Executive Order 12933 of October 20, 1994``Nondisplacement of Qualified Workers Under Certain Contracts''

DEPARTMENT OF LABOR

Employment Standards Administration

Wage and Hour Division

29 CFR Part 9

RIN 1215-AA95

Executive Order 12933 of October 20, 1994--``Nondisplacement of

Qualified Workers Under Certain Contracts''

AGENCY: Wage and Hour Division, Employment Standards Administration,

Labor.

ACTION: Final rule.

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SUMMARY: This document provides the text of final regulations to

implement Executive Order 12933, ``Nondisplacement of Qualified Workers

Under Certain Contracts'' (59 FR 53560, October 24, 1994). The

Executive Order requires that workers on a building service contract

for a public building be given the right of first refusal for

employment with a successor contractor, if they would otherwise lose

their jobs as a result of the termination of the contract. The final

rules contain a contract clause that must be incorporated into each

covered contract, implementing regulations, and enforcement procedures.

DATES: These rules are effective on July 21, 1997.

FOR FURTHER INFORMATION CONTACT: Ethel P. Miller, Government Contracts

Team, Office of Enforcement Policy, Wage and Hour Division, Employment

Standards Administration, U.S. Department of Labor, Room S-3018, 200

Constitution Avenue, NW, Washington, DC 20210; telephone (202) 219-

7541. This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Act

The reporting and recordkeeping requirements contained in

Secs. 9.6(c), 9.9(b) and 9.11 of this rule were submitted to and

approved by the Office of Management and Budget (OMB) under the

Paperwork Reduction Act of 1995 and assigned OMB Control No. 1215-0190.

The reporting requirements of Secs. 9.6(c) and 9.11 are already

required by the McNamara-O'Hara Service Contract Act regulations, 29

CFR 4.6(l)(2), assigned OMB Control No. 1215-0150, and impose no

additional burdens.

No comments were received from the public regarding this burden or

these regulatory provisions.

No material change has been made in this final rule which affect

the reporting or recordkeeping requirements and estimated burdens

previously submitted to OMB and discussed in the proposed rule.

II. Background

Executive Order 12933 was signed October 20, 1994, by President

Clinton, and published in the Federal Register on October 24, 1994 (59

FR 53560). The purpose and need for the Executive Order are clearly

stated in the Executive Order itself:

When a service contract for the maintenance of a public building

expires and a follow-on contract is awarded for the same service,

the successor contractor typically hires the majority of the

predecessor's employees. On occasion, however, a follow-on

contractor will hire a new work force, and the predecessor's

employees are displaced.

As a buyer and participant in the marketplace, the Government is

concerned about hardships to individuals that may result from the

operation of our procurement system.

Furthermore, the Government's procurement interests in economy

and efficiency benefit from the fact that a carryover work force

will minimize disruption to the delivery of services during any

period of transition and provide the Government the benefits of an

experienced and trained work force rather than one that may not be

familiar with the Government facility.

In order to address these concerns, section 1 of the Executive

Order makes the following statement of policy:

It is the policy of the Federal Government that solicitations

and building service contracts for public buildings shall include a

clause that requires the contractor under a contract that succeeds a

contract for performance of similar services at the same public

building to offer those employees (other than managerial or

supervisory employees) under the predecessor contract whose

employment will be terminated as a result of the award of the

successor contract, a right of first refusal to employment under the

contract in positions for which they are qualified. There shall be

no employment openings under the contract until such right of first

refusal has been provided. Nothing in this order shall be construed

to permit a contractor to fail to comply with any provision of any

other Executive order or laws of the United States.

The Executive Order requires implementing regulations to be issued

by the Secretary of Labor in consultation with the Federal Acquisition

Regulatory (FAR) Council, and that DOL and FAR regulations be issued

which require inclusion of the contract clause in covered Federal

solicitations and contracts. The Executive Order provides that the

order does not confer any right or benefit enforceable against the

United States, but that it is not intended to preclude judicial review

of final decisions by the Secretary of Labor in accordance with the

Administrative Procedure Act, 5 U.S.C. 701 et seq.

To obtain public input and assist in the development of these

regulations, the Department published a notice of proposed rulemaking

in the Federal Register on July 18, 1995 (60 FR 36756), inviting

comments until September 1, 1995, on a variety of questions and issues.

As required by the Executive Order, the Department of Labor (DOL) has

consulted with the FAR Council with respect to the implementation of

the Executive Order.

III. Summary of Comments and Discussion

Comments were received in response to the notice from the Building

Service Contractors Association International (BSCAI), the Service

Employees International Union, AFL-CIO (SEIU), the Laborers'

International Union of North America (LIUNA), and from Mr. Russell E.

Willis.

The BSCAI questioned the legality of and the rationale for the

Executive Order. These issues are clearly not within the purview of

this rulemaking action. All other comments are summarized in the

preamble under the relevant subsections.

Scope of Coverage

General Coverage (9.2)

The Executive Order applies only to ``building service contracts''

for ``public buildings'' where the contract is entered into by the

United States. These terms are defined in the Executive Order and

elsewhere in the regulations. The Order applies only to contracts of an

amount equal to or greater than the simplified acquisition threshold,

set by the Office of Federal Procurement Policy Act (41 U.S.C. 403(11))

at $100,000.

