[Federal Register Volume 88, Number 239 (Thursday, December 14, 2023)]
[Rules and Regulations]
[Pages 86736-86805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27072]



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Vol. 88

Thursday,

No. 239

December 14, 2023

Part II





Department of Labor





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29 CFR Part 9





Nondisplacement of Qualified Workers Under Service Contracts; Final 
Rule

  Federal Register / Vol. 88 , No. 239 / Thursday, December 14, 2023 / 
Rules and Regulations  

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DEPARTMENT OF LABOR

29 CFR Part 9

RIN 1235-AA42


Nondisplacement of Qualified Workers Under Service Contracts

AGENCY: Wage and Hour Division, Department of Labor.

ACTION: Final rule.

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SUMMARY: This document finalizes regulations to implement Executive 
Order 14055, ``Nondisplacement of Qualified Workers Under Service 
Contracts'' (Executive order or the order), which was signed by 
President Joseph R. Biden, Jr. on November 18, 2021. The Executive 
order states that when a service contract with the Federal Government 
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 Executive order, therefore, 
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 Executive order directs the Secretary of Labor 
(Secretary) to issue regulations, consistent with applicable law, to 
implement the order's requirements. This final rule establishes 
standards and procedures for implementing and enforcing the 
nondisplacement protections of the order.

DATES: 
    Effective date: This final rule is effective February 12, 2024.
    Applicability date: This final rule will apply to solicitations 
issued on or after the effective date of the final regulations issued 
by the Federal Acquisition Regulatory Council (FAR Council).

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 Wage and Hour Division (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/agencies/whd/contact/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), 41 U.S.C. 6701 et seq., and its implementing 
regulations. 86 FR 66397. Section 2 also 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 in section 3 of the Executive order 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

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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 at 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 at 66398. The list must also contain 
anniversary dates of employment of each service employee on 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, 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, 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 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 may 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 at 
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 at 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 at 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 
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 at 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 the Office of Management and 
Budget (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 at 66399. In addition, to the 
extent consistent with law, the FAR Council is to amend the Federal 
Acquisition Regulation (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 U.S. 
Department of Labor (Department). 86 FR at 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 at 66399-400. Neither an order for debarment of any 
contractor or subcontractor from further Federal

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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 at 66400. Section 8 also 
specifies that Executive Order 14055 creates no rights under the 
Contract Disputes Act, 41 U.S.C. 7101 et seq., 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. 86 FR at 66400.
    Section 9 of Executive Order 14055 revokes Executive Order 13897 of 
October 31, 2019, which itself revoked Executive Order 13495 of January 
30, 2009, Nondisplacement of Qualified Workers Under Service Contracts. 
86 FR at 66400; see also 84 FR 59709 (Nov. 5, 2019); 74 FR 6103 (Jan. 
30, 2009). Section 9 also explains that Executive Order 13495 remains 
revoked. 86 FR at 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 at 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 at 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 at 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. Id. at 66401.

A. Prior Relevant Executive Orders

    As indicated, section 9 of Executive Order 14055 revoked Executive 
Order 13897, which revoked 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. As required by Executive Order 13897, the Department rescinded 
these regulations 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. Compare 86 FR at 66398, with 74 FR at 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. Compare 86 FR at 66398, with 74 FR at 6104. 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 the 
requirements of Executive Order 14055 apply even if the successor 
contract is not 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 13495 did not contain a similar 
requirement.
    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 particular circumstances enumerated in the order as 
grounds for exemption exists with respect to that contract. 86 FR at 
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, Executive Order 14055 requires 
agencies 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 at 6104. 
Executive Order 13495 did not require notice or publication of agency 
exemptions. See id.

B. Notice of Proposed Rulemaking

    On July 15, 2022, the Department published a Notice of Proposed 
Rulemaking (NPRM) in the Federal Register inviting comments for a 
period of 30 days on a proposal to implement the provisions of 
Executive Order 14055. See 87 FR 42552. The 30-day comment period 
closed on August 15, 2022. The Department received 33 timely comments 
in response to the NPRM from a variety of interested stakeholders, such 
as labor organizations, nonprofit organizations, contractors, and 
contractor associations.

II. Discussion of Final Rule

A. Legal Authority

    President Biden lawfully issued Executive Order 14055 pursuant to 
his

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authority under ``the Constitution and the laws of the United States,'' 
expressly including the Procurement Act. 86 FR 66397 (citing 40 U.S.C. 
101 et seq.). The Procurement Act's express purpose is ``to provide the 
Federal Government with an economical and efficient system'' for 
``[p]rocuring and supplying property and nonpersonal services, and 
performing related functions including contracting.'' 40 U.S.C. 101. 
The Act empowers the President to ``prescribe policies and directives 
that the President considers necessary to carry out'' that objective. 
40 U.S.C. 121(a). Executive Order 14055 directs the Secretary, ``to the 
extent consistent with law,'' to issue regulations to ``implement the 
requirements of this order.'' 86 FR at 66399. The Secretary has 
delegated the 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).
    Some commenters, particularly Associated Builders and Contractors 
(ABC), the Professional Services Council (PSC), and an anonymous 
commenter, generally contended that neither Executive Order 14055 nor 
the proposed rule provide evidentiary support for the proposition that 
establishing a nondisplacement obligation would actually achieve 
greater economy and efficiency in federal procurement. ABC further 
commented that it believes the proposed rule conflicts with the plain 
language of the SCA, as the SCA does not require a successor contractor 
to hire a predecessor contractor's employees, and that neither the 
President nor the Department has the authority to override the SCA. 
Accordingly, ABC requested that the Department withdraw the proposed 
rule in its entirety.
    As a threshold matter, the purpose of this rulemaking is to 
implement Executive Order 14055, and therefore the President's legal 
authority to issue Executive Order 14055, and the justification for 
doing so, are not matters within the scope of this rulemaking. 
Concerning the scope of the Department's rulemaking authority, the 
Department strongly disagrees with ABC's comment that the proposed rule 
is in conflict with the SCA. While ABC is correct that the SCA does not 
require a successor contractor to hire the predecessor contractor's 
workforce, the SCA does not prohibit the hiring of the predecessor 
contractor's workforce or address whether such hiring may be encouraged 
or required by another law. That Executive Order 14055 applies to SCA-
covered contracts does not mean that the order and this rule must 
mirror the SCA's substantive provisions and that the nondisplacement 
provision is ``in conflict'' with the SCA because it is not required by 
that statute. Rather, Executive Order 14055 provides for contractual 
requirements that are separate and distinct from the legal obligations 
of the SCA--with the President's authority to issue the Executive order 
derived from the Procurement Act in particular. The Procurement Act 
empowers the President to ``prescribe policies and directives that the 
President considers necessary to carry out'' its objectives, and 
Executive Order 14055 further directs the Secretary to issue 
regulations to ``implement the requirements of this order.'' 40 U.S.C. 
121(a); 86 FR at 66399. This final rule has been promulgated consistent 
with that authority and contains obligations that are independent from 
a contractor's responsibilities under the SCA. The SCA's requirements 
thus do not preclude the Department from implementing and enforcing the 
nondisplacement requirements of Executive Order 14055. Instead, the SCA 
and Executive Order 14055 can and should be viewed as complementary and 
co-existing rather than in conflict because it is possible for 
contractors to comply with both authorities; the SCA does not reflect 
an intent to preclude application of a nondisplacement requirement 
established by another legal authority. Thus, the Department declines 
ABC's request to withdraw the proposed rule.
    After considering all timely comments received to the proposed 
rule, the Department is issuing this final rule to implement the 
provisions of Executive Order 14055.

B. Overview of the Rule

    This final rule, which amends Title 29 of the Code of Federal 
Regulations (CFR) by adding part 9, sets forth standards and procedures 
for implementing and enforcing Executive Order 14055. 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. Subpart B 
establishes requirements for contracting agencies and contractors to 
comply with the Executive order. Subpart C specifies standards and 
procedures related to complaint intake, investigations, and remedies. 
Subpart D specifies standards and procedures related to administrative 
enforcement proceedings.
    The following section-by-section discussion of this rule presents 
the contents of each section in more detail.
Part 9 Subpart A--General
    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.
1. Section 9.1 Purpose and Scope
    Proposed Sec.  9.1(a) explained that the purpose of the rule is to 
implement Executive Order 14055. The paragraph emphasized that the 
Executive order assigns enforcement responsibility for the 
nondisplacement requirements to the Department.
    Proposed Sec.  9.1(b) explained the underlying policy of Executive 
Order 14055. First, the provision repeated 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. Like the order, the 
proposed rule elaborated 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 explained 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

[[Page 86740]]

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 clarified 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) outlined the scope of the regulations and 
provided 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 restated 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, must be disposed of only as provided by the Secretary in 
regulations issued under the Executive order. This paragraph also 
clarified that neither the Executive order nor the regulations 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.
    The Department did not receive any comments directly related to 
Sec.  9.1. The Department has addressed comments directed at specific 
elements of the nondisplacement requirements, such as the scope of the 
right of first refusal, in the preamble sections for the relevant 
elements of the order's requirements. The final rule accordingly adopts 
the Sec.  9.1 provisions as proposed.
2. Section 9.2 Definitions
    Proposed Sec.  9.2 defined 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 noted that, while the definitions 
discussed in the proposed rule would govern the implementation and 
enforcement of Executive Order 14055, nothing in the proposed rule was 
intended to alter the meaning of or to be interpreted inconsistently 
with the definitions set forth in the FAR for purposes of that 
regulation.
    Consistent with the definition provided in Executive Order 14055, 
the Department proposed to define agency to mean an executive 
department or agency, including an independent establishment subject to 
the Procurement Act. See 86 FR 66397. The Department explained that, 
for the purpose of this definition, ``an executive department or 
agency'' means any executive agency as defined 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. The 
Department explained that the proposed definition would include 
independent regulatory agencies. The Department did not receive any 
comments addressing the term agency and the final rule adopts the 
definition of that term as proposed.
    The Department proposed 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. The Department did not receive any 
comments addressing the definition of Associate Solicitor, and the 
final rule adopts the definition of that term as proposed.
    The Department proposed to define business day as Monday through 
Friday, except Federal holidays declared under 5 U.S.C. 6103 or by 
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. The Department did not receive any 
comments addressing the definition of business day. The final rule 
therefore adopts this definition as proposed, with one technical edit 
to correct the alphabetical order of definitions that is not intended 
to reflect a change in the substance of this section.
    Consistent with section 2(a) of the Executive order, the Department 
proposed 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. See 86 FR 66397. PSC commented that 
the proposed definition of contract or service contract would wrongly 
expand the coverage of the SCA to ``contract-like instruments,'' while 
others, such as the Coalition,\1\ submitted comments supporting the 
proposed rule's broad scope and coverage.
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    \1\ As reflected in their comment, ``the Coalition'' refers 
collectively to the following organizations that submitted a joint 
comment in response to the NPRM: The American Association of People 
with Disabilities; the Autistic Self Advocacy Network; 
Communications Workers of America; the International Brotherhood of 
Teamsters; the Laborers' International Union of North America; the 
National Employment Law Project; and the Service Employees 
International Union.
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    PSC recommended removing ``contract-like instrument'' from the 
definition of contract on the grounds that, among other reasons, the 
use of ``contract-like instrument'' might ``create confusion by 
suggesting that a `contract-like instrument' can be subject to the 
SCA.'' The Department acknowledges that the term ``contract-like 
instrument'' is not used in the SCA. However, the term ``contract-like 
instrument'' was expressly used in the definition of contract and 
service contract in Executive Order 14055, was used in both of the 
previous Executive orders requiring a minimum wage for Federal 
contractor employees (Executive Orders 13658 and 14026), and is 
defined, collectively with the term contract, in the Department's 
regulations implementing both Executive Order 13658 and Executive Order 
14026. See 29 CFR 10.2; 29 CFR 23.20. Therefore, the Department expects 
that most contracting agencies and contractors affected by this 
rulemaking are already familiar with the use of this term.
    Furthermore, the use of the term ``contract-like instrument'' in 
Executive Order 14055 neither expands SCA coverage nor expands coverage 
under Executive Order 14055 to contracts not subject to the SCA. 
Rather, consistent with the SCA's scope of coverage, the term simply 
reflects that the order is intended to cover all agreements of a 
contractual nature (i.e., all agreements between two or more parties 
creating obligations that are enforceable or otherwise recognizable at 
law, including those agreements that may not be universally regarded as 
a contract in other contexts) that qualify as contracts under the SCA. 
Licenses, permits, and similar instruments may qualify as contracts 
under the SCA 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., 29 CFR 4.110, the 
Department views the term ``contract-like instrument'' as simply 
reinforcing the breadth of contract coverage under the SCA, and

[[Page 86741]]

hence under Executive Order 14055. The Department further believes that 
the use of the term ``contract-like instrument'' in Executive Order 
14055 is intended to prevent disputes or extended discussions between 
contracting agencies and contractors regarding whether a particular 
legal arrangement qualifies as a contract for purposes of coverage by 
the order and this part. In sum, the use of the term ``contract-like 
instruments'' in Executive Order 14055 and in this rule is consistent 
with previous Executive orders and will help facilitate more efficient 
determinations by contractors, contracting officers, and the Department 
as to whether a particular legal instrument is covered. The Department 
therefore declines to delete the term ``contract-like instrument'' from 
the definition of contract. Separately, however, to reduce ambiguity in 
the definition of contract or service contract, the Department is 
clarifying that SCA-covered temporary interim contracts are also 
included within the definition of contract and service contract. This 
technical clarification will ensure that temporary interim contracts 
are understood to be fully included within the definition. To 
effectuate the order, temporary interim contracts must be within that 
definition to prevent workforce displacement during any such contracts.
    PSC also recommended removing the term ``exercised contract 
options'' from the illustrative list of terms defining contract, noting 
that the inclusion of the term in the definition is inconsistent with 
the Department's statements in the preamble to Sec.  9.3 regarding 
coverage. Under Sec.  9.3, when an option is exercised and no 
solicitation is issued for a follow-on contract, the original contract 
is not considered expired for purposes of Executive Order 14055, and 
the requirements of the order and this rule do not apply at that time 
as a result of the exercised contract option. The Department agrees 
with PSC's recommendation and therefore, to maintain consistency and 
reduce confusion, is not including ``exercised contract options'' in 
the definition of contract.
    The Department proposed to substantially adopt the definition of 
contracting officer in section 2.101 of the FAR, which defines the term 
to mean an agency official with the authority to enter into, 
administer, and/or terminate contracts and make related determinations 
and findings. The term, as proposed, would include 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 did not receive any comments addressing the 
definition of contracting officer, and the final rule adopts the 
definition of that term as proposed.
    The Department proposed 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 noted 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. The proposed definition incorporated 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 noted that the fact that an individual 
or entity is a contractor under the Department's definition does not 
mean that such an individual or entity has legal obligations under the 
Executive order. Thus, an individual or entity that is awarded a 
service contract with the Federal Government will qualify as a 
``contractor'' pursuant to the Department's definition, but that 
individual or entity may only be subject to the nondisplacement 
requirements of the Executive order in connection with a particular 
contract if the contract is one that is covered under Sec.  9.3(a). For 
example, an employment contract providing for direct services to a 
Federal agency by an individual is not covered by the SCA. 41 U.S.C. 
6702(b)(6); 29 CFR 4.121. As a result, an individual who enters into 
such a contract may be a ``contractor'' under the definition of 
contractor in the nondisplacement rule, but the contract will not be 
covered by the nondisplacement requirements. The Department did not 
receive any comments addressing the definition of contractor, and the 
final rule adopts the definition of that term as proposed.
    Consistent with the definition provided in Executive Order 14055, 
the Department proposed to define employee to mean a service employee 
as defined in the SCA. See 86 FR 66397 (citing 41 U.S.C. 6701(3)). 
Accordingly, employee ``means an individual engaged in the performance 
of'' an SCA-covered contract. See 41 U.S.C. 6701(3)(A). The term 
``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 is 
identified as an independent contractor on the contract. See 41 U.S.C. 
6701(3)(B). It ``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. See 41 U.S.C. 6701(3)(C).
    The Coalition submitted a comment supporting the Department's 
proposed inclusion of individuals identified as independent contractors 
in the definition of employee. They stated that given the significant 
volume of work performed by such individuals, the purposes of the 
Executive order will be promoted by inclusion of such workers. The 
Department received no other comments about the proposed definition of 
employee, and therefore the final rule adopts the definition as 
proposed in the NPRM, with an edit to remove ``or service employee'' 
from the regulatory text. This edit is not intended to reflect a change 
in the substance of the definition, but is made to reduce redundancy, 
as Executive Order 14055 already states that employee means service 
employee as defined by the SCA.
    The Department proposed to define employment opening to mean any 
vacancy in a position on the successor contract. This is consistent 
with the definition of employment opening in the regulations that 
implemented Executive Order 13495. The Department did not receive any 
comments on the proposed definition of employment opening, and the 
final rule adopts the definition as proposed.
    The Department proposed 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 was 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 included 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 included 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 would not 
include the District of Columbia or any Territory or possession of the 
United States. The Department did not receive any comments on the 
proposed definition of Federal Government, and the final rule adopts 
the definition as proposed.
    The Department proposed to define month under the Executive order 
as a

[[Page 86742]]

period of 30 consecutive calendar days, regardless of the day of the 
calendar month on which it begins. The Department proposed defining the 
term to clarify how to address partial months and to balance calendar 
months of different lengths. The proposed definition was consistent 
with the definition of month in the regulations that implemented 
Executive Order 13495. The Department did not receive any comments 
addressing the definition of month, and the final rule adopts the 
definition of that term as proposed.
    The Department proposed 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 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.
    PSC requested the Department further define how the definition of 
same or similar work would be applied to Multiple Agency Contracts, 
especially with regard to competition at the task-order level and 
completion of task orders over years-long performance periods on the 
master contract as a whole, as well as best-in class contracts. PSC's 
question also implicates the overall subset of contracts for indefinite 
delivery indefinite quantity (IDIQ), including the Multiple Award 
Schedule (MAS) and the Federal Supply Schedule program. See 48 CFR 
8.401.
    Whether work is ``same or similar'' is only relevant when specific 
work on an expiring contract is going to be replaced by work under 
another contract, such that one contract can reasonably be considered 
to be a successor contract and the other a predecessor contract. In 
that situation, the contracting agency must compare the expiring work 
and the anticipated work to determine whether they share primary 
characteristics. Thus, where a contracting agency is considering the 
use of an order under an IDIQ contracting vehicle for a specific scope 
of work, the nondisplacement requirements of the Executive order--
including the determination of whether a contract involves the same or 
similar work--would apply at the task order level in the same manner as 
for any other contract. For example, an agency may have an expiring 
non-MAS contract for security services at an individual federal 
facility and may seek to use the MAS program to identify a contractor 
to take over the same or similar security services at that facility. In 
such a circumstance, any new MAS program task order would need to 
include the nondisplacement clause to be a permissible contracting 
vehicle for the successor contract and the MAS contractor would need to 
provide job offers to qualified employees on the expiring non-MAS 
contract.
    The Coalition recommended the Department modify the definition of 
same or similar work to make it clear that the definition applies 
regardless of whether the successor changes in size. However, such a 
change would be redundant to the existing use of the term ``similar,'' 
which encompasses contracts of varying monetary amounts or other 
material changes in size. Furthermore, the rule addresses reductions in 
staffing in detail at Sec.  9.12(d), and the Coalition's suggested 
revisions to the definition of same or similar work might add confusion 
to that existing framework. Although the Department therefore declines 
to modify the definition of same or similar work in the manner 
requested, the Department has revised the definition for purposes of 
clarity. As noted, the NPRM defined same or similar work 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 either 
by the Federal Government or a contractor on a Federal service 
contract.'' However, the portion of this proposed definition beginning 
with ``that is being replaced'' does not address whether the work at 
issue is the ``same or similar,'' but rather concerns the distinct 
(though related) issue of whether a predecessor-successor relationship 
exists. As a result, in the interest of clarity, the Department defines 
same or similar work in the final rule as ``work that is either 
identical to or has primary characteristics that are alike in substance 
to work performed on another service contract.'' This change is 
intended to be nonsubstantive, as it preserves the operative language 
regarding whether the work under a predecessor and successor contract 
is the same or similar.
    The Department proposed to define the term Service Contract Act 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 part 
4 (SCA implementing regulations); 29 CFR 4.1a(a) (defining the SCA for 
the purpose of the implementing regulations). The Department did not 
receive comments about this proposed definition and the final rule 
adopts the definition as proposed.
    The Department proposed 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 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 did not receive any comments addressing the 
definition of solicitation, and the final rule adopts the definition of 
that term as proposed.
    The Department proposed 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 proposed 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 was 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).
    The Coalition expressed support for this proposed definition, 
stating that it appropriately defines the geography it covers broadly 
and consistently with the SCA and its implementing regulations. The 
Coalition stated that they support such consistency because the Federal 
Government will obtain the most economy and efficiency benefits from 
Executive Order 14055 if it is applied broadly, and that uniform 
coverage between Executive Order 14055 and the SCA provides clarity for 
Federal agencies, contractors, and Federal

[[Page 86743]]

service contractor workers. The Department did not receive any other 
comments about the proposed definition of United States, and therefore 
the final rule adopts the definition as proposed.
    Finally, the Department proposed to use the definitions of the 
terms Administrative Review Board, Administrator, Office of 
Administrative Law Judges, Secretary, and Wage and Hour Division that 
were set forth in the regulations that implemented Executive Order 
13495. The Department did not receive comments on these proposed 
definitions, and the final rule adopts these definitions as proposed 
with one technical edit to correct the alphabetical order of Secretary 
that is not intended to reflect a change in the substance of this 
section.
3. Section 9.3 Coverage
    Proposed Sec.  9.3 addressed the coverage provisions of Executive 
Order 14055. It explained 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 (and 
solicitations for such contracts and subcontracts) that succeed a 
contract for performance of the same or similar work include a specific 
nondisplacement clause. This clause must state that the successor 
contractor and its subcontractors, except as otherwise provided in the 
order, must, in good faith, offer service employees employed under the 
predecessor contract and its subcontracts a right of first refusal of 
employment under the successor contract in positions for which those 
employees are qualified, if those service employees' employment would 
otherwise be terminated as a result of the award of the successor 
contract or the expiration of the contract under which the employees 
were hired. Section 2 of the order 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 of the order specifies that the order does not 
apply to contracts under the simplified acquisition threshold as 
defined in 41 U.S.C. 134.
    Section 9.3(a) of the NPRM proposed to implement these coverage 
provisions by stating 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 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 related requirements of paragraphs 
(e), (f), and (g) of Sec.  9.12, regarding contractor obligations near 
the end of contract performance, recordkeeping, and cooperation with 
investigations. Proposed Sec.  9.3(c) would require all contracts that 
satisfy the requirements of 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 in Appendix A. It also would require all 
contractors on such contracts to comply, without limitation, with all 
the requirements of Sec.  9.12. As in the NPRM, several issues relating 
to the coverage provisions of the Executive order and Sec.  9.3 are 
discussed below.
i. Coverage of Agencies
    Section 9.3 of the NPRM proposed to apply the nondisplacement 
requirements to contracts or solicitations for contracts with ``an 
agency.'' This language reflects that Executive Order 14055 applies to 
contracts and solicitations with the ``Federal Government'' that meet 
the other coverage requirements of the order. In Sec.  9.2 of the NPRM, 
the Department proposed 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.'' And, consistent with section 2(c) of the 
Executive order, the Department proposed to define ``agency'' as an 
``[e]xecutive department or agency, including an independent 
establishment subject to the [Procurement Act].'' The Department noted 
in discussing the proposed definitions in Sec.  9.2 that it would 
interpret the terms ``executive departments'' and ``agencies'' 
consistent with the definition of ``executive agency'' provided in 
section 2.101 of the FAR. See 48 CFR 2.101. Thus, the Department stated 
that the proposed rule would apply 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. See 48 
CFR 2.101 (definition of ``executive agency''). The NPRM stated that 
this proposed definition would be interpreted to 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. 101 et seq. Thus, for example, contracts 
awarded by the U.S. Postal Service are not 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 ``Federal 
Government,'' contracts awarded by the District of Columbia and any 
Territory or possession of the United States would not be covered by 
the order.
    No comments were received regarding coverage of agencies. The 
Department therefore affirms its discussion of coverage of agencies in 
the final rule.
ii. Coverage of Contracts
    Proposed Sec.  9.3(a) provided that the requirements of the 
Executive order generally would apply to ``any contract or solicitation 
for a contract with an agency.'' 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 [SCA] and its implementing 
regulations.'' In Sec.  9.2, the Department proposed 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.'' Cradle of Forestry in Am. 
Interpretive Ass'n, ARB No. 99-035, 2001 WL 328132, at *3 (Mar. 30, 
2001) (quoting Restatement (Second) of Contracts section 1 (Am. L. 
Inst. 1979)). As discussed above with regard to the definition of 
``contract'' in Sec.  9.2, 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

[[Page 86744]]

purposes of the specific programs under which they are administered.
    Proposed Sec.  9.3(a) provided that part 9 would also apply to 
``any . . . solicitation for a contract'' that meets the other 
requirements for coverage. In Sec.  9.2, the Department proposed to 
define ``solicitation'' to mean ``any request to submit offers, bids, 
or quotations to the Federal Government.'' In keeping with the 
definition proposed in that section, 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 are not ``solicitations'' for 
purposes of the Executive order. If the solicitation is for a contract 
that is covered by part 9, then the solicitation will also be covered.
    Consistent with section 2(a) of Executive Order 14055, proposed 
Sec.  9.3(a)(1) clarified 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'' 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. See, e.g., 29 CFR 
4.130(a) (providing a nonexclusive list of examples). 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. SCA coverage, 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 
FLSA regulations at 29 CFR part 541. Similarly, a contract for services 
performed essentially by bona fide executive, administrative, or 
professional employees, with the use of service employees being only a 
minor factor in contract performance, is not covered by the SCA and 
thus is not covered by the Executive order or part 9. See 41 U.S.C. 
6702(a)(3); 29 CFR 4.113(a); WHD Field Operations Handbook (FOH) 14c07. 
No comments were received regarding Sec.  9.3(a)(1). Aside from adding 
language to make clear that only contracts or solicitations issued or 
entered on or after the applicability date of part 9 are covered, the 
final rule adopts that provision as proposed.
iii. Coverage of Contracts at or Above the Simplified Acquisition 
Threshold
    Proposed Sec.  9.3(a)(2) provided 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 proposed 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. 
As the Department noted in the NPRM, 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 sought comment from the public on the 
potential impact, including any unintended consequences, of covering 
subcontracts below the simplified acquisition threshold.
    PSC advocated to exclude subcontracts with a value less than the 
simplified acquisition threshold, noting, as the Department also did, 
that Executive Order 14055 defines ``contract'' to include ``contract 
or subcontract.'' PSC also commented that applying the rule's 
nondisplacement requirements to subcontracts below the current 
simplified acquisition threshold would be unreasonable, calculating 
that a 5-year service subcontract that has a value below the current 
simplified acquisition threshold might only employ one person. Nakupuna 
Companies (Nakupuna) also opposed coverage of subcontracts below the 
simplified acquisition threshold, positing that the costs of compliance 
with Executive Order 14055 will be burdensome on small subcontractors.
    Conversely, multiple commenters supported covering subcontracts for 
amounts below the simplified acquisition threshold where the prime 
contract meets or exceeds the simplified acquisition threshold. The 
Coalition supported coverage of these subcontracts because such an 
approach maximizes the reach of Executive Order 14055 and avoids 
incentivizing circumvention of the order's requirements through 
subcontracting. Likewise, the American Federation of Labor and Congress 
of Industrial Organizations (AFL-CIO) supported coverage of 
subcontracts below the simplified acquisition threshold as an 
``important tool for ensuring that the contractors do not evade the 
nondisplacement requirements,'' and noted that the proposed rule 
appropriately specified that non-service subcontracts, such as supply 
subcontracts, were excluded. Relatedly, the Center for American 
Progress (CAP) supported the ways in which Executive Order 14055 
``clos[ed] loopholes,'' thereby ``preventing low road firms from 
undermining the rules.''
    The final rule adopts the regulatory language at Sec.  9.3(a)(2) as 
proposed in the NPRM, with a limited addition for clarity explained 
below. As in the NPRM, the final rule is not excluding subcontracts 
that fall below the simplified acquisition threshold where the prime 
contract is itself covered. While section 2(a) of the Executive order 
defines the term ``contract'' as ``any contract . . . or subcontract 
for services,'' the order includes a different textual indication that 
the exclusion in section 5(a) for ``contracts'' below the simplified 
acquisition threshold is only intended to exclude prime contracts below 
that level, not subcontracts. Notwithstanding the expansive definition 
of the word ``contract'' in section 2(a), section 3(a) of the order 
expressly requires the incorporation of the contract clause into 
contracts ``and subcontracts.'' In section 5(a), however, the order 
provides an exclusion only for ``contracts'' below the threshold and 
does not mention subcontracts. This comparison (in addition to the 
change in language from previous Executive Order 13495) supports 
limiting the interpretation of the term ``contract'' in section 5 to 
mean ``prime contract.''
    This interpretation is consistent with the Executive order's stated 
policy goals. The example provided by PSC--wherein a subcontractor 
employing a single person for 5 years might still be below the 
simplified acquisition threshold--supports, rather than

[[Page 86745]]

undercuts, extending nondisplacement protections to workers employed on 
subcontracts below the simplified acquisition threshold. This is 
because where, as in that example, an individual provides services to 
the government for a period as long as 5 years, displacing that well-
trained and experienced employee when a new subcontract occurs would 
undermine the policies of Executive Order 14055, such as uninterrupted 
delivery of services, physical and informational security, and 
familiarity with operations. PSC's example demonstrates that such goals 
are equally operative whether a particular service employee happens to 
be employed under a high-dollar-amount subcontract or not. Consistent 
application of these goals outweighs the compliance costs to 
subcontractors even where subcontracts are for amounts below the 
simplified acquisition threshold.
    In reaching this conclusion, the Department also considered that 
the existing exclusions in the rule limit the real-world scenarios in 
which the commenters' concerns regarding such compliance costs could be 
applicable. The Executive order's nondisplacement requirements do not 
apply to small prime contracts (and any subcontracts of those small 
prime contracts) that fall below the simplified acquisition threshold, 
nor (in keeping with the SCA) to non-service contracts, nor to 
contracts for services performed essentially by bona fide executive, 
administrative, or professional employees as defined in the FLSA's 
regulations at 29 CFR part 541, with the use of service employees being 
only a minor factor in contract performance. Likewise, the Executive 
order 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.'' As a result, many subcontracts below the 
simplified acquisition threshold will be excluded from coverage for 
other reasons.
    Finally, as indicated by commenters, extending coverage to 
subcontracts below the simplified acquisition threshold will avoid the 
creation of subcontracts for the purpose of circumventing the 
requirements of Executive Order 14055, helping to maintain the efficacy 
and consistent application of the order.
    Separately, the Department is modifying the language of Sec.  
9.3(a)(2) to clarify the coverage of contracts at the simplified 
acquisition threshold. Proposed Sec.  9.3(a)(2) provided that part 9 
would apply only to prime contracts that exceed the simplified 
acquisition threshold. However, section 5 of Executive Order 14055 
provides that the order does not apply to contracts under the 
simplified acquisition threshold. To avoid ambiguity, the Department is 
adding language to Sec.  9.3(a)(2) to include prime contracts equal to 
the simplified acquisition threshold. The Department did not receive 
any comments on this issue. This clarification is consistent with the 
intent of the order and ensures that prime contracts equal to the 
simplified acquisition threshold are covered by part 9.
    Accordingly, the final rule adopts Sec.  9.3(a)(2) as proposed with 
an amendment to clarify that part 9 applies to prime contracts equal to 
the simplified acquisition threshold.
iv. Coverage of Successor Contracts
    Proposed Sec.  9.3(c) provided that all of the nondisplacement 
requirements would apply only to contracts that satisfy the 
requirements of paragraph (a) of Sec.  9.3 and that ``succeed'' a 
contract for performance of the same or similar work. 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 
due to the completion of performance or is terminated. In contrast, if 
a term of an existing contract is simply extended pursuant to an option 
clause, and no solicitation is issued for a follow-on contract, then 
the original contract is not considered expired for purposes of 
Executive Order 14055, the extended term of the contract is not 
considered a new or 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 considers 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 Sec.  
9.3(a). Thus, for example, when the term of a contract ends and a 
follow-on contract is awarded, a predecessor-successor relationship 
exists for purposes of Executive Order 14055 if the two contracts are 
for the same or similar work. This includes circumstances where a 
temporary interim contract is the successor to a full-term predecessor 
contract and circumstances where a temporary interim contract is a 
predecessor to a full-term successor contract. Similarly, if a contract 
is terminated, a solicitation for a follow-on contract is issued, and a 
follow-on contract is awarded, then a predecessor-successor 
relationship exists for purposes of Executive Order 14055 (again if the 
two contracts are for the same or similar work). The identity of the 
contractor awarded the successor contract does 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 apply. Similarly, the successor contract does not need to be 
awarded by the same contracting agency as the predecessor contract to 
be covered by the Executive order and this part.
    PSC commented that the exclusion of options from the type of 
contract event that creates a successor contract under the Executive 
order conflicted with the Department's inclusion of ``exercised 
contract options'' in the list of terms in Sec.  9.2 that define 
``contract'' for purposes of the order. As explained in the discussion 
of Sec.  9.2, to resolve this inconsistency in accordance with the 
Executive order's scope of coverage, the Department is removing the 
term ``exercised contract options'' from the definition in Sec.  9.2 of 
the final rule. This change to Sec.  9.2 reduces the potential for 
confusion identified by PSC and no change is necessary to Sec.  9.3. No 
other comments were received regarding coverage of successor contracts, 
and the final rule adopts the language regarding those provisions of 
Sec.  9.3 as proposed. For clarity, the Department has switched the 
order of Sec.  9.3(b) and (c) and has revised the text for technical 
accuracy and to reflect that (b) applies to covered contracts that 
succeed a contract for performance of the same or similar work, whereas 
(c) applies to covered contracts and solicitations that do not succeed 
a contract for the same or similar work (i.e., SCA-covered contracts 
that are strictly predecessor contracts). Revised (b) and (c) thus 
reflect more clearly that contractor requirements under this rule may 
depend on whether a contractor is a predecessor contractor, a successor 
contractor, or both. For example, a predecessor contractor that is not 
succeeding a contract for the same or similar work will be required to 
provide the certified list of employees under Sec.  9.12(c) but would 
not be required to offer employment to any service employees because 
the contractor is not succeeding another contract.

