SCA Update: Labor Finalizes Mandatory Hiring Rule

Follow-On Contractors Must Hire Eligible Incumbent’s Employees

In the latest chapter in the political tug-of-war over hiring displaced workers, the Dept. of Labor has published a final rule requiring follow-on contractors to give the right of first refusal to incumbent contractor’s employees on SCA-covered contracts.

After 42, 3-columned pages of discussion and explanation, the Labor rule implements Executive Order 13495 signed by President Obama early in 2009. A similar Executive Order was put in place under President Clinton in 1994, but subsequently rescinded by President Bush in 2001. While of similar intent, the new EO is broader, covering all service contracts covered by SCA and their subcontracts.

In a nutshell, the rule requires a successor contractor and its subcontractors to offer a right of first refusal of employment to qualified service employees who are employed under the predecessor contract and whose employment would otherwise be terminated as a result of the award of the successor contract. (You can read the full rule at

Agency procurement executives have the authority to exempt contracts from the requirement if they think it is in the best interest of the government to do so, but the exemption must be declared and justified prior to the publication of the solicitation. Some agency comments argued against this timing, saying that making this decision up front denies the agency the opportunity to factor contractor bid/proposal responses – which could introduce cost savings — into the justification. If the exemption is not in place at the time the solicitation is publicized, or if agency fails to follow the proper procedures, the exemption is forfeited.

When an exemption is declared, contractors who potentially will be affected and their labor unions must be notified within 5 days of the solicitation publication. Likewise, contractors who will potentially be offered employment under the rule must also be notified. The final version of the rule shifts the burden of notification from the CO to the incumbent contractor, but the CO still is tasked with making sure the contractor is in compliance. Specifically, “The Contracting Officer will ensure that the predecessor contractor provides written notice to service employees of the predecessor contractor of their possible right to an offer of employment. Such notice shall be either posted in a conspicuous place at the worksite or delivered to the employees individually.” CO’s must also ensure:

• The predecessor makes accurate employee lists available to the incoming contractor for purposes of notification, and that employees who would otherwise be terminated are offered right of first refusal.
• Waiver notices are issued to employees and their union representatives in a timely manner.
• Reports of non-compliance from employees are acknowledged and that employees and contractors are advised on courses of corrective action. If corrective action is not taken or does not result in compliance, the CO must report the issue to DOL.

Contractors face fines, restitution and debarment for non-compliance. These changes will take effect when implemented by the FAR Council.

What are your thoughts on the new rule? Join the discussion on this blog.

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