Where a contract is for both recurring building services and some

other purpose, such as construction or other types of services, the

building services for the public building are subject to the Order, but

not any other portions of the contract. However, where the building

services are only incidental to a contract for another purpose, such as

incidental maintenance performed under a contract to operate a day-care

center, the Order would not apply to such services. The standards used

for determining when construction work performed under a mixed contract

is covered by the Davis-Bacon Act are incorporated in the regulation as

the standard for determining when building services for

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a public building are more than incidental. See 29 CFR 4.116(c)(2); 48

CFR 22.402(b)(ii).

As discussed under Sec. 9.3, below, the regulation is amended to

make it clear that if a contract provides services for more than one

public building, only buildings for which services were provided under

a predecessor contract are covered.

It should be recognized that the coverage principles of the

Executive Order differ from those of the McNamara-O'Hara Service

Contract Act (SCA), 41 U.S.C. 351 et seq., although there is

significant overlap between the two programs. SCA prevailing wage

requirements apply to service contracts of Federal agencies and the

District of Columbia, the principal purpose of which is to furnish

services in the United States through the use of service employees. 29

CFR 4.110. The Executive Order covers service contracts of $100,000 or

more with the Federal government for the maintenance of a public

building and contains no principal purpose requirement. Therefore, not

all SCA covered contracts are within the scope of the Executive Order,

and it may be that some contracts covered under the Executive Order are

not covered by the SCA.

Building Services Contract (9.3)

Section 2(b) of the Executive Order defines the term ``building

services contract'' to include contracts ``for recurring services

related to the maintenance of a public building, e.g., janitorial,

window washing, food service * * *.'' The regulations define

``recurring services'' to include services performed regularly or

periodically throughout a contract (and its follow-on contract) at the

same building. Contracts which are for non-recurring maintenance

services, such as servicing of fixed equipment which is performed only

one time each year, and contracts for services which are not

maintenance services, such as operation of a day care center, are not

subject to the Order.

SEIU suggested that the last sentence in Sec. 9.3(a) be clarified

to indicate which contracts are excluded. LIUNA expressed concern that

restricting the Executive Order's coverage to successor or follow-on

contracts ``at the same building'' may exclude a workforce that is

employed at multiple locations, all of which are public buildings.

LIUNA suggests that the final regulations should expressly state that

the Executive Order applies to contracts such as pest control, trash

removal, and window washing where the contractor's workforce is

employed only at buildings covered by the Executive Order.

We agree that the intent of the Executive Order was to cover

contracts which provided recurring building services at more than one

public building. However, as provided in Sec. 9.5(b)(5), the Executive

Order does not apply in certain cases to services where the

contractor's employees perform work both at a covered public building

and at other locations under contracts not covered by the Executive

Order. To avoid possible confusion, the discussion in Sec. 9.3 of

contracts which may be excluded from coverage has been moved to

Sec. 9.5. Sections 9.3 and 9.5 have been clarified in accordance with

this discussion.

Public Building (9.4)

Section 2 of the Executive Order defining the term ``public

building'' is patterned after the definition of a public building in

Section 13 of the Public Buildings Act of 1959, 40 U.S.C. 612. The

definition in the Executive Order is set forth and explained in

Sec. 9.4 of the regulations. Generally, buildings suitable for office

or storage space and administered by the General Services

Administration (GSA) or by another Federal agency under a delegation

from GSA are considered to be ``public buildings.''

Many buildings are specifically excluded from the term ``public

building,'' including buildings on properties of the United States

Postal Service, on military installations, and on Department of

Veterans Affairs installations used for hospital or domiciliary

purposes. In addition, buildings ``on the public domain (including that

reserved for national forests and other purposes)'' are not ``public

buildings.'' We have been unable to find any regulation, opinion, or

case law interpreting ``public domain'' as the term is used in the

Public Buildings Act of 1959, but the term is commonly considered to

refer to public lands in the West. Because these lands are administered

by the Department of Interior, Bureau of Land Management (BLM) (see 43

CFR 2091.0-5(c)), ``public domain'' was so defined in the proposed

regulations. In addition, because national forests are specifically

referenced in the Executive Order, lands administered by the Department

of Agriculture, U.S. Forest Service were included in the definition.

Buildings on other Federal property are not considered to be ``on the

public domain'' for purposes of the Executive Order.

SEIU and LIUNA objected to the proposed definition of ``public

domain'' as too broad, because it includes all lands administered by

the BLM and the U.S. Forest Service. LIUNA suggested a definition which

would exclude from the ``public domain'' land that ``has not been

specifically designated for a public or governmental use.'' SEIU

suggests that the public domain exception apply to buildings on land

``which has not been reserved for any specific governmental purpose or

purchased for a specific purpose such as an office building.''

These suggestions would be contrary to the plain meaning of the

Executive Order, which states that ``public domain'' includes land

``reserved for national forests and other purposes. For purposes of the

Executive Order, the Department agrees that the term ``public domain''

should be construed narrowly. The Department believes that an

appropriate definition of ``public domain'' is (1) any public lands

owned by the United States and administered by the Department of the

Interior, Bureau of Land Management, and (2) the National Forest System

administered by the Department of Agriculture, U.S. Forest Service.

