Biden Re-Establishes Non-Displacement Executive Order for SCA Contractors
On November 18, 2021, President Biden issued Executive Order 14055 that requires successor contractors under federal government service contracts to offer employment to certain employees of the predecessor contractor whose employment would otherwise be terminated as a result of the predecessor’s loss of the contract. Executive Order 14055 reinstates provisions of Executive Order 13495, which was issued under the Obama administration but revoked by President Trump in 2019.
The Executive Order applies to contracts covered by the Service Contract Act (SCA). A successor contractor who obtains an SCA-covered contract must provide the predecessor’s employees the option to continue working on the successor contract, before staffing the contract with other employees (commonly referred to as a “right of first refusal”). Successor contractors must give predecessor employees a minimum of 10 business days to accept the offer of employment. To ensure predecessor employees receive a right of first refusal, the predecessor contractor is required to provide a list of all SCA employees, working under the contract within the last month of the contract term, at least 10 business days prior to the end of the contract. The list must also include the anniversary dates of the covered employees.
The non-displacement requirement applies only to SCA-defined “service employees,” and therefore will generally encompass only employees who are non-exempt under the Fair Labor Standards Act. In an interesting departure from the Obama-era executive order, however, Executive Order 14055 does not exclude managerial and supervisory employees from the right of first refusal. The order does retain the Obama-era order’s exceptions for employees who perform work on both federal and commercial contracts and employees for whom the successor contractor reasonably believes, based on evidence of the employee’s past performance, there would be just cause for the employee’s termination.
The Executive Order instructs the Department of Labor to issue regulations implementing the non-displacement requirement. We expect that the forthcoming regulations will mirror the Department of Labor’s prior regulations implementing Executive Order 13495, which were the subject of some controversy upon their issuance.