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ABC Urges DOL to Withdraw Rule on Nondisplacement of Qualified Workers Under Service Contracts

August 24, 2022

On Aug. 15, ABC submitted comments to the U.S. Department of Labor identifying a number of concerns with its proposed rule on Nondisplacement of Qualified Workers Under Service Contracts, which would implement Executive Order 14055. Issued on Nov. 18, 2021, by President Biden, the EO requires that federal agencies include a clause about nondisplacement of workers in solicitations and contracts for projects covered by the McNamara-O’Hara Service Contract Act of 1965. The required clause states that successor contractors and subcontractors who win a bid for covered work must offer qualified employees employed under the predecessor contract a right of first refusal of employment under the successor contract.

In its comments, ABC urged the DOL to withdraw the rule in its entirety. The comments state, “ABC is concerned that, as written, the NPRM conflicts with the plain language of the SCA, which does not authorize the DOL, or the president, to require contractors to hire the incumbent employees of predecessor contractors on projects covered by the SCA. Two courts have so held without contradiction by Congress or by any other courts. In each of these cases, the courts rejected efforts by employees and/or labor organizations to assert preferential hiring rights for incumbent employees under the Act.

“In addition to and apart from the above conflict between the NPRM and the governing statute, ABC is also concerned that the proposal would create gross inefficiencies in the procurement process and would disproportionately impact small contractors and subcontractors through the imposition of additional regulatory burdens and substantial costs of compliance.” According to the NPRM, the total number of potentially affected small firms ranges from 74,097 to 329,470.

Further, “ABC observes that neither the EO nor the proposed rule contains any evidentiary support for the claim that the proposed changes will actually achieve greater efficiency in federal procurement. As is evident from the discussion of specific provisions of the NPRM, the proposed rule is likely to create greater inefficiencies as successor contractors are forced to employ workers who are not familiar with the often-different work practices that the successors may wish to implement. Thus, the cost savings that an agency may seek to achieve by hiring a new contractor will be lost or unobtainable if the successor is not allowed to bring its own uniquely qualified workforce onto the project.”

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