However, the Department agrees with the commenters that the ``public

domain'' does not include Federal office buildings occupied by BLM or

the U.S. Forest Service where such buildings are not on lands

administered by those agencies, such as office buildings in cities and

towns. The regulation has been clarified accordingly.

A unique situation arises with respect to the Pentagon. Originally,

the Pentagon was considered a ``public building'' within the scope of

the Public Buildings Act (not an exempt ``military installation'').

Subsequently, Section 2804 of the National Defense Authorization for FY

1991 (10 U.S.C. 2674) removed the Pentagon from GSA's authority under

the Public Buildings Act; however, that legislation did not change the

Public Buildings Act's definition of a public building. For these

reasons, and consistent with the purpose of the Executive Order to

cover Government office buildings, the preamble to the proposed

regulations stated that the Department of Labor considers the Pentagon

to be a ``public building'' within the meaning of the Executive Order.

Russell Willis commented that by covering the Pentagon, the

Executive Order appears to provide broader coverage than coverage under

GSA's authority. SEIU and LIUNA commented that the Pentagon should be

covered by the Executive Order.

As explained above, the Pentagon was removed from GSA's

jurisdiction without similarly restricting the definition of ``public

building.'' The

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final rule has been revised to expressly provide that the Pentagon is

not excluded from the Executive Order.

Leased buildings are not public buildings covered by the Executive

Order unless they are being leased to the Government pursuant to lease-

purchase contracts. It should be noted, however, that building services

performed on a building being leased pursuant to a lease-purchase

contract would be covered only if the services are being performed

under a contract directly with the Government; building services

performed by the lessor would be considered incidental to the lease

(see Sec. 9.2) and would not be covered.

LIUNA expressed concern that excluding other leased facilities

would create a gap in protection for building service employees. The

plain language of the Executive Order, however, limits coverage to

``Government-owned building(s).''

Coverage Limitations (9.5)

The Order does not apply to contracts under the simplified

acquisition threshold, which is currently $100,000. In addition,

certain other contracts are excluded from coverage pursuant to sections

3 (b)-(d) of the Executive Order, including: Contracts for commodities

or services by the blind or severely handicapped awarded pursuant to

the Javits-Wagner-O'Day Act, 41 U.S.C. 46-48a; contracts for certain

services provided by sheltered workshops for the severely handicapped,

awarded pursuant to the Edgar Amendment of the Treasury, Postal

Services and General Government Appropriations Act, Pub. L. 103-329;

and vending service contracts operated by the blind, awarded pursuant

to the Randolph-Sheppard Act, 20 U.S.C. 107.

The Executive Order also excludes ``services where the contractor's

employees perform work at the public building and at other locations

under contracts not subject to (the) Order (e.g., pest control or trash

removal where the contractor's employees visit the site periodically

and where the employees under the contract respond to service calls),''

provided that employees are not deployed in a manner designed to avoid

the purposes of the Order. Thus, the manner in which employees are

deployed by the successor contractor to perform the contract services,

as well as the nature of the services must both be considered in

determining whether a building services contract is subject to the

Executive Order.

The following discussion of comments regarding the exclusion of

contracts for services at a public building which are also performed at

locations under contracts not subject to the Executive Order, also

addresses the corresponding provision Sec. 9.8(b)(3) regarding when a

successor contractor must offer employment to the predecessor's

employees.

In commenting on these sections (Secs. 9.5 and 9.8(b)(3)) of the

proposed rule, SEIU suggested that these sections erroneously interpret

the Executive Order. SEIU is of the view that there is no basis in the

Executive Order for excluding ``positions'' as provided in

Sec. 9.8(b)(3) of the proposed regulations, and that the exclusion

refers only to ``services.'' SEIU asserts that this reference is to

services performed under a particular building service contract. SEIU

maintains that a particular contract should either be covered or not

covered by the Executive Order, and once a building service contract is

covered, the only ``positions'' excluded are those positions which are

not deemed to be ``service employees'' within the meaning of SCA, 41

U.S.C. 357(d), citing section 4(b)(2) of the Executive Order.

In support of their view, SEIU explained that to exclude certain

positions under covered contracts will mean that coverage depends upon

whether particular employees of the predecessor contractor

coincidentally decided to work for the same contractor at another

building. SEIU contends that this result is inconsistent with the

purpose of section 3(e) of the Executive Order and is likely to lead to

confusion.

In a similar manner, LIUNA and SEIU also commented that the

regulations could be read to exclude from coverage building service

contracts where all or part of the workforce was incidentally employed

by the contractor at other non-covered buildings. They suggested that,

under the proposed regulation, the exclusion would depend upon whether

the predecessor's employees happen to work for the contractor at

another location; that contract coverage will be determined at any

particular time based upon who the incumbent contractor is and the

employment needs of that contractor's employees, rather than on the

nature of the service contract itself and how those services are

typically rendered to the government. They contend that such an

unworkable result was not intended by the Executive Order. Similar or

even identical building service contracts might be covered in one case

and excluded in another.