[[Page 86746]]

v. 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 to be for the ``performance of 
the same or similar work'' in order to be covered by the 
nondisplacement requirements. As explained in the discussion of 
proposed Sec.  9.2, the Department proposed to define ``same or similar 
work,'' in relevant part, as ``work that is either identical to or has 
primary characteristics that are alike in substance.'' This definition 
requires 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 is 
not considered to be same or similar work where it only shares 
characteristics incidental to performance 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, the work on the successor contract would be considered to be 
``same or similar work.'' This is 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 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 to 
determine whether the prior and new contracts involve the same or 
similar work. Although such a circumstance-specific evaluation may be 
complex in certain instances, nondisplacement requirements can be 
expected to apply when a larger SCA-covered contract expires and is re-
bid as several individual SCA-covered contracts, as well as when two 
covered contracts expire and the new solicitation combines the work 
previously performed under those two contracts into a new contract. 
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.
    PSC expressed concern that various federal acquisition initiatives, 
including the category management initiative, are leading to an 
increase in the consolidation of smaller contracts and having a 
negative effect on small business contractors that are less able to 
compete for the resulting larger contracts. PSC stated that if 
nondisplacement rules apply in these situations, ``small business 
employees may be retained by successor contractors'' and ``small 
businesses themselves may suffer from employee attrition to follow-on 
successors.'' However, PSC also stated that ``such hiring is 
commonplace in many instances'' already even without the 
nondisplacement order. The Department understands that the Federal 
Government is carefully monitoring small business participation levels 
and implementing strategies to help ensure that new contracting 
initiatives such as category management do not undermine small business 
contracting. The Department believes this strikes the right balance for 
both small businesses and workers on service contracts even though 
there may be the potential for employee attrition from a small business 
predecessor to a successor contract.
    As noted above, in the final rule, the Department has switched the 
order of Sec.  9.3(b) and (c) and made edits for clarity, so that the 
proposed Sec.  9.3(c) is now, with minor revisions, located at Sec.  
9.3(b).
vi. 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 noted 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. As a 
corollary, the Executive order does not apply to non-service 
subcontracts. 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. No comments were received about the coverage 
of subcontracts, other than those related to the discussion of 
subcontracts below the simplified acquisition threshold.
vii. Geographic Scope
    The Executive order and this part apply to contracts that are both: 
(1) with the Federal Government; and (2) require performance in whole 
or in part within the United States. Performance in whole or in part 
within the United States means within 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 these regulations do 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 these regulations, the order and the regulations 
apply to the contract and require a right of first refusal for any 
workers who 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 are not covered by the order, as neither the District of 
Columbia nor any Territory or possession of the United States 
constitutes the ``Federal Government'' under these regulations. The 
Coalition expressed support for the scope of geographic coverage under 
the proposed rule; no other comments were received regarding the 
geographic scope of coverage.
4. Section 9.4 Exclusions
    Pursuant to section 5(a) of Executive Order 14055, proposed Sec.  
9.4(a) addressed 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.

[[Page 86747]]

The regulations, as finalized, omit that amount from the regulatory 
text in the event that a future statutory amendment changes the amount. 
Any such change would automatically apply prospectively to new 
contracts subject to part 9.
    Proposed Sec.  9.4(a)(2) clarified 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 in the discussion of Sec.  9.3, 
section 5(a) of Executive Order 14055 excludes only ``contracts under 
the simplified acquisition threshold[.]'' The proposed rule explained 
that this language differs from Executive Order 13495, which excluded 
``contracts or subcontracts under the simplified acquisition 
threshold.'' See Executive Order 13495, 74 FR 6103 (Feb. 4, 2009) 
(emphasis added). Accordingly, proposed Sec.  9.4(a)(2) explained that 
subcontracts would be excluded under Sec.  9.4(a)(1) only if the prime 
contract is under the simplified acquisition threshold. The Department 
sought comment on the potential impact, including any unintended 
consequences, of covering subcontracts below the simplified acquisition 
threshold.
    As described in the preamble to Sec.  9.3(a)(2), the Coalition and 
the AFL-CIO commented in support of coverage of subcontracts below the 
simplified acquisition threshold where the prime contract exceeds the 
simplified acquisition threshold. Conversely, PSC and Nakupuna 
suggested excluding subcontracts with a value less than the simplified 
acquisition threshold from the requirements of Executive Order 14055 
and this part. For the reasons given in the preamble to Sec.  
9.3(a)(2), the final rule does not exclude subcontracts below the 
simplified acquisition threshold where the prime contract meets or 
exceeds that threshold, and the final rule adopts paragraphs Sec.  
9.4(a)(1) and 9.4(a)(2) as proposed.
    In Sec.  9.4(b), the Department proposed to 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. The 
Department did not receive any comments on proposed Sec.  9.4(b), and 
the final rule adopts the provision as proposed.
    Proposed Sec.  9.4 did not include an exclusion for contracts 
awarded for services produced or provided by persons who are blind or 
have severe disabilities. The proposed rule explained that section 3 of 
Executive Order 13495 specifically excluded ``contracts or subcontracts 
awarded pursuant to the Javits-Wagner-O'Day Act,'' ``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,'' and ``agreements for vending facilities entered into pursuant 
to the preference regulations issued under the Randolph-Sheppard 
Act[.]'' In contrast, section 5 of Executive Order 14055 does not 
enumerate any such exclusions. For this reason, proposed Sec.  9.4 did 
not exclude such contracts from the requirements of part 9.
    The proposed rule explained, however, that 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'' to an agency and directs that the order be ``implemented 
consistent with applicable law.'' The applicable law encompassed by 
these sections includes the statutes that were excluded explicitly from 
Executive Order 13495, such as the Javits-Wagner-O'Day (JWOD) Act, 41 
U.S.C. 8501 et seq., and the Randolph-Sheppard Act, 20 U.S.C. 107. 
These laws establish requirements for contracts awarded for services 
produced or provided by persons who are blind or have severe 
disabilities, and the laws may conflict with the requirements of 
Executive Order 14055 in that the laws may impose staffing requirements 
that in many cases would preclude, in whole or in part, offering 
employment to the employees on the predecessor contract. For example, 
under the JWOD Act, a qualified nonprofit agency operating under the 
AbilityOne Program is required to employ blind or severely disabled 
individuals for at least 75 percent of the direct labor hours required 
for the particular nonprofit agency's production or provision of 
services. See 41 U.S.C. 8501(6)(C). If there are few blind or severely 
disabled workers on a predecessor contract, it could be impossible for 
a successor contractor to make offers to all incumbent workers and also 
comply with the JWOD Act 75-percent requirement. The proposed rule 
explained that where direct legal conflicts squarely exist between the 
requirements of Executive Order 14055 and the requirements of another 
statute, regulation, Executive order, or presidential memorandum under 
the particular factual circumstances of a specific situation, the 
requirements of this part would not apply. Under the proposed rule, a 
contracting agency would be obligated to follow the procedures proposed 
at Sec.  9.5 to make a case-by-case exception for contracts on the 
basis of a determination that the requirements of this part did not 
apply to a particular contract because of a direct legal conflict.
    In the NPRM, the Department also recognized that contracting 
agencies award contracts under a wide variety of programs, including 
those mentioned above, some of which have, by law, specific processes 
and requirements that may make it challenging to fully implement the 
requirements of Executive Order 14055. The Department invited comments 
on how Executive Order 14055 and its implementing regulations should be 
applied to any specific programs that are subject to contracting 
requirements that may conflict with Executive Order 14055 or the 
provisions of the proposed rule.
    Several commenters supported the Department's approach in the 
proposed rule. The Coalition commented that they supported the proposed 
rule's coverage of contracts covered by the JWOD Act and awarded under 
the AbilityOne Program, indicating that coverage of AbilityOne 
contracts is consistent with modern disability policy and promotes 
``integrated employment in which workers with disabilities work 
alongside nondisabled workers and enjoy the same rights and 
protections.'' In its comment, Jobs to Move America thanked the 
Department for ``providing equal treatment to disabled workers by 
covering'' these contracts.
    Several other commenters expressed opposition to the proposed 
treatment of contracts covered by the JWOD Act. These commenters 
requested an across-the-board exclusion for contracts or subcontracts 
awarded pursuant to the JWOD Act, in line with the exclusion previously 
granted in Executive Order 13495. These commenters criticized the 
proposed exception process in Sec.  9.5 that contracting agencies would 
need to use for AbilityOne contracts if the Department did not provide 
an express exclusion. Peckham Inc., Didlake Inc., and Nobis 
Enterprises, which are AbilityOne contractors, commented that making 
``case-by-case determinations on AbilityOne contracts will lead to 
inconsistent management of the AbilityOne Program, unnecessary contract 
award delays, and adverse impacts on the employment of individuals with 
disabilities.'' Source America, an AbilityOne contractor network, noted 
that the lack of an

[[Page 86748]]

express exclusion puts the burden of decision-making on procurement 
officers, possibly leading to inconsistent application for contracts 
covered by the AbilityOne Program. Source America further noted that 
the exception process in the proposed rule does not apply to 
subcontracts and that there are several instances where a JWOD Act 
contractor may operate as a subcontractor instead of a prime 
contractor.
    National Industries for the Blind (NIB), a nonprofit agency 
designated by the AbilityOne Commission to distribute Federal 
Government orders for products and services on the AbilityOne 
Procurement List, wrote that the potential need for a case-by-case 
exception for AbilityOne contracts may not even be recognized by the 
contracting agency. Melwood Horticultural Training Center, Inc. 
(Melwood), an AbilityOne contractor, commented that if the rule, as 
finalized, applies to AbilityOne authorized contractors, it would be 
extremely unlikely that those contractors would be able to maintain 
compliance with the AbilityOne program when a predecessor workforce 
does not have individuals who meet the required AbilityOne labor 
criteria. Melwood further explained that ``[i]f AbilityOne authorized 
contractors are not explicitly exempted from the requirements of the 
rule, they will be compelled to hire the incumbent workforce instead of 
offering up meaningful, steady opportunities to people with significant 
disabilities.'' Melwood recommended that the final rule explicitly 
exclude contracts under the JWOD Act. In the alternative, Melwood 
suggested that the Department codify an arrangement specifically for 
successor contracts awarded under the JWOD Act that would (1) create a 
right of nondisplacement for jobs constituting 25 percent of the direct 
labor hours on a contract; (2) require the successor contractor to 
offer positions to displaced predecessor contract workers on other 
contracts to the extent doing so would not affect AbilityOne 
compliance; (3) require the successor contractor to offer to displaced 
predecessor contract workers a right to be recalled for up to two years 
should a vacancy occur in roles performing the 25 percent of direct 
labor hours performed by people without disabilities; and (4) require 
the successor contractor to take a neutral position should a displaced 
worker accept an offer at a non-unionized site and attempt to organize 
it.
    Other commenters similarly requested exemptions from the 
nondisplacement requirements based on a perceived inconsistency between 
the requirements and other statutes. PSC, in response to the 
Department's question about location continuity and HUBZones, as well 
as other procurement preference programs,\2\ urged a broad exemption 
from the nondisplacement requirements whenever they would ``impact 
internal organizational or federal Diversity, Equity, Inclusion and 
Accessibility goals.'' The Council on Federal Procurement of 
Architectural & Engineering Services (COFPAES) asserted that 
architecture, engineering (A/E) and related services (including 
surveying and mapping) should be exempted from the rule because these 
services are governed by the Brooks Act, 40 U.S.C. 1101 et seq. COFPAES 
stated that the Brooks Act is inconsistent with the right of first 
refusal, because it requires that evaluation and selection of firms for 
A/E services be based on ``demonstrated competence and qualification,'' 
including award to the ``most highly qualified'' firm.
---------------------------------------------------------------------------

    \2\ The HUBZone program, established by title VI of the Small 
Business Reauthorization Act of 1997, is one of several procurement-
related preference programs for small businesses, and it is designed 
to aid small businesses that are located in economically distressed 
areas. See 15 U.S.C. 657a. HUBZone is an acronym for Historically 
Underutilized Business Zone Empowerment Contracting (HUBZone). The 
other small business preference programs include preferences for 
small businesses generally, Women-Owned Small Businesses, Service-
Disabled Veteran-Owned Small Businesses, and Small Disadvantaged 
Businesses. See generally Congressional Research Service, Small 
Business Administration HUBZone Program, R41268, (Updated July 29, 
2022), https://sgp.fas.org/crs/misc/R41268.pdf.
---------------------------------------------------------------------------

    After consideration of these comments, the Department is amending 
the contract clause to give effect to the requirements and goals of 
Executive Order 14055 to the maximum extent possible in light of the 
requirements and policy objectives of the HUBZone program statute, the 
JWOD Act, and the Randolph-Sheppard Act. Specifically, the Department 
has added paragraph (j) to the contract clause in Appendix A, which 
sets forth a requirement that, to the maximum extent possible, 
contractors that are awarded contracts under the HUBZone program 
statute, the JWOD Act, or the Randolph-Sheppard Act must comply with 
both the relevant requirements under those statutes and the 
requirements of Executive Order 14055. Paragraph (j) clarifies that 
nothing in the contract clause will be construed to permit a contractor 
or subcontractor to fail to comply with any applicable provision of the 
HUBZone program statute, the JWOD Act, or the Randolph-Sheppard Act. 
Consistent with paragraph (j) of the contract clause, when the 
requirements of such laws would conflict with the requirements of 
Executive Order 14055 in connection with a particular contract, then 
the requirements of such laws may be satisfied in tandem with and, if 
necessary, prior to the requirements of Executive Order 14055 and this 
part. In the contract clause, the Department has not included reference 
to section 505 of the Treasury, Postal Services and General Government 
Appropriations Act, because the requirements of that Act are covered 
already by the reference to the JWOD Act.
    Under this framework, for example, a successor AbilityOne 
contractor will be required to provide a right of first refusal to 
workers from the predecessor contract who have significant disabilities 
or visual impairment, as defined by the JWOD Act. The AbilityOne 
successor contractor could then hire non-predecessor contract workers 
with significant disabilities or visual impairment to the extent 
necessary to satisfy the employment threshold requirements of the 
AbilityOne Program. Specifically, the JWOD Act requires that 75 percent 
of direct labor hours be performed by workers with significant 
disabilities or visual impairment. See 41 U.S.C. 8501(6)(c). After 
ensuring that this programmatic threshold requirement is met, the 
AbilityOne successor contractor will be required under paragraph (j) of 
the nondisplacement contract clause in Appendix A to provide the right 
of first refusal to as many of the remaining predecessor contract 
employees (i.e., those who do not have significant disabilities or 
visual impairment) as necessary to fill any remaining positions on the 
successor contract for which those employees are qualified.
    Similarly, the HUBZone program statute requires small business 
concerns (SBCs) to have 35 percent of all of their employees reside in 
a HUBZone to be certified under the program, and to attempt to maintain 
this percentage when they are awarded contracts on the basis of a 
HUBZone preference. See 14 U.S.C. 657a(c) and (d). When both the 
successor and the predecessor contractors are SBCs, the residence 
requirement threshold normally could be met through a standard 
application of this final rule where the successor contractor is 
required to offer a right of first refusal to employees on the 
predecessor contract. Under circumstances where the successor is an SBC 
but the predecessor is not, HUBZone SBCs can meet both the requirements 
of the HUBZone program and the Executive order in accordance with 
paragraph (j) of the contract clause. For instance, the successor SBC 
contractor would first have to extend

[[Page 86749]]

offers of employment to the qualified predecessor contractor's 
employees who reside in a HUBZone. If necessary to reach the residency 
threshold, the successor HUBZone SBC would next extend offers of 
employment to qualified residents of a HUBZone who are not employees of 
the predecessor. The HUBZone SBC would next extend offers for the 
remaining employment openings to non-HUBZone-resident qualified 
employees of the predecessor contractor. Under such an approach, the 
HUBZone SBC would first ensure that it meets the statutory requirements 
of the HUBZone program so that it is not decertified, and then would be 
required to offer employment to the predecessor's employees pursuant to 
Executive Order 14055 to the maximum extent possible without violating 
HUBZone program requirements. This approach would also apply in other 
circumstances, such as where the predecessor HUBZone SBC did not 
maintain the HUBZone residence requirement but was permitted to remain 
in the program. While the HUBZone SBC must maintain the 35 percent 
HUBZone residency requirement at all times while certified in the 
program, there is an exception: an SBC may ``attempt to maintain'' this 
requirement when performing on a HUBZone contract. When that occurs and 
the HUBZone SBC is permitted to fall below the 35 percent threshold, it 
still must meet the requirement any time it submits a subsequent offer 
and wins a HUBZone contract. Where a non-SBC successor follows a 
HUBZone SBC predecessor, the non-SBC successor would be required to 
comply without limitation with the requirements of the nondisplacement 
contract clause and implementing regulations by offering a right of 
first refusal to all qualified predecessor contract employees. This 
framework is consistent with the Department's treatment of HUBZones in 
the 2011 final rule for Executive Order 13495. See 76 FR 53720, 53723.
    The Department believes that this framework recognizes contractors' 
obligations to comply with the requirements of the HUBZone program 
statute, the JWOD Act, and the Randolph-Sheppard Act while satisfying 
Executive Order 14055 by providing the nondisplacement benefit to 
workers employed on predecessor contracts to the greatest extent 
permissible. Consistent with Executive Order 14055, this part also 
applies to covered contracts in which the predecessor contractor, but 
not the successor contractor, is covered by the HUBZone program 
statute, the JWOD Act, or the Randolph-Sheppard Act. Similarly, this 
part applies to covered contracts in which both the predecessor and 
successor contracts are covered by the HUBZone program statute, the 
JWOD Act, the Randolph-Sheppard Act.
    In light of new paragraph (j) in the contract clause, there is no 
need for contracting agencies to authorize an exception under the 
agency exception procedure in Sec.  9.5 of these regulations for 
contracts because of the potential application of the HUBZone program 
statute, the JWOD Act, or the Randolph-Sheppard Act. Paragraph (j) 
operates to provide an exception to the requirements of Executive Order 
14055 where necessary (and only to the extent necessary) to enable 
compliance with these statutory provisions. The Department believes 
that the approach reflected in the final rule will promote consistency 
in applying the requirements of Executive Order 14055 to contracts 
subject to the HUBZone program statute, the JWOD Act, and the Randolph-
Sheppard Act. The approach in the final rule thus is preferable to an 
approach under which some such contracts would nominally be fully 
subject to Executive Order 14055's requirements even where application 
of those requirements would conflict with these statutory preference 
programs, while others would be entirely exempt from Executive Order 
14055's requirements even though certain positions on the successor 
contract could be filled with predecessor contract employees without 
any conflict with these preference programs. In this manner, the final 
rule strikes an important balance by retaining the nondisplacement 
benefit for many workers on predecessor contracts while enabling 
successor contractors to maintain compliance with these other statutes.
    The Department declines to create a broader exemption from the 
nondisplacement requirements wherever they might impact a contractor's 
``internal organizational'' or Federal Diversity, Equity, Inclusion, 
and Accessibility (DEIA) goals, as requested by PSC. There is no basis 
in the order to allow exceptions from the nondisplacement requirements 
to pursue internal corporate goals however laudable, and such an 
exemption would not be administrable. With regard to other Federal 
procurement preference and nondiscrimination programs, PSC did not 
identify any inconsistency between the nondisplacement requirements and 
such programs, other than the HUBZone employment requirements addressed 
in this preamble and contract clause. As noted in Sec.  9.12(d)(3), 
contractors are required to carry out their responsibilities and 
exercise their discretion under the nondisplacement requirements in a 
manner consistent with non-discrimination laws and regulations.
    The Department also considered COFPAES's assertion that there is a 
direct conflict between the Brooks Act and the nondisplacement 
requirements. COFPAES commented that a conflict exists because the 
Brooks Act requires that evaluation and selection of firms for 
architecture and engineering services be based on ``demonstrated 
competence and qualification'' and be awarded to the ``most highly 
qualified'' firm. See 40 U.S.C. 1101, 1103(d). COFPAES further stated 
that the Brooks Act requires selection of contractors based on the 
qualifications of ``key employees'' who will work on the contract and 
that firms compete by submitting a Standard Form (SF) 330 with the 
resumes of proposed personnel. See 48 CFR 36.603. The Department does 
not agree that these requirements create direct conflicts. The 
nondisplacement requirements do not conflict with a requirement to 
contract with the most highly qualified firm or with a firm based on 
its qualifications or demonstrated competence. Moreover, the order does 
not require a right of first refusal for employees who are exempt under 
the professional exemption in part 541 of the FLSA regulations and who 
therefore are not service employees within the meaning of the SCA. See 
Executive Order 14055, section 3(b). The Department's FLSA regulations 
state that the ``traditional professions'' of architecture and 
engineering are ``field[s] of science or learning'' such that employees 
performing work requiring advanced knowledge in those fields generally 
meet the duties requirements for the learned professional exemption. 
See 29 CFR 541.301(a) and (c). Accordingly, these individuals will 
generally not be ``service employees'' under the definition in the 
Executive order and thus there will generally not be any duty under the 
nondisplacement rule to provide a right of first refusal to these 
individuals or any reason that a bidder cannot list its own 
professional employees on its SF 330 form.\3\
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    \3\ While the order does not require a right of first refusal 
for professional architects and engineers, Brooks Act contracts may 
still be covered by the nondisplacement requirement. As discussed in 
Sec.  9.3, the order applies to contracts that are covered by the 
SCA and are at or above the simplified acquisition threshold. See 
also Executive Order 14055, section 2(a), 3(a). The SCA, and 
therefore the order, does not extend to contracts for services ``to 
be performed exclusively by persons who are not service employees--
i.e., persons who are bona fide executive, administrative or 
professional personnel[.]'' 29 CFR 4.113(a)(2). However, SCA (and 
therefore nondisplacement) coverage extends to contracts ``which may 
involve the use of service employees to a significant or substantial 
extent,'' even if there is ``some use of bona fide executive, 
administrative, or professional employees[.]'' 29 CFR 4.113(a)(3); 
see also Nat'l Cancer Inst., BSCA No. 93-10, 1993 WL 832143 (Dec. 
30, 1993) (discussing the meaning of ``significant or substantial 
extent''). Many employees who work on Brooks Act-covered contracts 
may be nonexempt service employees. The Brooks Act contemplates that 
covered work may include ``incidental services'' carried out by 
architects and engineers ``and individuals in their employ.'' 40 
U.S.C. 1103(2)(C)). Accordingly, some Brooks Act contracts could be 
covered by the SCA and therefore the nondisplacement order.

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[[Page 86750]]

    While there is no direct conflict between the Brooks Act and the 
nondisplacement requirements so as to justify an across-the-board 
exemption, an agency exception may be appropriate depending on the 
specific facts of a particular contract under the nondisplacement 
regulations in Sec.  9.5(a)(1) or (a)(2). See section II.B.5. below. 
These agency exceptions apply 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 or 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. Where a contract is largely performed 
by SCA-exempt professional services employees, it may still be covered 
by the order even if only a relatively small percentage of the 
employees on the project would be provided with a right of first 
refusal. In such a situation, where the agency's overriding interest 
may be in fostering creative competition between the professional 
employees on the project, it may not make sense to impose the 
nondisplacement requirements if their inclusion would adversely affect 
the ability of the agency to maximize the number of such firms that 
might participate while providing a benefit only to a limited number of 
covered service employees on the contract.
    Accordingly, the final rule adopts the paragraph at Sec.  9.4 as 
proposed, along with the amendments specified above to the contract 
clause in Appendix A.
5. Section 9.5 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 proposed to implement this procedure 
through language in Sec.  9.5 of the regulations. Under section 6 of 
the order, and in Sec.  9.5 as proposed and as adopted in this final 
rule, 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.
    Proposed Sec.  9.5(a) listed the qualifying circumstances for an 
agency exception, as provided for in the agency exceptions provision in 
section 6(a) of the order. These included (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; and (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 proposed to interpret section 6(a) of the order as 
allowing agencies to make exceptions only for prime contracts and not 
for individual subcontracts. The proposed language in Sec.  9.5(a) 
carried out this interpretation by authorizing contracting agencies to 
waive nondisplacement provisions only ``as to a prime contract.'' The 
Department's proposed interpretation of section 6(a) followed 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'' 
and does not reference subcontracts. In the NPRM, the Department also 
noted that section 2(a) of Executive Order 14055 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 that reason, the Department sought 
comment from the public on the potential impact, including any 
unintended consequences, of not allowing agency exceptions for 
particular subcontracts or classes of subcontracts.
    In response to the Department's request for comments, the Coalition 
responded in support of the proposed limitation that would allow 
exceptions to be granted only for prime contracts and not separately 
for subcontracts. The Coalition expressed concern that permitting 
exceptions for particular subcontracts could ``create opportunities for 
circumvention'' of the nondisplacement requirements by ``pushing more 
work to the subcontractor.'' The Coalition described an example of how 
contractors use subcontracting arrangements to evade contract 
requirements. In the example, a New Jersey state law required certain 
services to be provided only by nonprofits; a contractor evaded the law 
by using a shell nonprofit prime contractor and then subcontracting to 
a for-profit entity.
    No commenter specifically opposed the Department's proposed 
interpretation. PSC's comment, however, contained a more general legal 
argument that paralleled the Department's discussion in the NPRM. PSC 
opposed the Department's proposed limitation on the application of the 
simplified acquisition threshold exclusion (which appears in section 
5(a) of the order) to subcontracts. In making its argument, PSC 
referenced the order's definition section at section 2(a) that includes 
``subcontract'' within the definition of the term ``contract.'' PSC 
asserted that, because of this definition, the order requires the 
exclusion for prime contracts below the simplified acquisition 
threshold in section 5(a) of the order to apply to subcontracts as 
well. Although PSC did not extend its argument to the interpretation of 
section 6(a) of the order, the same logic would apply there too, given 
that section 6(a) provides for agency exceptions for ``a particular 
contract.''
    NIB expressed concern that if the agency exception process only 
applies to prime contracts, then the regulations might not be able to 
adequately account for potential conflicts between the nondisplacement 
requirements and the requirements of the JWOD Act and the AbilityOne 
Program. NIB noted that the FAR recognizes ``[t]he statutory 
obligation'' under the JWOD Act ``also applies when contractors 
purchase the supplies or services for Government use,'' 48 CFR 
8.002(c)--i.e., including

[[Page 86751]]

when contractors subcontract for services. Likewise, SourceAmerica 
noted that Marine Corps Food Service contracts are ``mandatory 
subcontracts'' under the JWOD Act, so there would be a direct conflict 
between the JWOD Act and the Executive order if JWOD-covered 
subcontracts are not given an exception. To remedy this concern, NIB 
recommended providing an express exemption for AbilityOne contracts and 
subcontracts so that contracting agencies would not need to follow the 
procedures in Sec.  9.5 of the nondisplacement regulations to except 
these contracts and subcontracts.
    Finally, PSC raised questions about the application of the 
Executive order and the regulations to Multi-Agency Contracts (MACs) 
and the individual task orders that may be made from them. For MACs, as 
well as for similar MAS/IDIQ contracts, there are at least two separate 
moments in which a contracting agency takes an action to enter into a 
contract: First, when the General Services Administration (GSA) (or 
other coordinating agency) negotiates the underlying umbrella contract 
with the contractor; and second, when the individual contracting agency 
issues a task order under the umbrella contract. As a general matter, 
an umbrella IDIQ contract should include the nondisplacement clause 
with appropriate modification (or some mechanism for its later 
inclusion at the task order level) if there is any reasonable 
possibility that a future task order under the contract could be found 
to be a covered successor contract. Unless a mechanism exists to add 
the nondisplacement clause to individual task orders at the time of 
their issuance, the fact that such a possibility is unknown at the time 
of the solicitation for the underlying MAS/IDIQ contract would not be 
sufficient reason to exempt the entire umbrella contract from coverage 
under the procedure in Sec.  9.5.
    Having considered these comments, the final rule retains the 
language that authorizes agency exceptions for ``a prime contract'' and 
not subcontracts. As noted in the NPRM, this approach follows from a 
comparison between Executive Order 14055 and its predecessor, Executive 
Order 13495. Executive Order 13495 expressly included the term 
``subcontracts'' in its authorization for agency exceptions, while 
section 6(a) of Executive Order 14055 does not. While it is true, as 
PSC noted, that the definition of ``contract'' in section 2(a) of 
Executive Order 14055 includes subcontracts, Executive Order 13495 
contained this same definition. The Department therefore believes the 
better interpretation of Executive Order 14055 is to give weight to the 
fact that Executive Order 14055 eliminated the express reference to 
``subcontracts'' that was included in the agency exemptions provision 
of Executive Order 13495. A comparison between section 3(a) and section 
6(a) supports this interpretation. Notwithstanding the expansive 
definition of the word ``contract,'' section 3(a) of the order 
expressly requires the incorporation of the contract clause into 
``contracts and subcontracts.'' In 6(a), however, the order provides an 
exception process only for ``contracts.'' In addition, the potential 
division of contract work through subcontracts is often only clear 
after prime contractors have submitted bids in response to a 
solicitation and not before it is issued. It would be impractical or 
impossible in many cases for contracting agencies, prior to the 
solicitation date for a prime contract, to identify ``particular'' 
subcontracts which could appropriately be excepted from coverage.
    The Department is mindful of NIB's concern regarding the 
application of the Sec.  9.5 agency exception procedure to JWOD Act-
covered contracts and subcontracts. However, as discussed in section 
II.B.4., the Department has separately addressed these concerns by 
including language in the contract clause that applies to all such 
contracts and subcontracts and instructs contractors that they must 
implement the JWOD Act and the nondisplacement provisions in tandem and 
to the maximum extent possible.
    To account for the unique structure of MAS/IDIQ contracts, the 
Department has added a new sentence to Sec.  9.5(b) that provides for a 
bifurcated exception process. The provision provides that for IDIQ 
contracts, an exception must be granted prior to the solicitation date 
if the basis for the exception cited would apply to all orders. 
Otherwise, exceptions must be granted for each order by the time of the 
notice of the intent to place an order. The appropriate entity to 
analyze and grant an agency exception at the time of a task order may 
often be the ordering agency, as the ordering agency will usually be 
best placed to make the initial determination of whether a task order 
is a successor contract that would be covered by the order and 
therefore whether it is relevant to consider an agency exception to 
coverage. As a general matter, however, the agency responsible for the 
umbrella contract may determine the procedure through which task orders 
may be excepted (and whether the contracting agency can overrule an 
ordering agency's determination regarding an agency exception), as long 
as that procedure is consistent with the nondisplacement order, these 
regulations, and any applicable FAR provisions.
    Accordingly, the final rule adopts the language limiting section 
6(a) to prime contracts as proposed, with a limited amendment to 
account for MAS/IDIQ contract task orders. The Department has also 
added a sentence to Sec.  9.5(b) to clarify that when an agency 
determines that a prime contract is excepted under this section, the 
nondisplacement requirements will not apply to any subcontracts under 
that prime contract.
    Section 6(a) of Executive Order 14055 also 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 proposed regulatory text at Sec.  
9.5(a) that identifies the senior procurement executive as the senior 
official who must make an exception decision. In the NPRM, the 
Department explained that, because the order specifically requires the 
decision to be made by a senior official, the decision cannot be 
delegated by the senior procurement executive to a lower-level 
official. This same non-delegation principle was applied in the 2012 
FAR rule that implemented Executive Order 13495. See 77 FR at 75773.\4\
---------------------------------------------------------------------------

