 

by (insert name of predecessor contractor) 

has been awarded to a new (successor) 

contractor (insert name of successor 

contractor). The new contractor’s first date of 

performance on the contract will be (insert 

first date of successor contractor’s 

performance). The new contractor is 

generally required to offer employment to the 

employees who worked on the contract 

during the last 30 calendar days of the 

current contract, except as follows: 

Employees who will not be laid off or 

discharged as a result of the end of this 

contract are not entitled to an offer of 

employment. 

Managerial, supervisory, or non-service 

employees on the current contract are not 

entitled to an offer of employment. 

The new contractor is permitted to reduce 

the size of the current workforce; in such 

circumstances, only a portion of the existing 

workforce may receive employment offers. 

However, the new contractor must offer 

employment to the displaced employees in 

positions for which they are qualified if any 

openings occur during the first 90 calendar 

days of performance on the new contract. 

An employee hired to work under the 

current federal service contract and one or 

more nonfederal service contracts as part of 

a single job is not entitled to an offer of 

employment on the new contract, provided 

that the existing contractor did not deploy 

the employee in a manner that was designed 

to avoid the purposes of this part. 

Time limit to accept offer: If you are 

offered employment on the new contract, you 

must be given at least 10 business days to 

accept the offer. 

Complaints: Any employee(s) or 

authorized employee representative(s) of the 

predecessor contractor who believes that they 

are entitled to an offer of employment with 

the new contractor and who has not received 

an offer, may file a complaint, within 120 

calendar days from the first date of contract 

performance, with the local Wage and Hour 

office. 

For additional information: 1–866–4US– 

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

5627, http://www.dol.gov/agencies/whd. 

[FR Doc. 2022–14967 Filed 7–14–22; 8:45 am] 

BILLING CODE 4510–27–P 


jspears on DSK121TN23PROD with PROPOSALS2