Nondisplacement of Qualified Workers Under Service Contracts

Federal RegisterJul 15, 2022

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DEPARTMENT OF LABOR

Wage and Hour Division

29 CFR Part 9

RIN 1235-AA42

Nondisplacement of Qualified Workers Under Service Contracts

AGENCY:

Wage and Hour Division, Department of Labor.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Department of Labor (Department) proposes regulations to implement Executive Order 14055, Nondisplacement of Qualified Workers Under Service Contracts, signed by President Joseph R. Biden, Jr. on November 18, 2021. The order establishes a general policy of the Federal Government that service contracts which succeed contracts for the same or similar services, and solicitations for such contracts, shall include a non-displacement clause. The non-displacement clause requires the contractor and its subcontractors to offer qualified employees employed under the predecessor contract a right of first refusal of employment under the successor contract. The Executive order also directs the Secretary of Labor (Secretary) to issue regulations to implement the requirements of this order. The order further directs that within 60 days of the Secretary issuing final regulations, the Federal Acquisition Regulatory Council (FAR Council) shall amend the Federal Acquisition Regulation (FAR) to provide for inclusion of the clause in section 3 of the order. Finally, the order requires the Director of the Office of Management and Budget (OMB) to issue guidance to implement section 6(c) of this order.

DATES:

Interested persons are invited to submit written comments on this notice of proposed rulemaking (NPRM) on or before August 15, 2022.

ADDRESSES:

You may submit comments, identified by Regulatory Information Number (RIN) 1235-AA42, by either of the following methods:

•

Electronic Comments:

Submit comments through the Federal eRulemaking Portal at

https://www.regulations.gov.

Follow the instructions for submitting comments.

•

Mail:

Address written submissions to: 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.

Instructions:

Please submit only one copy of your comments by only one method. Of the two methods, the Department strongly recommends that commenters submit their comments electronically via

https://www.regulations.gov

to ensure timely receipt prior to the close of the comment period, as the Department continues to experience delays in the receipt of mail. All comments must be received by 11:59 p.m. ET on August 15, 2022, for consideration in this rulemaking; comments received after the comment period closes will not be considered.

Commenters submitting file attachments on

https://www.regulations.gov

are advised that uploading text-recognized documents—

i.e.,

documents in a native file format or documents which have undergone optical character recognition (OCR)—enable staff at the Department to more easily search and retrieve specific content included in your comment for consideration. This recommendation applies particularly to mass comment submissions, when a single sponsoring individual or organization submits multiple comments on behalf of members or other affiliated third parties. The Wage and Hour Division (WHD) posts such comments as a group under a single document ID number on

https://www.regulations.gov.

Anyone who submits a comment (including duplicate comments) should understand and expect that the comment will become a matter of public record and will be posted without change to

https://www.regulations.gov,

including any personal information provided. Accordingly, the Department requests that no business proprietary information, copyrighted information, or personally identifiable information be submitted in response to this NPRM.

Docket:

For access to the docket to read background documents or comments, go to the Federal eRulemaking Portal at

https://www.regulations.gov.

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 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////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) 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 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 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 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 66398. The list must also contain anniversary dates of employment of each service employee under 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 of Labor, 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 of Labor, 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 of Labor 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 must 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 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 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 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 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 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 66399. In addition, to the extent consistent with law, the FAR Council is to amend the 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 Department. 86 FR 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 66399-66400. Neither an order for debarment of any contractor or subcontractor from further Federal 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 66400. Section 8 also specifies that Executive Order 14055 creates no rights under the Contract Disputes Act, 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.

Id.

Section 9 of Executive Order 14055 revokes Executive Order 13897 of October 31, 2019, which itself rescinded Executive Order 13495 of January 30, 2009, Nondisplacement of Qualified Workers Under Service Contracts. 86 FR 66400.

See also

84 FR 59709 (Nov. 5, 2019); 74 FR 6103 (Jan. 30, 2009). It also explains that Executive Order 13495 remains rescinded. 86 FR 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 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 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 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. 86 FR 66401.

Prior Relevant Executive Orders

As indicated, section 9 of Executive Order 14055 revoked Executive Order 13897, which itself rescinded 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, and per Executive Order 13897, rescinded them 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. 86 FR 66398, 74 FR 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.

Id.

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 Executive Order 14055 does not include a requirement that the successor contract be 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 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 exists with respect to that contract that would warrant exception from the requirements of the order. 86 FR 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, agencies are required 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 6104.

II. Discussion of Proposed Rule

A. Legal Authority

President Biden issued Executive Order 14055 pursuant to his authority under “the Constitution and the laws of the United States,” expressly including the Procurement Act, 40 U.S.C. 101

et seq.

86 FR 66397. The Procurement Act authorizes the President to “prescribe policies and directives that the President considers necessary to carry out” the statutory purposes of ensuring “economical and efficient” government procurement and administration of government property. 40 U.S.C. 101, 121(a). Executive Order 14055 directs the Secretary to issue regulations to “implement the requirements of this order.” 86 FR 66399. The Secretary has delegated his 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).

B. Overview of the Proposed Rule

This NPRM, which proposes to amend Title 29 of the CFR by adding part 9, proposes standards and procedures for implementing and enforcing Executive Order 14055. Proposed 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. Proposed subpart B establishes requirements for contracting agencies and contractors to comply with the Executive order. Proposed subpart C specifies standards and procedures related to complaint intake, investigations, and remedies. Proposed subpart D specifies standards and procedures related to administrative enforcement proceedings.

The following section-by-section discussion of this proposed rule presents the contents of each section in more detail. The Department invites comments on the issues addressed in this NPRM.

Part 9 Subpart A—General

Proposed 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.

Section 9.1 Purpose and Scope

Proposed § 9.1(a) explains that the purpose of the proposed rule is to implement Executive Order 14055. The paragraph emphasizes that the Executive order assigns enforcement responsibility for the nondisplacement requirements to the Department.

Proposed § 9.1(b) explains the underlying policy of Executive Order 14055. First, the paragraph repeats 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. The proposed rule elaborates 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 § 9.1(b) further explains 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 be terminated as a result of the award of the successor contract in positions for which the employees are qualified. Proposed § 9.1(b) also clarifies 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 § 9.1(c) outlines the scope of this proposal and provides 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 restates 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, shall be disposed of only as provided by the Secretary in regulations issued under the Executive order. This paragraph also clarifies that neither the Executive order nor the proposed rule 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.

Section 9.2 Definitions

Proposed § 9.2 defines 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 notes that, while the proposed definitions discussed in this proposed rule would govern the implementation and enforcement of Executive Order 14055, nothing in the proposed rule is 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 proposes to define

agency

to mean an executive department or agency, including an independent establishment subject to the Procurement Act.