SEIU pointed out that federal service contracts often have a work

force that is employed less than full time under that contract. The

employees will sometimes also apply to work for the same contractor

under another non-federal contract. SEIU reports that the practice in

the industry is for the workers to apply separately for work on the

non-federal job. The SEIU notes the difference between this situation

and one in which the entire workforce moves from location to location

performing the same work under many different contracts, only a few of

which are covered by the Executive Order.

SEIU recommends that Sec. 9.8(b)(3) be deleted and that the final

regulations clarify that entire contracts are either covered or not

covered based upon whether the workforce that performs the contract was

normally hired to (1) perform only that contract or (2) perform a

number of contracts including contracts not covered by the Executive

Order.

In a similar manner, LIUNA and SEIU also commented that the

Executive Order provides examples of services which are excluded from

coverage, where the employees only periodically visit the site and

where the employees respond to service calls at other non-covered

locations. As an exclusion from coverage, they contend that this

provision should be given a narrow interpretation.

LIUNA suggests that Sec. 9.8(b)(3) of the regulation be qualified

by the addition of language identical to that found in proposed

Sec. 9.3(b)(1), limiting the exclusion to services offered ``once a

year'' or on a ``one-time or annual basis.'' LIUNA asserts that

otherwise, large categories of typical building service contracts which

were intended to be covered, such as janitorial contracts performed

continuously, but only for several hours a day, will be excluded from

the Executive Order.

The Executive Order expressly excludes services where the

contractor's employees perform work at the public building and at other

locations under contracts not subject to the Executive Order and these

regulations, provided that the employees are not deployed in a manner

that is designed to avoid the purposes of the Order. The Executive

Order provides examples of services which are excluded from coverage,

where the employees only periodically visit the Federal building site

to perform contract work and where the employees typically respond as

well to service calls at non-covered locations. As an exclusion from

coverage, this provision should be given a narrow interpretation. The

Department agrees that the proposed regulations are confusing and could

allow results which would be inconsistent with the intent of the

Executive Order.

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The regulations have been amended to look at how the services in

question are performed, by examining whether a majority of the

employees performing the services in question under the contract work

both at buildings under contracts subject to the Executive Order and at

other locations not subject to the Executive Order. Where a majority of

the workers furnishing the contract services in question go from

location to location, including other locations under contracts not

subject to the Order, the exclusion will apply. In addition, the

regulation provides that the exclusion does not apply where the

employees separately applied for the non-federal job.

The Executive Order's exclusion would not apply if the employees

are deployed in a manner designed to avoid the purposes of the

Executive Order. The regulation has been clarified to provide that in

examining whether or not there is an attempt to avoid coverage under

the Executive Order, the Department will look carefully at how the

predecessor contractor deployed its workforce. The Department may also

consider the manner in which the work force is typically deployed to

perform the services in question and the manner in which the contracts

are structured to determine whether the building services contract

meets the coverage provisions of the Executive Order.

Contract Clause (9.6)

Section 4 of the Executive Order specifies the contract clause that

must be included in solicitations and contracts for building services

that succeed contracts for the performance of similar work at the same

public building. The regulations set forth additional provisions which

are necessary to implement the Order. In accordance with Section 5 of

the Order, a provision of the clause makes it clear that disputes under

the Order are to be resolved in accordance with Department of Labor

procedures rather than pursuant to the general disputes clause of the

Contract Disputes Act, 41 U.S.C. 601 et seq.

Other provisions state that contract funds may be withheld in the

event the contractor is determined to have violated the provisions of

the Executive Order and is found liable for lost wages or other

monetary relief, and require contractors to cooperate in investigations

by the Department of Labor or the contracting agency.

Introductory language has been added so that the clauses would not

be included in contracts which are excluded from the Executive Order

pursuant to subsections (b), (c) and (d) of section 3 of the Order and

Secs. 9.5(b) (2), (3) and (4) of these regulations. However, the

clauses must be included in contracts which may be exempt pursuant to

subsection (e) (Sec. 9.5(b)(5) of the regulations) since exclusion of

such a contract is dependent upon how workers are deployed by the

successor contractor, rather than just the nature of the contract

services and how the workers were deployed by the predecessor

contractor, and therefore cannot be known at the time of the bid

solicitation. A new paragraph (d) has been added, and the remaining

paragraphs have been re-ordered accordingly, to address the exclusion

from coverage in Sec. 9.5(b)(5), where the services are performed by

workers who also work at other locations under contracts not subject to

the Executive Order.

The application of the clause in paragraph (c), concerning the list

of employees to be provided by the predecessor contractor, is explained

in Sec. 9.11 of the regulations. Because paragraph (c) is confusing,

however, and this provision rather than Sec. 9.11 will be included in

contracts, the language is revised to conform to Sec. 9.11 by stating

that the list must contain the names of all employees working for the

contractor at the time the list is provided, to make it clear that

compliance with this provision will constitute compliance with the

referenced provision in the Service Contract Act regulations, and to

use the title of the clause utilized in the Federal Acquisition

Regulations. The Department notes that the situation may arise where

the clauses are not included in a contract because it does not itself

succeed a contract for the performance of similar services. In such

circumstances, in order to assist the successor contractor, it is

suggested that contracting agencies request that the predecessor

contractor, where possible, provide the list required by the SCA

regulations 60 days before the end of the contract.

