[Federal Register Volume 87, Number 135 (Friday, July 15, 2022)]
[Proposed Rules]
[Pages 42552-42596]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14967]



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Vol. 87

Friday,

No. 135

July 15, 2022

Part II





Department of Labor





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Wage and Hour Division





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29 CFR Part 9





Nondisplacement of Qualified Workers Under Service Contracts; Proposed 
Rule

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

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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.

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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 toll-free 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////local-offices 
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

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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

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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

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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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

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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, contract-like 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 Sec.  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

[[Page 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 Sec.  9.3 addresses the coverage provisions of Executive 
Order 14055. Proposed Sec.  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 Sec.  9.3 would implement these coverage provisions by 
stating in proposed Sec.  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 Sec.  9.3(b) would require all contracts 
that satisfy the requirements of proposed Sec.  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 Sec.  9.12. Proposed Sec.  
9.3(c) would require all contracts that satisfy the requirements of 
proposed Sec.  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 Sec.  9.12. Several 
issues relating to the coverage provisions of the Executive order and 
proposed Sec.  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 
Sec.  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 Sec.  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 Sec.  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

[[Page 42558]]

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 Sec.  9.3(a) also provides that part 9 would apply to 
``any . . . solicitation for a contract'' that meets the requirements 
of proposed Sec.  9.3(a). The Department proposes to define 
solicitation in Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  9.3(c) provides requirements that would apply only 
to contracts that satisfy the requirements of paragraph (a) of proposed 
Sec.  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 Sec.  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 Sec.  
9.3(c) would require successor contracts that satisfy the requirements 
of paragraph (a) of proposed Sec.  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 Sec.  9.2, the Department 
proposes to define same or similar work

[[Page 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 non-service 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 Sec.  
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 Sec.  9.4(a)(2) clarifies that the exclusion provision at 
Sec.  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 Sec.  9.4(a)(2) 
explains that subcontracts would be excluded under Sec.  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 Sec.  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 Sec.  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-Wagner-O'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

[[Page 42560]]

Randolph-Sheppard Act, 20 U.S.C. 107[.]'' In contrast, section 5 of 
Executive Order 14055 does not enumerate any such exclusions. 
Accordingly, proposed Sec.  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 Sec.  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 Sec.  9.5 of the regulations. Under section 6 of 
the order, and in proposed Sec.  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 Sec.  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 
Sec.  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 Sec.  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\
---------------------------------------------------------------------------

    \1\ Section 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.''

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

[[Page 42561]]

    Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.5(c) that 
would incorporate much of that previous regulatory language.
    In Sec.  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 Sec.  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 Sec.  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 Sec.  9.12(c)(3) would require the contractor 
to examine the qualifications of each employee so as to minimize 
displacement. Thus, any potential for

[[Page 42562]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 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 Sec.  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 Sec.  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 non-compliance 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 Sec.  9.11(a) provides the regulatory requirement to 
incorporate the contract clause specified in Appendix A in covered 
service contracts, and solicitations for such contracts, that succeed 
contracts for performance of the same or similar 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 
lower-tier 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

[[Page 42564]]

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 Sec.  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 Sec.  9.12(e)(3).
    Proposed Sec.  9.11(c) would implement the location continuity 
requirements in section 4 of the order. In Sec.  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 Sec.  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 Sec.  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 Sec.  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, Sec.  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 Sec.  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

[[Page 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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 42566]]

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 Sec.  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 Sec.  9.11(d) would require the contracting officer to 
provide the predecessor contractor's list of employees referenced in 
proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.12(b)(8). If the 
erroneous omission of the contract clause from a solicitation is 
discovered before contract award, proposed Sec.  9.11(f) would also 
require the contracting agency to amend the solicitation.
Section 9.12 Contractor Requirements and Prerogatives
    Proposed Sec.  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 Sec.  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 Sec.  9.4(b) or the exceptions 
listed in paragraph (c) of proposed Sec.  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