See

86 FR 66397. As used in its definition of

agency,

the Department proposes to define executive departments and agencies by adopting the definition of executive agency provided 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. This proposed definition would include independent regulatory agencies.

The Department proposes 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. Consistent with section 2(a) of the Executive order, the Department proposes to define

contract

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. 86 FR 66397.

The Department proposes to substantially adopt the definition of

contracting officer

in section 2.101 of the FAR, which means an agency official with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings. The term includes 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 proposes 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 notes 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. This proposed definition incorporates 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 notes that the fact that an individual or entity is a

contractor

under the Department's definition does not mean that such an entity has legal obligations under the Executive order. A contractor only has obligations under the Executive order if it has a service contract with the Federal Government that is covered by the order. Thus, an entity that is awarded a service contract with the Federal Government will qualify as a “contractor” pursuant to the Department's definition, but that entity will only be subject to the nondisplacement requirements of the Executive order in connection with a particular contract if such contractor is awarded or otherwise enters into a covered contract for the same or similar services as an existing service contract, as described in proposed § 9.3, for a solicitation issued after the effective date of the FAR Council's amendment of the FAR in accordance with section 7(b) of Executive Order 14055.

The Department proposes to define

business day

as Monday through Friday, except Federal holidays declared under 5 U.S.C. 6103 or by executive order.

Consistent with the definition provided in Executive Order 14055, the Department proposes to define

employee

to mean a service employee as defined in the McNamara-O'Hara Service Contract Act of 1965, as amended, 41 U.S.C. 6701(3). 86 FR 66397. Accordingly,

employee

“means an individual engaged in the performance of” an SCA-covered contract. 41 U.S.C. 6701(3)(A). The term

employee

“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 identified as an independent contractor on the contract. The term “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. 41 U.S.C. 6701(3)(B)-(C).

The Department proposes to define

employment opening

to mean any vacancy in a service employee position on the successor contract. This is consistent with the definition of

employment opening

in the regulations that implemented Executive Order 13495.

The Department proposes 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 is 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

includes 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 includes 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 does not include the District of Columbia or any Territory or possession of the United States.

The Department proposes to define

month

under the Executive order as a period of 30 consecutive calendar days, regardless of the day of the calendar month on which it begins. The Department believes defining the term will clarify how to address partial months and will balance calendar months of different lengths. This is consistent with the definition of

month

in the regulations that implemented Executive Order 13495.

The Department proposes 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 a prime 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.

The Department proposes to define the term

Service Contract Act

(SCA) 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 4.1a(a).

The Department proposes 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 proposes 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 proposes 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 is 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).

Finally, the Department proposes to adopt the definitions of the terms

Administrative Review Board, Administrator, Office of Administrative Law Judges, Secretary,

and

Wage and Hour Division

set forth in the regulations that implemented Executive Order 13495.

Section 9.3 Coverage

Proposed § 9.3 addresses the coverage provisions of Executive Order 14055. Proposed § 9.3 explains 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 that succeed a contract for performance of the same or similar work, and solicitations for such contracts and subcontracts, include a clause specifying that the successor contractor and its subcontractors must, except as otherwise provided in the order, in good faith offer 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 or the expiration of the contract under which the employees were hired, a right of first refusal of employment under the successor contract in positions for which those employees are qualified. Section 2 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 specifies that the order would not apply to contracts under the simplified acquisition threshold as defined in 41 U.S.C. 134.

Proposed § 9.3 would implement these coverage provisions by stating in proposed § 9.3(a) 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 § 9.3(b) would require all contracts that satisfy the requirements of proposed § 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 requirements of paragraphs (e), (f), and (g) of proposed § 9.12. Proposed § 9.3(c) would require all contracts that satisfy the requirements of proposed § 9.3(a) and that also succeed a contract for performance of the same or similar work, to contain the contract clause set forth at Appendix A, and all contractors on such contracts to comply, without limitation, with all the requirements of proposed § 9.12. Several issues relating to the coverage provisions of the Executive order and proposed § 9.3 are discussed below.

Coverage of Executive Departments and Agencies

Executive Order 14055 would apply to contracts and solicitations for contracts with the Federal Government that meet the requirements of § 9.3. The Department proposes 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.”

See

§ 9.2. Consistent with section 2(c) of the Executive order, the Department proposes to define agency as all “[e]xecutive department[s] and agenc[ies], including independent establishment[s] subject to the Federal Property and Administrative Services Act, 40 U.S.C. 102(4)(A).” As used in its definition of agency, the Department proposes to define executive departments and agencies by adopting the definition of executive agency provided in section 2.101 of the FAR. 48 CFR 2.101. The proposed rule therefore would interpret the Executive order as applying 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. This proposed definition would 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. 121,

et seq.

Thus, for example, contracts awarded by the U.S. Postal Service would not be 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 executive departments and agencies, contracts awarded by the District of Columbia and any Territory or possession of the United States would not be covered by the order.

Coverage of Contracts

Proposed § 9.3(a) provides that the requirements of the Executive order generally would apply to “any contract or solicitation for a contract with the Federal Government.” 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 Service Contract Act of 1965, as amended, 41 U.S.C. 6701

et seq.,

and its implementing regulations.” The Department proposes 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.”

In re Cradle of Forestry in Am. Interpretive Ass'n,

No. 99-035, 2001 WL 32813, at *3 (ARB Mar. 30, 2001) (quoting Restatement (Second) of Contracts

section 1 (Am. L. Inst. 1979)). 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 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., id.;

29 CFR 4.110, the Department views the term “contract-like instrument” as not expanding the scope of coverage under Executive Order 14055, but rather as simply reinforcing the breadth of contract coverage under the SCA.

Proposed § 9.3(a) also provides that part 9 would apply to “any . . . solicitation for a contract” that meets the requirements of proposed § 9.3(a). The Department proposes to define solicitation in § 9.2 to mean “any request to submit offers, bids, or quotations to the Federal Government.” 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 would not be “solicitations” for purposes of the Executive order. If the solicitation is for a contract that would be covered by part 9, then the solicitation would also be covered.

Consistent with section 2(a) of Executive Order 14055, proposed § 9.3(a)(1) clarifies 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 or the District of Columbia” 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, so long as the principal purpose of the contract is to provide services through the use of service employees.

See, e.g.,

29 CFR 4.130(a). 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.

Coverage of the SCA, 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 Fair Labor Standards Act's (FLSA) regulations at 29 CFR part 541. Similarly, a contract for professional services performed essentially by bona fide professional employees, with the use of service employees being only a minor factor in contract performance, is not covered by the SCA and thus would not be covered by the Executive order or part 9.