    \4\ 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.''
---------------------------------------------------------------------------

    The Coalition approved of the Department's interpretation of the 
term ``senior official'' in Sec.  9.5(a), stating that the required 
approval of the senior procurement executive will ensure that 
exceptions are ``subject to consistent, rigorous levels of review.'' 
The Coalition noted that an agency's senior procurement executive is 
``well positioned to assess whether the need for any particular service 
contract is sufficiently unusual to justify waiving the nondisplacement 
requirement.'' The Coalition agreed with the Department that 
prohibiting any further delegation of this duty is consistent with use 
of the term ``senior official'' in section 6(a) of the order. The 
Coalition, however, also recommended that the Department add a 
consultation requirement, such that the senior procurement executive 
would have to make the determination ``in consultation with the agency 
head.'' The Coalition noted that such a requirement

[[Page 86752]]

would be consistent with the FAR, which permits individual deviations 
from FAR requirements when authorized by the agency head. See 48 CFR 
1.403. The AFL-CIO stated that they supported the requirement that any 
exception decision be made by the senior procurement executive.
    In contrast, Nakupuna expressed concern that the exception process 
in Sec.  9.5(a) is ``too arduous'' and may result in agencies not 
granting exceptions that would have been in the best interest of the 
Federal government. Nakupuna also stated that the head of a contracting 
department or agency should have the authority to exempt contracts from 
the requirements of the order if justified. Several other commenters 
expressed more general concerns about the requirements for senior-level 
decision-making. PSC, in a response to the Department's proposal 
regarding location continuity, stated that requiring the senior 
procurement executive to make a determination ``would cause needless 
delay'' because such decisions ``require time, consideration, and 
decision capital'' that may ``bottleneck solicitations.'' NIB, in 
requesting a blanket exemption for contracts awarded under the JWOD 
Act, suggested that exception decisions by senior procurement 
executives would be ``superfluous'' and ``time-consuming.'' Several 
other entities involved in contracting under the JWOD Act expressed 
similar concerns. These comments, however, did not address the express 
language in section 6(a) of the Executive order that limits the 
exception authority to a ``senior official within an agency'' or 
suggest that the Department was incorrect to interpret that language as 
limiting the decision to the senior procurement executive.
    The final rule adopts the senior-procurement-executive requirement 
in Sec.  9.5(a) as proposed. As the Coalition noted, this language is 
consistent with the requirement in the order that the decision must be 
made by a ``senior official,'' and the involvement of the senior 
procurement executive will promote consistency in agency exception 
decisions. The requirement is also consistent with the implementation 
of Executive Order 13495 in the 2012 FAR final rule, which adopted 
language at 48 CFR 22.103-3 authorizing the senior procurement 
executive to waive nondisplacement requirements. See 77 FR at 75767. 
The Department declines to implement the Coalition's proposal to 
require consultation with the agency head. While such consultation may 
be appropriate and should be encouraged, it is not required by the 
order and may not be warranted in every instance.
    NIB also suggested that the word ``may'' in Sec.  9.5(a) should be 
replaced with the word ``shall,'' to more effectively require a 
contracting agency to grant an exception to the nondisplacement 
requirements in certain circumstances. While acknowledging that section 
6(a) of the order itself uses the term ``may,'' NIB asserted that 
replacing it with the word ``shall'' in the regulations would eliminate 
any implication that a contracting agency has any ``discretion'' to 
apply the nondisplacement requirements even when that would be 
inconsistent with another law such as the JWOD Act. The Department 
agrees with NIB that in circumstances in which the application of the 
nondisplacement requirements would directly conflict with an express 
provision of another statute, such that compliance with the 
nondisplacement requirements set forth in this final rule would 
necessarily result in a violation of another statute, the agency should 
authorize the exception. But the Department interprets the order's use 
of the term ``may'' to suggest only that (consistent with Nakupuna's 
suggestion) the senior procurement executive's determination can still 
be subject to review and revision by the contracting agency head or 
otherwise pursuant to an individual contracting agency's procurement 
procedure. Accordingly, the final rule continues to authorize, but not 
require, the agency to waive the application of nondisplacement 
provisions after the determination of the senior procurement executive. 
The final rule therefore adopts the language of Sec.  9.5(a) as 
proposed.
    Proposed Sec.  9.5(b) reiterated the procedural requirements that 
section 6(a) of the order states must be satisfied for an exception to 
be effective. The proposed language stated that the action to except a 
contract from some or all of the requirements of the Executive order or 
the regulations must 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) stated 
that this written explanation must 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) 
provided that any determination by an agency to exercise its exception 
authority that is made after the solicitation date or without the 
timely and specific written explanation would be inoperative. In such a 
circumstance, the contract clause would have been wrongly omitted and 
the agency would be required to take action consistent with paragraph 
Sec.  9.11(f) of this part, which sets forth the requirements for 
incorporating missing contract clauses.
    The Coalition and the AFL-CIO expressed general support for the 
proposed procedural requirements in Sec.  9.5(b). The Coalition noted 
that the requirement for a specific written explanation, including the 
facts and reasoning, will promote thorough analyses and consistent 
decision-making. They also noted that this requirement is in accordance 
with the FAR's requirement that documentation in contract files be 
sufficient to constitute a complete history of the contractual action, 
including support for actions taken. See 48 CFR 4.801(b). The 
Coalition, however, recommended modifying the language of Sec.  9.5(b) 
to also require an ``attestation'' by the incoming contractor that ``no 
service disruption will occur due to the displacement of predecessor 
contract employees.'' They explained that the attestation could be 
requested in the solicitation.
    The Department declines to require an additional ``attestation'' 
condition. Such an attestation requirement could be an effective 
mechanism in a particular contract to maximize the use of predecessor 
employees and limit disruption even when the nondisplacement contract 
clause is not included in the solicitation. However, the order does not 
impose this blanket requirement, and the Department did not propose one 
in the NPRM. Thus, while agencies are encouraged to take alternative 
and contract-specific measures to protect against service disruption 
where the nondisplacement provisions do not apply--including an 
attestation requirement on a contract-by-contract or agency-wide 
basis--the Department is not imposing such a requirement in this final 
rule.
    Multiple commenters noted potential challenges from the requirement 
in Sec.  9.5(b) that the exception determination and written analysis 
must be carried out no later than the solicitation date. One entity, 
Professional Contract Services, Inc. (PCSI), requested a modification 
of these timing requirements to accommodate the potential for 
interaction between bidders and the contracting agency. PCSI noted that 
the regulations do not provide for a ``process for a bidder or 
contractor to interact with the contracting agency and explain its need 
for such an exception.'' PCSI suggested that such a procedure would be 
particularly useful with regard to the AbilityOne program, where ``a 
contracting agency may not understand

[[Page 86753]]

the conflict in laws posed without such an interaction with the 
selected [AbilityOne contracting entity].'' PCSI did not suggest how 
exactly the timeframe should be modified--whether by providing a pre-
solicitation procedure or by allowing exceptions to be requested and 
provided after the solicitation date.
    The Coalition discussed the challenge of the exception deadline in 
the context of a comment about the proposed reconsideration process. 
Under their suggestion, agencies would be required to notify workers 
and their representatives of a proposed exception no later than 120 
days before the solicitation, providing time for comment from 
interested parties. The deadline for the agency to make an initial 
exception decision would be 60 days prior to the solicitation date, to 
accommodate time for interested parties to then request reconsideration 
and for that reconsideration to be resolved before any bid solicitation 
goes out. The AFL-CIO expressed agreement with the Coalition's proposed 
timeframe.
    The Department acknowledges that the solicitation-date deadline for 
an agency exception decision may be challenging in some circumstances 
because it requires agencies to collect relevant information regarding 
the need for an exception prior to the solicitation date, and because 
any decision that is made close to or on the solicitation date leaves 
little to no time for interested parties to assist the agency in 
correcting any mistakes before the solicitation is issued. 
Notwithstanding these concerns, the Department declines to extend the 
deadline for agency exceptions beyond the solicitation date, which 
would be contrary to the specification in the order itself that the 
exception may be granted ``no later than the solicitation date.'' This 
language does not allow a procedure in which exceptions are granted 
after the solicitation date, unless the solicitation is subsequently 
canceled and reissued. Such a rule strikes a reasonable balance, as 
allowing exceptions after the solicitation date would not make sense 
procedurally and could invite abuse of the exceptions provision.
    The Department also declines to impose a procedural framework that 
would require agency exception decisions to be made 60 days before the 
solicitation date for all contracts. The Department agrees with the 
Coalition that agencies will be able to make better-informed decisions 
and avoid errors if they engage with stakeholders--including workers on 
predecessor contracts or their collective bargaining representatives--
as early as possible in the acquisition planning process. The order, 
however, requires only that the exception decision be made no later 
than the solicitation date, which allows, but does not require, agency 
exception decisions to be made at an earlier date. In responding to the 
Coalition's suggestion, the Department considered that the FAR contains 
broad requirements for acquisition planning prior to the issuance of 
solicitations. See generally 48 CFR 7.102 (``Agencies shall perform 
acquisition planning and conduct market research . . . for all 
acquisitions[.]''). It is during this advance planning process that 
agencies should be identifying whether an exception from the 
nondisplacement provisions is necessary--and engaging workers and their 
representatives if possible--and not at the last minute before a 
solicitation is issued. The language of the order allows agencies to 
address exceptions in this way, and agencies are encouraged to carry 
out the exceptions decision as early as possible. At this time, 
however, the Department declines to impose by regulation an earlier 
deadline for agency exceptions determinations. As noted below, however, 
the Department has included new language in Sec.  9.5(d) that requires 
contracting agencies, to the extent consistent with mission security, 
to include employee representatives in any pre-solicitation market-
research-related industry exchanges that are specific to the 
nondisplacement requirements and conducted for the purpose of analyzing 
whether to impose an agency exception under Sec.  9.5.
    For the foregoing reasons, the final rule adopts Sec.  9.5(b) as 
proposed.
i. Bases for Agency Exceptions
    In the NPRM, the Department also proposed 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.
    In Sec.  9.5(c), the Department proposed language to address the 
first of the three circumstances under which an agency may authorize an 
exception from the nondisplacement provisions: where adhering to the 
requirements of the order would not advance the Federal Government's 
interests in achieving economy and efficiency in Federal procurement. 
The proposed language in Sec.  9.5(c) is consistent with the language 
in section 6(a)(i) of Executive Order 14055. 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 nondisplacement 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 the Executive Order 13495 and Executive Order 
14055 versions of this exception 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 at 53726-
29 (discussion of comments); 29 CFR 9.4(d)(4) (2012) (regulatory text). 
The Department has not received information suggesting that, during the 
several years in which the prior regulations were in effect, these 
factors were over- or under-prescriptive or abused by contracting 
agencies. The AFL-CIO noted in its comment that the prior 
nondisplacement procedure was a ``resounding success.''
    In Sec.  9.5(c), as it did in the regulations implementing 
Executive Order 13495, the Department proposed 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 proposed to include the same requirement as 
under the prior regulations 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. Thus, if the agency finds that costs or other factors 
support an exception from the nondisplacement requirements, it must 
specify how the particular circumstances support a conclusion contrary 
to the general findings of the order.
    In Sec.  9.5(c)(1), the Department proposed to include a non-
exhaustive list of 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 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

[[Page 86754]]

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 replacement workforce. They also include 
emergency situations, such as a natural disaster or an act of war, that 
physically displace incumbent employees. Finally, they 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.
    As the Department explained in the NPRM, a determination that the 
entire workforce failed cannot be made lightly. A senior agency 
official who 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. 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 proposed 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 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 appropriate 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 proposed in Sec.  9.5(c)(2), 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 to minimize displacement. Thus, any potential for 
reconfiguration cannot justify excepting the entire contract from 
coverage.
    The Department also proposed in Sec.  9.5(c)(2), 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 employees.
    Finally, the Department proposed in Sec.  9.5(c)(2) to limit 
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 the Executive orders 
governing minimum wage and sick leave for Federal contractors, and 
these rates will therefore apply regardless of whether the predecessor 
workforce is rehired. 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(c) (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.
    The AFL-CIO expressed general support for the Department's approach 
to agency exceptions, including the Department's decision to provide a 
set of specific factors in Sec.  9.5(c) that the agency may and may not 
consider in determining whether an exception is appropriate. The 
Coalition stated that the Department's proposed agency exception 
process was a ``good start.'' The Coalition in particular supported the 
requirement in Sec.  9.5(c) that an agency justify its deviation from 
the order's assessment of the benefits of nondisplacement if it seeks 
to rely on costs as a basis for exception. The Coalition stated that 
this requirement would promote a thorough and consistent analysis 
across agencies. They also stated that this requirement is in line with 
general principles under the Procurement Act, under which, they 
explained, ``economy and efficiency are not necessarily promoted by 
contracting with the lowest bidder or seeking to minimize costs with a 
less effective workforce.''
    The Coalition also suggested a number of changes to the procedural 
requirements in Sec.  9.5(c). As an initial matter, the Coalition 
recommended that the required comparison of anticipated outcomes should 
include a cost-benefit analysis in a standard format, as

[[Page 86755]]

determined by the Secretary, that estimates the direct and indirect 
costs of employee turnover during the first year of the successor 
contract. The Coalition also suggested amending the discussion of 
relevant factors in Sec.  9.5(c)(1) and exceptional circumstances in 
Sec.  9.5(c)(2) to require that any conclusions about potential 
disruptions or workforce failures must be based on ``documented 
incidents'' during the predecessor contract's period of performance 
``such as at least two consecutive annual past performance ratings of 
`unsatisfactory' as defined by FAR 42.1503(b)(4).''
    The Department declines to adopt the Coalition's suggestion that 
Sec.  9.5(c) include a requirement to carry out a standardized cost-
benefit analysis in a format designated by the Secretary. As the 
Coalition noted, Sec.  9.5(c) already requires agencies to carry out a 
written analysis that compares the anticipated outcomes of hiring 
predecessor contract employees with those of hiring a new workforce; 
and the proposed regulation already provides guidance for how to 
consider costs as part of that analysis, as well as guidance about 
factors that are not appropriate. The Department believes the scope of 
the current Sec.  9.5(c) is sufficient to assist agencies in a way that 
will lead to consistent decision-making across agencies. Under 
paragraphs 6(b) and 6(c) of the Executive order, agencies are also 
required to publish descriptions of the exceptions they have granted on 
a centralized website and to report to OMB descriptions of these 
exceptions on a quarterly basis. The Department intends to analyze use 
of the agency exception process as these regulations are implemented 
and may consider in the future whether additional procedural 
requirements (such as the suggested standardized cost-benefit analysis) 
are necessary.
    The Department also declines to adopt the Coalition's suggestion 
regarding additional guideposts for the discussion of factors in Sec.  
9.5(c)(1) and (c)(2). The existence of two consecutive annual 
``unsatisfactory'' past performance ratings, as suggested by the 
Coalition, would certainly be relevant evidence for a determination 
made with reference to the factor at Sec.  9.5(c)(1)(iii). That factor 
provides for agency exceptions in situations where there is a 
reasonable belief ``based on the predecessor employees' past 
performance, that the entire predecessor workforce failed, individually 
as well as collectively to perform suitably on the job[.]'' However, as 
the Department noted in the NPRM, a contractor's past performance alone 
will generally not be sufficient basis to invoke an exception, because 
poor performance may result from poor management decisions of the 
predecessor contractor (and not from failures of the predecessor's 
service employees), and the management failures could be addressed by 
awarding the contract to another entity. Instead, as the Department 
proposed in the NPRM, the specific reasons for such poor performance 
ratings would need to be considered. The Department is concerned that 
adopting the Coalition's suggested language could give the impression 
that past performance ratings alone can justify an exception. Thus, the 
Department declines to adopt the Coalition's suggested amendments. For 
the reasons discussed, the final rule adopts Sec.  9.5(c) as proposed.
    In Sec.  9.5(d), the Department proposed language to address the 
second of the three circumstances under which an agency may authorize 
an exception from the nondisplacement provisions: where their 
application 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. This exception is 
provided for in section 6(a)(ii) of Executive Order 14055. The proposed 
language of Sec.  9.5(d) clarified that a reduction in the number of 
potential bidders is not, alone, sufficient to except a contract from 
coverage under this authority; the senior procurement executive 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 
stated 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 requires that any exercise of this authority must be 
based on a market analysis. This requirement was addressed in proposed 
Sec.  9.5(a)(2) and (d). This market analysis requirement is consistent 
with existing requirements in the FAR. 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(b)(1). To justify the exception from the 
nondisplacement requirements, the order requires that the market 
analysis show that adherence to the requirements would 
``substantially'' reduce the number of potential bidders so as to 
frustrate full and open competition. In proposed Sec.  9.5(d), the 
Department clarified that 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.
    As with any of the exceptions, where an agency seeks to except a 
particular contract under this competition-related analysis, the agency 
is required, consistent with section 6(a) of Executive Order 14055 and 
proposed Sec.  9.5(b), 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--must 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).
    The AFL-CIO stated their general support for the Department's 
proposed specific requirements in Sec.  9.5(d). As noted above, 
however, the AFL-CIO and the Coalition also sought a process by which 
employees for incumbent contractors would be notified of the potential 
for an exception 120 days before the solicitation date and allowed to 
submit comments. The final rule adopts Sec.  9.5(d) as proposed with a 
slight and nonsubstantive change to the wording of one sentence, and 
with two limited additions. In a nonsubstantive change, the Department 
has streamlined the language that explains that a potential reduction 
in the number of bidders alone is not sufficient to justify the 
exception. The final rule clarifies that such a reduction is not 
sufficient ``unless it is coupled with the finding that the reduction 
would not allow for adequate competition at a fair and reasonable 
price'' and adhering to the nondisplacement requirements would not be 
reasonably tailored to the agency's needs for the contract.
    In the first addition to this paragraph, the Department has 
included a sentence to provide additional detail regarding

[[Page 86756]]

the requirement that the agency determine whether ``a fair and 
reasonable price'' can be achieved in order to justify this exception. 
The new sentence states that ``[w]hen determining whether a fair and 
reasonable price can be achieved, the agency must consider current 
market conditions and the extent to which price fluctuations may be 
attributable to factors other than the nondisplacement requirements 
(e.g., costs of labor or materials, supply chain costs).'' The 
consideration of current market conditions in a price analysis is 
consistent with agency approaches under FAR subpart 15.4 (Contract 
Pricing). See Nomura Enter., Inc., B-271215 (May 24, 1996).
    Second, the Department has added language to Sec.  9.5(d) to 
require contracting agencies, to the extent consistent with mission 
security, to include employees' representatives in any market-research-
related exchanges with industry that are specific to the 
nondisplacement requirement. See 48 CFR 10.002(b)(2) (discussing market 
research techniques involving industry outreach); 48 CFR 15.201 
(encouraging ``early exchanges'' of information with industry and other 
interested parties to identify concerns about acquisition strategy). As 
the Department noted in the NPRM, to satisfy the Executive order's 
requirement for an agency exception, the market analysis must be an 
objective, contemporary, and proactive examination of the market 
conditions. Accordingly, it would not be appropriate for the agency to 
except a contract from the nondisplacement requirements on the basis of 
a market analysis without a proactive effort to determine whether 
sufficient bidders may exist so as to satisfy full and open 
competition, including through communication with other knowledgeable 
sources (such as, where feasible, the representatives of employees 
currently working in that industry) regarding the services to be 
provided.
    In Sec.  9.5(e), the Department proposed to address the third 
circumstance in which an agency exception would be appropriate: where 
adhering to the requirements of the order would otherwise be 
inconsistent with statutes, regulations, Executive orders, or 
Presidential Memoranda. This exception basis is articulated in section 
6(a)(iii) of Executive Order 14055 and restated in Sec.  9.5(a)(3) of 
the regulations. In Sec.  9.5(e), the Department proposed 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 proposed this requirement to provide 
consistency, to the extent possible, in the application of the order.
    NIB commented that the exception process described in Sec.  9.5(e) 
is, at least as to the legal questions around the JWOD Act, 
``unnecessary and likely to negatively impact the AbilityOne Program.'' 
NIB noted that unless the Department issues guidance as referenced in 
the proposed Sec.  9.5(e) regarding the AbilityOne Program, contracting 
agencies would always be required to consult with the Department before 
invoking this exception. For this reason, among others, NIB advocated 
for an express exemption for AbilityOne contracts to remove these steps 
from the procurement process. Melwood expressed a different but related 
general concern--that the determination of legal conflicts by 
contracting agencies ``on a case-by-case basis'' may lead to 
inconsistent application or exceptions for AbilityOne authorized 
contractors. Several other commenters, including SourceAmerica, Peckham 
Inc., ServiceSource, and Didlake Inc., expressed similar concerns.
    The Coalition, on the other hand, commented in support of the 
proposed consultation requirement in Sec.  9.5(e). In their comment, 
however, the Coalition advocated that the rule should further require 
that the Department approve any exception before a contracting agency 
is allowed to proceed. They also advocated that the Department's 
approval should be contingent on a finding that such an exception would 
be ``consistent with the federal government's interest in promoting 
competitive integrated employment for people with disabilities, as 
defined by the Workforce Innovation and Opportunity Act and applicable 
implementing regulations and guidance issued by the Rehabilitation 
Services Administration.''
    Having considered the comments received regarding the procedure in 
proposed Sec.  9.5(e), the final rule adopts the text of this paragraph 
as proposed. Section 6(a) of the Executive order itself provides for a 
default procedure of individual case-by-case determinations regarding 
potential legal conflicts with the nondisplacement requirements. The 
Department agrees with the various commenters that it makes sense to 
ensure, as much as possible, that these agency exception decisions are 
not made on an inconsistent basis or with inconsistent outcomes. The 
proposed consultation procedure in Sec.  9.5(e) is intended to ensure 
that these case-by-case determinations are as consistent as possible.
    The Department declines to adopt the Coalition's suggestion that 
agencies be required to receive approval from the Department, in 
addition to seeking consultation, before issuing an exception for a 
contract under Sec.  9.5. The procedure in Sec.  9.5(e) provides an 
appropriate balance. In most cases, the procedure will require 
consultation with the Department if a potential conflict is identified. 
Consultation will allow the Department to share any resources or 
information with the contracting agency, including how the specific 
potential conflict has been treated by other agencies. This should 
decrease the potential for inconsistency, about which commenters 
expressed concern. Section 9.5(e) also seeks to increase efficiency, 
without cost to consistency, by eliminating the consultation 
requirement where the Department has already issued guidance on the 
potential conflict.
    If an agency itself has the authority to interpret and implement a 
particular law or policy that potentially conflicts with the 
requirements of Executive Order 14055 or this regulation, the procedure 
in Sec.  9.5(e) defers in the first instance to that agency and does 
not require consultation with the Department. Although no consultation 
is required, the Department encourages communication because the 
determination of whether a conflict exists between two legal 
requirements necessarily involves interpreting both legal 
requirements--and the Department itself has authority to interpret and 
enforce nondisplacement requirements.
    Finally, with regard to the potential conflicts with contracts 
covered by the JWOD Act, as discussed in section II.B.4. above, the 
Department has separately addressed these concerns by including a 
contract clause that applies to all such contracts and subcontracts and 
instructs contractors that they must implement the JWOD Act (and 
certain other statutory procurement preference programs) and the 
nondisplacement provisions in tandem and to the maximum extent 
possible.
ii. Reconsideration of Agency Exceptions
    In the NPRM, the Department proposed language at Sec.  9.5(f) to 
provide a procedure for interested parties to request reconsideration 
of agency exception determinations. This proposed language mirrored the 
procedure that was included in the

[[Page 86757]]

regulations that implemented Executive Order 13495. See 29 CFR 
9.4(d)(5) (2012). In using the term ``interested parties,'' the 
Department stated that it intended to extend the opportunity to request 
reconsideration to affected workers or their representatives, in 
addition to actual or prospective bidders. The Department stated that 
it did 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 sought input from commenters regarding 
the proposed procedure.
    PSC expressed concerns about the reconsideration process that the 
Department proposed for both the location continuity decision described 
in Sec.  9.11 and the agency exception decision in Sec.  9.5. The PSC 
noted that the Executive order does not expressly provide for a 
reconsideration process and stated that the process could have negative 
outcomes, such as by allowing a broad set of individuals or entities to 
``potentially delay the implementation of business judgments of agency 
acquisition personnel'' and thereby delay acquisitions. PSC warned that 
the Department's intent to give a broad meaning to the term 
``interested parties'' could have unforeseen results, like potentially 
allowing formal requests for reconsideration by governmental 
jurisdictions that might be competing to be the location of a successor 
contract.
    The Coalition and the AFL-CIO, on the other hand, expressed general 
support for the concept of a reconsideration provision, but with 
significant amendments. As noted above, these commenters suggested that 
agency exception decisions should be made 60 days before a solicitation 
is issued so that reconsideration could be sought and resolved before 
the solicitation date. The Coalition also advocated that requests for 
reconsideration be directed to the Department, not to the contracting 
agency that proposed the exception. The Coalition noted that this 
suggestion is ``consistent with the fundamental principle of fairness 
that appeals should not be directed to the original decisionmaker.''
    The Department considered these comments within the larger context 
of the agency exceptions determination and finds that it is not 
necessary at this time to include the proposed formal reconsideration 
provision in Sec.  9.5. When an agency seeks to waive the 
nondisplacement requirements for a particular contract, there are 
several safeguards to ensure that this procedure is not misused. As 
adopted in this final rule, Sec.  9.5(b) of the regulations requires 
the agency, through its senior procurement executive, to make a written 
explanation, ``including the facts and reasoning supporting the 
determination,'' and to make that determination no later than the 
solicitation date. Paragraphs 9.5(c) and (d) contain specific 
additional requirements regarding the factors that must be considered 
and those that cannot be considered for the first two exception 
provisions, and Sec.  9.5(e) contains additional procedural 
requirements where an agency seeks to waive the nondisplacement 
provisions based on a perceived conflict with another law or policy. If 
the agency does not issue a timely specific written explanation, then 
the exception will be inoperative, and the agency will be required to 
either terminate the contract or cancel the solicitation and properly 
reissue it or to modify the existing contract to incorporate the 
nondisplacement contract clause consistent with the procedure outlined 
in Sec.  9.11(f) of the regulations.
    Even without a formal reconsideration provision in the regulations, 
the Department expects and encourages workers and their representatives 
to communicate with contracting agencies (and the Department, as 
appropriate) about any potential agency exception decision. Decisions 
regarding agency exceptions should be rare. But when they occur, they 
will generally be fact-specific, and workers and their representatives 
will likely have important information that can assist agencies in 
weighing the potential outcomes of a decision regarding an agency 
exception. Moreover, section 6(b) of the Executive order itself 
requires agencies to provide notice of an agency exception decision to 
workers and any collective bargaining representatives. The implication 
of that notice provision is that contracting agencies should welcome 
communications from workers or their representatives about an exception 
decision, and agencies should be prepared to reconsider any decision if 
they are provided with material facts or persuasive legal arguments 
that they had not previously considered.
    In light of these safeguards--and in particular the availability of 
the retroactivity mechanism at Sec.  9.11(f)--the Department finds that 
it is not necessary at this time to implement the formal 
reconsideration procedure that was previously proposed for Sec.  
9.5(f). However, the Department will carefully analyze the publication 
and reporting of exception decisions that is required under the order, 
along with feedback from workers, their representatives, and 
contractors. If appropriate, the Department may engage in a future 
notice and comment rulemaking to implement a more formal 
reconsideration procedure or take other appropriate action such as 
issuance of subregulatory guidance.
    The Department therefore is removing the reconsideration provision 
that was at Sec.  9.5(f) of the proposed rule and is removing from the 
contract clause, set forth in Appendix A, the language that required 
notices of agency exceptions to include reference to the manner of 
directing a request for reconsideration.
iii. Notification, Publication, and Reporting of Agency Exceptions
    In the NPRM, the Department proposed to include in the regulations 
at Sec.  9.5(g) a recitation of the notification, publication, and 
reporting requirements contained in sections 6(b) and 6(c) of the 
order. 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.
    The Department received comments from the Coalition and the AFL-CIO 
regarding these notice and publication provisions. The commenters 
proposed revisions to the timeframe for notice of agency exceptions 
decisions so that agencies would have to notify workers and their 
representatives of a proposed exception no later than 120 days before a 
bid solicitation goes out to give workers time to comment on the 
proposed exception, the agency to respond, and the workers to request 
reconsideration (from the Department). The Coalition and Jobs to Move 
America also encouraged the Department to provide guidance to agencies 
about the form, content, and accessibility of the required publications 
on agency websites that are required by section 6(b) of the order, and 
to periodically monitor their compliance. They also stated that the 
Department could also promote the purposes of the order and 
transparency into government decision-making by coordinating with OMB 
to ensure that the quarterly reports that it receives from agencies are 
compiled and