[[Page 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 Sec.  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 Sec.  9.12(a)(2) would clarify that the successor 
contractor's obligation to offer a right of first refusal exists even 
if the successor contractor 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 Sec.  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 Sec.  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 Sec.  9.12(b) discusses the method of the job offer. 
Proposed Sec.  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 Sec.  9.12(c) and the conditions detailed in Sec.  9.12(d). 
Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 42568]]

language in Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.11(f), 
proposed Sec.  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 
Sec.  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 Sec.  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 Sec.  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 Sec.  
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 
Sec.  9.12(c) would be construed narrowly and the contractor would bear 
the burden of proof regarding the applicability of any exception.
    Under proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.12(d) or otherwise alter the 
requirements of Executive Order 14055 and this part. Consistent with 
proposed Sec.  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 Sec.  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 Sec.  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

[[Page 42570]]

minimizing displacement. The proposed regulation provides examples to 
demonstrate this principle.
    Proposed Sec.  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 Sec.  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 Sec.  9.12(e) specifies an incumbent contractor's 
obligations near the end of the contract. Proposed Sec.  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 
Sec.  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 Sec.  9.12(e)(1), proposed 
Sec.  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 Sec.  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 Sec.  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 Sec.  9.12(f) addresses recordkeeping requirements. 
Proposed Sec.  9.12(f)(1) clarifies that this part prescribes no 
particular order or form of records for contractors, and 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 Sec.  9.12(f)(2) specifies the records contractors must 
maintain, including copies of any written offers of employment or a 
contemporaneous written record of any oral offers of employment, 
including the date, location, and attendance roster of any employee 
meeting(s) at which the offers were extended, a summary of each 
meeting, a copy of any written notice that may have been distributed, 
and the names of the employees from the predecessor contract to whom an 
offer was made. Proposed Sec.  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 
Sec.  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 Sec.  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 Sec.  9.12(e)(3) of the regulations; notices of agency 
exceptions that a contracting agency requires a contractor to provide 
under Sec.  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 
Sec.  9.11(c)(3) of the regulations. WHD will use the records that are 
retained pursuant to Sec.  9.12(f)(2) in determining a contractor's 
compliance and whether debarment is warranted. All contractors must 
retain the records listed in proposed Sec.  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 Sec.  9.12(g) outlines the contractor's obligations to 
cooperate

[[Page 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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  
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 Sec.  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 Sec.  9.23 discusses remedies and sanctions for violations 
of Executive Order 14055 and this part. Proposed Sec.  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 Sec.  9.23(b) provides that, in addition to satisfying any 
costs imposed by an administrative order under proposed Sec. Sec.  
9.34(j) or 9.35(d), a contractor that violates part 9 would be required 
to take appropriate action to 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 Sec.  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 make-

[[Page 42572]]

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 Sec.  9.23(c) addresses the withholding of contract funds 
for non-compliance. Under proposed Sec.  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 Sec.  9.23(c)(1) permits the cross-
withholding of monies due. Cross-withholding 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 long-established 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 Sec.  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 Sec.  9.12(e). Proposed Sec.  9.23(c)(3) 
clarifies that if the Administrator directs a contracting agency to 
withhold funds from a contractor pursuant to Sec.  9.23(c), the 
Administrator or contracting agency must notify the affected 
contractor.
    Proposed Sec.  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 long-established 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 Sec.  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 Sec.  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 Sec.  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

[[Page 42573]]

accordance with proposed Sec.  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 Sec.  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 Sec.  9.32(b)(2).
Section 9.32 Requesting Appeals
    Proposed Sec.  9.32 provides procedures for requesting appeals. 
Proposed Sec.  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 
Sec.  9.31(b) of this part.
    Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.34(a)(2) details the limits on the scope of review 
for proceedings before the ALJ. Proposed Sec.  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 Sec.  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 Sec.  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 
Sec.  9.34(b).