See

41 U.S.C. 6702(a)(3); 29 CFR 4.113(a) and 4.156; WHD Field Operations Handbook (FOH) ¶¶ 14b05, 14c07.

Coverage of Contracts Above the Simplified Acquisition Threshold

Proposed § 9.3(a)(2) provides 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 proposes that all subcontracts for services, regardless of size, would be covered by part 9 if the prime contract meets the coverage requirements of § 9.3. The Department notes, however, that 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 is seeking comment from the public on the potential impact, including any unintended consequences, of covering subcontracts below the simplified acquisition threshold.

Coverage of Successor Contracts

Proposed § 9.3(c) provides requirements that would apply only to contracts that satisfy the requirements of paragraph (a) of proposed § 9.3 and that “

succeed

at contract for performance of the same or similar work[.]” (emphasis added). 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 after a fixed period of time or is terminated. In contrast, when a term of an existing contract is simply extended pursuant to an option clause, and no solicitation is issued for a follow-on contract, the original contract is not considered expired, the extended term of the contract is not 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 would consider 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 proposed § 9.3(a). Thus, for example, when the term of a contract ends and a follow-on contract is awarded as a result of a solicitation, a predecessor-successor relationship would exist for purposes of Executive Order 14055 if the two contracts were for the same or similar work. Similarly, if a contract is terminated, a solicitation for a follow-on contract is issued and the follow-on contract is awarded, a predecessor-successor relationship would exist for purposes of Executive Order 14055, again if the two contracts were for the same or similar work. The identity of the contractor awarded the successor contract would 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 would apply. Similarly, the successor contract would not need to be awarded by the same contracting agency as the predecessor contract in order to be covered by the Executive order and this part.

Coverage of Contracts for Same or Similar Work

Consistent with section 3 of Executive Order 14055, proposed § 9.3(c) would require successor contracts that satisfy the requirements of paragraph (a) of proposed § 9.3 and that are for “performance of the same or similar work” to meet additional requirements of part 9. As explained in the discussion of proposed § 9.2, the Department proposes to define 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 by the Federal Government or a contractor on a Federal service contract.” This definition would require the work under the successor contract to, at a minimum, share the characteristics essential to the work to be 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.

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 that requires many of the same job classifications as the predecessor contract, the work on the successor contract would be considered to be “same or similar work.” This would be 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 in order 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 in order to determine whether the prior and new contracts involve the same or similar services. 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.

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 notes 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. However, the Executive order does not apply to non-service subcontracts between a subcontractor and a prime contractor for use on a covered Federal contract. 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.

Geographic Scope

The Executive Order and this part would only apply to contracts with the Federal Government requiring performance in whole or in part within the United States, which is defined to mean, when used in a geographic sense, 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 this part would 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 this part, the order and this part would apply to the contract and require a right of first refusal for any workers that 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 would not be covered by the order, as neither the District of Columbia nor any Territory or possession of the United States would constitute an executive department or agency under this part.

Section 9.4 Exclusions

Pursuant to section 5(a) of Executive Order 14055, proposed § 9.4(a) addresses 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. The proposed regulations would omit that amount from the regulatory text in the event that a future statutory amendment changes the amount. Any such change would automatically apply to contracts subject to part 9.

Proposed § 9.4(a)(2) clarifies that the exclusion provision at § 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, section 5(a) of Executive Order 14055 excludes only “contracts under the simplified acquisition threshold[.]” This language differs from Executive Order 13495, which excluded “contracts

or subcontracts

under the simplified acquisition threshold” (emphasis added). Accordingly, proposed § 9.4(a)(2) explains that subcontracts would be excluded under § 9.4(a)(1) only if the prime contract is under the simplified acquisition threshold, but, as explained above, the Department is seeking comment from the public on the potential impact, including any unintended consequences, of covering subcontracts below the simplified acquisition threshold.

Proposed § 9.4(b) would 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.

Proposed § 9.4 does not include an exclusion for contracts awarded for services produced or provided by persons who are blind or have severe disabilities. Executive Order 14055 diverges from Executive Order 13495 with respect to such contracts. Section 3 of Executive Order 13495 specifically excluded “contracts or subcontracts awarded pursuant to the Javits-Wagner-O'Day Act, 41 U.S.C. 46-48c;” “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, Public Law 103-329;” and “agreements for vending facilities entered into pursuant to the preference regulations issued under the

Randolph-Sheppard Act, 20 U.S.C. 107[.]” In contrast, section 5 of Executive Order 14055 does not enumerate any such exclusions. Accordingly, proposed § 9.4 does not exclude such contracts from the requirements of part 9.

However, 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” and directs that the order be “implemented consistent with applicable law.” The applicable law encompassed by these sections includes, for example, the Javits-Wagner-O'Day Act, 41 U.S.C. 8501-8506, section 505 of the Treasury, Postal Services and General Government Appropriations Act, 1995, Public Law 103-329, and the Randolph-Sheppard Act, 20 U.S.C. 107. Each of these laws establishes requirements for contracts awarded for services produced or provided by persons who are blind or have severe disabilities that may conflict with the requirements of Executive Order 14055 in that these laws may impose hiring requirements that preclude, in whole or in part, offering employment to the employees on the predecessor contract. Where direct legal conflicts squarely exist between the requirements of Executive Order 14055 and the requirements of another statute, regulation, Executive Order, or Presidential Memoranda under the particular factual circumstances of a specific situation, the requirements of this part would not apply. As with any determination to except a particular contract from the application of the nondisplacement requirements, a contracting agency would be obligated to follow the procedures proposed at § 9.5 to support a determination that the requirements of this part do not apply because of a direct legal conflict.

The Department recognizes that contracting agencies award contracts under a wide variety of programs, including those mentioned above, many of which have, by law, specific processes and requirements. The Department understands that some of these requirements may make implementation of the requirements of Executive Order 14055 more challenging under certain programs than others. The Department invites comment on any specific programs with contracting requirements that may conflict with Executive Order 14055 or the provisions of this proposed rule. For example, the Department recognizes that applying the requirements of Executive Order 14055 to some contracts awarded pursuant the Randolph-Sheppard Act, specifically the Randolph-Sheppard Vending Facility Program (RSVFP), may present certain challenges. The Department invites interested parties to comment on the interaction of the requirements in the proposed rule with the provisions of the Randolph-Sheppard Act.

Section 9.5 Exceptions Authorized by Agencies

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 proposes to implement this procedure through language in § 9.5 of the regulations. Under section 6 of the order, and in proposed § 9.5, 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.