[[Page 86758]]

published on a centralized public website.
    The Department acknowledges these comments, but notes that section 
7(a) of the Executive order does not provide the Department with the 
authority to issue implementing regulations regarding the notice and 
publication requirements in paragraphs 6(b) and (c) of the order. 86 FR 
at 66399. For that reason, the Department's proposed regulations at 
Sec.  9.5(g), which are finalized in Sec.  9.5(f) of the final rule, 
are recitations of the text of the Executive order itself and do not 
include any additional detail. For contracts that are subject to the 
FAR, the regulations that are implemented by the FAR Council may 
include additional instructions regarding the notice, publication, and 
reporting requirements.
    Accordingly, the final rule adopts the language regarding notice, 
publication, and reporting provisions as proposed, except that the 
language now appears in Sec.  9.5(f) of the final rule instead of Sec.  
9.5(g) to account for the removal of the reconsideration language 
previously proposed for Sec.  9.5(f).
Subpart B--Requirements
6. Section 9.11 Contracting Agency Requirements
    As proposed, Sec.  9.11 would implement sections 3 and 4 of 
Executive Order 14055. Section 3 of the order directs agencies to 
ensure that covered contracts and solicitations include the 
nondisplacement contract clause. 86 FR at 66397-98. Section 4 of the 
order directs agencies to consider, during the preparation of a covered 
solicitation, 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--and, if so, to include a requirement or preference for 
location continuity in the solicitation. Id. at 66398-99.
    Proposed Sec.  9.11 specified contracting agency responsibilities 
to incorporate the nondisplacement contract clause in covered 
contracts, to ensure notice is provided 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 specified contracting agency 
responsibilities to provide the list of employees working under the 
predecessor contract and its subcontracts to the successor, to forward 
complaints and other pertinent information to WHD when there are 
allegations of contractor non-compliance with the nondisplacement 
contract clause or this part, and to incorporate the contract clause 
when it has been erroneously omitted from the contract.
i. Section 9.11(a) Incorporation of Contract Clause
    Section 3(a) of Executive Order 14055 specifies the 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) provided a regulatory requirement to 
incorporate the contract clause specified in Appendix A into covered 
service contracts, and solicitations for such contracts, except for 
procurement contracts subject to the FAR. For procurement contracts 
subject to the FAR, contracting agencies would use the relevant clause 
developed to implement this rule set forth in the FAR. As the proposed 
rule explained, 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, as the Department noted in the proposed rule, 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 the 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, No. C86-2188, 1988 WL 125784, at *4 
(N.D. Ohio 1988) (finding SCA clause was enforceable where the SCA 
contract clause was not incorporated ``verbatim,'' but the contract 
incorporated by reference a GSA form that set forth the provisions of 
the SCA); Progressive Design & Build, Inc., WAB No. 87-31, 1990 WL 
484308, at *2 (Feb. 21, 1990) (finding subcontractor liable for Davis-
Bacon Act (DBA) back wages where the DBA contract clause was not 
physically incorporated into subcontracts, but was incorporated by 
reference). The Department specifically noted in the proposed rule that 
the full contract clause will be deemed to have been incorporated by 
reference in a covered contract when 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. Similarly, under the FAR, a contract that contains 
a provision expressly incorporating contract clauses by reference gives 
those clauses the same force and effect as if they were given in full 
text. See 48 CFR 52.107, 52.252-2.
ii. Appendix A Contract Clause
    Appendix A contains the nondisplacement contract clause that must 
be inserted in covered contracts as required by Sec.  9.11(a). The 
proposed language of the contract clause in Appendix A is based on the 
language of the clause that appears in the Executive order itself. 
Contract clause paragraphs (a) through (e) of proposed Appendix A 
repeat the language in paragraphs (a) through (e) of the Executive 
order's contract clause verbatim, with one exception. The Department 
proposed to modify the contract clause by inserting 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.
    As 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 was 
for employees who are not service employees and the other was 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 would provide to the successor contractor to ensure the

[[Page 86759]]

successor contractor has the information necessary to provide the 
employees with the right of first refusal. Proposed contract clause 
paragraph (d) provided 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 honor the requirements of paragraphs (a) through (c) and 
would 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 set forth additional provisions necessary to 
implement the Executive order. As the proposed rule explained, 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) provided 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 on the 
contract and its predecessor contracts with either the current or 
predecessor contractors or their subcontractors. Proposed paragraph 
(f)(1) further explained that if there are changes to the workforce 
made after the 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.
    Proposed contract clause paragraph (f)(2) provided notice that 
under certain circumstances the contracting officer would, 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 (f)(3) provided that contractors 
would deliver notices to their employees of an agency determination to 
except a successor contractor from the nondisplacement requirements of 
29 CFR part 9, or to decline to include location-continuity 
requirements or preferences in a successor contract.
    In contract clause paragraph (g), the Department proposed to 
require the contractor to maintain certain records to demonstrate 
compliance with the substantive requirements of part 9. As proposed, 
this 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 specified that the 
contractor would be required to maintain the particular records 
(regardless of format, e.g., paper or electronic) for 3 years. The 
proposed paragraph further specified that such 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, and the date of payment, along with a copy of any receipt form 
provided by or authorized by WHD. The proposed clause also stated 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) provided that disputes concerning the requirements of the 
nondisplacement clause would not be subject to the general disputes 
clause of the contract. Instead, such disputes would be resolved in 
accordance with the procedures in part 9.
    The Coalition requested that the Department explicitly provide in 
the contract clause a statement that covered employees are intended 
third-party beneficiaries of the contract clause. The Coalition 
explained that this would give employees the ability to pursue private 
litigation to enforce Executive Order 14055. The Department does not 
adopt the Coalition's suggestion. Section 12(c) of Executive Order 
14055 states that 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 66400. The Department interprets this language to limit 
its discretion to create or authorize a private right of action. Accord 
86 FR 67192 (interpreting identical language to similarly limit 
discretion under Executive Order 14026). The Department declines to 
amend the contract clause to expressly designate workers as third-party 
beneficiaries of the contract's nondisplacement requirements. While the 
Coalition noted that Executive Order 14055 ``explicitly create[s] 
particular nondisplacement rights for workers,'' the Department 
believes that section 12(c) of the order is clear in limiting the 
Department's ability to create or authorize a private right of action 
under Executive Order 14055. As explained in Sec.  9.1(c), however, 
neither Executive Order 14055 nor this part creates or changes any 
private right of action that may exist under other applicable laws. 
Thus, nothing is intended to limit or preclude a civil action under the 
False Claims Act, 31 U.S.C. 3730, or criminal prosecution under 18 
U.S.C. 1001. Likewise, whether a worker could make a third-party 
beneficiary claim under relevant state law would be determined by such 
state law.
    The Department did not receive additional comments on proposed 
Sec.  9.11(a) or on the proposed contract clause in Appendix A, and 
thus the final rule adopts them as proposed, with the following 
exceptions. The Department has added language to Sec.  9.11(a) to 
reflect that the application of the FAR nondisplacement clause will 
take place under the procedures set forth in the FAR, as well as 
paragraph (f)(3) of Appendix A to add reference to the requirement from 
Sec.  9.12(e)(3) that predecessor contractors provide notice to 
employees of their possible right to an offer of employment on the 
successor contract. The Department also made several revisions to the 
contract clause

[[Page 86760]]

for purposes of clarity and to reflect revisions to the regulations 
that are discussed elsewhere in this final rule.
iii. Section 9.11(b) Notices
    Proposed Sec.  9.11(b) specified 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). The Department 
did not receive any comments on proposed Sec.  9.11(b). Comments 
addressing the other notice requirements contained in this rule are 
addressed in the preamble sections corresponding to where they appear 
in the regulatory text. The final rule adopts Sec.  9.11(b) as 
proposed, other than, for clarity, adding a cross-reference to the 
other employee notice provisions found at Sec.  9.11(c)(4) (relating to 
notice to employees' representatives to provide information relevant to 
the location continuity analysis), and where relevant, Sec.  9.5(f) 
(relating to agency exceptions).
iv. Section 9.11(c) Location Continuity
    Section 9.11(c) implements the location continuity requirements in 
section 4 of Executive Order 14055. Section 4(a) of the order states 
that, in preparing covered solicitations, contracting agencies 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. 86 FR at 66398. Section 4(b) states 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. 86 FR at 66399. For IDIQ contracts under the MAS and other 
similar programs, the location continuity determination would be made 
by the ordering agency prior to issuing the RFQ. See 48 CFR 8.405-
1(d)(2), 8.405-2(b)-(c), 8.405-3(b)(ii) (requiring statements of work 
and/or RFQs for proposed orders and blanket purchase agreements 
exceeding the simplified acquisition threshold).
    These requirements represent a different approach to location 
considerations than the prior nondisplacement provisions in Executive 
Order 13495. The new requirements seek to increase the government's 
opportunity to benefit from carryover workforces even where a contract 
location changes, but the requirements also place significantly more 
emphasis on the potential benefits of keeping contract locations 
constant. Executive Order 13495 limited the application of the 
nondisplacement requirements to contracts for similar services at the 
``same location.'' 74 FR at 6104. Executive Order 14055, in contrast, 
does not contain such a limitation. As a result, Executive Order 14055 
applies the nondisplacement requirements regardless of the location of 
the successor contract. Even if the place of performance for a 
successor contract will be in a different locality from the predecessor 
contract, the successor contract will still be required to include the 
nondisplacement contract clause and the successor contractor will 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 
Executive Order 14055, however, clarifies that these requirements 
should not be construed to require or recommend the payment of 
relocation costs to workers who exercise their right to take a new 
position when a contract location is moved. 86 FR at 66398. Executive 
Order 14055 recognizes this through the location continuity 
requirements in section 4 of the order, as well as in a discussion of 
location continuity in section 1 of the order. Id. at 66397-99. The 
central location continuity provisions, in section 1 and section 4 of 
Executive Order 14055, reflect the basic but important conclusion that 
the right of first refusal in the contract clause may have a more 
limited effect in many circumstances 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. 86 FR 
66397. The benefits of using a carryover workforce and location 
continuity are intertwined because for many contracts, in particular 
those on which workers cannot or may not be allowed to work in a fully 
remote capacity, 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, the 
provisions of section 4 of the order require that for each covered 
contract, the contracting officer consider whether to include a 
requirement or preference for location continuity. See 86 FR at 66398-
99. The Department proposed to restate these requirements from the 
order in Sec.  9.11(c)(1) and Sec.  9.11(c)(2), respectively.
    The Department received several general comments regarding the 
location continuity requirements in the order and in the proposed text 
of Sec.  9.11(c). The AFL-CIO and the Coalition expressed strong 
support for the requirements. The Coalition stated that the benefits of 
retaining experienced workers are no different for contracts that 
change locations. They provided the example of a 2008 decision by the 
State Department to move a call center contract for the National 
Passport Center to Michigan from New Hampshire, where it had been 
operating for 12 years. The decision resulted in the termination of 
hundreds of trained workers and allegations of significant service 
disruptions.\5\ The AFL-CIO agreed with the NPRM that the benefits of 
using a carryover workforce and location continuity are intertwined. 
They stated that absent a location continuity requirement, there is 
``significant risk that the broader benefits of the nondisplacement 
rule will not be realized.''
---------------------------------------------------------------------------

    \5\ See ``Call Center to Close in Dover; 300 Jobs Cut,'' 
Associated Press (Dec. 3, 2008), https://www.seacoastonline.com/story/news/2008/12/03/call-center-to-close-in/52169521007/; ``Local 
AT&T Worker Claims Mich. Call Center Backed Up,'' Fosters Daily 
Democrat (Mar. 11, 2009), https://www.fosters.com/story/news/2009/03/11/local-at-t-worker-claims/52067699007/.
---------------------------------------------------------------------------

    In contrast, ABC and Nakupuna opposed the location continuity 
provision in its entirety. ABC commented that the combination of the 
location continuity provisions and the elimination of the ``same 
location'' requirement from the prior nondisplacement order ``will 
needlessly limit successor contractors from performing the work in a 
new locality with employees who are familiar with the new location.'' 
Nakupuna expressed concern that the required location continuity 
analysis will be burdensome for agencies and that ``any subsequent 
final decision will severely constrain the government if labor market

[[Page 86761]]

conditions change rapidly throughout the solicitation, award, and 
hiring/staffing process.'' Nakupuna thus advocated for limiting 
coverage of the nondisplacement rule only to the same location, and 
``specifically the same Federal facility.''
    The Department reviewed and considered the above general comments 
regarding the location continuity provisions and declines to eliminate 
these provisions in the final rule. The Executive order expressly 
requires agencies to consider location continuity and include location 
continuity requirements or preferences where reasonably necessary. 86 
FR at 66398-99. Accordingly, Sec.  9.11(c)(1) and (c)(2), as finalized, 
include these requirements within the subpart of the regulations that 
addresses contracting agency requirements.
    The Department, however, also disagrees with ABC and Nakupuna that 
the location continuity requirements will have adverse effects. Even 
though there is no express requirement to do so in the FAR, agencies 
already in many cases require contracts to be performed at specific 
locations or otherwise consider whether to include location continuity 
requirements in solicitations. For example, where the services at issue 
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., Novad Mgmt. 
Consulting, LLC, B-419194.5, 2021 WL 3418798, at *3-4 (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 or preference may be 
reasonably necessary to ensure economical and efficient provision of 
services.
    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. 86 FR at 66398-99. 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. One commenter, PSC, while opposing several of the 
procedural safeguards that the Department proposed for the location 
continuity requirement, noted its general agreement that location 
continuity might be appropriate where related to ``efficiency in 
facilities or with regard to classified information management.''
    The Department also noted in the NPRM that there will be other 
cases in which changed agency needs may outweigh the basic interest in 
a carryover workforce. 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. The Coalition provided another 
example in their comment. If workers under the predecessor contract 
have been primarily working in a fully remote capacity, location 
continuity may be less necessary to obtain the goals of the order, 
particularly if the solicitation contemplates the continued 
availability of remote work on the successor contract. As discussed 
below, the Department is not limiting contracting agencies from 
considering any aspects of agency requirements in making location 
continuity determinations. Accordingly, the Department does not agree 
with ABC or Nakupuna that the location continuity provisions will 
unnecessarily limit or constrain agency decision-making.
(A) ``Same Location'' and ``Same Locality''
    COFPAES requested clarification regarding the meaning of the 
Executive order's statement in section 1 that the same benefits of the 
nondisplacement order are also realized when the successor contractor 
performs the work at ``the same location where the predecessor contract 
was performed.'' See 86 FR 66397. COFPAES stated that this reference 
was confusing because the NPRM explained that the order's coverage 
applies coextensively with the SCA, and therefore applies irrespective 
of where the contractor performs the work. See 29 CFR 4.133(a).\6\ 
COFPAES also stated that the nondisplacement requirements would be 
``unworkable and impractical'' if applied to mapping or engineering 
design firms where ``a deliverable of plans and specifications is 
prepared on the contractor's site and delivered to the government.''
---------------------------------------------------------------------------

    \6\ COFPAES also stated that the nondisplacement provisions are 
inconsistent with the Brooks Act, 40 U.S.C. 1101 et seq, and its 
implementing regulations and stated that these types of contracts 
should be exempted from coverage. The Department has addressed this 
request for an exemption above in section II.B.4.
---------------------------------------------------------------------------

    The order uses two slightly different terms to discuss the same 
concept: ``same location'' (in section 1) and ``same locality'' (in 
section 4). 86 FR at 66397-98. The operative requirement of the order 
is in section 4 of the order and in Sec.  9.11(c)(1) and (c)(2) of the 
regulations, all of which require consideration of whether performance 
of the work in the ``same locality or localities'' is reasonably 
necessary for economy and efficiency. See 86 FR at 66398. The 
Department interprets this language to mean performance within a 
reasonable commuting distance of the specific facility at which the 
predecessor contract employees worked or were based, or, where 
relevant, within commuting distance of the locality in which most of 
the predecessor contract employees live. As noted in the NPRM, the 
language about contract ``location'' and ``locality'' and sections 1 
and 4 of the order reflect the basic conclusion that the right of first 
refusal in the nondisplacement contract clause may have a more limited 
effect if a contract is moved beyond commuting distance from the 
predecessor contract, such that predecessor employees may be less 
likely to accept an offer of employment on the successor contract. 
Accordingly, a ``same locality'' preference or requirement generally 
means a preference or requirement that the location of the facility at 
which employees will be working or operations will be headquartered (if 
covered employees work remotely) be sufficiently within the same 
general geographic area such that employees on the predecessor contract 
could continue to work on the successor contract without having to move 
their residences.
    The Department's understanding of the concept of ``location'' and 
``locality'' in Executive Order 14055 is consistent with the FAR 
Council's interpretation of

[[Page 86762]]

the term ``same location'' as it was used in Executive Order 13495.In 
its final rule implementing Executive Order 13495, the FAR Council 
refrained from narrowly defining the term to mean the ``same building, 
base, city, command'' or something else. See 77 FR 75766, 75768-69. 
Instead, it stated that what constitutes the ``same location'' in that 
context ``will depend upon the geographic area in which performance 
under the predecessor and successor contracts occur'' and can be 
resolved with reference to the statement of work or similar contract 
provision. Id. at 75769. The Department's understanding of these terms 
is also consistent with the interpretation of the term ``locality'' as 
it is used in the SCA to define the geographic unit within which 
prevailing wages are calculated. See 41 U.S.C. 6703(1). In the SCA 
context, the Department and reviewing courts have given the word 
``locality'' a flexible but not unlimited meaning, see S. Packaging & 
Storage Co. v. United States, 618 F.2d 1088 (4th Cir. 1980), such that 
a ``locality'' typically encompasses a metropolitan statistical area 
(MSA) or similar grouping of nonmetropolitan counties.\7\
---------------------------------------------------------------------------

    \7\ The Office of Management and Budget designates counties or 
groups of counties as MSAs as part of its core based statistical 
area (CBSA) standards. See 86 FR 37770 (July 16, 2021).
---------------------------------------------------------------------------

(B) Location-Continuity Factors
    In the NPRM, the Department sought comment on whether Sec.  9.11(c) 
should provide additional guidance on the relevant factors that an 
agency should consider when it is considering location continuity, and, 
if so, which factors to include and whether to provide guidance 
regarding any particular weight that should be given to each of them. 
The Department sought comment on whether contracting agencies should be 
required to start with a presumption in favor of location continuity, 
and regarding when, if ever, it is appropriate for contracting officers 
to consider costs as a reason to decline to require location 
continuity. The Department also sought comment on how the HUBZone 
program or other procurement-related programs \8\ should factor into a 
location-continuity analysis, how an agency should weigh the history of 
remote work or telework by incumbent contractor employees, and whether 
there are 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.
---------------------------------------------------------------------------

    \8\ The HUBZone program, 15 U.S.C. 657a, is one of several 
procurement-related preference programs for small businesses, and it 
is designed to aid small businesses that are located in economically 
distressed areas. See supra footnote 2 in section II.B.4. Of all 
existing small business preference programs, the HUBZone program is 
the only one that has a geographic component.
---------------------------------------------------------------------------

    The AFL-CIO and the Coalition encouraged the Department to apply a 
presumption in favor of location continuity. The AFL-CIO further 
proposed that contracting agencies should have to identify clear and 
convincing evidence to rebut such a presumption. They noted that it may 
be appropriate to presume that the contracting agency chose the 
location of the predecessor contract for a substantial reason, and that 
keeping the same location increases the benefits of the nondisplacement 
provisions by making it more likely that predecessor employees will be 
able to accept an offer from the successor contractor. Accordingly, 
they suggested, the burden should be on the contracting agency to 
explain why the location of a contract should be moved.
    The Coalition also urged the Department to provide additional 
guidance to contracting agencies in the final rule regarding relevant 
factors for a location-continuity determination and regarding the 
consideration of cost. The Coalition proposed several factors, 
including (1) the size of the workforce under the new contract; (2) the 
level of experience and training of the incumbent workforce; (3) 
whether workers on the predecessor contract have access to any 
sensitive, privileged, or classified information; and (4) prior 
successful performance by the predecessor workforce. The Coalition 
urged a general prohibition on the consideration of labor costs, 
asserting that the policy of the Executive order prefers the benefits 
of worker nondisplacement over potential reduction in labor costs.
    PSC, on the other hand, urged the Department not to impose a 
presumption in favor of location continuity or to provide guidance 
regarding factors to consider. They commented that a presumption would 
``put[ ] agencies in the position of having to prove a negative'' and 
would ``intrude[ ] on acquisition judgements.'' They expressed concern 
that guidance regarding factors to consider would lead to a ``check-
the-box exercise on factors that may be irrelevant to the agency, and 
potentially downplay factors that really matter to the agency,'' and 
that, even if the factors are framed as optional, they ``may not be 
optional in practice.'' PSC stated that costs must always be a 
permissible consideration with regard to location continuity, ``with 
the scope of other potential considerations left to the contracting 
officer's discretion.'' They added that if ``economy and efficiency are 
realized by requiring successors to offer employment to predecessor 
employees by location, those efficiencies must be balanced with costs 
that may result from imposing that requirement.''
    The Department does not agree with PSC that the provision of 
guidance regarding factors to consider in the location-continuity 
analysis will confuse contracting officers or undermine their business 
judgement. The provision of nonexclusive lists of factors for 
contracting officers to consider is a routine aspect of contract 
formation. See, e.g., 48 CFR 15.304 (Evaluation factors and significant 
subfactors). In addition, as the Department noted in the NPRM, many 
covered contracts will not require consideration of factors related to 
nondisplacement because the location of the services must be fixed for 
other reasons. For example, an agency drafting a solicitation for a 
successor contract for janitorial or security services for a specific 
federal facility would not need to consider nondisplacement factors as 
part of a location-continuity analysis because there is no reasonable 
possibility that the location of the services could be moved. However, 
where the agency believes the services could possibly (nondisplacement 
factors aside) be carried out at a different location, the location-
continuity analysis required by the Executive order should include 
consideration of the nondisplacement factors. The final rule, 
therefore, includes at Sec.  9.11(c)(3) a nonexclusive list of factors 
that are important to consider when there is a possibility that the 
successor contract could be performed in a locality other than where 
the predecessor contract has been performed.
    The list of factors in Sec.  9.11(c)(3) includes: (i) whether 
factors specific to the contract at issue suggest that the employment 
of a new workforce at a new location would increase the potential for 
disruption to the delivery of services during the period of transition 
between contracts (e.g., the large size of workforce to be replaced or 
the relatively significant level of experience or training of the 
predecessor workforce); (ii) whether factors specific to the contract 
at issue suggest that the employment of a new workforce at a new 
location would unnecessarily increase physical or informational 
security risks on the contract (e.g. whether workers on the contract 
have had and will have access to sensitive, privileged, or classified 
information); (iii) whether the workforce on the predecessor contract 
has

[[Page 86763]]

demonstrated prior successful performance of contract objectives so as 
to warrant a preference to retain as much of the current workforce as 
possible; and (iv) whether program-specific statutory or regulatory 
requirements govern the method through which the location of contract 
performance must be determined or evaluated, or other contract-specific 
factors favor the performance of the contract in a particular location.
    The listed factors added in Sec.  9.11(c)(3) of the final rule 
follow directly from the policy and purpose of the Executive order as 
described in section 1 therein. See 86 FR at 66397. The first three 
factors will generally weigh in favor of location continuity.
    The Coalition expressed concern about successor contractors 
eliminating or significantly reducing the options of remote work or 
telework where it has existed on predecessor contracts. If workers on a 
predecessor contract have been provided the option of remote work or 
significant telework, the removal of that option on the successor 
contract may make it difficult for the successor contractor to maintain 
a carryover workforce, even if the contract stays in the same location 
and even if the workers are provided with a nondisplacement right-of-
first-refusal offer. Any reduction in the option for remote work, the 
Coalition asserted, ``should be treated as a change in location that is 
presumed to be disruptive.''
    The Department agrees that the removal of telework options by a 
successor contractor could cause significant disruptions, and 
consideration of the availability of remote work could therefore be 
relevant to location continuity determinations. Congress has 
specifically encouraged the use of telework by Federal contractors. See 
41 U.S.C. 3306(f) (authorizing telecommuting for Federal contractors); 
see also 48 CFR 7.108 (requiring agencies make a specific determination 
regarding security or other requirements before prohibiting 
telecommuting or unfavorably evaluating proposals involving 
telecommuting). In addition, Sec.  9.12(b)(5) of these regulations 
limits successor contractors from changing the terms and conditions of 
predecessor contractors for the purpose of discouraging employees from 
accepting the offer of employment on the successor contract. That 
paragraph states that successor contractors generally must offer 
employees of the predecessor contractor the option of remote work under 
reasonably similar terms and conditions to those that the successor 
contractor offers to any employees it has or will have in the same or 
similar occupational classifications who work in an entirely remote 
capacity.
    The fourth factor in Sec.  9.11(c)(3) of the final rule reminds 
contracting officers that it is appropriate to consider any program-
specific statutory or regulatory requirements governing the method by 
which location of performance must be determined or evaluated, or other 
contract-specific factors that favor the performance of the contract in 
a particular location. For example, the FAR regulations regarding the 
architectural and engineering services under the Brooks Act contain 
their own location preference. See 48 CFR 36.602(a)(5). Under this 
regulation, one of five enumerated selection criteria is: ``Location in 
the general geographical area of the project and knowledge of the 
locality of the project; provided, that application of this criterion 
leaves an appropriate number of qualified firms, given the nature and 
size of the project.'' Id. Because the Brooks Act already determines 
that location is to be factored into the solicitation by way of this 
specific location-continuity preference, it generally would not be 
appropriate to impose a location-continuity requirement (as opposed to 
this preference) because of the location-continuity provision in the 
nondisplacement regulation. This factor is consistent with the 
Executive order's mandate in section 4(b) that, upon determining that 
location continuity is reasonably necessary to ensure economical and 
efficient provision of services, agencies must include location-
continuity requirements or preferences ``to the extent consistent with 
law.'' 86 FR at 66399.
    The language at Sec.  9.11(c)(3) of the final rule that introduces 
the relevant location-continuity factors clarifies that the list is 
nonexclusive. It states that the location-continuity analysis ``should 
generally include, but not be limited to'' the listed considerations. 
The final rule does not contain a required presumption in favor of 
location continuity, and it does not restrict consideration of costs. 
Having considered the comments submitted regarding these additional 
proposed provisions, the Department finds at this time that they are 
not necessary to achieving the purpose of the order. The final rule 
requires agencies to approach the location-continuity analysis on a 
case-by-case basis, while providing guidance regarding the critical 
benefits that carryover workforces provide and the possibility that 
changing a contract's location may have adverse effects on contract 
performance, physical or information security, or other proprietary 
interests of the Federal government.
    In this case-by-case analysis, in addition to considering whether a 
location-continuity requirement is reasonably necessary, the 
contracting agency must also consider the option of including a 
location-continuity preference instead of a requirement. Inclusion of a 
preference still allows the agency to weigh proposals that involve 
moving a contract to a different location and award the contract to 
such a bidder if the benefits from moving outweigh the nondisplacement-
related and other benefits of maintaining the same contract location. 
However, in some circumstances where the need for a carryover workforce 
is stronger (for example, where retaining a carryover workforce may 
limit risks related to information and physical security), it may be 
more important to ensure workforce continuity and thus suggest that a 
location-continuity requirement may be more appropriate than a 
preference. Ultimately, the decision regarding whether to use a 
requirement or a preference, like the determination of reasonable 
necessity, will be a case-by-case determination based on the agency's 
analysis of its needs.
    PSC responded to the Department's request for comment about how the 
HUBZone program or other similar procurement programs should factor 
into the location-continuity analysis. In their response, PSC suggested 
that ``these considerations would greatly factor into such an 
analysis.'' Though they did not suggest a specific method of balancing 
the programs or goals, PSC noted that 35 percent of employees of 
HUBZone contractors must live within a HUBZone.\9\ They also raised the 
question of whether ``equity [would] be realized'' if a successor 
contractor offered a right of first refusal to a HUBZone contractor's 
employees ``and relocated employees from that HUBZone.'' \10\
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    \9\ To benefit from the sole-source awards, set-asides, or 
price-evaluation preferences under the HUBZone program, a contractor 
must become certified as a HUBZone small business concern (SBC), 
which requires that ``the principal office of the business is 
located in a HUBZone and not fewer than 35 percent of its employees 
reside in a HUBZone.'' 15 U.S.C. 657a(d)(1). The SBC also must 
certify that it will attempt to maintain the 35 percent employment 
ratio during the performance of any contract awarded on the basis of 
one of these HUBZone mechanisms. Id.
    \10\ In addition to commenting on the location continuity 
analysis, PSC also recommended an exemption to the right-of-first 
refusal requirement when such a right would ``impact internal 
organizational or federal Diversity, Equity, Inclusion and 
Accessibility goals.'' The Department had addressed this request for 
an exemption above in section II.B.4.

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

[[Page 86764]]

    The Department agrees that aspects of the HUBZone program could be 
relevant to whether an agency imposes a location-continuity 
requirement, depending on the facts and circumstances of the particular 
contract. As an initial matter, if a predecessor contract is located in 
a HUBZone, a location-continuity requirement or preference for a 
successor contract would be consistent with the goals of the HUBZone 
program. And even where the predecessor contract is outside of a 
HUBZone, a location-continuity requirement or preference would not 
necessarily be inconsistent with the program, as there is no 
requirement under the HUBZone program that contracts set aside for or 
awarded to HUBZone-certified contractors must themselves be performed 
within a HUBZone. See Cont. Mgmt., Inc. v. Rumsfeld, 434 F.3d 1145, 
1149 (9th Cir. 2006); see generally 48 CFR subpart 19.13. There is also 
a possibility that a HUBZone-certified contractor could be awarded a 
contract outside of the sole-source or set-aside processes, instead 
using only the HUBZone price-evaluation preference or in open 
competition. Given the breadth of contracts in which this can be the 
case, it would not be appropriate to give any significant weight 
against a location-continuity requirement or preference because of this 
possibility.
    However, there may also be circumstances in which a location-
continuity requirement for a successor contract at a non-HUBZone 
location could make it challenging for HUBZone contractors to complete 
the successor contract while complying with the 35-percent employee-
residency requirement. This could be the case, for example, where the 
contract location is outside of commuting distance from any HUBZone and 
the workers cannot perform the contract remotely. In such a situation, 
where an agency identifies the potential for a HUBZone sole-source 
award or a set-aside, this fact might reasonably weigh against imposing 
a location-continuity requirement. In that circumstance, however, the 
contracting agency would still also need to consider whether other 
aspects of the contract, such as the handling of classified or 
confidential information, may justify a location-continuity requirement 
and therefore instead make the contract not suitable for a HUBZone set-
aside.
    Finally, while there may be circumstances in which the potential 
for a HUBZone set-aside weighs against a location-continuity 
requirement, such a potential will not weigh against the inclusion of a 
location continuity preference. As a general matter, there is no 
conflict where a solicitation contains multiple different preferences 
mandated by different statutes or regulations, as ``[e]ach preference 
can be given its due.'' Automated Commc'n Sys., Inc. v. United States, 
49 Fed. Cl. 570, 577-79 (2001) (finding HUBZone preference and 
Randolph-Sheppard Act preference can both be applied in the same 
solicitation). Moreover, the inclusion of a location continuity 
preference will generally be compatible with the HUBZone program 
procedures even where a set-aside is used. Where a set-aside is used, 
the inclusion of a location continuity preference may lead to location 
continuity if feasible for one of the SBCs, but not limit the contract 
from being performed at a new location if continuity is not feasible 
for any bidders.
(C) Location-Continuity Procedural Safeguards
    In the NPRM, the Department proposed language in Sec.  9.11(c)(3) 
to implement several procedural safeguards for the location continuity 
determination. The Department proposed to require that agencies 
complete the location continuity analysis prior to the date of issuance 
of the solicitation. The Department proposed that any agency decision 
not to include a location continuity requirement or preference in a 
particular contract must be made in writing by the agency's senior 
procurement executive. In addition, the Department proposed that when 
an agency determines that no such requirement or preference is 
warranted, the agency must include a statement to that effect in the 
solicitation and also ensure that the incumbent contractor notifies 
affected workers and their collective bargaining representatives, if 
any, in writing of the agency's determination and of the workers' right 
to request reconsideration.
    In the NPRM, the Department also proposed further requirements 
related to notice to predecessor workers and requests for 
reconsideration. Under the proposed text, the notice would need to 
occur within 5 business days after the solicitation is issued, and the 
incumbent contractor would need to provide confirmation to the 
contracting agency that the notification has been made. The Department 
proposed language in the nondisplacement contract clause set forth in 
Appendix A of the NPRM to require contractors to agree to provide this 
notification. The NPRM also provided that any request by an interested 
party for reconsideration of an agency's location continuity decision 
would have to be directed to the head of the contracting department or 
agency. Finally, the Department sought comment regarding whether there 
should be a remedy for an agency's failure to follow location 
continuity procedures, such that a procedurally deficient location-
related determination would be ineffective as a matter of law. The 
Department also requested comment on whether there should be specific 
remedies for workers or sanctions for contractors in the circumstances 
in which a contractor fails to timely provide the required notice of a 
location continuity determination.
    The Coalition and the AFL-CIO commented that the Department should 
require the same or similar procedural safeguards for location 
continuity as for agency exception decisions under the provisions set 
forth in Sec.  9.5, and for the same reasons. These commenters thus 
supported the Department's proposed requirement that decisions be made 
in writing, by an agency's senior procurement executive, and before the 
solicitation date. As they did for Sec.  9.5 exceptions, however, the 
commenters also advocated that the Department amend the timing 
requirement for the determination, notice, and reconsideration, to 
provide ample time before the solicitation for interested parties to 
comment on the determination and request reconsideration if necessary. 
These commenters also advocated that the rule should include a right to 
appeal to the Secretary, who would be ``an independent arbiter.''
    The Coalition and the AFL-CIO advocated that the final rule require 
agencies to notify workers and their representatives of their location 
continuity determinations no later than 120 days before a bid 
solicitation goes out, and, with the notice, also provide the agency's 
written analysis and supporting evidence. They suggested that 
interested parties be given 30 days to comment on the determination, 
that agencies be required to respond no fewer than 60 days before the 
bid solicitation, and that interested parties be given 15 days to file 
an appeal with the Secretary, who would have to decide the appeal 
within 45 days and before any solicitation is issued. The AFL-CIO 
strongly urged the Department to treat procedurally deficient location-
continuity determinations in the same manner as exception 
determinations, by making such determinations ineffective as a matter 
of law.