Because the phrase ``[d]isputes arising out of this clause'' may be

construed too broadly to include disputes over issues such as whether

contractors should be reimbursed for costs incurred, paragraph (h) is

revised to provide language similar to the SCA provision entitled

``Disputes Concerning Labor Standards'' in the FAR at 48 CFR 52.222-

42(t).

Contractor Obligations

Employee coverage/staffing (9.7/9.8)

With certain exclusions, all employees performing recurring

building services on the predecessor contract whose employment would

otherwise be terminated as the result of the award of the contract to a

new contractor, must in good faith be offered the right of first

refusal to employment under the successor contract before any other

employees may be hired. Because the successor contractor will not know

whether an individual employee of the predecessor contractor will

continue to be employed or will be terminated because of the change in

contracts, the regulations state a presumption that all employees will

be terminated when the predecessor's contract expires. This presumption

can be defeated by specific evidence to the contrary, which the

successor contractor could obtain through inquiries of, or contact

with, the contracting officer, the employees, or the predecessor

contractor after award of the contract to the successor.

The Executive Order does not require that a successor contractor

perform a contract with the same number of employees as the

predecessor. For example, if the predecessor employed twenty (20)

custodial workers, the successor may determine it can perform the

contract work with only eighteen (18) custodial workers. Thus if the

contractor continues to employ five (5) of its existing workers, the

offer of the right of first refusal would initially be limited to

thirteen (13) employees of the predecessor. The successor contractor

has discretion, within the constraints of these regulations, to

determine which employees will first be offered a right of first

refusal. If any of the predecessor's employees to whom the right of

first refusal is offered declines that offer, then the successor must

offer the right of first refusal to any remaining employees of the

predecessor who were not originally offered the right of first refusal.

The question arises, however, whether the successor contractor's

obligations continue throughout the performance of the contract.

Although the language of the Executive Order could suggest such a

result, it would be impractical and unduly burdensome. Therefore, the

proposed regulations provided at Sec. 9.8(c) that once the contract had

been fully staffed and contract performance had commenced, the

obligation to offer the right of first refusal ceased, and any

subsequent vacant positions could be filled in accordance with the

successor's normal business practices. The only proposed exception to

this provision was if the evidence showed that the successor contractor

increased the initial staffing level within the first three months

after commencement of the contract. Three months was selected as a

reasonable

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period for continuing to impose an obligation to offer a right of first

refusal in order to ensure that any necessary staffing adjustments

during the start-up period would be covered, and at the same time to

discourage attempts to manipulate the starting work force. The proposed

regulation required that the right of first refusal be offered to any

eligible employees of the predecessor contractor during this three-

month period, or until the full staffing level is reached, whichever

comes first.

Both SEIU and LIUNA believe the Department of Labor incorrectly

interpreted the Executive Order in Sec. 9.8(c) as relieving the

successor contractor of its obligation to offer a right of first

refusal to the predecessor's employees once the successor contractor

reaches a full staffing level. They contend there is nothing in the

Executive Order that relieves the successor employer of its obligation

to offer a right of first refusal when vacancies become available under

the contract. They believe the obligation by the successor contractor

should continue until all predecessor employees have been offered

employment or until three months after the successor contract has

begun.

In that regard, these commenters stated that proposed Sec. 9.8(c)

(1) and (2) are inconsistent. Under proposed Sec. 9.8(c)(2), a

successor contractor who employs fewer employees than the predecessor

contractor must continue to offer a right of first refusal during the

first three months of the contract if the successor contractor decides

to increase the size of the workforce. However, under proposed

Sec. 9.8(c)(1), the successor contractor does not need to continue to

offer a right of first refusal if vacancies occur during the first

three months of the contract due to termination of one of the employees

who was employed under the successor contract. According to SEIU and

LIUNA, the successor contractor should first be required to offer

employment for that vacancy to any predecessor employees who have not

yet received an offer of employment. They suggest that because DOL

apparently determined in proposed Sec. 9.8(c)(2) that three months is a

reasonable time to continue the obligation of the contractor where

vacancies occur due to increases in the workforce, that same time

limitation should also be applied to vacancies created for other

reasons and Sec. 9.8(c)(1) should be so revised.

The Department agrees with the commenters and Sec. 9.8(c)(1) is

amended to reflect a continuing obligation of the successor contractor

to offer employment to the predecessor's employees for any position

vacancies which occur for any reason during the first three months of

the contract, until all of the predecessor's employees have received a

bona fide offer of employment.

Existing employees of the successor contractor. The Executive Order

provides that employees who worked for the successor contractor for at

least three months immediately preceding the commencement of the

successor contract and who would otherwise face lay-off or discharge,

may be employed on the successor contract without regard to the

successor's obligation to offer the right of first refusal. The key

elements are that the employee (1) must have been employed by the

successor for at least three months prior to the commencement of the

successor contract, and (2) would otherwise face lay-off or discharge.