In § 9.5(a), the Department proposes to list the qualifying circumstances for an agency exception based on the agency exceptions provision in section 6(a) of the order. These include (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; or (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 proposes to interpret section 6(a) of the order as allowing agencies to make exceptions only for prime contracts and not for individual subcontracts. As discussed above, whether a subcontract is covered by the order depends on whether the prime contract is covered. If the prime contract is covered, then the subcontracts under that prime contract will also be covered. If a prime contract is not covered (whether because it does not satisfy an element of coverage or because an agency has made an exception for that prime contract), then the subcontracts under that prime contract will also not covered. Under the Department's interpretation of section 6(a), there would be no mechanism for a prime contract to be covered, but for an agency to exempt individual subcontracts for services under that prime contract.

The Department's proposed interpretation of section 6(a) follows 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.” Accordingly, the proposed regulatory text at § 9.5(a) only provides the authority for agencies to make an exception for “a prime contract.” However, the Department also recognizes that section 2(a) of the order 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 this reason, the Department is seeking comment from the public on the potential impact, including any unintended consequences, of not allowing agency exceptions for particular subcontracts or classes of subcontracts.

Section 6(a) of Executive Order 14055 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 proposes regulatory text at § 9.5(a) that identifies the senior procurement executive as the senior official who must make an exception decision. Because the order specifically requires the decision to be made by a senior official, the Department concludes that the decision cannot be delegated by the senior procurement executive to a lower-level official.

See

77 FR 75773 (stating the same non-delegation principle applied to the FAR rule implementing Executive Order 13495).

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.”

Proposed § 9.5(b) reiterates the procedural requirements that section 6(a) of the order states must be satisfied for an exception to be effective. The proposed language would require that the action to except a contract from some or all of the requirements of the Executive order or the regulations 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 § 9.5(b) would require that this written explanation 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 § 9.5(b) provides that any determination by an agency to exercise its exception authority that is made after the solicitation date or without the specific written explanation would be inoperative. In such a circumstance, the contract clause has been wrongly omitted and the agency would be required to take action consistent with paragraph (f) of § 9.11 of this part.

Bases for Agency Exceptions

The Department also proposes 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.

Proposed § 9.5(c) would address the provision in section 6(a)(i) of Executive Order 14055 permitting an exception where adhering to the requirements of the order would not advance the Federal Government's interests in achieving economy and efficiency in Federal procurement. Although the wording differs slightly, 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 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 provisions 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 53726-29 (discussion of comments), 53754-55 (regulatory text);

See also

48 CFR 4.801(b) (requiring sufficient documentation in contract files to support actions taken).

Proposed § 9.5(e) would address the provision in section 6(a)(iii) of Executive Order 14055 providing that an exception may be appropriate where adhering to the requirements of the order would otherwise be inconsistent with statutes, regulations, Executive orders, or Presidential Memoranda. In § 9.5(e), the Department proposes 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 proposes this requirement in order to provide consistency, to the extent possible, in the application of the order.

Reconsideration of Agency Exceptions

The Department proposes language at § 9.4(f) to provide a procedure for interested parties to request reconsideration of agency exception determinations. This proposed language mirrors the procedure that was included in the regulations that implemented Executive Order 13495.

See

29 CFR 9.4(d)(5) (2012). In using the term “interested parties,” the Department intends to extend the opportunity to request reconsideration to affected workers or their representatives, in addition to actual or prospective bidders. The Department does 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 seeks input from commenters on whether there should be a time limit within

which interested parties would have to request reconsideration, or whether the request for reconsideration instead should just have to be made before the contract is awarded.

Notification, Publication, and Reporting of Agency Exceptions

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. In § 9.5(g), the Department proposes to include a recitation of these notification, publication, and reporting requirements.

Subpart B—Requirements

Proposed subpart B of part 9 establishes the requirements that contracting agencies and contractors will undertake to comply with the nondisplacement provisions.

Section 9.11 Contracting Agency Requirements

Proposed § 9.11 would implement section 3 of Executive Order 14055, which directs agencies to ensure that covered contracts and solicitations include the nondisplacement contract clause. The proposed section specifies contracting agency responsibilities to incorporate the nondisplacement contract clause in covered contracts, provide notice 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 specifies contracting agency responsibilities to provide the list of employees on the predecessor contract to the successor, to forward complaints and other pertinent information to WHD when there are allegations of contractor non-compliance with the Executive order and this part, and to retroactively incorporate the contract clause when it was not initially incorporated.

Section 3 of Executive Order 14055 specifies a 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 § 9.11(a) provides the regulatory requirement to incorporate the contract clause specified in Appendix A 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 FAR. For procurement contracts subject to the FAR, contracting agencies will use the clause set forth in the FAR developed to implement this rule; 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, the Department notes that 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 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.

Brock,

Case No. C86-2188, 1988 WL 125784 (N.D. Ohio 1988);

In re Progressive Design & Build, Inc.,

WAB Case No. 87-31, 1990 WL 484308 (WAB Feb. 21, 1990). The Department specifically notes that the full contract clause will be deemed to have been incorporated by reference in a covered contract if 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.

Contract clause paragraphs (a) through (e) of proposed Appendix A repeat the clause in paragraphs (a) through (e) of the Executive Order verbatim, with one exception. The proposed modification of the contract clause would insert 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.

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 is for employees who are not service employees and the other is 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 will provide to the successor contractor to ensure the successor contractor has the information necessary to provide the employees with the right of first refusal. Proposed contract clause paragraph (d) provides 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 will honor the requirements of paragraphs (a) through (c), and 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 sets forth additional provisions that are necessary to implement the order. 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) provides 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 under the contract and its predecessor contracts with either the current or predecessor contractors or their subcontractors. Proposed paragraph (f)(1) further explains 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 and dates of separation, if applicable.

Proposed contract clause paragraph (f)(2) provides notice that under certain circumstances the contracting officer will, 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 (g) would require the contractor to maintain certain records to demonstrate compliance with the substantive requirements of part 9. This proposed 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 specifies that the contractor would be required to maintain the particular records (regardless of format,

e.g.,

paper or electronic) for 3 years. The specified 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, the date of payment, along with a copy of any receipt form provided by or authorized by WHD. The proposed clause also states 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) provides 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.

Proposed § 9.11(b) specifies 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 § 9.12(e)(3).

Proposed § 9.11(c) would implement the location continuity requirements in section 4 of the order. In § 9.11(c)(1), the proposed regulatory language restates the requirement in section 4(a) of the order that, in preparing covered solicitations, contracting agencies “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.” In § 9.11(c)(2), the proposed regulatory language also restates the requirement in section 4(b) of the order, 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.”