[[Page 86765]]

    Conversely, PSC and Nakupuna advocated against the Department's 
proposed procedural safeguards. PSC stated that the Department's 
interpretation of section 4 of the Executive order and proposed Sec.  
9.11(c) would be ``unworkable.'' PSC suggested that requiring a case-
by-case analysis by the senior procurement executive could ``bottleneck 
solicitations'' and cause ``needless delay.'' PSC said the procedure 
would ``make it difficult for contracting agencies to decide for 
themselves whether they really need performance to be in the same 
location,'' thereby inviting contractor bid protests. Nakupuna 
commented that the subsequent notification of affected workers and 
their collective bargaining representatives is burdensome for both 
agencies and contractors. PSC likewise opposed, as unnecessary and 
burdensome, the Department's proposed requirement that agencies must 
include language in the solicitation affirmatively stating that the 
location continuity analysis has been completed. PSC stated that the 
order only requires agencies to ``consider'' location continuity, and 
that this obligation should be satisfied by acquisition teams with 
``[a] (brief) notation in the acquisition plan or equivalent, 
commensurate with the size and complexity of the acquisition.''
    PSC also opposed the Department's proposed reconsideration language 
for the same reasons that they opposed the proposed provision 
discussing reconsideration of agency exceptions in Sec.  9.5. PSC 
stated that the order itself does not provide for such reconsideration, 
and that allowing ``catch-all `interested parties' to speculate on . . 
. business judgments . . . will delay acquisitions needlessly and would 
undermine economy and efficiency in Government contract performance.'' 
PSC stated that it recognizes workers must have a fair say in matters 
of their employment, but that ``interested parties'' could include ``a 
wide variety of entities or even a community in which many incumbent 
employees reside.'' Finally, PSC recommended against including remedies 
or enforcement in circumstances where the predecessor contractor does 
not relay performance location determinations to employees.
    The final rule includes amended procedural safeguards for location 
continuity that are reorganized into a new paragraph at Sec.  
9.11(c)(4). In response to the comments received, the Department is 
narrowing the requirements to focus on ensuring that contracting 
agencies benefit from information that employees may have that would be 
helpful and relevant to the analysis. The Department is not adopting 
some of the proposed requirements that were not provided for expressly 
by the order--including the requirements that certain determinations be 
made by the senior procurement executive, that an affirmative statement 
regarding the analysis be made in the solicitation, and that requests 
for reconsideration be directed to the head of the contracting 
department or agency. Instead, the Department is amending the provision 
to require that agencies, to the extent consistent with mission 
security, ensure that employees covered by a collective bargaining 
agreement on the predecessor contract have an opportunity prior to the 
issuance of the solicitation to provide information relevant to the 
location continuity analysis. Thus, the final rule states that, at the 
earliest reasonable time in the acquisition planning process, the 
agency must direct the incumbent contractor to notify any collective 
bargaining representative(s) for affected employees of the appropriate 
method to communicate such information (i.e., contact information for a 
specific member of the agency's acquisition team). The provision 
includes requirements regarding the methods of the notice that must be 
provided and model language that contracting agencies may use. While 
the final rule reflects the Department's decision that a 
reconsideration process is not necessary at this time, the absence of a 
formal process from the regulations should not deter interested parties 
from communicating with contracting agencies or the Department if they 
believe that a location-continuity decision may have failed to consider 
important information.\11\
---------------------------------------------------------------------------

    \11\ For similar reasons, the final rule does not contain the 
provision discussed in the NPRM that would result in a procedurally 
deficient contract-location decision being inoperative as a matter 
of law. However, interested parties who believe that a location-
continuity determination was made in a procedurally defective 
manner--or was not made at all--may communicate this concern to the 
Department, so that the Department may follow up with the 
contracting agency or take other appropriate action.
---------------------------------------------------------------------------

    The Department agrees with the Coalition and the AFL-CIO that it is 
important to build into the program's procedures ``a role for workers 
and their representatives to provide input''--and for this process to 
occur before bid solicitation. As the Coalition noted, interested 
parties ``are likely to have information on the benefits of 
nondisplacement for any given service contract'' and ``are well 
positioned to identify any errors or omissions'' in the contracting 
agency's analysis. In addition, seeking feedback from affected workers 
accords with the PSC's recognition that workers should have ``a fair 
say in matters of their employment.'' While the Department declines to 
adopt the specific timeframes for agency determinations and submissions 
that the Coalition and the AFL-CIO requested, the requirement that 
agencies seek information from predecessor employees prior to the 
solicitation date, if practicable, will help to ensure that the 
policies of the order are built into solicitations and are not 
dependent on convincing an agency to reconsider a solicitation it has 
already issued. Accordingly, the final rule includes revised language 
in Sec.  9.11(c)(4) requiring pre-solicitation notice, to the extent 
consistent with mission security, instead of the proposed requirement 
for notice of a location continuity determination within 5 business 
days after the solicitation.
    In addition to the revised pre-solicitation notice requirement, the 
Department considered whether to retain the requirement in the proposed 
rule that incumbent contractors must provide confirmation to 
contracting agencies that the notification has been made. The 
Department is not including this requirement, given that Sec.  
9.12(f)(2) already requires contractors to maintain evidence of any 
notices that they provide to employees, or employees' collective 
bargaining representatives, to satisfy the requirements of the order or 
these regulations--which includes the pre-solicitation notice regarding 
location continuity. The Department also considered whether to include 
specific required sanctions for contractors that fail to provide the 
notice. The final rule does not include a specific sanction. However, 
where a contractor fails to provide the notice, even after receiving a 
timely request from a contracting agency, evidence of this fact could 
support (in addition to other evidence) a lower past performance rating 
on the contract or a debarment decision.
(D) Relocation Costs
    In the NPRM, the Department proposed language at Sec.  9.11(c)(4) 
that restated, in part, the language from section 3(b) of the Executive 
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. See 86 at FR 66398. The Department proposed 
similar language, directed at contractors and

[[Page 86766]]

subcontractors specifically, in Sec.  9.12(b)(6). In the final rule, as 
noted above, the Department is moving the location continuity 
procedural safeguards and notice provisions from Sec.  9.11(c)(3) to 
Sec.  9.11(c)(4). The Department therefore is moving the relocation 
costs language to Sec.  9.11(c)(5). The Department did not receive any 
comments seeking to amend this language. Accordingly, the final rule 
adopts it as proposed.
v. Section 9.11(d) Disclosures
    Proposed Sec.  9.11(d) would require that the contracting officer 
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. Proposed Sec.  9.12(e)(1) required the 
predecessor contractor to provide the list of employees to the 
contracting officer no later than 30 calendar days prior to before 
completion of the contractor's performance of services on a contract. 
Under proposed Sec.  9.11(d), the contracting officer would have to 
provide the predecessor contractor's list of employees to the successor 
contractor 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 contracting 
officer would have to provide the updated list to the successor 
contractor within 7 calendar days of the beginning of performance on 
the contract. However, if the contract is awarded fewer than 30 days 
before the beginning of performance, then the predecessor contractor 
and the contracting agency would be required to 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 deadlines 
set forth in proposed Sec.  9.11(d) took such circumstances into 
account while also providing specific deadlines by which the seniority 
list must be transmitted to the successor contractor 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.
    One commenter, PCSI, recommended extending the timeframes in Sec.  
9.12(e) and Sec.  9.11(d) to allow the predecessor contractor not less 
than 90 days to furnish the contracting officer with their certified 
list of employees and in turn allow contracting officers not less than 
60 days before the start of performance to provide this list to 
successor contractors. PCSI stated that the shorter proposed time 
frames were too short to provide enough time for successor contractors 
to ensure they have the employees to perform contracts on their start 
dates. The Department has considered this comment but declines to 
extend the timeframes. Longer time frames for furnishing the certified 
list will decrease the accuracy of the lists and may not always be in 
accord with procurement schedules. The timeframes, as proposed, best 
balance the need to provide an accurate and timely certified list of 
predecessor employees with the need to afford successors time to ensure 
continuity of performance. The final rule therefore adopts Sec.  
9.11(d) without change.
vi. Section 9.11(e) Actions on Complaints
    Proposed Sec.  9.11(e) addressed contracting officers' 
responsibilities regarding complaints of alleged violations of part 9. 
The proposal stated 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 elaborated that the contracting officer would have to 
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 any other relevant facts known to the 
contracting officer or other information requested by WHD. The 
Department did not receive any comments on this provision; accordingly, 
the final rule adopts the provision as proposed.
vii. Section 9.11(f) Incorporation of Omitted Contract Clause
    Proposed Sec.  9.11(f) provided that when the nondisplacement 
contract clause is erroneously omitted from a contract, a contracting 
agency must retroactively incorporate the contract clause on its own 
initiative or within 15 calendar days of notification by an authorized 
representative of the Department. Proposed Sec.  9.11(f) explained that 
there may be 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 the 
predecessor contractor would be the sole bidder on the contract and the 
contracting officer erroneously believed that it was not a successor 
contract for that reason. Proposed Sec.  9.11(f) thus would have 
permitted the Administrator, at their discretion, to determine that the 
circumstances warrant prospective, rather than retroactive, 
incorporation of the contract clause. The NPRM explained that proposed 
Sec.  9.12(b)(8) set forth 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. As noted in the NPRM, if the 
erroneous omission of the contract clause from a solicitation is 
discovered before contract award, proposed Sec.  9.11(f) also would 
require the contracting agency to amend the solicitation.
    The Department did not receive any comments addressing Sec.  
9.11(f), but PSC expressed general concern about the disruption to the 
procurement process where an agency could be forced to reissue a 
solicitation after ``missing a procedural step,'' which could generate 
``additional administrative burden and cost.'' Having considered this 
comment, the Department is modifying the language of Sec.  9.11(f) to 
require the Administrator to determine that retroactive incorporation 
of the nondisplacement contract clause is warranted in a manner 
consistent with retroactive incorporation of contract clauses and wage 
determinations under the SCA. Pursuant to 29 CFR 4.5(c), where the 
Department determines that a contracting agency made an erroneous 
determination that the SCA did not apply to a particular contract or 
failed to include an appropriate wage determination in a covered 
contract, the contracting agency must incorporate into the contract the 
required

[[Page 86767]]

stipulations and/or any applicable wage determination, which, at 
minimum, apply prospectively. Under 29 CFR 4.5(c), the Administrator 
may require retroactive application of a wage determination. See also 
48 CFR 22.1015 (applying the error-correction and retroactivity 
provisions of 29 CFR 4.5 to contracts awarded under the FAR). This 
language effectively requires the Administrator to determine that 
retroactive application is appropriate, considering various factors, 
including whether there may be an ``overly onerous administrative and 
economic burden'' on the contracting agency that may constitute a 
``severe disruption in the agency's procurement practices.'' Raytheon 
Aerospace, ARB Nos. 03-017, 03-019, 2004 WL 1166284, at *8-11 (May 21, 
2004) (identifying three reasonable factors the Administrator 
appropriately considered in exercising discretion to not apply the SCA 
retroactively). In this final rule, the Department is amending Sec.  
9.11(f) to more closely parallel the language used in 29 CFR 4.5(c), 
modified to fit the nondisplacement context. The Department believes 
that such consistency will provide clarity and streamline the 
incorporation process both for contracting agencies and contractors. As 
the terms of Sec.  9.11(f) and 29 CFR 4.5(c) are similar, the 
Department notes that the case law interpreting 29 CFR 4.5(c) would be 
persuasive regarding retroactive application of the contract clause 
under Sec.  9.11(f). See, e.g., Raytheon Aerospace, 2004 WL 1166284, at 
*8-11; FlightSafety Def. Corp., ARB Nos. 2021-0071, 2022-0001, 2022 WL 
20100986, at *9-10 (Feb. 28, 2022) (holding that the Administrator 
reasonably declined to retroactively apply the SCA). As such, the final 
rule states that the Administrator will consider the administrative and 
economic burdens on contracting agencies, among other factors, when 
determining whether retroactive application is appropriate in a given 
case.
    The Coalition generally approved of proposed Sec.  9.11 but 
recommended adding a paragraph that would require contracting agencies 
to include training on the requirements of Sec.  9.11 to existing 
acquisition training courses for the Federal acquisition workforce. The 
Coalition further recommended that compliance with Sec.  9.11 should be 
a factor considered in evaluations of contractor performance pursuant 
to 48 CFR 42.1502. The Coalition stated that these steps would promote 
compliance with Executive Order 14055. While the Department agrees 
training on the nondisplacement requirements will be important for 
promoting compliance and that past performance evaluations 
appropriately evaluate regulatory compliance (including compliance with 
labor regulations), these recommendations are outside the scope of this 
rulemaking.
7. Section 9.12 Contractor Requirements and Prerogatives
    As proposed, Sec.  9.12 would implement contractors' requirements 
and prerogatives under Executive Order 14055. The proposed section 
detailed a successor contractor's general obligation to offer 
employment to qualified service employees from the predecessor 
contract, the method of making job offers, exceptions to the 
nondisplacement requirement, implementation of the nondisplacement 
requirement in the context of reduced staffing, obligations near the 
end of the predecessor contract, recordkeeping, and obligations to 
cooperate with reviews and investigations.
i. Section 9.12(a) General
    Proposed Sec.  9.12(a)(1) included the Executive order's central 
requirement that employees on a predecessor contract receive offers of 
employment on the successor contract before any employment openings for 
service employees on the successor contract are otherwise filled. 
Specifically, the proposal provided that, unless an exception or 
exclusion applies, a successor contractor or subcontractor may not fill 
any employment openings for service employees under the contract prior 
to making ``good faith offers'' of employment to employees on the 
predecessor contract. Employees on the predecessor contract must only 
receive such offers in positions for which they are qualified, and only 
if their employment would be terminated as a result of award of the 
contract or the expiration of the contract under which they were hired. 
Because the order states that the term employee ``includes an 
individual without regard to any contractual relationship alleged to 
exist between the individual and a contractor or subcontractor,'' see 
supra section II.B.2., the contractor would be obligated to make good 
faith offers to any service employee under the predecessor contract, 
regardless of whether the service employee was classified as an 
employee or independent contractor on the predecessor contract. To the 
extent necessary to meet the successor contractor's anticipated 
staffing pattern and in accordance with the requirements of the rule, 
proposed Sec.  9.12(a)(1) would require the successor contractor and 
its subcontractors to make a bona fide, express offer of employment to 
each service employee in a position for which the employee is qualified 
and state the time within which the employee must accept such offer. As 
discussed in proposed Sec.  9.12(b)(4), although the offer would have 
to be for a position for which the employee is qualified, it would not 
necessarily have to be for the same or similar position as the employee 
held on the predecessor contract. The proposed rule specified that in 
no case could the contractor or subcontractor give an employee fewer 
than 10 business days to consider and accept the offer of employment.
    Comments received regarding proposed Sec.  9.12(a)(1) are discussed 
below, in conjunction with related comments received regarding Sec.  
9.12(b). To emphasize the relationship between this section and other 
sections, a notation was added to the text of Sec.  9.12(a)(1) that all 
offers must be made in accordance with the requirements described in 
this part. Otherwise, the final rule adopts the language of Sec.  
9.12(a)(1) as proposed.
    Proposed Sec.  9.12(a)(2) clarified that the successor contractor's 
obligation to offer a right of first refusal would exist even if the 
successor contractor was not provided a list of the predecessor 
contractor's employees or if the list did not contain the names of all 
service employees employed during the final month of contract 
performance. The Coalition commented in support of the proposed rule's 
job protections for employees on the predecessor contract, including 
under circumstances as described in Sec.  9.12(a)(2). Conversely, an 
anonymous commenter pointed to circumstances such as those described in 
Sec.  9.12(a)(2) as part of that commenter's general contention that 
the proposed rule would be burdensome to contractors. However, even 
where a predecessor fails to provide the required list on a timely 
basis, the successor contractor may still determine which employees 
should be given offers by relying upon the types of evidence described 
in Sec.  9.12(a)(3). Moreover, Executive Order 14055 does not make the 
obligation to provide a right of first refusal contingent upon receipt 
of a list of predecessor contract employees. Therefore, the final rule 
adopts the language of Sec.  9.12(a)(2) as proposed.
    Proposed Sec.  9.12(a)(3) discussed determining an employee's 
eligibility for a job offer even when their name was not included on 
the certified list of all service employees working under the 
predecessor's contract or subcontracts

[[Page 86768]]

during the last month of contract performance. As proposed, Sec.  
9.12(a)(3) would require a successor contractor to accept other 
reliable evidence, in addition to the certified list, of an employee's 
right to receive a job offer. Under the provision as proposed, the 
successor contractor would be allowed to verify any such information 
before relying on it as a basis to extend a job offer. For example, 
even if a person's name did not appear on the list of employees on the 
predecessor contract, an employee's assertion of an assignment to work 
on the contract during the predecessor's last month of performance, 
coupled with contracting agency staff verification, would 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 were unable to verify the claim, the 
paycheck stub still would be considered sufficient to demonstrate 
eligibility absent evidence from the predecessor contractor indicating 
otherwise.
    The Coalition supported the proposed framework of Sec.  9.12(a)(3) 
because it would provide several ways for an employee to establish 
eligibility for an offer of employment on the successor contract. The 
Coalition further encouraged the Department to clarify that the 
examples provided in the proposed rule are not exclusive and that other 
reliable data may be provided to determine whether a service employee 
is eligible to receive an offer of employment on the successor 
contract. The Department agrees that the examples are not exclusive and 
believes the proposed regulatory text made that sufficiently clear. 
Thus, after considering the comments, the final rule adopts the 
proposed language of Sec.  9.12(a)(3) without change.
    Proposed Sec.  9.12(a)(4) clarified that contractors and 
subcontractors have an affirmative obligation to ensure that any 
covered contracts they hold contain the contract clause. In keeping 
with the related requirements at Sec.  9.13(a) (relating to the 
insertion of required clauses into subcontracts), proposed Sec.  
9.12(a)(4) stated that the contractor must notify the contracting 
officer as soon as possible if the contracting officer did not 
incorporate the required contract clause into a covered contract. No 
comments were received on Sec.  9.12(a)(4) and the final rule adopts 
Sec.  9.12(a)(4) as proposed.
ii. Section 9.12(b) Method of Job Offer
    Proposed Sec.  9.12(b) discussed the method of communicating the 
job offer. Proposed Sec.  9.12(b)(1) required that, except as otherwise 
provided elsewhere 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 service employee. Under proposed Sec.  9.12(b)(1), in determining 
whether an employee is entitled to a bona fide, express offer of 
employment, a contractor could 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) clarified that a contractor could 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 could 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 clarified that while the 
results of such screenings could show that an employee is unqualified 
for a position and thus not entitled to an offer of employment, a 
contractor could 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 
could not deem predecessor employees unqualified solely because they 
had not completed the specific background check the successor 
contractor requires before receiving a job offer. However, the 
Department has edited Sec.  9.12(b)(1) to clarify that an employee's 
unreasonable failure to complete a screening process could be grounds 
to conclude an employee is unqualified. No comments were received 
regarding Sec.  9.12(b)(1). Other than the clarification already noted, 
replacing the word ``person'' with ``service employee'' to make clear 
that a successor contractor may make offers of employment to non-
service employees (for example, to hire an executive team) before 
extending offers to qualified employees on the predecessor contract, 
and replacing the phrase ``by itself'' with ``solely'' for clarity, the 
final rule adopts Sec.  9.12(b)(1) as proposed.
    Proposed Sec.  9.12(b)(2) discussed the time limit in which the 
employee has a right to accept the offer. Under the proposed language, 
the contractor has the discretion to determine the time limit for an 
acceptance, provided that the time limit is not shorter 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. ABC commented that this 
requirement was burdensome. Similarly, an anonymous commenter stated 
that in light of Sec.  9.12(a)(1)'s requirement that employees on a 
predecessor contract receive offers of employment on the successor 
contract before any employment openings for service employees on the 
successor contract are otherwise filled, the 10-business-day time 
period for acceptances might prevent contractors from having a full 
staff when the contract commences. The commenter noted that in 
practice, employers may be caught off guard by how many employees do 
not accept offers and be left with insufficient time to fill vacancies. 
Conversely, the Coalition supported the inclusion of the requirement 
that employees be given 10 business days to accept or reject an offer.
    Section 3 of the Executive order specifies that ``in no case shall 
the period within which the employee must accept the offer of 
employment be less than 10 business days.'' 86 FR at 66398. Therefore, 
the Department does not have discretion to reduce the amount of time 
that employees must be given to consider offers of employment, and that 
time commences at the employee's receipt of the offer. The Department 
also notes that, given the changes to proposed Sec.  9.12(e)(1) set 
forth in this final rule, successor contractors will be provided with a 
list of employees' addresses, lessening any delays contractors might 
face prior to making and receiving responses to offers. For these 
reasons, the final rule adopts Sec.  9.12(b)(2) as proposed.
    Proposed Sec.  9.12(b)(3) set forth the process for making the job 
offer. Under the proposed provision, the successor contractor would 
have had the option of making a specific oral or written employment 
offer to each employee. Proposed Sec.  9.12(b)(3) would require 
successor contractors to make reasonable efforts to make the offer in a 
language each worker understands, to ensure the offer was effectively 
communicated. Written offers would be

[[Page 86769]]

required to be sent by registered or certified mail to the employees' 
last known address or by any other means normally ensuring delivery. 
Proposed Sec.  9.12(b)(3) provided examples of such other means, 
including, but not limited to, email to the last known email address, 
delivery to the last known address by commercial courier or express 
delivery service, or personal service to the last known address.
    Regarding proposed Sec.  9.12(b)(3), the Coalition suggested the 
Department require job offers be provided in writing, and not verbally, 
to lessen disputes between contractors and employees as to the 
existence and adequacy of offers. The comment noted that requiring 
offers in writing also would lessen the degree of employees' reliance 
on the accuracy of contractors' interpreters. AFL-CIO echoed the 
Coalition's views regarding the benefit of requiring that offers be 
made in writing.
    The Department agrees that requiring offers to be made in writing 
would reduce the risk of such factual disputes between contractors and 
employees (including disputes about the accuracy of translations), and 
for that reason, the final rule amends proposed Sec.  9.12(b)(3), as 
well as the corresponding recordkeeping requirements of Sec.  
9.12(f)(2)(i), to require that offers be made in writing. In regard to 
translation, the Department notes that, pursuant to Sec.  9.12(e)(3), 
where the predecessor contractor's workforce is comprised of a 
significant portion of workers who are not fluent in English, notice of 
their possible right to an offer of employment on the successor 
contract must be provided in both English and a language in which the 
employees are fluent. Therefore, as it relates to the offer of 
employment to an individual, the Department is removing the requirement 
to translate the written offer into different languages. The final rule 
also removes as moot the example related to a bilingual coworker 
providing interpretation of an oral offer. Under the final rule, if a 
contractor makes an oral offer of employment, it must accompany such an 
offer with a communication of the offer in writing (and both the oral 
and written offers in this example would be subject to the requirement 
that the employee receive at least 10 business days to consider the 
offer).
    Proposed Sec.  9.12(b)(4) stated that the employment offer may be 
for a different job position on the successor contract. More 
specifically, the proposed provision stated that 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 the offer were for a position 
for which the employee is qualified. If a question arose 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. 
Under the proposed language of Sec.  9.12(b)(4), a contractor could 
only 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 would be credible 
information.
    Regarding proposed Sec.  9.12(b)(4), the Coalition commented that 
the successor should only be able to rely upon information a 
predecessor kept in the regular course of business to determine an 
employee's qualifications. In considering this comment, the Department 
notes that adopting this approach might unnecessarily limit reliance on 
sources of information that could otherwise lead to employment 
opportunities for predecessor employees, as well as impose a 
potentially difficult burden on successors to determine which of its 
predecessors' records were kept in the ``regular course of business.'' 
For this reason, the Department declines to adopt this suggestion, and 
the final rule adopts Sec.  9.12(b)(4) as proposed.
    Proposed Sec.  9.12(b)(5) stated that the offer of employment may 
be to a position providing different terms and conditions of employment 
than those the employee held with the predecessor contractor, where the 
difference is not related to a desire that the employee refuse the 
offer, or a desire that other employees be hired. The Coalition 
commented that the final regulations should establish a presumption 
that an offer is not bona fide if positions are available under the 
successor contract with similar or better terms and conditions for 
which an employee is qualified, but the successor only makes an 
employee an offer for a position with worse terms or conditions. 
However, as discussed below regarding Sec.  9.12(d)(2), when a 
contractor reduces the number of contract positions in an occupation, 
that provision already would require the contractor to scrutinize each 
employee's qualifications ``to offer the greatest possible number of 
predecessor contract employees positions equivalent to those held under 
the predecessor contract.'' Given this framework, the Department 
believes the rule provides sufficient safeguards as proposed.
    The Department also proposed language in Sec.  9.12(b)(5) that 
addressed terms and conditions related to remote work or telework. 
Under proposed Sec.  9.12(b)(5), if a successor contractor places 
limitations on telework or remote work for predecessor employees that 
it did not consistently place on other, similarly situated workers, 
that could indicate that those limitations are intended to cause the 
predecessor employees to refuse the offer, and thus, would likely be 
impermissible. Accordingly, under proposed Sec.  9.12(b)(5), where the 
successor contractor had or will have had 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 would be required to 
include the option of remote work under reasonably similar terms and 
conditions. The proposed language was based on the premise that such 
employment, where permitted on a successor contract and consistent with 
security and privacy requirements, would generally assist with 
workforce carryover, even in circumstances where the location of 
contract performance is changing.
    The Coalition supported the Department's provision in proposed 
paragraph 9.12(b)(5) regarding remote work, while PSC voiced concerns. 
PSC commented that the proposed provision should be revised to require 
offers of remote work only when the successor contractor allows any 
worker in the same or similar classification to work remotely in 
performing on the same Federal contract, rather than permitting 
comparisons with any of the successor's employees who are not working 
on that contract, because different types of contracts might involve 
different requirements. PSC further commented that because specific 
constraints, such as employees working in differing time zones, might 
interfere with contract performance, remote work should only be offered 
consistent with the requirements of the contract and its deliverables, 
and then no more than in proportion to the percentage of employees who 
worked remotely under predecessor contracts or other successor 
contracts. In response, the Department notes that where material 
differences

[[Page 86770]]

between employees' job requirements on different contracts result in 
workers under each contract working in dissimilar occupational 
classifications, then these employees would (under the language of 
Sec.  9.12(b)(5) as proposed) not be apt comparators for purposes of 
determining whether a contractor has limited remote work in order to 
discourage predecessor employees from accepting an offer. Furthermore, 
the proposed rule provided that even when the successor is required to 
offer the option of remote work, the successor's obligation is subject 
to the qualifier that successor contractors are only required to offer 
remote work to employees of the predecessor under ``reasonably similar 
terms and conditions.'' Thus, where a contractor's existing workers are 
granted remote work only as an accommodation, pursuant to certain 
preconditions, or subject to limitations that workers will be available 
during certain hours (defined in relation to a particular time zone), 
then that contractor could also place the same limitations on the 
remote working conditions of any predecessor employee--so long as the 
contractor's intent was not to evade the nondisplacement mandates of 
the Executive order. Finally, PSC's suggestion that the requirement for 
remote work be limited to certain percentages of the workforce would 
allow successor contractors to impose limits on remote work that are 
inconsistent with the Executive order. Thus, the Department declines to 
adopt all of PSC's suggested change in the final rule, but has made 
edits in order to clarify that successor contractors may change remote 
working arrangements based on a legitimate business rationale.
    As already discussed in relation to Sec.  9.11(c), regarding 
location continuity, remote work plays a recognized role in the 
efficacy of federal contracting. Given the significance of remote work 
in avoiding potential workforce disruptions, absent a legitimate 
operational rationale, a contractor that eliminates the remote working 
arrangements under which employees successfully performed their jobs 
during the predecessor contract, or who does not offer employees of the 
predecessor contractor remote working arrangements available to other 
employees, should be presumed to be doing so to circumvent the 
Executive order. This is because, as is evident from the importance 
placed on location continuity considerations in the Executive order, 
enabling an employee to work in the same general place where they have 
worked before (be it in a particular commuting area or in their own 
home, remotely) is often a key factor in the retention of an 
experienced and well-trained workforce. See 86 FR at 66397-99.
    Therefore, while largely adopting the final rule language regarding 
terms and conditions as proposed, the Department amends Sec.  
9.12(b)(5) to clarify that a successor may offer different remote 
working arrangements than those the employee held with the predecessor 
contractor, so long as the change is not made for the purpose of 
discouraging acceptance of offers to work on the successor contract. In 
other words, a successor contractor may not capriciously end a 
predecessor's remote working arrangements without contravening the 
requirements of the Executive order and this final rule. Likewise, the 
final rule reflects that a contractor must generally--absent a 
legitimate operational rationale to do otherwise--offer remote work to 
predecessor employees on a reasonably similar basis as it does for its 
other employees in the same or similar occupational classifications. 
This use of a rebuttable presumption framework is appropriate because 
successor contractors possess the information necessary to articulate 
and substantiate an operational reason for limiting remote working 
arrangements. Requiring contractors to support and justify their 
decisions in this context will enable the Department and interested 
parties to evaluate whether or not declining to offer remote working 
arrangements was intended to circumvent the nondisplacement 
requirement.
    In Sec.  9.12(b)(6), the Department proposed 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 pay relocation 
costs for employees of predecessor contractors hired pursuant to their 
exercise of their rights under the order. See 86 FR at 66398. The 
Department proposed similar language, directed at contracting agencies 
specifically, in Sec.  9.11(c)(3). The Department noted that this 
language would not forbid the voluntary payment of relocation expenses 
or the payment of any such expenses if they are otherwise required by 
contract or law. No comments were received regarding Sec.  9.12(b)(6), 
and the final rule adopts Sec.  9.12(b)(6) as proposed.
    Proposed Sec.  9.12(b)(7) provided that where an employee is 
terminated under circumstances suggesting the offer of employment may 
not have been bona fide, the facts and circumstances of the offer and 
the termination would be closely examined to determine whether the 
offer was bona fide. No comments were received regarding Sec.  
9.12(b)(7), and the final rule adopts Sec.  9.12(b)(7) as proposed.
    Proposed Sec.  9.12(b)(8) provided requirements for successor 
contractors 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 is erroneously 
excluded from a contract, contracting agencies may be required to 
retroactively incorporate it, depending on the circumstances. 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. Proposed Sec.  9.12(b)(8) also provided 
requirements where the omitted contract clause has been incorporated 
only prospectively. In such cases, the successor contractor and its 
subcontractors would only be required to provide employees on the 
predecessor contract a right of first refusal for any positions that 
remain open. Regardless of whether incorporation of the contract clause 
is retroactive or prospective, in the event of an employment opening 
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 nondisplacement right 
of first refusal to employees from the predecessor contract. The 
Department stated that these requirements struck an appropriate balance 
between the interests of the employees on the predecessor and successor 
contracts.
    In the final rule, the Department slightly modifies the language of 
Sec.  9.12(b)(8) for clarity and consistency with the final text of 
Sec.  9.11(f), which is being amended, as discussed in section 
II.B.7.vii. above. In Sec.  9.12(b)(8), the Department is replacing the 
proposed phrase ``the Administrator has not exercised their discretion 
and required only prospective incorporation of the contract clause'' 
with the phrase ``the Administrator has required only prospective 
application of the contract clause.'' The Department has also modified 
the phrase in the title of this paragraph from ``[r]etroactive 
incorporation of contract clause'' to ``[p]ost-award incorporation of 
omitted contract clause'' because the paragraph also addresses 
contractor obligations when the contract clause is incorporated

