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Nondisplacement of Qualified Workers Under Service Contracts Rule is Back

03 Apr

Update Applicable to:Effective date
All employers with a service contract after the effective dateFebruary 12, 2024

What happened?

On December 14, 2023, the Department of Labor (DOL) published its final rule to implement Executive Order 14055, “Nondisplacement of Qualified Workers Under Service Contracts.” 

What are the details?

Although contractors will largely be familiar with the requirements under the Rule, as it generally reinstates the Nondisplacement rule that was in effect during the Obama Administration, there are a few notable differences. Requirements apply across all tiers of SCA-covered contracts and subcontracts, and the FAR clause that will be issued under the Rule will be a mandatory flow down clause. 

The rules include the following limitations:

  • The requirements do not apply to SCA contracts that are for less than $250,000.
  • Only applies to offers made to service employees as defined under the SCA (i.e., an individual engaged in the performance of an SCA-covered contract, excluding individuals employed in a bona fide executive, administrative, or professional capacity).
  • The requirements only extend to offers made to employees who are qualified and can perform suitably under the successor contract.
  • A successor contractor is not required to make offers to all the employees of a predecessor contract if the successor contractor has proposed to utilize a smaller workforce than the predecessor contractor.
  • Other requirements here.

One of the most important changes is that the predecessor must make offers where required by the Rule to employees working in another geographic location, as well as those working remotely, and if he wishes to forgo making an employment offer to a predecessor employee it must have reliable evidence that it would have just cause to discharge the employee; which in practice means that it will be nearly impossible avoiding to make an offer to a qualified predecessor employee.

The DOL will investigate alleged violations of the Rule based on the department’s initiative or oral or written complaints. 

Business Considerations

  • Conduct an audit of your policies and practices to incorporate the new requirements.
  • Contractors should be prepared to navigate the broadened scope of the new requirements
  • Contractors performing service contracts should consider their service employee workforce options and hiring processes when bidding on successor SCA-covered contracts. 


Source References

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