In § 9.11(c)(3), the Department proposes procedural safeguards for the required location continuity determination. The Department proposes to require that agencies complete the location continuity analysis prior to the date of issuance of the solicitation. The Department also proposes to require that any agency determination not to include a location continuity requirement or preference must be made in writing by the agency's senior procurement executive. The requirement that the determination be made in writing is consistent with 48 CFR 4.801(b) of the FAR, which requires sufficient documentation in contract files to support actions taken. The Department seeks input from commenters regarding these proposed procedural safeguards and any alternative safeguards that might assist agencies in ensuring that the location continuity determination is carried out as required by the order.

Proposed § 9.11(c)(3) includes safeguards to ensure that interested parties are able to request reconsideration of a determination not to include a location continuity requirement or preference. Where an agency has conducted the location continuity analysis and determined that no such requirement or preference is warranted, the proposed language would require that the agency include a statement to that effect in the solicitation. The statement in the solicitation would assist interested parties by clarifying that the agency conducted the location continuity analysis and determined not to include the requirement or preference, and did not simply fail to conduct the analysis at all. The agency would also be required to ensure that the incumbent contractor notifies affected workers and their collective bargaining representatives, if any, in writing of the agency's determination not to include a location continuity requirement or preference and of the workers' right to request reconsideration. This notification, and the contractor's confirmation to the agency that the notification has been made, would need to occur within 5 business days after the solicitation is issued. The Department has proposed language in the nondisplacement contract clause set forth in Appendix A that would require contractors to agree to provide this notification. Finally, § 9.11(c)(3) would provide that any request by an interested party for reconsideration of an agency's decision to include, or not to include, a location continuity requirement or preference must be directed to the head of the contracting department or agency. This provision for requesting reconsideration is similar to the approach the Department proposes with regard to agency exceptions in § 9.5 of the regulations. As in that section, the use of the term “interested parties” is intended to include workers and worker representatives in addition to contractors and prospective bidders. The Department seeks input from commenters on an appropriate time limit within which interested parties

would have to request reconsideration, or whether the request for reconsideration instead should just have to be made before the contract is awarded.

In § 9.11(c)(4), the Department proposes language that restates, in part, the language from section 3(b) of the 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. The Department proposes similar language, directed at contractors and subcontractors specifically, in § 9.12(b)(6).

The location continuity provision in the order and the proposed implementing regulations serve an important purpose. Like Executive Order 13495, Executive Order 14055 reflects that there is a relationship between the effectiveness of the nondisplacement order and the location of a successor contract. In sections 1 and 5 of Executive Order 13495, the order limited coverage only to contracts for similar services at the “same location.” While Executive Order 14055 does not contain a similar limitation to contracts at the “same location,” it contains the provision at section 4 that requires contracting agencies to consider requiring location continuity for all covered contracts.

Executive 14055 also contains additional interrelated provisions governing how the order will apply related to the location of covered contracts. As an initial matter, because there is no “same location” requirement, the order applies regardless of the location of the successor contract. Thus, even if the place of performance for a successor contract will be in a different locality from the predecessor contract, the successor contract would still be required to include the nondisplacement contract clause and the successor contractor would 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 the order, however, clarifies that it should not be construed to require or recommend the payment of relocation costs to workers who exercise their right to take a new position under those circumstances.

The central location continuity provisions, in section 1 and section 4 of Executive Order 14055, reflect the basic conclusion that the right of first refusal in the contract clause may have a more limited effect 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. The benefits of using a carryover workforce and location continuity are intertwined because, for many contracts, 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, section 4 of the order requires that for each covered contract, the contracting officer consider whether to include a requirement or preference for location continuity.

In many cases, contracts may already require location continuity for reasons other than those stated in the Executive order. For example, where the services 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., Matter of: Novad Mgmt. Consulting, LLC,

B-419194.5 (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 may be reasonably necessary to secure the economy and efficiency benefits identified by Executive Order 14055.

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. 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. In other cases, the contracting agency's basic interest in a carryover workforce may be outweighed by an agency re-organization that creates different location needs. 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.

Given the order's requirement that contracting agencies consider these questions, the Department is contemplating whether the proposed regulatory provision at § 9.11(c) should provide additional guidance on the relevant factors that an agency should consider when it is considering location continuity. The Department seeks comment on whether the factors should be provided in the regulatory text, and, if so, which factors to include and whether to provide guidance regarding any particular weight that should be given to each of them. In this regard, the Department notes that the ultimate question here—of economy and efficiency—may also be at issue in the determination of whether a contract should be excepted entirely from the application of the order, as detailed in proposed § 9.5. The location continuity determination thus presents some of the same questions as those exception determinations. For example, given the purpose and policy of the order, to what extent should contracting agencies be required to start with a presumption in favor of location continuity in order to secure the full benefits of the nondisplacement clause on workforce retention? When, if ever, is it appropriate for contracting officers to consider costs—such as the potential to reduce labor costs by moving operations to a lower-cost locality—as a reason to decline to require location continuity? What other factors may weigh in favor

of location continuity? For example, where there have been significant training investments in the incumbent contract workforce, or where the incumbent workforce has been particularly successful in achieving contract objectives? How might the HUBZone program or other procurement-related programs factor into a location continuity analysis? How should an agency weigh the history of remote work or telework by incumbent contractor employees in the importance of location continuity? Are there 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?

Finally, as discussed further in proposed § 9.5 regarding exceptions authorized by agencies, the Department is proposing regulatory language that would make an exception determination ineffective as a matter of law if the agency does not follow the procedural requirements for such an exception. The Department seeks comment on whether a similar provision is appropriate for addressing agency failures to follow location continuity procedures. The Department also seeks comment on whether the regulations should include specific remedies for workers or sanctions for contractors in the circumstances in which a contractor fails to timely provide the workers or workers' representative the required notice that a contracting agency has determined not to include location continuity requirements or preferences in the solicitation for a successor contract.

Proposed § 9.11(d) would require the contracting officer to provide the predecessor contractor's list of employees referenced in proposed § 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. The predecessor contractor's list of employees must be provided 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 § 9.12(e)(2), the updated list must be provided within 7 calendar days of the beginning of performance on the 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.

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 proposed deadlines set forth in § 9.11(d) take such circumstances into account while also providing specific deadlines by which the seniority list must be transmitted to the successor contractor in order 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.

Proposed § 9.11(e) addresses contracting officers' responsibilities regarding complaints of alleged violations of part 9. The proposal states 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 elaborates that the contracting officer must 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 other pertinent information the contracting officer chooses to disclose.