[[Page 86771]]

only prospectively. For clarity and consistency with the definition of 
``employment opening,'' the Department has also replaced the phrase 
``positions become vacant'' with the phrase ``of an employment 
opening.'' Other than the modifications described above, the final rule 
adopts Sec.  9.12(b)(8) as proposed.
iii. Section 9.12(c) Contractor Exceptions
    Proposed Sec.  9.12(c) addressed the exceptions to the general 
obligation to offer employment under Executive Order 14055. As 
proposed, these exceptions detailed circumstances in which, although a 
contract or subcontract as a whole is covered by the nondisplacement 
requirements, a contractor or subcontractor would not need to make a 
bona fide offer of employment to certain employees. These proposed 
exceptions were therefore distinct from the ``exceptions authorized by 
agencies'' detailed in proposed Sec.  9.5, which explained the 
circumstances in which contracts as a whole may be excepted from 
coverage through the actions of a contracting agency. As stated in the 
NPRM, the contractor bears the burden of proof regarding the 
appropriateness of claiming any exception in Sec.  9.12(c).
    At the outset of Sec.  9.12(c) in the final rule, for clarity, the 
Department is changing the phrase ``[t]he successor contractor is 
responsible for demonstrating the applicability of the following 
exceptions to the nondisplacement provisions subject to this part,'' to 
``[t]he successor contractor is responsible for demonstrating the 
applicability of the following exceptions to the nondisplacement 
provisions in this part.''
    As proposed under 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 is retaining. 
However, the successor contractor would be required to presume that all 
employees working under a predecessor's Federal service contract would 
be terminated as a result of the award of the successor contract, 
unless the successor contractor could 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. No comments were received regarding Sec.  
9.12(c)(1). Other than modifying the phrase ``hired to work'' to 
``working'' to clarify which employees are referenced, the final rule 
adopts Sec.  9.12(c)(1) as proposed.
    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, as defined 
by Sec.  9.2. Consistent with proposed Sec.  9.2, this exception would 
apply to individuals 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 are service employees if they 
appear on the list of service employees the predecessor contractor is 
required to provide by proposed Sec.  9.12(e) (or have demonstrated 
they should have been included on the list). However, the successor 
contractor would be permitted to conclude that the list included non-
service employees (and thus decline to offer those non-service 
employees employment) 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 
considered sufficient for purposes of the proposed exception. No 
comments were received regarding Sec.  9.12(c)(2), and the final rule 
adopts it as proposed, other than modifying the phrase ``hired to 
work'' to ``working'' to clarify which employees are referred to.
    Consistent with paragraph (b) of the contract clause in section 
3(a) of the Executive order, Sec.  9.12(c)(3) of the proposed rule 
reiterated that a successor contractor or subcontractor would not be 
required to offer employment to any employee of the predecessor 
contractor if the contractor or any of its subcontractors reasonably 
believed, 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 contractor or any subcontractors. See 86 FR at 
66398. The proposed rule would require the successor contractor to 
presume that there was no just cause to discharge any employees, unless 
the contractor 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.
    For example, under the proposed rule, a successor contractor could 
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. Similarly, as the Department explained in the NPRM 
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, under the 
proposed language, written evidence that the predecessor contractor 
took disciplinary action against an employee for poor performance but 
stopped short of recommending termination would not generally 
constitute reliable evidence of just cause to discharge the employee. 
The determination that this exception applies would need to 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 sought 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 reflected in the Executive order.
    The Department received several comments on proposed Sec.  
9.12(c)(3). Laborers' International Union of North America, Local Union 
572 (LIUNA) suggested that the Department remove proposed Sec.  
9.12(c)(3) to exclude any performance-based exception from the final 
rule, asserting that any such exception is unnecessary and would lead 
to unfair hiring decisions and abuse, in particular for unionized 
workforces. The National Air Traffic Controllers Association (NATCA) 
suggested the Department modify the proposed rule to include a 
provision that would apply a predecessor contractor's grievance 
arbitration and disciplinary action procedures contained in its 
collective bargaining agreement to the successor contractor when 
applying the section Sec.  9.12(c)(3) exception.
    Several commenters also criticized proposed Sec.  9.12(c)(3), as 
exemplified by the comment submitted by ABC, taking issue not only with 
the proposed rule but with the provisions of the Executive order, and 
arguing that it will be

[[Page 86772]]

difficult for incoming contractors to gain reliable information about 
the past performance of a predecessor's employees, thereby requiring 
those contractors to hire unsuitable workers. Nakupuna also commented 
that it would be a challenge for successor contractors to obtain the 
level of evidence described in the proposed rule, which could result in 
the successor contractor being required to offer employment to 
employees with unsatisfactory performance, and asserted that providing 
information about the performance of current or previous employees 
could expose an employer to a wide range of legal liabilities. Nakupuna 
further suggested the Department clarify the definition of reliable 
evidence, provide specific examples, and establish methods for the 
successor contractor to obtain such evidence from the predecessor 
contractor or the contracting agency. PSC, suggesting ``anecdotal'' 
evidence should be considered ``reliable,'' commented that predecessors 
may not always disclose sensitive performance information about their 
employees, as requiring predecessor contractors to share reliable 
evidence of just cause to discharge an employee could, in some 
circumstances, conflict with laws protecting worker privacy.
    The Coalition generally supported the proposed exceptions to the 
obligation to offer a right of first refusal. The Coalition, however, 
expressed concern that a successor's reliance upon a predecessor 
contractor's unfinished termination process could be considered 
``reliable evidence'' or ``just cause'' without requiring the successor 
to also obtain (in addition to the bare fact that a termination process 
has commenced) reliable evidence that the predecessor's proposed 
termination was supported by just cause. AFL-CIO also generally 
supported the just cause requirement, but similarly commented that the 
predecessor's mere initiation of a termination process should not be 
considered sufficient evidence of just cause because additional 
information can be provided during a termination process that can 
reduce the discharge to a lesser penalty or eliminate the penalty 
altogether.
    Some commenters, like Nakupuna, ABC, and PSC, suggested a framework 
that, in effect, would permit successor contractors to decline to offer 
employment under a highly discretionary standard based on contractors' 
assessments of past performance. Other commenters, like LIUNA, 
advocated for elimination of any performance-based exception to the 
nondisplacement principles. The Department declines to make changes as 
suggested by commenters on either side of this question. Instead, the 
final rule seeks to advance the goals of the Executive order, which 
explicitly states that such just-cause-based decisions must be based 
upon reliable evidence, by focusing on the underlying evidence. See 86 
FR at 66398. After considering the comments, the Department is 
modifying the language in proposed Sec.  9.12(c)(3)(ii)(A). The 
proposed provision stated: ``[c]onversely, 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.'' The Department is modifying the 
provision to state that ``[w]ritten evidence related to disciplinary 
action taken without a recommendation of termination may constitute 
reliable evidence of just cause to discharge the employee, depending on 
the specific facts and circumstances.'' This change allows the 
successor contractor to have greater discretion when considering a 
predecessor's written disciplinary records in its just cause 
determination, but still requires the contractor to demonstrate that 
just cause for termination exists based on reliable evidence. This 
change in the language is also consistent with the proposed rule's 
acknowledgement that some forms of misconduct, such as severe sexual 
harassment, may be just cause for termination even if they did not 
result in termination of employment by the predecessor contractor.
    The Department also declines to require successor contractors to 
adhere to the due process procedures of their predecessors' collective 
bargaining agreements in assessing past performance. The Executive 
order does not direct the imposition of such a requirement, and 
employees of the predecessor who have been wrongly denied an offer of 
employment can seek remedies provided consistent with the 
nondisplacement contract clause, as discussed further in Sec.  9.21, 
regardless of whether they may have a right or ability to file a 
grievance under a collective bargaining agreement. The Department 
notes, however, that a contractor may not rely on Executive Order 14055 
or its implementing regulations to circumvent any contractual 
obligations that it owes its employees, including those under a 
collective bargaining agreement. Nor does the order or the regulations 
supersede any obligations that a predecessor or successor contractor 
may have under the National Labor Relations Act.
    The Department also declines to add further discussion in the 
regulatory text regarding the meaning of ``reliable evidence,'' as 
successor employers are generally already aware that any evidence upon 
which evaluations of past performance are based must, in the event of 
any review pursuant to Sec. Sec.  9.22 and 9.34 of the rule, be 
sufficient to overcome the presumption (already stated explicitly in 
the proposed rule) that there is no just cause to discharge employees 
working on the predecessor contract during the last month of 
performance. As proposed, the language of the rule already permitted 
that such reliable evidence might come, for example, from the business 
records of the contracting agency, or from new statements supplied by 
other employees or other knowledgeable individuals; such evidence is 
not, as commenters like PSC and Nakupuna implied, only limited to a 
predecessor's potentially confidential personnel files, thus negating 
those commenters' calls for a provision protecting predecessor 
contractors who shared such confidential information. Finally, for 
greater clarity, the Department is moving the phrase ``[t]his 
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,'' from Sec.  
9.12(c)(3)(ii)(A) to Sec.  9.12(c)(3)(ii), as that instruction applies 
broadly, and not only to the specific circumstances described in Sec.  
9.12(c)(3)(ii)(A).
    Pursuant to proposed Sec.  9.12(c)(4), a contractor or 
subcontractor would not be required to offer employment to any employee 
who worked 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 the Executive order. 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. Under 
the proposed rule, to be reasonable, such a belief should be 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

[[Page 86773]]

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, statements from several employees that a janitorial 
contractor reassigned its workers who previously worked exclusively in 
a Federal building to both Federal and other private clients as part of 
a single job may indicate that the predecessor deployed workers to 
avoid the purposes of the nondisplacement provisions. Conversely, where 
the employees of the predecessor contractor were traditionally deployed 
to Federal and nonfederal service work as part of their job, and 
continued to do so on the predecessor contract, the successor would not 
be required to offer employment to the workers.
    The Coalition requested the Department modify the language in 
proposed Sec.  9.12(c)(4)(i), regarding nonfederal work, by replacing 
``working'' with ``hired to work,'' pointing out, among other 
arguments, that such a change would more consistently track the 
language of the Executive Order 14055. After consideration of the 
comment, the final rule adopts Sec.  9.12(c)(4) as proposed, other than 
changing the phrase ``working'' to ``hired to work,'' in accordance 
with the language used in section 4(b) of the order, as well as 
substituting the phrase ``in a manner'' for ``in such a way,'' in Sec.  
9.12(c)(4)(iii) for clarity.
iv. Section 9.12(d) Reduced Staffing
    Proposed Sec.  9.12(d) addressed 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) recognized 
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, permitted 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 would not be required to ensure 
offers of employment on the contract to all employees on the 
predecessor contract, but would be required to ensure offers of 
employment to the number of eligible employees the successor contractor 
believes would be necessary to meet its anticipated staffing pattern. 
Where a successor contractor does not offer employment to all the 
predecessor contract employees, the obligation to offer employment 
would continue for 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 provided 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 subcontractors or the scope of work 
that particular subcontractors perform would not alter the requirements 
of Executive Order 14055 and this part. Consistent with proposed Sec.  
9.13, a prime contractor would be 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 the Executive order and this 
part. Where a prime successor contractor chooses to use subcontractors, 
the prime contractor would be responsible for ensuring that any of its 
subcontractors and lower-tier subcontractors offer employment to 
service employees employed under the predecessor contract (including 
the predecessor subcontracts) in accordance with the requirements of 
the order and this part. Where a prime successor contractor chooses to 
subcontract less of the contract work than the prime predecessor 
contractor did, and instead chooses to employ more workers directly, 
the prime successor contractor would be required to offer direct 
employment to the number of eligible service 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 the order and 
this part. The Department did not receive comments on Sec.  9.12(d)(1) 
and the final rule adopts Sec.  9.12(d)(1) as proposed.
    Proposed Sec.  9.12(d)(2) acknowledged 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 
numbers employed in others. In such cases, proposed Sec.  9.12(d)(2) 
would require the 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 minimizing displacement. The proposed 
regulation provided examples to demonstrate this principle.
    Nakupuna stated that this provision would impose restrictions on a 
successor contractor's ability to reduce staff. Section 9.12(d)(1) 
allows a successor contractor to determine the number of employees 
necessary for efficient performance of the contract or subcontract 
(and, for bona fide staffing or work assignment reasons, to elect to 
employ fewer employees than the predecessor contractor employed in 
connection with performance of the work), while Sec.  9.12(d)(2) 
provides safeguards to ensure that reductions in staff or changes to 
staffing patterns are made in a way that minimizes the displacement of 
predecessor contract employees. The Department believes these 
safeguards are necessary to fulfill the nondisplacement goals of the 
Executive order, and that they still provide flexibility for a 
successor contractor to make staffing decisions in pursuit of efficient 
performance of the contract. Thus, the final rule adopts Sec.  
9.12(d)(2) as proposed.
    Proposed Sec.  9.12(d)(3) clarified that, subject to provisions of 
this part and other applicable restrictions (including non-
discrimination laws and regulations), the successor contractor would be 
permitted to determine to whom 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 a court that a 
contractor has unlawfully discriminated or retaliated against a worker 
would be considered in determining whether the contractor's action or 
omission also violated the nondisplacement requirements.

[[Page 86774]]

    Regarding Sec.  9.12(d)(3), the Coalition commented that when all 
the predecessor employees cannot be hired, the successor contractor's 
offer of a right of first refusal should be based on seniority and 
length of service under the current and predecessor contractor for the 
same or similar service at the same location. The Department declines 
to adopt this change because the Executive order provides that 
employment be offered to qualified predecessor employees, without 
prescribing the criteria to be used when selecting among qualified 
workers to fill a reduced number of positions. See 86 FR at 66397. 
Establishing a bright-line requirement that a single criterion (such as 
seniority) must be used when a contractor is selecting among qualified 
employees could preclude employers from using a number of other 
legitimate factors (such as skills, prior experience, and cross-
training) that successor contractors may wish to consider in selecting 
among qualified employees in this context. For this reason, the final 
rule adopts proposed Sec.  9.12(d)(3) without change.
v. Section 9.12(e) Contractor Obligations Near End of Contract 
Performance
    Proposed Sec.  9.12(e) specified an incumbent contractor's 
obligations near the end of the contract; these requirements would work 
in tandem with the requirements at Sec.  9.11(d). As proposed, Sec.  
9.12(e)(1) would require a contractor to, no fewer 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. 
Proposed Sec.  9.12(e)(1) would require this list to also contain the 
anniversary dates of employment for each service employee on the 
contract with either the current or predecessor contractors or their 
subcontractors. A service employee would be considered employed under 
the contract even 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. To meet this provision, proposed Sec.  9.12(e)(1) 
would allow a contractor to use 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 the 
30-day certified list, proposed Sec.  9.12(e)(2) would require a 
contractor to furnish the contracting officer with an amended certified 
list of the names of all service employees working under the contract 
and its subcontracts during the last month of contract performance not 
fewer than10 business days before completion of the contract. Proposed 
Sec.  9.12(e)(2) would require this list to include the anniversary 
dates of employment with either the current or predecessor contractors 
or their subcontractors. The contractor could use the list submitted to 
satisfy the requirements of the SCA contract clause specified at 29 CFR 
4.6(l)(2) to meet this requirement.
    The Department received an anonymous comment suggesting that the 
burden on the incoming contractor could be lessened if they did not 
have to search for employees employed under the predecessor contract 
but were instead provided contact information for the employees such as 
phone numbers, email addresses, or mailing addresses. The Department 
agrees with that recommendation, especially as the burden of this 
change on predecessor contractors will be minimal in light of the 
existing requirement that contractors maintain records of addresses 
pursuant to 29 CFR 4.6(g)(1)(i). Accordingly, the Department is 
modifying proposed Sec.  9.12(e)(1) and (e)(2) to require predecessor 
contractors to list (in addition to names and anniversary dates) 
mailing addresses, and, if known, email addresses and phone numbers of 
the employees. The Department is also modifying Sec.  9.12(e)(2) to 
remove the phrase ``and, where applicable, dates of separation'' from 
the information that must be included in the certified list of 
employees provided 10 days before contract completion, as this phrasing 
was unclear, and because where an employee is no longer employed by the 
predecessor 10 days before contract completion, that employee's name 
would simply not appear on that list. The Department is also inserting 
``business'' before ``days'' for clarity.
    The Department also received an anonymous comment suggesting that 
bidding on a contract without knowing the seniority level of workers is 
difficult. The Department notes that under the SCA, successor 
contractors are specifically provided the list of employees' dates of 
employment at the commencement of the successor contract pursuant to 29 
CFR 4.6(l)(2). The commenter appeared to be suggesting a mandatory 
timeframe to communicate this information that would be earlier than 
this established regulation. The final rule does not adopt the 
suggestion to require earlier provision of a seniority list, because, 
for purposes of the Executive order, the provision of the list is meant 
to facilitate the communication of offers to employees and is not meant 
to otherwise influence the bidding process or the established rules and 
timeframes of the SCA. After considering the comments, the final rule 
adopts Sec.  9.12(e)(1) and (e)(2) as proposed other than the 
modifications discussed.
    Proposed Sec.  9.12(e)(3) would require the predecessor contractor 
to, before contract completion, provide written notice to service 
employees employed under the predecessor contract of their possible 
right to an offer of employment on the successor contract. Such notice 
would be required to be posted in a conspicuous place at the worksite 
and/or delivered to employees individually. The text of the proposed 
notice was set forth in Appendix B to part 9. The Department intends to 
translate the notice into several common languages and make the English 
and translated versions available online in a poster format to allow 
easy access. Language clarifying that another form with the same 
information could be used was added to the regulatory text. Proposed 
Sec.  9.12(e)(3) further explained that where the predecessor 
contractor's workforce is comprised of a significant portion of workers 
who are not fluent in English, the notice would be required to be 
provided in both English and a language in which the employees are 
fluent. Multiple language notices would be required to be provided 
where significant portions of the workforce speak different 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 would need to 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 solicited comments on whether it should establish a 
percentage threshold for determining what constitutes a ``significant 
portion of the workforce.'' In response to this question, the Coalition 
suggested that the Department impose a requirement consistent with 
their recommendation regarding Sec.  9.12(b)(3) to provide notice in a 
language that each worker understands. As this worker-specific 
requirement would impose costs on the contractor regardless of whether 
a significant portion of the workforce required such translations, and 
as the

[[Page 86775]]

Department is modifying Sec.  9.12(b)(3) to require that all offers be 
made in writing (making it possible for members of the workforce to 
themselves obtain a translation of the offer document), the Department 
declines this suggested change. Therefore, the final rule adopts Sec.  
9.12(e)(3) as proposed, other than, for clarity, changing the heading 
of Sec.  9.12(e)(3) from ``Notices'' to the more specific ``Notices to 
employees of possible right to offers of employment on successor 
contract,'' and adding cross references to other employee notice 
provisions at Sec.  9.5(f) (relating to agency exceptions) and Sec.  
9.11(c) (relating to location continuity).
vi. Section 9.12(f) Recordkeeping
    Proposed Sec.  9.12(f) addressed recordkeeping requirements. 
Proposed Sec.  9.12(f)(1) clarified that this part would prescribe no 
particular order or form of records for contractors, and that the 
recordkeeping requirements would 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. No comments were received on Sec.  9.12(f)(1), 
and the final rule adopts Sec.  9.12(f)(1) as proposed.
    As proposed, Sec.  9.12(f)(2) specified the records contractors 
must maintain, including copies of any written offers of employment. 
Proposed Sec.  9.12(f)(2) also would require 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 through a method of documentation authorized by WHD. 
Finally, proposed Sec.  9.12(f)(2) would require contractors to 
maintain evidence of any notices that they provide 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 required under Sec.  9.12(e)(3) of the regulations; notices of 
agency exceptions that a contracting agency requires a contractor to 
provide to affected workers and their collective bargaining 
representatives under Sec.  9.5(f) of the regulations and section 6(b) 
of the Executive order; and notices to collective bargaining 
representatives of the opportunity to provide information relevant to 
the contracting agency's location continuity determination in the 
solicitation for a successor contract, pursuant to Sec.  9.11(c)(4) of 
the regulations. WHD would use the records that are retained pursuant 
to Sec.  9.12(f)(2) in determining a contractor's compliance with the 
order and this part. All contractors would be required to retain the 
records listed in proposed Sec.  9.12(f)(2) for at least 3 years from 
the date the records were created and to provide copies of such records 
upon request of any authorized representative of the contracting agency 
or the Department.
    As discussed above in relation to Sec.  9.12(b)(3), in response to 
comments recommending all offers be made in writing, the Department is 
adding such a requirement to Sec.  9.12(b)(3). Therefore, the 
Department is modifying Sec.  9.12(f)(2)(ii) to remove reference to 
records related solely to oral offers, including removing the 
requirement for a contemporaneous written record of any oral offers of 
employment. The Department is also clarifying that copies of written 
offers must include the date of the offer. The Coalition was generally 
supportive of the proposed recordkeeping requirements, commenting that 
the requirements were similar to other requirements with which 
contractors are already required to comply. However, the Coalition also 
commented that the Department should require successor contractors to 
proactively report the number of employees they retained from the 
predecessor contract. The Department declines to add another procedural 
requirement to successor contractors in light of the other mechanisms 
provided by the rule for employees and the contracting agency to detect 
noncompliance. Finally, to conform to the final version of Sec.  
9.11(c), Sec.  9.12(f)(2) was revised to require keeping records of 
notices to collective bargaining representatives regarding the 
provision of information related to the agency's location continuity 
determination. Additionally, Sec.  9.12(f)(2)(iii) was edited to twice 
replace the phrase ``the employee list'' with ``any employee list'' to 
clarify that contractors must maintain copies of any applicable list 
required by Sec.  9.12(e). Other than the modifications discussed 
above, the final rule adopts Sec.  9.12(f)(2) as proposed.
vii. Section 9.12(g) Investigations
    Proposed Sec.  9.12(g) outlined the contractor's obligations to 
cooperate during any investigation to determine compliance with part 9 
and to not discriminate against any person because such person has 
cooperated in an investigation or proceeding under part 9 or has 
attempted to exercise any rights afforded under part 9. As proposed, 
this obligation to cooperate with investigations would not be limited 
to investigations of the contractor's own actions, but also included 
investigations related to other contractors (e.g., predecessor and 
successor contractors) and subcontractors. The Department did not 
receive any comments regarding this proposed provision and the final 
rule adopts Sec.  9.12(g) without change.
8. Section 9.13 Subcontracts
    Proposed Sec.  9.13(a) discussed the responsibilities and 
liabilities of prime contractors and subcontractors with respect to 
subcontractor compliance with the nondisplacement clause. The proposed 
section stated that prime contractors would be required 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 any lower-tier subcontracts. Requiring that 
the contract clause be inserted in all subcontracts, including lower-
tier subcontracts, would serve to notify a subcontractor of their 
obligation to provide employees the right of first refusal and of the 
enforcement methods WHD may use when a subcontractor is found to be in 
violation of the Executive order, including the withholding of contract 
funds.
    Proposed Sec.  9.13(a) also explained that the prime contractor 
would be responsible for the compliance of any subcontractor or lower-
tier subcontractor with the contract clause. 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 contractor's 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 violations of any 
subcontractors. The requirements of this proposed section would prevent 
contractors from circumventing the requirements of part 9 by 
subcontracting the work to other contractors. Thus, the proposed 
section would help to ensure that all covered contractors and 
subcontractors of any tier are aware of and adhere to the requirements 
of

[[Page 86776]]

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) explained 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.
    The Department received one comment from the Coalition regarding 
proposed Sec.  9.13. The Coalition strongly supported the proposed 
section, citing concerns about subcontractor oversight. The Coalition 
stated that holding the prime contractor responsible for the compliance 
of a subcontractor will increase compliance and promote clarity and 
consistency because contracting agencies have minimal direct 
interaction with subcontractors.
    The Department agrees with the Coalition's comment that proposed 
Sec.  9.13 would increase compliance and promote greater clarity and 
consistency. The final rule adopts Sec.  9.13 as proposed, with minor 
modifications to reference the FAR contract clause that will be 
required to be flowed down (instead of the clause in Appendix A) in 
contracts covered by the FAR.
Subpart C--Enforcement
9. Section 9.21 Complaints
    As part of the NPRM, the Department put forth a process for filing 
complaints in proposed Sec.  9.21. Section 9.21(a) outlined the 
procedure to file a complaint with any office of WHD. It provided that 
a complaint may be filed orally or in writing and that WHD would accept 
a complaint in any language. Section 9.21(b) reiterated the well-
established policy of the Department with respect to confidential 
sources. See 29 CFR 4.191(a); 29 CFR 5.6(a)(5). The Department received 
a few comments related to proposed Sec.  9.21.
    The Coalition indicated support for much of the proposed 
enforcement provisions in the NPRM. NATCA commented that the NPRM did 
not account for employees of a predecessor contractor who are 
represented by a union and covered by a collective bargaining agreement 
that contains grievance and arbitration provisions. Specifically, NATCA 
requested that the Department amend Sec.  9.21 to include a new 
provision that would allow an employee of a predecessor contractor who 
was covered by a collective bargaining agreement and who was not 
offered employment by the successor contractor pursuant to proposed 
Sec.  9.12(c)(3) to raise the matter pursuant to the complaint process 
under Sec.  9.21(a) or under the predecessor contractor's collective 
bargaining agreement's negotiated alternative dispute resolution 
procedure. This proposal is addressed above in the discussion of the 
``just cause'' exception to the nondisplacement requirements in Sec.  
9.12(c)(3). The Department declines to impose this requirement in the 
rule, but notes that a contractor may not rely on Executive Order 14055 
or its implementing regulations to circumvent any contractual 
obligations that it owes its employees, including those under a 
collective bargaining agreement. Nor do the order or the regulations 
supersede any obligations that a predecessor or successor contractor 
may have under the National Labor Relations Act.
    After review of the comments, the final rule adopts Sec.  9.21 as 
proposed.
10. Section 9.22 Wage and Hour Division Investigation
    Proposed Sec.  9.22(a) outlined WHD's investigative authority. The 
Department proposed to 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 an 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 an investigation. The 
proposal was consistent with WHD's investigative authority under other 
statutes and regulations administered by WHD.
    Proposed Sec.  9.22(b) addressed subsequent investigations and 
would allow the Administrator to conduct a new investigation or issue a 
new determination if the Administrator concludes the circumstances 
warrant additional action. The proposed rule included examples of 
situations where additional action may be warranted, such as 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.
    As noted in the preamble discussing Sec.  9.21, the Coalition 
generally supported the proposed enforcement provisions in the NPRM. 
The Coalition, however, also recommended that Departmental 
investigations commence within 15 days of receipt of a complaint and 
that if the Administrator finds that the complaint was not frivolously 
brought, that the Administrative Review Board have the ability to order 
the immediate reinstatement of the employee upon application of the 
Administrator pending final order on the complaint. The Coalition 
further requested clarifying language in Sec.  9.22 that workers and 
their representatives have the same right to inspect and copy relevant 
contractor records, documents, or evidence as the Department has under 
proposed Sec.  9.22.
    The Department considered these suggestions and the views of those 
who opined on enforcement provisions. The Department understands 
commenter concerns but declines to implement these changes. 
Specifically, the Department will not implement a 15-day requirement 
for Departmental action following the receipt of a complaint. Nothing 
in the Executive order requires that investigations commence within 15 
days of receipt of a complaint. Such a stringent requirement could 
negatively affect other enforcement obligations of the Department. The 
Department believes that the complaint procedure as proposed will 
ensure effective enforcement of and compliance with the rule's 
requirements.
    The Department also declines to add the suggested provision giving 
workers and their representatives the right to inspect and copy 
relevant contractor records, documents, or evidence in the same manner 
as the Department. The Department recognizes that worker cooperation 
with Wage and Hour investigations is critical to effective enforcement. 
The final rule provides procedures in Sec.  9.21 for workers to file 
complaints and in Sec.  9.32 for complainants to request hearings by an 
Administrative Law Judge in specified circumstances, which may include

[[Page 86777]]

discovery of relevant evidence. The rule also includes an 
antiretaliation provision at Sec.  9.23(e) to protect workers who file 
a complaint, cooperate in an investigation, or otherwise pursue any 
rights under the order. The Department further declines to add the 
suggested provision giving the Administrative Review Board the ability 
to reinstate an employee on an expedited basis if the Administrator 
finds that a complaint was not frivolously brought. ``Reinstatement'' 
for a particular employee may not always be an appropriate remedy, 
depending on the circumstances. However, Sec.  9.23(a) does afford the 
Secretary the authority to require a contractor to offer employment in 
positions for which the employee is qualified, if warranted, and a 
contractor may be debarred for noncompliance with any order of the 
Secretary.
    The Department believes that the Administrator's investigation 
process, as proposed, will achieve effective enforcement of Executive 
Order 14055. Thus, the Department declines to amend the language in 
proposed Sec.  9.22(a) to mandate additional procedures and authorities 
during the investigation process.
    The Department did not receive any other comments addressing 
proposed Sec.  9.22 and the final rule adopts the provision as 
proposed.
11. Section 9.23 Remedies and Sanctions for Violations of This Part
    Proposed Sec.  9.23 discussed remedies and sanctions for violations 
of Executive Order 14055 and this part. Proposed Sec.  9.23(a) 
reiterated 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) provided that, in addition to satisfying any 
costs imposed by an administrative order under proposed Sec. Sec.  
9.34(j) or 9.35(d), a contractor that violates part 9 would be required 
to take appropriate action to 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) also provided that the contractor 
would be required to pay interest on any underpayment of wages. As 
explained in the proposed rule, 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 on back-pay is an 
appropriate remedial measure to make a worker fully whole. The proposed 
language provided 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. As the proposed rule explained, various OSHA whistleblower 
regulations use the tax underpayment rate and daily compounding because 
that accounting best achieves the make-whole purpose of an employee 
receiving back-pay. 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). A similar 
approach is warranted in implementing Executive Order 14055.
    Proposed Sec.  9.23(c) addressed the withholding of contract funds 
for noncompliance. Under proposed Sec.  9.23(c)(1), the Administrator 
would be able to 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) permitted the 
cross-withholding of monies due. The proposed rule explained that 
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 provided 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, the proposed rule explained, 
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 provided 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) 
clarified 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) provided 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 provided 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. The Department 
explained in the proposed rule that, 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 will enhance contractor compliance with Executive Order 14055 as 
well.
    Proposed Sec.  9.23(e) stated 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 will 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