Employees who had been laid-off by the successor prior to the

commencement of the successor contract or existing employees of the

successor who are not facing lay-off or termination because, for

example, they would continue to be employed on another contract, may

not be employed on the successor contract until all eligible employees

of the predecessor have been offered the right of first refusal.

No comments were received on this provision set forth in proposed

Sec. 9.7(b) and no revisions have been made.

Managerial and supervisory employees. The successor contractor is

not required to offer a right of first refusal to employees who

performed as managers or supervisors under the predecessor contract or

to employees who are not service employees within the meaning of the

SCA. Thus the proposed regulations provided at Sec. 9.8(b)(1) that

those employees who are employed as bona fide executive,

administrative, or professional employees within the meaning of the

regulations issued under the Fair Labor Standards Act (FLSA) at 29 CFR

part 541 (and therefore are exempt from the provisions of the FLSA and

SCA), need not be offered a right of first refusal, but the successor

contractor is under no obligation to make an offer to such a position.

The successor contractor has complete discretion to decide who will

be employed as managers and supervisors on the contract. If a service

employee of the predecessor is qualified for a management/supervisory

position, an offer of employment in that classification would satisfy

the successor's obligation to offer the employee a right of first

refusal, but the successor contractor is under no obligation to make an

offer to such a position.

No comments were received on this provision and no revisions have

been made.

Unsuitable employees. The successor contractor is not required to

offer a right of first refusal to any employee who the successor

reasonably believes, based on the particular employee's past

performance, has failed to perform suitably on the job. The proposed

regulation implementing this provision, Sec. 9.8(b)(2), did not define

what constituted a ``reasonable belief'' or ``suitable performance.''

However, the successor contractor must base the conclusion that an

employee failed to perform suitably on information relative to a

particular employee's past performance on the job obtained from a

credible source, such as the predecessor contractor, the employee's

supervisor or foreman, or the contracting agency. Information that does

not directly relate to an employee's performance on the predecessor

contract may not be used as a basis for failing to offer a right of

first refusal.

BSCAI commented that the Executive Order will require a successor

contractor to assume responsibility for workers that the contractor has

not screened or trained. In addition, BSCAI stated that requiring the

successor contractor to retain the predecessor's employees would defeat

the purpose of changing contractors--i.e., quality, performance and

cost could be compromised. The Executive Order expressly states,

however, that the contractor ``is not required to offer a right of

first refusal to any employee(s) of the predecessor contractor whom the

contractor reasonably believes, based on the particular employee's past

performance, has failed to perform suitably on the job.''

SEIU and LIUNA both commented that the exception should not become

a loophole to allow contractors to avoid their obligations under the

Executive Order based upon undocumented oral conversations. They stated

that the regulations should ensure the exception is limited to the

employee who clearly has not performed suitably. In that regard, both

commenters suggested that the regulations should make clear that an

employer's reasonable belief as to a particular employee's past

performance should be based upon a contemporaneous written record of

the predecessor contractor. It was their view that a written record

would help avoid disputes in the administration of the Executive Order

with regard to what the contractor knew or did not know when it made

the decision not to offer a right

[[Page 28181]]

of first refusal. If there is no written record, SEIU would require

that reports of the employee's performance be from persons with first-

hand knowledge of the employee's past performance. Putting the burden

of proof on the employer rather than the employee is clearly justified,

according to SEIU and LIUNA.

SEIU further commented that the regulations should state clearly

that a contractor's determination that an employee has not suitably

performed his or her job must be based on that employee's particular

past performance and not on the past performance of the predecessor

contractor. The Executive Order, by using the phrase ``based on the

particular employee's past performance,'' makes clear that the general

performance of the predecessor contractor is irrelevant to the

successor contractor's assessment of an employee's ability to perform

the work. Further, SEIU recommended that the regulations provide that

where an employee has worked for more than thirty days for the

predecessor contractor and has not been disciplined for inadequate

performance during that period of time, there would be a presumption

that the employee can suitably perform the job. The presumption would

make it more difficult for contractors to abuse this exception, while

making it rebuttable would still allow contractors to eliminate any

truly unsuitable employee. SEIU believes that the presumption would not

cause an undue hardship on successor contractors since the Executive

Order does not impose a continuing obligation to employ an employee

after the employee starts work with the successor contractor. The

successor employer will have an opportunity to evaluate the employee on

the job and to take appropriate action against the employee if that

employee is not performing adequately.

LIUNA recommended the creation of a similar presumption where an

employee has not been subject to discipline by the predecessor

contractor. The presumption would be greater for employees with greater

seniority and no record of disciplinary action.

The Department agrees with the comments that the Executive Order

does put the responsibility on the employer rather than the employee

regarding establishing a reasonable belief that the employee has failed

to perform suitably based on the employee's past performance.