When the nondisplacement contract clause is erroneously excluded from the contract, proposed § 9.11(f) would require a contracting agency to retroactively incorporate the nondisplacement contract clause on its own initiative or within 15 calendar days of notification by an authorized representative from the Department. There may be limited 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, based on the available information at the time, a predecessor-successor relationship was not evident. Proposed § 9.11(f) acknowledges this and permits the Administrator, at their discretion, to determine that the circumstances warrant prospective, rather than retroactive, incorporation of the contract clause. 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 are detailed in § 9.12(b)(8). If the erroneous omission of the contract clause from a solicitation is discovered before contract award, proposed § 9.11(f) would also require the contracting agency to amend the solicitation.

Section 9.12 Contractor Requirements and Prerogatives

Proposed § 9.12 would implement contractors' requirements and prerogatives under the nondisplacement requirements. The proposed section would consist of the general obligation to offer employment, the method of the job offer, exceptions, reduced staffing, obligations near the end of the contract, recordkeeping, and obligations to cooperate with reviews and investigations.

Proposed § 9.12(a)(1) would implement the requirement that the successor contractor and any subcontractors offer employment to the employees on the predecessor contract prior to filling employment openings. Specifically, the proposal provides that, except as provided under the exclusion listed in proposed § 9.4(b) or the exceptions listed in paragraph (c) of proposed § 9.12, a successor contractor or subcontractor must not fill any employment openings under the contract prior to making good faith offers of employment, 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 contract or the expiration of the contract under which the employees were hired. Because the term

employee

“includes an individual without regard to any contractual relationship alleged to exist between the individual and a contractor or subcontractor,” the obligation to make good faith offers of employment extends to independent contractor service employees performing work under the predecessor contract. In making such an offer, a successor contractor may hire as an employee a worker who was an independent contractor under the predecessor contract. To the extent necessary to meet its anticipated staffing pattern and in accordance with the requirements described at 9.12(d), the

successor contractor and its subcontractors would be required to make a bona fide, express offer of employment to each employee to a position for which the employee is qualified and state the time within which the employee must accept such offer. Although the offer must be for a position for which the employee is qualified, it does not necessarily need to be for the same or similar position as the employee held on the predecessor contract, as discussed in proposed § 9.12(b)(4). In no case may the contractor or subcontractor give an employee fewer than 10 business days to consider and accept the offer of employment.

Proposed § 9.12(a)(2) would clarify that the successor contractor's obligation to offer a right of first refusal exists even if the successor contractor were not provided a list of the predecessor contractor's employees or if the list did not contain the names of all employees employed during the final month of contract performance.

Proposed § 9.12(a)(3) discusses how a successor contractor should determine employee eligibility for a job offer. Under this proposal, an employee would be entitled to a job offer if the employee's name is included on the certified list of all service employees working under the predecessor's contract or subcontracts during the last month of contract performance. In addition, a successor contractor would also be required to accept other reliable evidence of an employee's entitlement to a job offer. The successor contractor would be allowed to verify the information as a condition of accepting it. For example, even if an employee's name does not appear on the list of employees on the predecessor contract, an employee's assertion of an assignment to work on a contract during the predecessor's last month of performance coupled with contracting agency staff verification could 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 is unable to verify the claim, the paycheck stub would be considered sufficient to demonstrate eligibility absent evidence from the predecessor employer indicating otherwise.

Proposed § 9.12(a)(4) proposes to clarify that contractors and subcontractors have an affirmative obligation to ensure that any covered contracts they hold contain 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 covered contract.

Proposed § 9.12(b) discusses the method of the job offer. Proposed § 9.12(b)(1) would require that, except as otherwise provided 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 employee. To determine whether an employee is entitled to a bona fide, express offer of employment, a contractor may consider the exceptions set forth in proposed § 9.12(c) and the conditions detailed in § 9.12(d). Proposed § 9.12(b)(1) would clarify that a contractor may 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 may 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 § 9.12(b)(1) also would clarify that 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 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 cannot deem predecessor employees unqualified solely because they have not completed the specific background check the successor contractor requires before receiving a job offer.

Proposed § 9.12(b)(2) discusses the time limit in which the employee has a right to accept the offer, which the contractor determines, but which in no case can be fewer 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.

Proposed § 9.12(b)(3) provides the process for making the job offer. As proposed, the successor contractor would be required to make a specific oral or written employment offer to each employee. An invitation to apply for a job, for example, is not a bona fide offer. In order to ensure that the offer is effectively communicated, the successor contractor must take reasonable efforts to make the offer in a language that each worker understands. The proposed rule contains an example of how if the successor contractor holds a meeting for a group of employees on the predecessor contract, it could satisfy this provision by having a co-worker or other person translate for employees who are not fluent in English. Where offers are not made 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.

Proposed § 9.12(b)(4) would clarify that the employment offer may be for a different job position on the contract. More specifically, 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 it were for a position for which the employee were qualified. If a question arises 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. A contractor would have to 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 all would be credible information.

Proposed § 9.12(b)(5) would allow for an offer of employment to a position providing different employment terms and conditions than the employee held with the predecessor contractor, provided 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 changes to pay or benefits. The Department also proposes

language in § 9.12(b)(5) that addresses how this principle would apply to telework or remote work. If a successor contractor places limitations on telework or remote work for predecessor employees that it does not consistently place on other, similarly situated workers, that may reflect that those limitations are intended to cause the predecessor employees to refuse the offer. Therefore, such a difference likely would be impermissible under the order. Accordingly, under this proposed language, where the successor contractor has had or will have 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 must include the option of remote work under terms and conditions that are reasonably similar to those afforded to the other employees of the successor contractor. Such employment, where it is permitted on a successor contract and is consistent with security and privacy requirements, would generally assist with workforce carryover even in circumstances where the location of contract performance is changing.

In § 9.12(b)(6), the Department proposes 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 must pay relocation costs for employees of predecessor contractors hired pursuant to their exercise of their rights under the order. The Department proposes similar language, directed at contracting agencies specifically, in § 9.11(c)(3). The Department notes that this language does not forbid the voluntary payment of relocation expenses or the payment of any such expenses if they are otherwise required by contract or law. Proposed § 9.12(b)(7) would provide 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.

Proposed § 9.12(b)(8) would provide requirements for successor contractors for proceeding 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 § 9.11(f), when the nondisplacement contract clause has been erroneously excluded from a contract, contracting agencies would be required to retroactively incorporate it. 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. Consistent with proposed § 9.11(f), proposed § 9.12(b)(8) acknowledges that the Administrator may exercise their discretion and require only prospective application of the contract clause in certain circumstances. In such cases, the successor contractor and its subcontractors would be required to provide employees on the predecessor contract a right of first refusal for any positions that remain open. In the event of a vacancy within 90 calendar days of the first date of contract performance, under proposed § 9.12(b)(8), the successor contractor and its subcontractors would be required to provide the employees under the predecessor contract the right of first refusal as well, regardless of whether incorporation of the contract clause is retroactive or prospective. The Department believes these requirements strike an appropriate balance between the interests of the employees on the predecessor and successor contracts.