[[Page 42574]]

    Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.35 describes the ARB's jurisdiction and provides 
the procedures for appealing an ALJ decision to the ARB under Executive 
Order 14055.
    Proposed Sec.  9.35(a)(1) states the ARB has jurisdiction to hear 
and decide in its discretion appeals from the Administrator's 
determinations issued under Sec.  9.31, and from ALJ decisions issued 
under Sec.  9.34.
    Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.23(b) 
of this part.
    Proposed Sec.  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 Sec.  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

[[Page 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 Sec.  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 Sec.  9.12(f); (3) the complaint process described in proposed 
Sec.  9.21; (4) disclosure and records requirements under proposed 
Sec.  9.5; and (5) the administrative proceedings described in proposed 
subpart D.
    Proposed Sec.  9.12 states compliance requirements for contractors 
covered by Executive Order 14055. Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  9.12(a). 
Proposed Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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.

[[Page 42576]]

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 [email protected]. 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.
---------------------------------------------------------------------------

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

    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 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

[[Page 42577]]

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 in-
depth 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.
---------------------------------------------------------------------------

    \3\ The Department recognizes that some SCA-covered 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.
    \4\ The 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.
    \5\ The 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.
---------------------------------------------------------------------------

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

    \6\ For 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).
    \7\ Contracts 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.
---------------------------------------------------------------------------

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

    \8\ For 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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \9\ The 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).
---------------------------------------------------------------------------

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

[[Page 42578]]

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

    \11\ Data released in monthly files. Available at: https://www.sam.gov/SAM/pages/public/extracts/samPublicAccessData.jsf.
    \12\ Entities 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.''
    \13\ While 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.

                                                 Table 1--Range of Number of Potentially Affected Firms
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Lower-bound estimate                            Upper-bound estimate
                                                         -----------------------------------------------------------------------------------------------
                Industry                       NAICS                                      Subcontractors                                  Subcontractors
                                                               Total        Primes from        from            Total      Firms from SAM       from
                                                                            USASpending     USASpending                                     USASpending
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and                    11           2,482           2,482               0           5,389           5,389               0
 hunting................................
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               54          37,739          26,103          11,636         116,120         104,484          11,636
 services...............................
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, non-service employees).
---------------------------------------------------------------------------

    \14\ See 86 FR 38816, 38816-38898.
    \15\ See 81 FR 9591, 9591-9671 and 79 FR 60634-60733.
---------------------------------------------------------------------------

    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).
[GRAPHIC] [TIFF OMITTED] TP15JY22.007

    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

[[Page 42579]]

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

    \16\ Identified when the ``Construction Wage Rate Requirements'' 
element is ``Y,'' meaning that the contracting agency flagged that 
the contract is covered by DBA.
---------------------------------------------------------------------------

    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-to-gross 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.
---------------------------------------------------------------------------

    \17\ Bureau of Economic Analysis (BEA) (2020). Table 8. Gross 
Output by Industry Group. https://www.bea.gov/news/2020/gross-domestic-product-industry-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.''
    \18\ Bureau of Labor Statistics. OEWS. May 2019. Available at: 
http://www.bls.gov/oes/.
---------------------------------------------------------------------------

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

    \19\ GDP is limited to personal consumption expenditures and 
gross private domestic investment.
    \20\ For 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 x 1.5 = $110.1 billion.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \21\ For the U.S. territories, the unincorporated self-employed 
are excluded because CPS data are not available on the number of 
unincorporated self-employed workers in U.S. territories.

                                 Table 2--Number of Potentially Affected Workers
----------------------------------------------------------------------------------------------------------------
                                                      Covered
                                   Total private    contracting    Share output   Private sector  Workers on SCA
              NAICS                   output          output       from covered       workers        contracts
                                   (billions) a    (millions) b     contracting     (1,000s) c      (1,000s) d
                                                                     (percent)
----------------------------------------------------------------------------------------------------------------
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

[[Page 42580]]

 
Territories.....................             156           1,501             \e\             963             9.9
                                 -------------------------------------------------------------------------------
    Total.......................          33,691         297,794           0.88%         134,761           1,376
----------------------------------------------------------------------------------------------------------------
\a\ Bureau 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.
\c\ OEWS 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.
\d\ Assumes 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.
\e\ Varies 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 x 0.5 hour x 
449,168 contractors). The Department has included all regulatory 
familiarization costs in Year 1. The Department welcomes comments on 
these rule familiarization estimates.
---------------------------------------------------------------------------

    \22\ This 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.
---------------------------------------------------------------------------