[[Page 86778]]

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 rule, as proposed, would protect workers who file oral 
as well as written complaints. See Kasten, 563 U.S. at 17. The 
Department's rule, as proposed, 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, 
or with the Department or another Federal agency--and from retaliation 
for otherwise taking reasonable action with the intent to seek 
compliance with or enforcement of the order.
    As explained in the proposed rule, 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.
    In its comment, the Coalition requested that the Department add 
liquidated damages in an amount equal to two times the amount of back 
pay owed as a remedy available to employees under this section. The 
Coalition explained that this suggestion is modeled, in part, on the 
remedies provision in the FLSA and that the possibility of treble 
damages will deter employer noncompliance and help cover the added 
expenses workers may incur. The Department believes that the remedies 
under this section, which include the payment of interest on back pay, 
reinstatement, withholding, debarment, and the suspension of the 
payment of contract funds, are sufficient to both make a worker whole 
and deter employers from noncompliance. For this reason, the Department 
declines to implement the Coalition's suggestion to add liquidated 
damages as a remedy available to employees under this section. The 
Department did not receive any additional comments, and the final rule 
adopts Sec.  9.23 as proposed.
Subpart D--Administrator's Determination, Mediation, and Administrative 
Proceedings
12. Section 9.31 Determination of the Administrator
    Proposed Sec.  9.31(a) provided 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 that 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 and express delivery services, or 
personal service to the last known address. As 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 ensuring 
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) explained that where the Administrator 
concludes 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 accordance with proposed Sec.  9.32(b)(1). 
Determining when a request for a hearing or any other notification 
under this section was sent would 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. This proposed section also stated 
that such a request may be sent by letter or by any other means 
normally ensuring 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 explained that the 
Administrator's determination not to seek debarment is not appealable.
    The Department explained that proposed Sec.  9.31(b)(2) would apply 
to situations where the Administrator has concluded that there are no 
relevant facts in dispute. In such cases, 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 would become the final order of the Secretary 
and would 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 ensuring delivery sent within 20 
calendar days of the date of the Administrator's determination. Upon 
such a request, the Administrator would either refer the request for a 
hearing to the Chief ALJ 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).
    The Department received one comment on this proposal, from the 
Coalition, which generally supported the proposed administrative 
process provisions in the proposed rule. However, the Coalition 
recommended that the Department amend Sec.  9.31(b) to provide that the 
Administrator's decision not to seek debarment be appealable. The 
Department considered this recommendation but declines to make this 
change. The Department believes that the Administrator's decision not 
to seek debarment should not be appealable, as the Administrator must 
consider several factors that are particularly within their purview 
when determining if debarment is warranted, such as whether pursuing 
debarment is the best use of Departmental resources under the 
particular circumstances. Moreover, the Administrator's decision not to 
pursue debarment should be left to the Administrator's discretion, 
particularly given that the Administrator would necessarily be required 
to participate in such an appeal, that debarment cases are resource-
intensive, and that debarment does not provide individual relief to a 
particular employee. These factors render debarment a distinct form of 
relief and warrant special consideration. The Department believes that 
this provision, as proposed, will achieve effective enforcement of 
Executive

[[Page 86779]]

Order 14055. Thus, the Department does not adopt the recommendation to 
make the Administrator's decision not to debar appealable.
    The Department did not receive any other comments addressing 
proposed Sec.  9.31, and the final rule adopts the provisions as 
proposed.
13. Section 9.32 Requesting Appeals
    Proposed Sec.  9.32 provided procedures for requesting appeals. 
Proposed Sec.  9.32(a) provided 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) stated that any aggrieved party may 
request a hearing by an ALJ within 20 days of the determination of the 
Administrator. To request a hearing, the aggrieved party must send the 
request to the Chief ALJ of the Office of Administrative Law Judges by 
letter or by any other means normally ensuring delivery and the request 
must include a copy of the Administrator's determination. The proposal 
also would require that the party send a copy of the request for a 
hearing to the complainant(s) or successor contractor, their 
representatives, if any, as appropriate, and to the Administrator and 
the Associate Solicitor. The final rule includes the complete address, 
adding Division of Fair Labor Standards, Office of the Solicitor, U.S. 
Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210, 
to the regulatory text.
    Proposed Sec.  9.32(b)(1)(ii) provided 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 proposal explained 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) provided 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 proposal explained 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) explained 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)-(B) stated that a petition for 
review must refer to the specific findings of fact, conclusion 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. The final rule includes the complete address, adding 
Division of Fair Labor Standards, Office of the Solicitor, U.S. 
Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210, 
to the regulatory text.
    Proposed Sec.  9.32(b)(2)(ii)(C) provided 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 ineligibility sanctions, however, the 
remainder of the decision would be immediately effective. The proposal 
stated that no judicial review would be available to parties unless a 
petition for review to the ARB is first filed.
    The Coalition recommended the Department amend Sec.  9.32(b)(ii) by 
removing the word ``monetary,'' thereby allowing the complainant or 
other interested party to appeal an Administrator determination if the 
complainant or other interested party believes the Administrator has 
ordered inadequate nonmonetary relief, such as reinstatement. The 
Department considered this suggestion and declines to make this change. 
The requirements of proposed Sec.  9.32(b)(ii) are identical to the 
approach the Department took in implementing Executive Order 13495, and 
the Department believes that such an approach aided in achieving 
effective enforcement of Executive Order 13495. Further, nothing in 
Executive Order 14055 indicates that a different approach was expected 
or is warranted in implementing Executive Order 14055. In addition, 
just as the Administrator's decision of whether to pursue debarment of 
a contractor involves discretion, the Administrator's decision of 
whether to seek reinstatement of a worker involves discretion. The 
Administrator may consider a variety of factors when considering 
whether to pursue reinstatement, including whether reinstatement may 
result in the termination of employment of another employee who is 
currently performing on the contract. Thus, it would not be appropriate 
to allow a complainant or other interested party to seek review where 
the Administrator has determined that reinstatement is not warranted. 
As another example, the Administrator might not order reinstatement and 
instead pursue front pay for the employee. In such an instance, it 
would add a level of complexity and inefficiency if the employee could 
seek reinstatement at the same time. For these reasons, the Department 
does not believe that it would be practicable for a complainant or 
other interested party to be able to request a hearing if they believe 
the Administrator has ordered inadequate nonmonetary relief.
    PSC also commented on proposed Sec.  9.32 and requested that the 
Administrator--and not the contractor--be the respondent in appeals of 
the Administrator's determinations. PSC believes the proposed provision 
unfairly punishes contractors by creating the functional equivalent of 
a private right of action against the contractor. In particular, PSC 
believes that contractors should not incur the cost and burden to 
defend a challenge to the Administrator's finding that the contractor 
did not commit a violation. The Department does not agree that 
permitting aggrieved and interested parties to seek review is unfair or 
unduly burdensome, and the final rule reaffirms that the employer is 
the appropriate respondent in appeals brought under this section, as 
the employer is best suited to represent its own interests in such 
appeals and may well wish to participate in such appeals to defend the 
legality of its actions. The Department also notes that Executive Order 
14055 does not contemplate a private right of action, nor does the 
final rule provide a private right of action. The Department considered 
the comments received, and the final rule adopts the proposed language 
without change.
14. Section 9.33 Mediation
    To resolve disputes by efficient and informal alternative dispute 
resolution methods to the extent practicable, proposed Sec.  9.33 
generally encouraged

[[Page 86780]]

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 provided that the assigned ALJ must approve any 
settlement agreement reached by the parties consistent with the 
procedures and requirements of 29 CFR 18.71. The Department did not 
receive any comments related to Sec.  9.33. The final rule accordingly 
adopts the provision as proposed.
15. Section 9.34 Administrative Law Judge Hearings
    Proposed Sec.  9.34(a) provided for the OALJ to hear and decide, in 
its discretion, appeals concerning questions of law and fact regarding 
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) detailed 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) 
provided that the Equal Access to Justice Act (EAJA), as amended, 5 
U.S.C. 504, would not apply to proceedings under part 9 because 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 would have 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) stated 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).
    Proposed Sec.  9.34(c) provided 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 provided 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.
    Proposed Sec.  9.34(d) stated that 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 paragraph also stated 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) provided that copies of the request for 
hearing under this part would be sent to the WHD Administrator and the 
Associate Solicitor of Labor, regardless of whether the Administrator 
is participating in the proceeding.
    With certain exceptions, proposed Sec.  9.34(g) stated that it 
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 part 9. The exceptions in proposed 
Sec.  9.34(g) provided that part 9 would be controlling to the extent 
it provides any rules of special application that may be inconsistent 
with the rules in part 18, subpart A. In addition, proposed Sec.  
9.34(g) provided that the Rules of Evidence at 29 CFR part 18, subpart 
B, would be inapplicable to administrative proceedings under this part. 
The proposed paragraph would clarify that rules or principles designed 
to ensure 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.
    Proposed Sec.  9.34(i) stated that, upon the issuance of a decision 
that a violation had occurred, the ALJ would order the successor 
contractor to take appropriate action to remedy the violation. The 
remedies could 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. The 
Coalition suggested amending proposed Sec.  9.34(j) to make reasonable 
expenses incurred by an employee's representative in connection with 
ALJ hearings under this paragraph recoverable. However, Sec.  9.34(j) 
is not intended to be an open-ended provision for the recovery of costs 
incurred by anyone other than the aggrieved employee. The Department 
clarifies that labor costs incurred by an aggrieved employee's 
representative would not be recoverable under this provision. However, 
the Department views costs for postage, photo copying, or messenger 
delivery, for example, that are initially incurred by the aggrieved 
employee's representative could be ``costs incurred by the aggrieved 
employee'' if they are ultimately charged to the employee. Such costs, 
therefore, could be recoverable under this provision if they are 
reasonable and otherwise meet the criteria for the recovery of costs 
under this paragraph. Therefore, the final rule does not expand the 
amount awarded to an aggrieved employee to include reasonable expenses 
incurred by an employee's representative in connection with ALJ 
hearings and adopts the provision as proposed.
    Proposed Sec.  9.34(k) provided that the ALJ's decision would 
become the final order of the Secretary, unless a timely appeal is 
filed with the ARB.
    With exception of one comment related to Sec.  9.34(j), the 
Department did not receive any comments on proposed Sec.  9.34 and the 
final rule adopts Sec.  9.34 as proposed.
16. Section 9.35 Administrative Review Board Proceedings
    Proposed Sec.  9.35 described the ARB's jurisdiction and provided 
the procedures for appealing an ALJ decision to the ARB under Executive 
Order 14055.
    Proposed Sec.  9.35(a)(1) stated the ARB has jurisdiction to hear 
and decide, in

[[Page 86781]]

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) identified 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) provided 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 were to involve an appeal 
from an ALJ's decision.
    Proposed Sec.  9.35(c) would require the ARB's order to mandate 
action to remedy the violation if the ARB concludes a violation 
occurred. Under the proposed rule, 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 
seeks debarment, the ARB would be required to determine whether 
debarment would be appropriate. Proposed Sec.  9.35(c) also provided 
that the ARB's order would be 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) would allow 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 lost wages or other relief due under Sec.  9.23(b) 
of this part.
    Proposed Sec.  9.35(e) provided that the ARB's decision would 
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.
    The Department did not receive any comments related to Sec.  9.35. 
The final rule accordingly adopts the provision as proposed.
17. 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 will not be affected. See 86 FR at 66400. Consistent with 
this directive, the Department proposed to include a severability 
clause in part 9. Proposed Sec.  9.36 explained that each provision 
would be capable of operating independently from one another. If any 
provision of part 9 were 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 intended that the remaining 
provisions would remain in effect.
    The Department did not receive any comments related to Sec.  9.36. 
The final rule accordingly adopts the provision as proposed.
18. Nonsubstantive Changes
    The Plain Writing Act of 2010 (Pub. L. 111-274, 124 Stat. 2861) 
requires Federal agencies to write documents in a clear, concise, well-
organized manner. The Department has written this document to be 
consistent with the Plain Writing Act as well as the Presidential 
Memorandum, ``Plain Language in Government Writing,'' published June 
10, 1998 (63 FR 31885). Consistent with this practice, technical edits 
have been made throughout the regulations such as replacing the term 
``shall'' with ``will'' or ``must,'' and replacing the term ``assure'' 
with ``ensure.'' Such changes are not intended to reflect a change in 
the substance of these sections.

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, the 
information collections' practical utility, the impact of paperwork and 
other information collection burdens imposed on the public, and how to 
minimize those burdens. Under the PRA, an agency may not collect or 
sponsor an information collection requirement unless it displays a 
currently valid Office of Management and Budget (OMB) control number. 
See 5 CFR 1320.8(b)(3)(vi). OMB has assigned control number 1235-0021 
to the information collection which gathers information from 
complainants alleging violations of the labor standards that WHD 
administers and enforces, and the Department requested a new control 
number be assigned to the new information collection required as part 
of this rule. In accordance with the PRA, the Department solicited 
public comments on the proposed changes to the information collection 
under control number 1235-0021 and the creation of the new information 
collection in the NPRM, as discussed below. See 87 FR 42552 (July 15, 
2022). The Department also submitted a contemporaneous request for OMB 
review of the proposed revisions to the existing information collection 
and the creation of a new information collection in accordance with 44 
U.S.C. 3507(d). On August 16, 2022, OMB issued a notice that assigned 
the new information collection control number 1235-0033 and on August 
18, 2022, issued a notice that continued the previous approval of the 
information collection under 1235-0021 under the existing terms of 
clearance. Both notices ask the Department to resubmit the requests 
upon promulgation of the final rule and after consideration of the 
public comments received.
    Circumstances Necessitating this Collection: This rulemaking 
implements Executive Order 14055, Nondisplacement of Qualified Workers 
Under Service Contracts, signed by President Joseph R. Biden, Jr. on 
November 18, 2021. The Department administers and enforces these 
regulations that implement Executive Order 14055.
    Executive Order 14055 generally requires Federal service contracts 
and subcontracts that succeed a contract for performance of the same or 
similar work, and solicitations for such contracts and subcontracts, to 
include a clause requiring the successor contractor and its 
subcontractors to offer service employees employed under the 
predecessor contract and its subcontracts 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 those employees 
are qualified. Section 5 of Executive Order 14055 contains exclusions, 
directing that the order will not apply to contracts under the 
simplified acquisition threshold as defined in 41 U.S.C. 134 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 
Executive order permits agencies to except certain contracts from the 
requirements of the Executive order in certain circumstances. Section 8 
of

[[Page 86782]]

Executive Order 14055 grants the Secretary authority to investigate 
potential violations of, and obtain compliance with, the order.
    This final rule, which implements Executive Order 14055, contains 
several provisions that could be considered to entail collections of 
information: (1) the requirement in Sec.  9.12(b)(3) requiring 
successor contractors to make employment offers in writing; (2) the 
notice provision in Sec.  9.11(c)(4) that requires contractors to 
provide notice to employees' representatives on a contract of the 
method and opportunity to provide information to the contracting agency 
relevant to the location continuity determination; (3) the notice 
provision described in in Sec.  9.5(f) that requires contractors to 
provide notice to workers of contracting agency decisions to except 
contracts from the nondisplacement requirements; (4) the requirement in 
Sec.  9.12(e) that predecessor contractors submit a list of the names, 
mailing addresses, and, if known, phone numbers and email addresses of 
all service employees working under the contract and its subcontracts 
to the contracting officer before contract completion and the 
requirement to provide service employees with written notice of their 
possible right to an offer of employment on a successor contract; (5) 
disclosure and recordkeeping requirements for covered contractors 
described in Sec.  9.12(f); (6) the requirement in Sec.  9.13(a) for 
the contractor to insert the nondisplacement contract clause into any 
lower-tier subcontracts; (7) the complaint process described in Sec.  
9.21; and (8) the administrative proceedings described in subpart D. 
These requirements are essential to the Department's ability to 
implement and enforce the requirements of Executive Order 14055 and 
this final rule.
    Section 9.12 states compliance requirements for contractors covered 
by Executive Order 14055. As discussed above, under proposed Sec.  
9.12(b)(3) the successor contractor would have had the option of making 
a specific oral or written employment offer to each qualified employee 
on the predecessor contract. The final rule modifies the language of 
proposed Sec.  9.12(b)(3), as well as the corresponding recordkeeping 
requirements of Sec.  9.12(f)(2)(i), to require contractors to make 
offers of employment in writing. As all offers must be in writing, the 
final rule does not include the requirement that these offers be 
translated, as employees may obtain their own translations of the 
written offer documents in their possession.
    Section 9.12(e) details contractor obligations near the end of 
contract performance. Sections 9.12(e)(1) and (e)(2) require a 
contractor to furnish the contracting officer with a certified list of 
the names, mailing addresses, and, if known, phone numbers and email 
addresses of all service employees working under the contract and its 
subcontracts during the last month of contract performance. 
Additionally, Sec.  9.12(e)(3) requires a contractor to provide service 
employees with written notice of their possible right to an offer of 
employment on a successor contract. Finally, as noted in Sec.  
9.12(e)(3), contractors are also required to provide additional notices 
to workers by the provisions in Sec.  9.5(f) (relating to agency 
exceptions) and Sec.  9.11(c)(4) (relating to location continuity).
    To verify compliance with the requirements in part 9, Sec.  9.12(f) 
requires 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; (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), 
1320.4(a)(2), 1320.4(c). Additionally, 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 
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(f) of the regulations; and notices to collective 
bargaining representatives of the opportunity to provide information 
relevant to the contracting agency's location continuity determination 
in the solicitation for a successor contract, pursuant to Sec.  
9.11(c)(4) of the regulations.
    Section 9.13(a) requires the contractor or subcontractor to insert 
in any lower-tier subcontracts the nondisplacement contract clause in 
Appendix A or the FAR, as appropriate. As explained in the preamble to 
that section, this requirement notifies subcontractors of their 
obligation to provide employees the right of first refusal and of the 
enforcement methods WHD may use when subcontracts are found to be in 
violation of the Executive order. The Department has estimated 
additional burden hours for this requirement, but believes that this 
additional burden will be minimal, because the clause will be easily 
accessible to contractors and subcontractors who may simply copy and 
insert the clause into the lower-tier subcontract.
    Section 9.21 details the procedure for filing complaints of 
violations of the Executive order or part 9. 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. WHD submitted an Information 
Collection Request (ICR) to revise the approval under 1235-0021 to 
incorporate the regulatory citations in this rule and to adjust burden 
estimates to reflect an increase in the number of complaints filed.
    Subpart D establishes administrative proceedings to resolve 
investigation findings. Particularly with respect to hearings, the rule 
imposes information collection requirements. The Department notes that 
information exchanged between the target of a civil or administrative 
action and the agency to resolve the action is 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 final 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 regulations. A respondent may meet the 
requirements of this final rule using paper or electronic means. WHD, 
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 assist.
    Public comments: The Department invited public comment on its 
analysis that the rule would create a slight increase in the paperwork 
burden associated with ICR 1235-0021 and on the burden related to the 
new ICR 1235-0033. The Department did not receive comments on the ICRs 
themselves or any comments submitted regarding the

[[Page 86783]]

PRA analysis in particular. However, commenters addressed aspects of 
the information collections while commenting on the text of the 
proposed rule.
    For example, ABC commented that the 10-day time frame in which 
predecessor contractors must furnish to the contracting officer an 
updated list of employees working on the predecessor contract under 
Sec.  9.12(e)(2) is both impractical and unworkable, arguing that 10 
days is an inadequate time frame for the successor contractor to 
inform, interview, and evaluate the displaced workers prior to the 
commencement of the successor contract. Relatedly, an anonymous 
commenter suggested that the burden on the successor contractor to 
offer employment to qualified employees on the predecessor contract may 
be lessened if the successor contractor is provided with contact 
information for the employees such as phone numbers, email addresses, 
or mailing addresses. To address ABC's concern that the 10-day time 
frame may make it impractical for the successor contractor to inform, 
interview, and evaluate employees prior to the commencement of the 
successor contract, the Department is adopting the anonymous 
commenter's suggestion that the successor contractor be provided with 
employee contact information. Accordingly, as explained in the preamble 
to Sec.  9.12, the Department is modifying proposed Sec.  9.12(e)(1) 
and (e)(2) to require predecessor contractors to list (in addition to 
names and anniversary dates) mailing addresses, and, where known, email 
addresses and phone numbers of the employees. The Department believes 
that the burden of this change on contractors will be minimal in light 
of the existing requirement that contractors maintain records of 
addresses pursuant to 29 CFR 4.6(g)(1)(i).
    The Coalition commented on the requirements for successor 
contractors in Sec.  9.12(b)(3) when making the required job offers to 
employees on the predecessor contract. The Coalition suggested the 
Department require job offers be provided in writing, and not verbally, 
to lessen disputes between contractors and employees as to the 
existence and adequacy of offers. The Coalition further noted that 
requiring offers in writing would lessen the degree of employees' 
reliance on the accuracy of contractors' translators. AFL-CIO echoed 
the Coalition's sentiments regarding offers being made in writing. The 
Department agrees that requiring offers to be made in writing would 
lessen such factual disputes between contractors and employees, 
including disputes about the fidelity of linguistic translations. For 
that reason, the Department is amending proposed Sec.  9.12(b)(3), as 
well as the corresponding recordkeeping requirements of Sec.  
9.12(f)(2), to require that offers be in writing, thus removing the 
option for successor contractors to make offers orally. Because this 
change removes the requirement for a contemporaneous written record of 
any oral offers of employment and simply retains the requirement that 
contractors maintain copies of any written offers of employment, this 
change does not require contractors to maintain additional information. 
Thus, the Department has not estimated additional recordkeeping burden 
hours or costs associated with this change. However, because this 
change requires contractors to provide written offers of employment to 
predecessor contract employees, the Department estimates additional 
burden hours and costs associated with this requirement.
    Total burden for the subject information collections, including the 
burdens that will be unaffected by this final rule and any changes, is 
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: 27,010 (10 from this rulemaking).
    Estimated number of responses: 27,010 (10 from this rulemaking).
    Frequency of response: On occasion.
    Estimated annual burden hours: 9,003 (3 burden hours due to this 
rulemaking).
    Capital/start-up costs: $0 ($0 from this rulemaking).
    Title: Nondisplacement of Qualified Workers Under Service 
Contracts.
    OMB control number: 1235-0033.
    Affected public: Private sector, businesses or other for-profits 
and Individuals or Households.
    Estimated number of respondents: 137,463 (all from this 
rulemaking).
    Estimated number of responses: 3,042,829 (all from this 
rulemaking).
    Frequency of response: on occasion.
    Estimated annual burden hours: 205,332 (all from this rulemaking).
    Estimated annual burden costs: $13,307,567.00
    Capital/start-up costs: $0 ($0 from this rulemaking).

IV. Executive Order 12866, Regulatory Planning and Review; Executive 
Order 13563, Improved Regulation and Regulatory Review

    Under Executive Order 12866, as amended by Executive Order 14094, 
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.\12\ OIRA has 
determined that this rule is a ``significant regulatory action'' under 
section 3(f)(1) of Executive Order 12866.
---------------------------------------------------------------------------

    \12\ See 88 FR 21879 (Apr. 11, 2023); 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 could result from this 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 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 only 
to contracts that are covered by the SCA.

[[Page 86784]]

    This 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 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 442,761 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.13 14 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.\15\
---------------------------------------------------------------------------

    \13\ 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.
    \14\ The Department also acknowledges that prime contracts that 
are less than $250,000 and their subcontracts would not be covered 
by this regulation, but the Department 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.
    \15\ The Department estimated the number of prime contractors 
using the 2021 USASpending.gov 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 at times 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 \16\ and (2) those covered by the DBA.\17\ 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 certain U.S. territories. The firms for the remaining 
contracts are included as potentially impacted by this rulemaking.
---------------------------------------------------------------------------

    \16\ 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).
    \17\ 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.gov 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 rule. The Department examined 5 years of USASpending.gov data 
(2015 through 2019) and identified 33,708 unique subcontractors that 
did not hold contracts as prime contractors in 2019.\18\ 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.
---------------------------------------------------------------------------

    \18\ 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.gov 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.19 20
---------------------------------------------------------------------------

    \19\ 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/.
    \20\ 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 GSA's System for Award Management 
(SAM) since all entities bidding on Federal procurement contracts as a 
prime contractor or applying for 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 
contractor 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 rulemaking; these firms are not included 
in the Department's estimate. The 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 October 2022 SAM data and identified 409,053 registered firms.\21\ 
The Department excluded firms with expired registrations, firms only 
applying for grants,\22\ government

[[Page 86785]]

entities (such as city or county governments),\23\ 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.gov 
to this estimate. Adding these 33,708 firms identified in 
USASpending.gov to the number of firms in SAM results in 442,761 
potentially affected firms.
---------------------------------------------------------------------------

    \21\ Data released in monthly files. See GSA, SAM.gov, available 
at: https://www.sam.gov/SAM/pages/public/extracts/samPublicAccessData.jsf.
    \22\ 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.''
    \23\ 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 
relatively 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
                                                              Total        Primes from     Subcontractors from    Total      Firms           from
                                                                         USASpending.gov     USASpending.gov                from SAM    USASpending.gov
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting......        11      2,482               2,482                   0       5,769      5,769                   0
Mining..........................................        21        145                 102                  43         959        916                  43
Utilities.......................................        22      1,596               1,541                  55       2,485      2,430                  55
Construction....................................        23     13,708               5,457               8,251      56,126     47,875               8,251
Manufacturing...................................     31-33     13,958               5,637               8,321      51,299     42,978               8,321
Wholesale trade.................................        42      1,205                 564                 641      18,092     17,451                 641
Retail trade....................................     44-45        344                 317                  27       7,979      7,952                  27
Transportation and warehousing..................     48-49      3,387               2,998                 389      17,921     17,532                 389
Information.....................................        51      4,061               3,735                 326      13,350     13,024                 326
Finance and insurance...........................        52        475                 429                  46       3,365      3,319                  46
Real estate and rental and leasing..............        53      2,822               2,821                   1      19,439     19,438                   1
Professional, scientific, and technical services        54     37,739              26,103              11,636     115,007    103,371              11,636
Management of companies and enterprises.........        55          3                   3                   0         604        604                   0
Administrative and waste services...............        56     15,120              11,509               3,611      36,187     32,576               3,611
Educational services............................        61      3,609               3,359                 250      17,600     17,350                 250
Health care and social assistance...............        62      7,004               6,987                  17      36,758     36,741                  17
Arts, entertainment, and recreation.............        71        916                 915                   1       5,172      5,171                   1
Accommodation and food services.................        72      3,037               3,031                   6      10,474     10,468                   6
Other services..................................        81      8,084               7,997                  87      24,175     24,088                  87
                                                 -------------------------------------------------------------------------------------------------------
    Total private...............................  ........    119,695              85,987              33,708     442,761    409,053              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.\24\ 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).\25\ 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. 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). One 
commenter also posited that this estimate could be an overestimate 
because many of these workers are already covered under collective 
bargaining agreements that may ensure them continued employment.
---------------------------------------------------------------------------

    \24\ See 86 FR 67126, 67194 (Nov. 24, 2021).
    \25\ See 81 FR 67598 (Sept. 30, 2016) and 79 FR 60634 (Oct. 7, 
2014).
---------------------------------------------------------------------------

    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.
i. 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] TR14DE23.000

    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 
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.\26\ The firms for the 
remaining contracts are also included as potentially impacted by this

[[Page 86786]]

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 certain U.S. territories.
---------------------------------------------------------------------------

    \26\ 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.\27\ 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 code 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) data, formerly 
Occupational Employment Statistics.\28\ 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.
---------------------------------------------------------------------------

    \27\ Bureau of Economic Analysis (BEA). Table 8. Gross Output by 
Industry Group. 2020, available at: 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.''
    \28\ Bureau of Labor Statistics Occupational Employment and Wage 
Statistics. May 2019. Available at: https://www.bls.gov/oes/.
---------------------------------------------------------------------------

    According to this methodology, the Department estimates 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.
ii. 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.29 30 The other difference is the analysis is not 
performed by NAICS because the GDP data are not available at that level 
of disaggregation.
---------------------------------------------------------------------------

    \29\ GDP is limited to personal consumption expenditures and 
gross private domestic investment.
    \30\ 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).\31\
---------------------------------------------------------------------------

    \31\ 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      Share output
                                   Total private    contracting    from covered       Private     Workers on SCA
              NAICS                   output          output        contracting   sector workers     contracts
                                  (billions) \a\  (millions) \b\        (%)        (1,000s) \c\    (1,000s) \d\
----------------------------------------------------------------------------------------------------------------
11..............................            $450            $431            0.10           1,168               1
21..............................             577             104            0.02             699               0
22..............................             498           2,350            0.47             547               3
23..............................           1,662           7,218            0.43           9,100              40
31-33...........................           6,266          42,023            0.67          12,958              87
42..............................           2,098             183            0.01           5,955               1
44-45...........................           1,929             331            0.02          16,488               3
48-49...........................           1,289          14,288            1.11           6,215              69
51..............................           1,942          10,308            0.53           2,971              16
52..............................           3,161          12,474            0.39           6,180              24
53..............................           4,143             968            0.02           2,699               1
54..............................           2,487         151,809            6.10          10,581             646
55..............................             675               0            0.00           2,470               0
56..............................           1,141          36,238            3.18          10,158             323
61..............................             381           4,140            1.09           3,271              36
62..............................           2,648          11,130            0.42          20,791              87
71..............................             382              82            0.02           2,949               1
72..............................           1,192           1,019            0.09          14,303              12
81..............................             772           2,699            0.35           5,260              18
Territories.....................             156           1,501           (\e\)             963             9.9
                                 -------------------------------------------------------------------------------

[[Page 86787]]

 
    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. In the proposed rule, the 
Department asked for comments regarding any data sources that would 
allow it to analyze the demographic composition of SCA contract 
workers, so that it could better assess any equity impacts of this 
rulemaking. In their comment, the Center for American Progress (CAP) 
noted that women and people of color are overrepresented in many of the 
service industries that the Federal government contracts out. CAP, 
along with multiple other commenters, cited their analysis which looked 
at industries with significant Federal contracting spending and found 
that women and people of color were overrepresented in industries such 
as building services, administrative services, security services, 
nursing care, and meat and food processing.\32\ In their comment, the 
American Federation of State, County, and Municipal Employees (AFSCME) 
also noted that ``[c]overed workers under the SCA comprise a 
disproportionate share of women, people of color, LGBTQ individuals, 
people with disabilities, and veterans compared to the workforce as a 
whole.'' They stated that this rule will help reduce historical 
inequities in the effects of job displacement for these groups.
---------------------------------------------------------------------------

    \32\ Center for American Progress, ``Federal Contracting Doesn't 
Go Far Enough to Protect American Workers.'' November 19, 2020. 
Available at: https://www.americanprogressaction.org/article/federal-contracting-doesnt-go-far-enough-protect-american-workers/.
---------------------------------------------------------------------------

C. Costs

1. Rule Familiarization Costs
    This 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 442,761 potentially 
affected firms to calculate rule familiarization costs. This is an 
overestimate, because not all of the firms that are registered in SAM 
currently hold contracts or will bid on an SCA contract. Those that do 
not hold contracts and 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 the content of the contract clause itself 
as incorporated into a solicitation, 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 are already 
familiar. Thus, this regulation is not introducing an entirely novel 
policy that would require substantially 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.\33\ Therefore, the Department has estimated regulatory 
familiarization costs to be $11,124,370 ($50.25 per hour x 0.5 hour x 
442,761 contractors). The Department has included all regulatory 
familiarization costs in Year 1.
---------------------------------------------------------------------------