Proposed § 9.12(c) addresses the exceptions to the general obligation to offer employment under Executive Order 14055. The exceptions would be included in the contract clause established in section 3 of the Order and are distinct from the exclusions and agency exceptions discussed in proposed § 9.4. The exclusions and agency exceptions specify both certain classes of contracts and certain employees that either would be or may be excluded from the provisions of Executive Order 14055. In contrast, the exceptions in proposed § 9.12(c)—exceptions from the successor contractor's obligation to offer employment on a contract to employees on the predecessor contract prior to making an offer to anyone else—would not relieve the contractor of other requirements of this part (

e.g.,

the obligation near the end of the contract to provide a list of employees who worked on the contract during the last month). Under this proposal, the exceptions in proposed § 9.12(c) would be construed narrowly and the contractor would bear the burden of proof regarding the applicability of any exception.

Under proposed § 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 will retain. The successor contractor is required to presume that all employees hired to work under a predecessor's Federal service contract would be terminated as a result of the award of the successor contract, unless the successor contractor 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.

Under proposed § 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. Consistent with the definition of service employee in proposed § 9.2, this exception would apply to a person 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 appearing on the list required by § 9.12(e) or who have demonstrated they should have been included on the list were service employees, unless the successor contractor 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 would not be sufficient for purposes of this exception.

Under proposed § 9.12(c)(3), a successor contractor or subcontractor would not be required to offer employment to any employee on the predecessor contract 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 subcontractors. Again, the successor contractor would be required to presume that there is no just cause to discharge any employees working under the predecessor contract in the last month of performance, unless the successor contractor can 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, a successor contractor could demonstrate its reasonable belief that there would be just cause to discharge an employee through reliable 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, 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, evidence that the predecessor contractor took disciplinary action against an employee for poor performance but stopped short of recommending termination would not generally constitute sufficient evidence of just cause to discharge the employee. The determination that this exception applies must 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 is seeking 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 laid out in the Executive Order.

Under proposed § 9.12(c)(4), a successor contractor or subcontractor would not be required to offer employment to a service employee that provided services 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 this part. 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, based upon reliable evidence provided by a knowledgeable source, such as the predecessor contractor, the local supervisor, the employee, or the contracting agency. In making such a reasonable determination, the successor must also reasonably determine that the predecessor did not deploy workers to both Federal and non-federal contractors purposely to evade the requirements of this part. Information regarding the general business practices of the predecessor contractor or the 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, claims from several employees who state a janitorial contractor reassigned its janitorial workers who previously worked exclusively in a Federal building to both Federal and other clients as part of a single job may indicate that the predecessor deployed workers to avoid the purposes of the nondisplacement provisions, which include Federal interests in economy and efficiency that would be served when the successor hires the predecessor's employees. Conversely, where the employees on the predecessor contract were traditionally deployed to Federal and nonfederal service work as part of their job, the successor would not be required to offer employment to the workers.

Proposed § 9.12(d) addresses the provision in paragraph (a) of Executive Order 14055's contract clause that allows the successor contractor to reduce staffing. Proposed § 9.12(d)(1) recognizes 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, permits 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 or subcontractor would not be required to offer employment on the contract to all employees on the predecessor contract, but must offer employment to the number of eligible employees the successor contractor believes would be necessary to meet its anticipated staffing pattern. However, 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 provides 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 subcontracts or the scope of work that particular subcontractors perform does not by itself constitute reduced staffing under proposed § 9.12(d) or otherwise alter the requirements of Executive Order 14055 and this part. Consistent with proposed § 9.13, a prime contractor is 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 Executive Order 14055 and this part. Where a prime successor contractor chooses to use subcontractors, the prime contractor is responsible for ensuring that any of its subcontractors and lower-tier subcontractors offer employment to employees employed under the predecessor contract (including the predecessor subcontracts) in accordance with the requirements of Executive Order 14055 and this part. Where a prime successor contractor chooses to use fewer subcontractors than the predecessor prime contractor used, and instead chooses to employ more workers directly, the prime successor contractor must offer direct employment to the number of eligible 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 Executive Order 14055 and this part.

Proposed § 9.12(d)(2) acknowledges 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 number of employees in others. In such cases, proposed § 9.12(d)(2) would require the successor 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 provides examples to demonstrate this principle.

Proposed § 9.12(d)(3) clarifies that subject to provisions of this part and other applicable restrictions (including non-discrimination laws and regulations), the successor contractor may determine to which employees it will offer employment. Consistent with proposed § 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 by a court that a contractor has unlawfully discriminated against a worker would be considered in determining whether the discriminatory action has also violated the nondisplacement requirements.

Proposed § 9.12(e) specifies an incumbent contractor's obligations near the end of the contract. Proposed § 9.12(e)(1) would require a 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 under the contract and its predecessor contracts with either the current or predecessor contractors or their subcontractors. A service employee is considered employed under the contract 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. Proposed § 9.12(e)(1) would allow a contractor to satisfy these requirements using 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 this certified list pursuant to proposed § 9.12(e)(1), proposed § 9.12(e)(2) would 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 list must include the anniversary dates of employment with either the current or predecessor contractors or their subcontractors, and, where applicable, dates of separation of each service employee. The contractor may use the list submitted to satisfy the requirements of the SCA contract clause specified at 29 CFR 4.6(l)(2) to meet this provision.

Proposed § 9.12(e)(3) requires the predecessor contractor to, before contract completion, provide written notice to service employees employed under the predecessor contractor of their possible right to an offer of employment on the successor contract. Such notice must be either posted in a conspicuous place at the worksite or delivered to the employees individually. The text of the proposed notice is set forth in the Appendix B to part 9. The Department intends to translate the notice into several common foreign languages and make the English and translated versions available online in a poster format to allow easy access. Another form with the same information may be used. Proposed § 9.12(e)(3) further explains that where the predecessor contractor's workforce is comprised of a significant portion of workers who are not fluent in English, the notice must be provided in both English and a language in which the employees are fluent. Multiple foreign language notices would be required to be provided where significant portions of the workforce speak different foreign 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 must 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 solicits comments on whether it should establish a percentage threshold for determining what constitutes a “significant portion of the workforce.”

Proposed § 9.12(f) addresses recordkeeping requirements. Proposed § 9.12(f)(1) clarifies that this part prescribes no particular order or form of records for contractors, and that the recordkeeping requirements 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.