Therefore, the regulation is revised to provide a presumption that an

employee has performed suitably. This presumption can be rebutted by

showing the contractor's reasonable belief that the employee had failed

to perform suitably--e.g., by evidence of past discipline for

unsuitable performance or evidence directly from contracting agency

officials that the particular employee had not performed suitably. The

Department is of the view that it is not necessary in every case to

have written or first-hand evidence, since such evidence frequently

will not be available to contractors. The evidentiary standard has been

tightened, however, to provide that the evidence must be ``based on

credible information provided by a knowledgeable source * * *''

Establishing a presumption based on a specific time frame under which

an employee has performed without disciplinary action goes beyond the

intent of the Executive Order, which requires only the successor

contractor's ``reasonable belief.'' In addition, the requirement that

past performance be based on the particular employee's performance

rather than the general performance of the predecessor contractor is

further clarified.

Services at buildings not covered by the Order. The proposed

regulation provided at Sec. 9.8(b)(3) that the successor contractor is

not obligated to offer a right of first refusal to employment in a

position which will perform building services both at public buildings

covered by the Executive Order and at other buildings not covered by

the Order.

The comments on and discussion of this section are included above

in Sec. 9.5, which has been amended to include a new explanatory

paragraph in Sec. 9.5(b)(5)(ii). Section 9.8(b)(3) has been revised to

include the language of the Executive Order exclusion, together with a

cross-reference to Sec. 9.5(b)(5)(ii), which applies this exclusion

only where a majority of the contractor's employees perform work at the

public building and at other locations under contracts not covered by

the Executive Order.

Offer of Employment/Recordkeeping (9.9, 9.10)

The Executive Order requires the successor to make an express offer

of employment to each employee and state the time within which the

employee must accept such offer, which must be at least ten (10) days.

The proposed regulation at Sec. 9.9 stated that the offer could be made

either in writing or orally at a meeting of the predecessor

contractor's employees, and required that the contractor keep either a

copy of the offer or documentation regarding the meeting at which the

offer was made, which could consist of notations on the attendance

roster and a copy of any written notice distributed.

The proposed regulations provided that the successor's obligation

to extend a right of first refusal applied to all employees employed at

the end of the contract, including any who began work within 60 days

before the end of the predecessor contract and thus do not appear on

the list of employees which Sec. 9.11 requires the predecessor

contractor to provide at least 60 days before the end of the contract.

Given that successor contractors commonly hire the predecessor's work

force without the convenience of such a list, it is not likely that the

absence of such employees' names from the list would be unduly

burdensome.

The proposed regulations at Sec. 9.10 discussed what is a bona fide

offer of employment. In general, an offer of employment will be

presumed to be bona fide. Employees need not be offered employment in

the same job that they were employed in under the predecessor contract,

provided the employee is qualified for the position offered. Thus an

employee may be equipped by education, training or experience to

perform the duties of a position to be filled by the successor

contractor, even though he or she held a position under the predecessor

contractor that did not require or utilize such education, training or

experience. The proposed regulation further provided that an offer of

employment at a lower level or to a different position may be a basis

for closely examining whether the offer is bona fide, i.e., based on

valid business reasons.

Both SEIU and LIUNA suggested that the final regulations should

require that the ``express offer of employment'' be made in writing in

order to avoid disputes regarding whether an offer is properly made.

Both parties also recommend that the offer be made in a language in

which the employees are fluent in order to make it meaningful. SEIU

does not believe this would be a hardship on the employer since the

employer must have a supervisory employee fluent in the language of the

employees in order to properly supervise them.

The regulations have been revised to state that the employer should

take reasonable efforts to make the employment offer in a language that

the workers understand. We do not anticipate that this will place

significant burden on contractors since both the predecessor and

successor contractor will need to have some mechanism to communicate

with the workers. This may be accomplished, for example, by having a

co-worker or other person fluent in the workers' language at the

meeting to translate or otherwise assist

[[Page 28182]]

employees who are not fluent in English. The Department recognizes that

there may be a rare case where a contractor may need to hire an

interpreter or translate a written offer.

SEIU, while noting that there is nothing in the Executive Order

that requires a successor contractor to offer employment to the

employee in the same position that he or she held with the predecessor

contractor, stated concerns that employers may offer employment in

lower level positions or different positions in order to discourage

acceptance of offers of employment. SEIU believes that the regulations

should go further than to state that where an employee is offered a

position at a lower level, the basis for doing so should be ``closely

examined to insure that the offers are bona fide.'' SEIU and LIUNA

believe that the final regulation should create a presumption that

offers of employment to a lower or less favorable position are not bona

fide offers, but that the presumption can be overcome by the employer

showing a valid business reason for offering that particular employee

employment at a lower or less favorable position. They state that the

creation of this presumption will help to protect against contractors

frustrating the purposes of the Executive Order. Otherwise, according

to LIUNA, this proposed subsection does not provide sufficient

protections to employees who may have performed acceptably at higher

level positions under previous contractors.

In addition, SEIU believes the final regulations should provide

that there is a presumption that an employer has not made a good faith

offer of employment if the employer terminates the employee within the

first ninety days of employment. The presumption could be overcome by

the employer by showing a valid business reason, such as a reduction in

force or unsatisfactory performance by the employee. SEIU expressed the

view that the use of the term ``good faith offer'' in the Executive

Order was intended to guard against successor employers frustrating the

intent of the Executive Order by making an offer, employing the

individual and then terminating the individual immediately without any

valid reason for doing so.