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 x 1 hour x 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

[[Page 42581]]

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 x 2.5 hours x 
115,224).
---------------------------------------------------------------------------

    \23\ Because the contracting agency may be split amongst 
different positions, the Department has used the wage of a more 
senior position for the estimate.
    \24\ The Department has used the 2021 Rest of United States 
salary table to estimate salary expenses. See https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-tables/21Tables/html/RUS_h.aspx.
    \25\ Based 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.
---------------------------------------------------------------------------

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 x 1 hour x 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

[[Page 42582]]

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 short-term 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.
---------------------------------------------------------------------------

    \26\ https://www.govtech.com/data/ibm-government-data-breaches-becoming-less-costly.html.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
    \28\ Bahn, 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-standards-and-the-quality-of-jobs-to-reduce-the-costs-of-employee-turnover-to-u-s-companies/.
---------------------------------------------------------------------------

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

[[Page 42583]]

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

    \29\ The 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.

                                                   Table 3--Range of Potentially Affected Small Firms
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Lower-bound estimate                            Upper-bound estimate
                                                         -----------------------------------------------------------------------------------------------
                                                                                               Small                                           Small
                Industry                       NAICS                       Small primes   subcontractors                    Small firms   subcontractors
                                                               Total           from            from            Total         from SAM          from
                                                                            USASpending     USASpending                                     USASpending
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and                    11           2,198           2,198               0           3,849           3,849               0
 hunting................................
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               54          24,371          20,164           4,207          90,547          86,340           4,207
 services...............................
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 x 
0.5 hour). The Department welcomes comments on these rule 
familiarization estimates.
---------------------------------------------------------------------------

    \30\ This 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.
---------------------------------------------------------------------------

    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

[[Page 42584]]

contract clause to be $50.25 per small firm ($50.25 per hour x 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.


0
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.

[[Page 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


Sec.  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.


Sec.  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.

[[Page 42586]]

    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 non-appropriated 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.


Sec.  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 
Sec. Sec.  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 Sec.  9.12.


Sec.  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 Sec.  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.


Sec.  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 Sec.  
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:

[[Page 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


Sec.  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 
Sec.  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

[[Page 42588]]

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 Sec.  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 Sec.  
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.


Sec.  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 
Sec.  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

[[Page 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 Sec.  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 Sec.  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 Sec.  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

[[Page 42590]]

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 Sec.  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,

[[Page 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 higher-level 
occupation.
    (3) Contractor determines which employees. The contractor, subject 
to provisions of this part and other applicable restrictions (including 
non-discrimination laws and regulations), will determine to which 
employees it will offer employment. See Sec.  9.1(b) regarding 
compliance with 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-by-case 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 Sec.  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 Sec.  9.12(e)(3); notices of 
agency exceptions that a contracting agency requires a contractor to 
provide under Sec.  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 Sec.  
9.11(c)(3).
    (3) Records retention period. The contractor must retain records 
prescribed by Sec.  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

[[Page 42592]]

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.


Sec.  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


Sec.  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).


Sec.  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 Sec.  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.


Sec.  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 Sec. Sec.  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 Sec.  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 Sec.  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

[[Page 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


Sec.  9.31  Determination of the Administrator.

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


Sec.  9.32  Requesting appeals.

    (a) General. If any party desires review of the determination of 
the Administrator, including judicial review, a request for an 
Administrative Law Judge hearing or petition for review by the 
Administrative Review Board must first be filed in accordance with 
Sec.  9.31(b) of this part.
    (b) Process--(1) For Administrative Law Judge hearing--(i) General. 
Any aggrieved party may 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 Sec.  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

[[Page 42594]]

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.


Sec.  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.


Sec.  9.34  Administrative Law Judge hearings.

    (a) Authority--(1) General. The Office of Administrative Law Judges 
has jurisdiction to hear and decide appeals pursuant to Sec.  
9.31(b)(1) concerning questions of law and fact from determinations of 
the Administrator issued under Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  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 
Sec.  9.32(b)(2) of this part.


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

[[Page 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 Sec.  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.


Sec.  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

[[Page 42596]]

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