Proposed § 9.12(f)(2) specifies the records contractors must maintain, including 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. Proposed § 9.12(f)(2) also requires 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 § 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 on a receipt form authorized by WHD. Finally, proposed § 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 would include records of notices of the possibility of employment on the successor contract that are required under § 9.12(e)(3) of the regulations; notices of agency exceptions that a contracting agency requires a contractor to provide under § 9.5(g) of the regulations and section 6(b) of the order; and notices that a contracting agency has declined to include location continuity requirements or preferences in a solicitation, pursuant to § 9.11(c)(3) of the regulations. WHD will use the records that are retained pursuant to § 9.12(f)(2) in determining a contractor's compliance and whether debarment is warranted. All contractors must retain the records listed in proposed § 9.12(f)(2) for at least 3 years from the date the records were created and must provide copies of such records upon request of any authorized representative of the contracting agency or the Department.

Proposed § 9.12(g) outlines 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 would also include investigations related to other contractors (

e.g.,

predecessor and subsequent contractors) and subcontractors.

Section 9.13 Subcontracts

Proposed § 9.13(a) discusses the responsibilities and liabilities of prime contractors and subcontractors with respect to subcontractor compliance with the nondisplacement clause. The proposed section would require prime contractors 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 Appendix A in any lower-tier subcontracts. Requiring that the contract clause be inserted in all subcontracts, including lower-tier subcontracts, notifies subcontractors of their obligation to provide employees the right of first refusal and of the enforcement methods WHD may use when subcontractors are found to be in violation of the Executive order, including the withholding of contract funds.

Proposed § 9.13(a) also clarifies that prime contractors would be responsible for the compliance of any subcontractor or lower-tier subcontractor with the contract clause in Appendix A. 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 contractors' 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 subcontractors' violations. The requirements of this proposed section would ensure contractors cannot avoid the requirements of part 9 by subcontracting the work to other contractors. Thus, this section helps to ensure that all covered contractors and subcontractors of any tier are subject to the requirements of 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 § 9.13(b) explains 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.

Subpart C—Enforcement

Section 8 of Executive Order 14055, titled “Enforcement,” grants the Secretary “authority to investigate potential violations of, and obtain compliance with, this order.” 86 FR 66399. This proposed subpart addresses the process for filing complaints, investigations, and remedies and penalties for violations.

Section 9.21 Complaints

The Department proposes a procedure for filing complaints in § 9.21. Section 9.21(a) outlines the procedure to file a complaint with any office of WHD. It additionally provides that a complaint may be filed orally or in writing and that WHD will accept a complaint in any language. Section 9.21(b) states the well-established policy of the Department with respect to confidential sources.

See

29 CFR 4.191(a); 29 CFR 5.6(a)(5).

Section 9.22 Wage and Hour Division Investigation

Proposed § 9.22(a), which outlines WHD's investigative authority, would 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 the 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 § 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 investigations. This section is consistent with WHD's investigative authority under the acts administered by WHD.

Proposed § 9.22(b) addresses subsequent investigations and allows the Administrator to conduct a new investigation or issue a new determination if the Administrator concludes the circumstances warrant additional action. Situations where additional action may be warranted include, for example, 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.

Section 9.23 Remedies and Sanctions for Violations of This Part

Proposed § 9.23 discusses remedies and sanctions for violations of Executive Order 14055 and this part. Proposed § 9.23(a) reiterates 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 § 9.23(b) provides that, in addition to satisfying any costs imposed by an administrative order under proposed §§ 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 § 9.23(b) would also require the contractor to pay interest on any underpayment of wages. A 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 is an appropriate remedial measure to make a worker fully whole with a back-pay award. The proposed language provides 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. Various OSHA whistleblower regulations use the tax underpayment rate and daily compounding because that accounting best achieves the make-

whole purpose of a back-pay award.

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). The Department believes that a similar approach is warranted in implementing Executive Order 14055.

Proposed § 9.23(c) addresses the withholding of contract funds for non-compliance. Under proposed § 9.23(c)(1), the Administrator may 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 § 9.23(c)(1) permits the cross-withholding of monies due. 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 provides 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 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 § 9.23(c)(2) similarly provides 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 § 9.12(e). Proposed § 9.23(c)(3) clarifies that if the Administrator directs a contracting agency to withhold funds from a contractor pursuant to § 9.23(c), the Administrator or contracting agency must notify the affected contractor.

Proposed § 9.23(d) provides 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 provides 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. 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 would enhance contractor compliance with Executive Order 14055 as well.

Proposed § 9.23(e) states 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 would 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 vindicate rights claimed to have been denied.”

Kasten

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 Department's proposed rule would protect workers who file oral as well as written complaints.

See Kasten,

563 U.S. at 17. The Department's proposed rule 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, with the Department or another federal agency, or from retaliation for otherwise taking reasonable action with the intent to seek compliance with or enforcement of the order.

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.

Subpart D—Administrator's Determination, Mediation, and Administrative Proceedings

Proposed subpart D addresses informal and formal proceedings to determine compliance with the requirements of part 9 and resolution of disputes.

Section 9.31 Determination of the Administrator

Proposed § 9.31(a) provides 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 and 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 or express delivery services, or by personal service to the last known address. As has been recently 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 assuring delivery. This flexibility would allow the Department to choose methods to ensure that the necessary notifications are effectively delivered to the parties.

Proposed § 9.31(b)(1) explains that where the Administrator has concluded 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 § 9.32(b)(1). Determining when a request for a hearing or any other notification under this section was sent will 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. The proposed section also states that such a request may be sent by letter or by any other means normally assuring 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 explains that the Administrator's determination not to seek debarment is not appealable.

Proposed § 9.31(b)(2) would apply to situations where the Administrator has concluded that there are no relevant facts in dispute. 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 will become the final order of the Secretary and will 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 assuring delivery, sent within 20 calendar days of the date of the Administrator's determination. Upon such a request, the Administrator will either refer the request for a hearing to the Chief Administrative Law Judge 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 § 9.32(b)(2).

Section 9.32 Requesting Appeals

Proposed § 9.32 provides procedures for requesting appeals. Proposed § 9.32(a) provides 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 § 9.31(b) of this part.

Proposed § 9.32(b)(1)(i) states that any aggrieved party may request a hearing by an ALJ within 20 days of the date of the determination of the Administrator. To request a hearing, the aggrieved party must send the request to the Chief Administrative Law Judge (ALJ) of the Office of Administrative Law Judges (OALJ) by letter or by any other means normally assuring delivery and the request must include a copy of the Administrator's determination. The proposed section further requires that the party send a copy of the request for hearing to the complainant(s) or successor contractor, and their representatives, if any, and to the Administrator and the Associate Solicitor.

Proposed § 9.32(b)(1)(ii) provides that a complainant or any other

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