    \33\ 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 rule contains various requirements for contractors. The 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 nondisplacement contract 
clause. This provision comes directly from Executive Order 14055, and 
the Department estimated 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. A contractor must provide notices to 
affected workers and their collective bargaining representatives, if 
any, in writing of the agency's determination to grant an exception and 
of the opportunity to provide information relevant to an agency's 
location continuity determination. 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. Contractors may also be required 
to retroactively incorporate a contract clause into subcontracts when 
it was not initially incorporated. In the NPRM, the Department 
estimated that these requirements would take an average of 30 minutes 
for each contractor. The Department explained that this average

[[Page 86788]]

estimate is appropriate because some of these requirements would not 
apply to all potentially affected contractors. For example, the 
requirement that a contractor send an agency exception notice would 
only apply when an agency grants an exception. In this final rule, the 
Department has increased this estimate to an average of 45 minutes for 
each contractor. This increase is to account for the change to the 
location-continuity notice procedure in the final rule, which now 
requires contractors to provide collective bargaining representatives 
with notice of an opportunity to provide information regarding location 
continuity determinations where a location change is possible. Under 
this amended procedure, location-continuity notices still will not be 
required for all predecessor contracts; but they will be required 
wherever a location change is possible, whereas under the NPRM, the 
provision required notice only after contracting agencies determine not 
to require location continuity. The increase is also to account for the 
time it takes a successor contractor to issue an offer letter (to a 
predecessor employee) in circumstances where the successor contractor 
otherwise may not have needed to issue an offer letter to staff the 
successor contract.
    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 
$7,518,342 ($50.25 per hour x 1.25 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 in subcontracts each year since 
the clause only needs to be included in new contracts (which under 
Executive Order 14055 and this rule do not include options or other 
extensions) and their subcontracts.
    Under this rule, contracting agencies will, among other things, be 
required to ensure contractors provide notice to employees on 
predecessor contracts of their possible right to an offer of 
employment. Contracting agencies will also be required 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 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 
incorporate the contract clause post-award 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.\34\ This includes the median base wage of 
$52.17 from Office of Personnel Management salary tables,\35\ plus 
benefits paid at a rate of 69 percent of the base wage,\36\ 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. Therefore, the estimated cost 
to contracting agencies is $27,953,342 ($97.04 per hour x 2.5 hours x 
115,224 contracts).
---------------------------------------------------------------------------

    \34\ Because the work of the contracting agency may be split 
among different positions, the Department has used the wage of a 
more senior position for the estimate.
    \35\ 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.
    \36\ 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 rule will 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 on 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 rule will 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 rule also specifies the records successor contractors would be 
required to maintain, including copies of or documentation of any 
written offers of employment and copies of the written notices that 
have been posted or delivered. The rule will 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 $11,124,370 in rule familiarization 
costs, $35,471,685 in implementation costs ($7,518,342 for contractors 
and $27,953,342 for contracting agencies), and $6,014,674 in 
recordkeeping costs. Therefore, total Year 1 costs are $52,610,728. 
Costs in the following years consist only of implementation and 
recordkeeping costs and amount to $41,486,358. Average annualized costs 
over 10 years are $43 million using a 7 percent discount rate, and $52 
million using a 3 percent discount rate.
5. Other Potential Impacts
    This 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 rule, successor contractors will 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 will likely spend at most an equal amount of time 
determining job suitability under this final rule as under current 
practices. To the extent that, in the absence of this rule, a successor

[[Page 86789]]

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.
    Many successor contractors may already be keeping the predecessor 
contractor's employees on the contract, so the Executive order and this 
rule would not impact any existing hiring practices for these firms.
    There may be some 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 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 they are currently working on a 
covered contract which is then awarded to another contractor, they 
would receive offers of employment from the successor contractor.
    This rule will 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 14026 (Increasing 
the Minimum Wage for Federal Contractors), or Executive Order 13658 
(Establishing a Minimum Wage for Contractors). Executive Order 14055 
and this 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 will not be a result of this rule. What this rule 
will do is help ensure that these workers have continued employment, 
saving them the costs of finding a new job. The requirement for 
successor contractors 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. In their comment, 
NELP agreed that displaced workers may suffer financial hardship and 
communities could see an increased need for social insurance 
programs.\37\ As discussed above, the benefits of increased job 
security and prevention of unemployment could be offset in some cases 
in which the successor contractor has existing employees for whom it is 
unable to find positions because of the requirements of this rule. The 
Department did not receive any comments discussing this scenario.
---------------------------------------------------------------------------

    \37\ In support of their analysis, NELP cited a study in an 
academic journal. See Jennie E. Brand, ``The Far-Reaching Impact of 
Job Loss and Unemployment.'' Annual Review of Sociology. Aug 2015. 
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4553243/.
---------------------------------------------------------------------------

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.\38\ Maintaining the same staff on a Federal 
Government contract could reduce the occurrence of these costly data 
breaches. The Coalition agreed that the rule will promote physical and 
information security. They note, ``Whether through building security, 
janitorial services provided in a secure facility, or CMS call center 
representatives addressing callers' personal health information, 
federal service contract workers regularly provide physical security 
and work with or adjacent to classified, sensitive, or private personal 
information. Retaining those workers across service contracts limits 
the need for costly training and vetting[.]'' They also note that the 
requirements of this rule will lead to cost savings for new contractors 
and the Federal Government, because of the extensive security clearance 
process required to enter Federal buildings. They stated that, 
``[a]ccording to the Defense Counterintelligence and Security Agency, 
prices for new background investigations and clearances for fiscal year 
2023 will range from $140 each at the lowest level of vetting, to $400 
for a secret clearance, and then up to $5,140 for a top-secret 
clearance.'' \39\ If successor contractors hire predecessor contractor 
employees who already have the necessary security clearances, it could 
lead to cost savings.
---------------------------------------------------------------------------

    \38\ See Ben Miller, IBM: Government Data Breaches Becoming Less 
Costly (Aug. 18, 2020), https://www.govtech.com/data/ibm-government-data-breaches-becoming-less-costly.html.
    \39\ U.S. Dep't of Def., Def. Counterintel. & Sec. Agency, DCSA 
Products & Services Billing Rates for Fiscal Years 2023 and 2024 
(June 30, 2022), available at https://www.dcsa.mil/Portals/91/Documents/pv/GovHRSec/FINs/FY22/FIN_22-01_FY23-FY24-Billing-Rates_30June2022.pdf; Lindsey Kyzer, How Much Does It Cost to Obtain 
a Clearance--FY 2022/23 Costs Go Down, ClearanceJobs (Sept. 7, 2021, 
available at https://news.clearancejobs.com/2021/09/07/how-much-does-it-cost-to-obtain-a-clearance-fy-2022-23-costs-go-down/.
---------------------------------------------------------------------------

    The requirements of the Executive order and this rule also will 
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.\40\ Another paper conducted an analysis of 
case studies and found that turnover costs represent 39.6 percent of a 
position's annual wage.\41\ Multiple commenters also agreed that this 
rule would help reduce turnover, and they provided additional sources 
showing the high cost of turnover in multiple industries. The Economic 
Policy Institute (EPI) cited research showing that ``worker turnover 
can cost employers approximately one-fifth of a job's salary to fill 
each vacancy, plus an average of nearly $1,300 in training expenditures 
for each new hire.'' \42\ Other commenters

[[Page 86790]]

cited literature showing that turnover impacts organizational 
performance and customer service.43 44 This rule will lead 
to staffing continuity from the perspective of the customer (both the 
Federal government and its clients) and could therefore lead to 
improved service.
---------------------------------------------------------------------------

    \40\ Kuhn, Peter and Lizi Yu. 2021. ``How Costly is Turnover? 
Evidence from Retail.'' Journal of Labor Economics 39(2), 461-496.
    \41\ 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/.
    \42\ Heather Boushey and Sarah Jane Glynn, There Are Significant 
Business Costs to Replacing Employees, Center for American Progress, 
November 2012. https://www.americanprogress.org/article/there-are-significant-business-costs-to-replacing-employees/. Lorri Freifeld, 
``2020 Training Industry Report,'' Training Magazine, November 17, 
2020. https://pubs.royle.com/publication/?m=20617&i=678873&p=30&ver=html5.
    \43\ TaeYoun Park and Jason Shaw, ``Turnover Rates and 
Organizational Performance: A Meta-Analysis,'' Journal of Applied 
Psychology, 98 (2) (2013): 268-309. https://leeds-faculty.colorado.edu/dahe7472/Park%20and%20Shaw%20Turnover%20rates%20and%20organizational%20performance_%20A%20meta-analysis%202013.pdf.
    \44\ Mahesh Subramony and Brook Holtom, ``The LongTerm Influence 
of Service Employee Attrition on Customer Outcomes and Profits,'' 
Journal of Service Research, 15 (4) (2012): 460-473. https://www.researchgate.net/publication/258158753_The_Long-Term_Influence_of_Service_Employee_Attrition_on_Customer_Outcomes_and_Profits.
---------------------------------------------------------------------------

E. Comments Received Relating to the Economic Analysis

    The Department received various other comments on the impacts 
discussed in this economic analysis. For example, both ABC and PSC 
generally contended that the Department did not provide evidentiary 
support that the rule would actually achieve greater efficiency in 
federal procurement. The Department notes that section IV.D. discusses 
various ways in which the rule is expected to promote increased 
efficiency, such as through reduced turnover and by maintaining 
information security. Additionally, PSC said that the Department did 
not offer any analysis or studies concluding that the potential 
benefits would outweigh the administrative costs that the rule would 
impose on contractors and contracting agencies. They also noted that 
the Department only included studies about the costs of turnover in the 
retail sector, so in light of this comment, the Department has included 
a discussion of additional literature provided by other commenters in 
the above section. Moreover, as noted above, 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. The cost of data security breaches is such a 
cost, with individual data security breaches having the potential for 
widespread private costs where confidential personal information may be 
involved or very difficult to quantify public costs where data breaches 
may involve national security. See, e.g., Protecting Against Nat'l Sec. 
Threats to the Commc'ns Supply Chain Through FCC Programs, 34 F.C.C. 
Rcd. 11423, 11466-67 (2019) (noting that such national security-related 
benefits of data security are particularly hard to quantify).
    One commenter asserted that the true costs of implementing this 
rule are unknown. They state that the cost estimate does not include 
the time it will take successor contractors to track down the 
predecessor contractor's employees. The Department believes that 
because the rule requires the predecessor contractor to provide the 
successor contractor with a list of its employees and their contact 
information, it will not take successor contractors a significant 
amount of time to get in contact with employees. The commenter also 
stated that the cost estimate does not include the ``resources needed 
for contractors (and subcontractors) to onboard the predecessor's SCA 
employees at the last minute.'' The Department believes that any cost 
to onboard predecessor contract employees will be alleviated because 
these workers are already familiar with the work of the contract. The 
successor contractor will therefore save on training costs.

V. Final Regulatory Flexibility Act 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 rules 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. Need for, and Objectives of, the Rule

    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 final rule to implement the directives of 
the Executive order.

B. Comments Received in Response to the Initial Regulatory Flexibility 
Analysis

    The Department received a few comments regarding the rule's impact 
on small businesses. For example, ABC stated that the proposed rule 
would disincentivize small businesses from engaging in federal 
contracting. They requested that DOL provide additional flexibility to 
small business contractors and provide businesses with a Small Entity 
Compliance Guide. Following issuance of this rule, the Department will 
publish a Small Entity Compliance Guide, which will help small entities 
comply with the requirements of Executive Order 14055 and these 
implementing regulations. The Department will also publish 
subregulatory guidance and offer technical assistance to help 
businesses understand and comply with the rule. In its comment, PSC 
stated that ``[w]hile small business employees may be retained by 
successor contractors, small businesses themselves may suffer from 
employee attrition to follow-on successors.'' While predecessor 
contractors of all sizes could see some employee attrition if their 
current employees chose to remain on the contract, the Department notes 
that this rule can be expected to benefit small businesses who are 
successor contractors, because they will gain employees who are already 
familiar with the work of the contract.
    The Chief Counsel for Advocacy of the Small Business Administration 
did not provide a comment on the proposed rulemaking.

C. Estimating the Number of Small Businesses Affected by the Rulemaking

    In order to determine the number of small businesses that will be 
affected by the rulemaking, the Department followed the same 
methodology laid out in section IV.B.1. of the economic analysis.\45\ 
For the data from USASpending.gov, the business determination was based 
on the

[[Page 86791]]

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

    \45\ 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
                    Industry                        NAICS               Small primes from         Small                      Small      subcontractors
                                                              Total      USASpending.gov   subcontractors from    Total      firms           from
                                                                                             USASpending.gov                from SAM    USASpending.gov
--------------------------------------------------------------------------------------------------------------------------------------------------------
Agriculture, forestry, fishing and hunting......        11      2,198               2,198                   0       3,849      3,849                   0
Mining..........................................        21         94                  72                  22         888        866                  22
Utilities.......................................        22        374                 358                  16       1,601      1,585                  16
Construction....................................        23      8,290               4,348               3,942      45,683     41,741               3,942
Manufacturing...................................     31-33      6,621               4,243               2,378      39,631     37,253               2,378
Wholesale trade.................................        42        516                 411                 105      15,810     15,705                 105
Retail trade....................................     44-45        227                 222                   5       7,500      7,495                   5
Transportation and warehousing..................     48-49      2,120               1,989                 131      14,854     14,723                 131
Information.....................................        51      2,352               2,218                 134      11,208     11,074                 134
Finance and insurance...........................        52        179                 154                  25       2,299      2,274                  25
Real estate and rental and leasing..............        53      2,068               2,068                   0       7,654      7,654                   0
Professional, scientific, and technical services        54     24,371              20,164               4,207      90,547     86,340               4,207
Management of companies and enterprises.........        55          0                   0                   0         290        290                   0
Administrative and waste services...............        56     10,251               9,060               1,191      30,932     29,741               1,191
Educational services............................        61      2,224               2,123                 101      11,800     11,699                 101
Health care and social assistance...............        62      4,060               4,054                   6      16,904     16,898                   6
Arts, entertainment, and recreation.............        71        546                 546                   0       3,944      3,944                   0
Accommodation and food services.................        72      2,102               2,098                   4       9,321      9,317                   4
Other services..................................        81      5,504               5,479                  25      14,755     14,730                  25
                                                 -------------------------------------------------------------------------------------------------------
    Total private...............................  ........     74,097              61,805              12,292     329,470    317,178              12,292
--------------------------------------------------------------------------------------------------------------------------------------------------------

D. Compliance Requirements of the Rule, Including Reporting and 
Recordkeeping

    The 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 
nondisplacement contract clause. The rule also requires contracting 
agencies to incorporate the nondisplacement contract clause in 
applicable contracts; ensure contractors provide notices to employees 
on predecessor contracts of their possible right to an offer of 
employment, of agency decisions to except a successor contract from 
nondisplacement requirements, and of employees' opportunity to provide 
information relevant to the location continuity analysis; 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 will 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 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 rule requires a contractor, no less than 30 calendar days 
before completion of the contractor's performance of services on a 
contract, to furnish the contracting officer a list of the names and 
contact information 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 on 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 rule also 
requires a contractor to furnish the contracting officer a certified 
list of the names and contact information 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 Rule on Small Business Firms

    This rule could result in costs for small business firms in the 
form of rule familiarization costs, implementation costs, and 
recordkeeping costs. See section IV.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.\46\ Therefore, the Department has estimated regulatory 
familiarization costs to be $25.13 per small firm ($50.25 per hour x 
0.5 hour).
---------------------------------------------------------------------------

    \46\ 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: https://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 45 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 86792]]

contract clause to be $62.81 per small firm ($50.25 per hour x 1.25 
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 rule could 
each have additional costs of $138.19 in Year 1 ($25.13 + $62.81 + 
$50.25).
    As discussed in section IV.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 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. Regulatory Alternatives and the Impact on Small Entities

    The Department is issuing a 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, in the proposed rule, the 
Department discussed a few specific provisions in which limited 
alternatives could have been possible.
    First, the Department has some discretion in defining the specific 
analysis that must be completed by contracting agencies regarding 
location continuity. The Department considered whether to require 
contracting officers to analyze additional factors when determining 
whether to decline to require location continuity. In the final rule, 
the Department has limited this language to provide a list of factors 
for consideration only when a location change is a possibility, and the 
rule suggests the factors that generally should be considered but does 
not mandate their consideration. In the final rule, the Department also 
has eliminated the proposed requirement that a location continuity 
determination must be made in writing by the Senior Procurement 
Executive, and declined to adopt reconsideration procedures suggested 
by commenters that could have increased the contract administration 
responsibilities of agencies related to location continuity 
determinations. The Department also proposed, but did not adopt, a 
reconsideration procedure for agency exceptions that could have had a 
similar effect. The Department's decisions not to include such 
requirements and procedures reduces the impact of the rule on small 
entities.
    There are also a few places in this rule where the Department has 
developed additional requirements beyond what is set forth 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 added the 
requirement that the successor contractor must generally 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 believes that these clarifications will help small 
businesses comply with the rulemaking.

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 final rule in accordance with 
Executive Order 13132 regarding federalism and determined that it does 
not have federalism implications. The final rule will not have 
substantial direct effects on the States, on the relationship between 
the National Government and the States, or on the distribution of power 
and responsibilities among the various levels of government.

VIII. Executive Order 13175, Indian Tribal Governments

    This final rule will not have tribal implications under Executive 
Order 13175 that would require a tribal summary impact statement. The 
final rule will 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 in 29 CFR Part 9

    Employment, Federal buildings and facilities, Government contracts, 
Law enforcement, Labor.
    For the reasons set out in the preamble, the Department of Labor 
amends Title 29 of the Code of Federal Regulations by adding part 9

PART 9--NONDISPLACEMENT OF QUALIFIED WORKERS UNDER SERVICE 
CONTRACTS

Sec.
Subpart A--General
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.
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).

[[Page 86793]]

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, 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 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 
will 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, must be disposed of only as 
provided by the Secretary of Labor 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.
    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.
    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, temporary interim contracts, 
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; 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.
    Employee means a service employee as defined in the Service 
Contract Act, 41 U.S.C. 6701(3), and its implementing regulations.
    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

[[Page 86794]]

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.
    Same or similar work means work that is either identical to or has 
primary characteristics that are alike in substance to work performed 
on another service contract.
    Secretary means the U.S. Secretary of Labor or an authorized 
representative of the Secretary.
    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 issued or entered on or after the applicability 
date of this part, provided that:
    (1) It is a contract for services covered by the Service Contract 
Act; and
    (2) The prime contract is equal to or exceeds the simplified 
acquisition threshold as defined in 41 U.S.C. 134.
    (b) 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 described in Sec.  9.11(a), and contractors on such contracts 
must comply with all the requirements of Sec.  9.12 unless the contract 
is excluded or excepted under this part.
    (c) Contracts and solicitations that satisfy the requirements of 
paragraph (a) of this section, but do not succeed a contract for 
performance of the same or similar work, must contain the contract 
clause described in Sec.  9.11(a), and all contractors on such 
contracts must comply with the requirements of Sec.  9.12(a)(4), (e), 
(f), and (g), unless the contract is excluded or excepted under this 
part.


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 Executive Order 14055 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. Where an agency 
determines that a prime contract is excepted under this section, the 
nondisplacement requirements will also not apply to any subcontracts 
under the excepted prime contract. For indefinite-delivery-indefinite-
quantity (IDIQ) contracts, an exception must be granted prior to the 
solicitation date if the basis for the exception cited would apply to 
all orders. Otherwise, exceptions must be granted for each order by the 
time of the notice of the intent to place an order.
    (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

[[Page 86795]]

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:
    (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. Where an incumbent contractor's employees are covered 
by a collective bargaining agreement, the contracting agency must, to 
the extent consistent with mission security, include the employees' 
representative in any market-research-related exchanges with industry 
that are specific to the nondisplacement requirement. 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 it is coupled with the finding 
that the reduction would not allow for adequate competition at a fair 
and reasonable price and adhering to the requirements of the order 
would not be reasonably tailored to the agency's needs. When 
determining whether a fair and reasonable price can be achieved, the 
agency must consider current market conditions and the extent to which 
price fluctuations may be attributable to factors other than the 
nondisplacement requirements (e.g., costs of labor or materials, supply 
chain costs). 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) 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 Federal Acquisition Regulation (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) Notices. 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), and, where relevant, notice to 
employees' representatives consistent with the provisions of Sec.  
9.11(c)(4) (relating to the location continuity analysis), and Sec.  
9.5(f) (relating to agency exceptions).
    (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

[[Page 86796]]

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) When there is a possibility that the successor contract could 
be performed in a locality other than where the predecessor contract 
has been performed, and a location change is under consideration, an 
agency's location-continuity analysis should generally include, but not 
be limited to, the following considerations:
    (i) Whether factors specific to the contract at issue suggest that 
the employment of a new workforce at a new location would increase the 
potential for disruption to the delivery of services during the period 
of transition between contracts (e.g., the large size of workforce to 
be replaced or the relatively significant level of experience or 
training of the predecessor workforce);
    (ii) Whether factors specific to the contract at issue suggest that 
the employment of a new workforce at a new location would unnecessarily 
increase physical or informational security risks on the contract 
(e.g., whether workers on the contract have had and will have access to 
sensitive, privileged, or classified information);
    (iii) Whether the workforce on the predecessor contract has 
demonstrated prior successful performance of contract objectives so as 
to warrant a preference to retain as much of the current workforce as 
possible; and
    (iv) Whether program-specific statutory or regulatory requirements 
govern the method through which the location of contract performance 
must be determined or evaluated, or other contract-specific factors 
favor the performance of the contract in a particular location.
    (4) Agencies must complete the location-continuity analysis 
required under paragraph (c)(1) of this section prior to the date of 
issuance of the solicitation. Where an incumbent contractor's employees 
are covered by a collective bargaining agreement and a contract 
location change is possible and under consideration, the agency must, 
to the extent consistent with mission security, provide the employees 
with an opportunity prior to the issuance of the solicitation to submit 
information relevant to this analysis. Under such circumstances, the 
agency must, at the earliest reasonable time in the acquisition 
planning process, direct the incumbent contractor to notify the 
collective bargaining representative(s) for the affected employees of 
the appropriate method to communicate such information.
    (i) Method of notice. Agencies must direct the incumbent contractor 
to provide notice in the manner set forth in this paragraph. The 
contractor must provide written notice directly to the employees' 
representative in the same manner customarily used by the contractor to 
communicate with the representative.
    (ii) Model notice. Agencies may use the following sample language 
as a basis in preparing their own notices regarding location 
continuity: Notice to Employees Regarding Location Continuity of 
Federal Contract Services. The contract for [insert type of service] 
services currently performed by [insert name of incumbent contractor] 
is scheduled to expire on [insert date]. [Insert name of contracting 
agency] is currently preparing a [insert type of solicitation] for a 
new contract for the provision of these services. As part of the 
acquisition planning process, [insert name of contracting agency] is 
considering whether to require or include a preference that these 
services continue to be performed in the same locality. If you have 
information regarding the provision of these services that would be 
relevant to this location continuity analysis, please contact [insert 
name of contracting agency contact] at [insert email address]. Before 
completion of the [insert name of incumbent contractor] contract, a 
subsequent notice will be provided to employees regarding the rights of 
certain service employees on the current contract to an offer of 
employment on any successor contract that is awarded. For additional 
information, contact the Wage and Hour Division of the United States 
Department of Labor at 1-866-4US-WAGE (1-866-487-9243), https://www.dol.gov/agencies/whd. If you are deaf, hard of hearing, or have a 
speech disability, please dial 7-1-1 to access telecommunications relay 
services.
    (5) 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

[[Page 86797]]

incorporate the contract clause in 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 require retroactive application of the contract 
clause to the commencement of performance under the contract or other 
date the Administrator determines to be appropriate. In determining 
whether retroactive application is appropriate, the Administrator will 
consider, among other factors, whether retroactive application would 
result in an overly onerous administrative or economic burden on the 
contracting agency that may constitute a severe disruption in the 
agency's procurement practices.


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 in this part, 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 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 service employee. 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 
(e.g., 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 to conclude an employee is unqualified solely because, despite 
an employee's reasonable efforts to do so, 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, offer 
employment to each employee. See also paragraph (f) of this section, 
Recordkeeping. Where written offers are not delivered 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 
offers with changes to pay, benefits, or terms and conditions

[[Page 86798]]

such as the option of remote work, provided that these changes were not 
made to discourage acceptance of the offer. 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 
generally 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) Post-award incorporation of omitted 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 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 of an employment opening 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 in 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 
working 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 
working 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 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. 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.
    (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 
clearly warranting termination prior to the expiration of the contract, 
but the termination process was not completed before the contract 
expired. Written evidence related to disciplinary action taken without 
a recommendation of termination may constitute reliable evidence of 
just cause to discharge the employee, depending on the specific facts 
and circumstances.
    (B) [Reserved].
    (4) Nonfederal work. (i) A successor contractor or subcontractor is 
not required to offer employment to any employee hired to work under a 
predecessor's Federal service contract and one or more nonfederal 
service contracts as part of a single job, provided that the employee 
was not deployed in a manner that was designed to avoid the purposes of 
this part.
    (ii) The successor contractor must presume that no employees 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 a 
manner 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

[[Page 86799]]

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, 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 to 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, mailing 
addresses, and if known, phone numbers and email addresses 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 on 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 but must also include the mailing address, and if known, 
phone numbers and email addresses of the workers.
    (2) Certified list of employees provided 10 business 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 business days before 
completion of the contractor's performance of services on a contract, 
furnish the contracting officer with a certified list of the names, 
mailing addresses, and if known, phone numbers and email addresses of 
all service employees employed within the last month of contract 
performance. The list must also contain anniversary dates of employment 
of each service employee on 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 but must also include the mailing addresses, and 
if known, phone numbers and email addresses of the workers.
    (3) Notices to employees of possible right to offers of employment 
on successor contract. 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

[[Page 86800]]

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. Another form with the same information can be used. 
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. These notice 
requirements are in addition to the notice provisions listed at Sec.  
9.5(f) (relating to agency exceptions) and Sec.  9.11(c) (relating to 
location continuity).
    (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, including the date of the offer.
    (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 any employee list 
received from the contracting agency and any 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 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(f) and section 6(b) of the order; and notices 
to workers and their representatives of the opportunity to provide 
information relevant to the contracting agency's location-continuity 
determination in the solicitation for a successor contract pursuant to 
Sec.  9.11(c)(4).
    (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 
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 nondisplacement contract clause 
contained in Appendix A or the FAR, as appropriate. The contractor or 
subcontractor must also insert a clause in any subcontracts to require 
the subcontractor to include the Appendix A or FAR contract clause 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 the event of any violations of the contract 
clause, 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 (WHD) 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 WHD. No particular form of 
complaint is required. A complaint may be filed orally or in writing. 
The WHD 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 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.

[[Page 86801]]

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 must 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 
may, at their discretion, and must 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) Notification to a contractor of the withholding of funds. If 
the Administrator directs a contracting agency to 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 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); contractors, 
including the prime contractor if a subcontractor is implicated; 
contractor representative(s); and the contracting officer by registered 
or certified mail to the last known address or by any other means 
normally ensuring 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 ensuring 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

[[Page 86802]]

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 ensuring 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).
    (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 days of the 
determination of the Administrator. The request for a hearing may be 
sent by mail or by any other means normally ensuring delivery and must 
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 Administrator of the Wage and Hour Division; 
and the Associate Solicitor, Division of Fair Labor Standards, Office 
of the Solicitor, U.S. Department of Labor, 200 Constitution Avenue NW, 
Washington, DC 20210.
    (ii) By the complainant. The complainant or any other interested 
party may request a hearing where the Administrator determines, after 
investigation, that 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 must 
refer to the specific findings of fact, conclusions of law, or order at 
issue.
    (B) Service. Copies of the petition and all briefs must be served 
on the Administrator, Wage and Hour Division, and on the Associate 
Solicitor, Division of Fair Labor Standards, Office of the Solicitor, 
U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 
20210.
    (C) Effect of filing. If a timely request for hearing or petition 
for review is filed, the determination of the Administrator or the 
decision of the Administrative Law Judge 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 order of the Secretary. If a petition for review 
concerns only the imposition of ineligibility sanctions, however, the 
remainder of the decision will 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 will 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

[[Page 86803]]

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 must 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, must 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, will 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, will not apply. Rules or principles designed to ensure 
production of the most probative evidence available will 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 must 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).


Sec.  9.35  Administrative Review Board proceedings.

    (a) Authority--(1) General. The 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).
    (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 is 
to be construed so as to continue to give the maximum effect to the 
provision permitted by law, unless such holding will be one of utter 
invalidity or unenforceability, in which event the provision will be 
severable from this part and will not affect the remainder thereof.

Appendix A to Part 9--Contract Clause

    The following clause must be included by the contracting agency 
in every contract 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) of this clause, 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

[[Page 86804]]

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) of this 
clause, 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, mailing addresses, and if known, phone numbers and email 
addresses 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) of this clause 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 must, 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, mailing addresses, and if known, phone numbers and email 
addresses 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. Where changes to the workforce are made after the 
submission of the certified list described in this paragraph (f)(1) 
of this clause, the contractor must, in accordance with paragraph 
(c) of this clause, 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, 
mailing addresses, and if known, phone numbers and email addresses 
of all service employees employed within the last month of contract 
performance. The updated 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. Only contractors experiencing a 
change in their workforce between the 30- and 10-day periods will 
have to submit a list in accordance with paragraph (c) of this 
clause.
    (2) The contracting officer must 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 and 
mailing addresses of service employees working under the contract 
and its subcontracts during the last month of contract performance 
in accordance with 29 CFR part 9, the contracting officer may, at 
their discretion, and must 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) 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. The contractor further agrees to provide 
notifications to employees under the contract, and their 
representatives, if any, in the timeframes and methods 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, and to notify them of 
the opportunity to provide information relevant to the contracting 
agency's location-continuity determination in the solicitation for a 
successor contract.
    (g) The contractor and subcontractors must 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.
    (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 must 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 must 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 must make records 
requested by such official(s) available for inspection, copying, or 
transcription upon request.
    (i) Disputes concerning the requirements of this clause will not 
be subject to the general disputes clause of this contract. Such 
disputes will 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.
    (j) Nothing in this clause will relieve a contractor or 
subcontractor of any obligation under the HUBZone program statute, 
15 U.S.C. 657a, the Javits-Wagner-O'Day Act, 41 U.S.C. 8501-8506, 
the Randolph-Sheppard Act, 20 U.S.C. 107. The provisions of those 
laws must be satisfied in tandem with and,

[[Page 86805]]

if necessary, prior to, the requirements of Executive Order 14055, 
29 CFR part 9, and this clause. Thus, any contractor or 
subcontractor operating under a contract awarded on the basis of a 
HUBZone preference, 41 U.S.C. 657a(c); operating pursuant to the 
Javits-Wagner-O'Day Act, 41 U.S.C. 8501-8506; or operating pursuant 
to agreements for vending facilities entered into pursuant to the 
regulations establishing a priority for individuals who are blind 
issued under the Randolph-Sheppard Act, 20 U.S.C. 107, must ensure 
that it complies with the statutory and regulatory requirements of 
the relevant program. Such contractor or subcontractor must, 
whenever possible, also comply with requirements of this clause, 
Executive Order 14055, and 29 CFR part 9, to the extent that such 
compliance would not result in a violation of the requirements of 
the relevant program.

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, in writing, 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.
    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.
    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), 
https://www.dol.gov/agencies/whd. If you are deaf, hard of hearing, 
or have a speech disability, please dial 7-1-1 to access 
telecommunications relay services.

Jessica Looman,
Administrator, Wage and Hour Division.
[FR Doc. 2023-27072 Filed 12-13-23; 8:45 am]
BILLING CODE 4510-27-P