The Department agrees with the concerns expressed by the commenters

and has revised Sec. 9.10(b) to provide that an offer may be made to a

position providing lower pay or benefits than the employee held with

the predecessor if the contractor shows valid business reasons. The

Department does not believe that it is appropriate to have a

presumption that an offer is not bona fide where an employee is

terminated from employment shortly after being hired. Terminations

which are not for valid reasons would not ordinarily be in the

employer's interest, due to such concerns as unemployment insurance

obligations and similar reasons. However, the regulation has been

revised to state that the Department will closely examine cases,

including the facts and circumstances of the dismissal, where the

timing of an employee's termination suggests that the offer of

employment may not have been bona fide.

Predecessor's Obligation To Provide a List of Employees (9.11)

The Executive Order requires that, no less than 60 days before the

completion of the contract, the predecessor contractor provide the

contracting officer with a certified list of all service employees

working at the Federal facility during the last month of the contract.

The list is also required to contain anniversary dates of employment,

either with the current or predecessor contractor (as appropriate), of

each service employee. The contracting officer in turn will provide the

list to the successor contractor, and it will be provided on request to

employees or their representatives.

Except for the timing of submission of the list, this requirement

is the same as the requirement under the SCA at 29 CFR 4.6(l)(2) that

the predecessor furnish the names and anniversary dates at least ten

days before contract termination. By providing the names of all service

employees working on the contract 60 days in advance of termination, as

required by the Executive Order, the predecessor contractor also

fulfills its obligation under 29 CFR 4.6(l)(2). Thus the Executive

Order does not create any new obligation on the predecessor, but simply

moves forward the date the list must be submitted.

Because the predecessor contractor cannot know with certainty, 60

days in advance of termination, who will be performing on the contract

in the final month, the regulations provide that the predecessor will

provide the names of all service employees working on the contract at

the time the list is submitted. The successor in turn must assume the

employees listed will be working during the final month of the contract

unless the facts demonstrate otherwise.

No comments were received on this provision, but language was added

to clarify that the list is to contain the names of all employees

working for the contractor at the Federal location.

Notice to Employees (9.12)

Service employees need to be advised of their right of first

refusal in the event of contract transition. Various options were

considered regarding how the employees should be so advised. Notice

could easily be accomplished by the predecessor contractor, but it has

no substantive obligations under the Order. The Department also

considered placing the obligation on the successor contractor, but

concluded that it would be more efficient to require notification by

the contracting agency since the predecessor's employees are working

regularly at the Federal building. Therefore, the proposed regulations

required that the agency either post a notice or give individual notice

to the predecessor contractor's employees. A prototype notice was

included in an Appendix to the proposed regulations.

SEIU and LIUNA urged the Department to require that the notice also

be provided by the predecessor contractor. They also suggested that the

notice be posted both in English and in other languages spoken by the

employees, if they are not fluent in English.

It remains the Department's view that the predecessor should have

no obligation to provide notice. The Executive Order places no

obligation on the predecessor contractor except providing a list of

employees. The Department does not consider it appropriate to impose

unnecessary notice obligations on predecessor contractors. The

Executive Order clearly places the responsibility upon the successor

contractor to ``make an express offer of employment'' to each service

employee. Therefore, the Department continues to believe that notice to

employees of their right of first refusal should be accomplished by

placing the responsibility with the contracting agency. The Department

expects the contracting agency to provide notice in English and in any

other language that is understandable by a substantial portion of the

service employees performing work under the predecessor contract. In

response to comments, the Department expanded and clarified the

prototype notice in the Appendix.

Enforcement (Subpart B)

Section 5 of the Executive Order provides that the Secretary of

Labor is responsible for investigating and obtaining compliance with

the Executive Order. It further provides that the Secretary has the

authority to issue

[[Page 28183]]

final orders prescribing appropriate sanctions and remedies, including

but not limited to, orders requiring employment and payment of wages

lost.

The Executive Order also requires that alternative dispute

mechanisms be utilized to the maximum extent possible in resolving

enforcement issues. Thus, the thrust of the Executive Order is to keep

the enforcement processes as simple and timely as possible, given the

immediacy of both the employees' and the contractor's need for

resolution.

Role of the Contracting Officer (9.100)

The enforcement provisions of the regulations seek to provide a

process that encourages resolution at the earliest possible stage with

fairness and efficiency. For this reason, the proposed regulations

provided that complaints alleging violations shall be filed with the

contracting officer, who will provide the employee and the successor

contractor with information about the requirements of the Executive

Order. If this is not sufficient to resolve the matter, the proposed

regulations provided that the contracting officer will obtain

statements from the parties of their respective positions and submit a

report to the Department of Labor.

While SEIU is not opposed to DOL requiring that contracting

officers attempt to resolve violations of the Executive Order as a

first step, SEIU expressed concern that contracting officers not become

an impediment to effective and quick resolution of disputes. SEIU

contends the proposed regulations are seriously deficient because they

permit contracting officers to block enforcement of employee rights by

simply delaying completion of their responsibilities. SEIU and LIUNA

suggest that this problem can be alleviated by placing a time limit on

when the contracting officers must take action and recommend that the

final regulations in Sec. 9.100(b) provide that the contracting officer

must perform his or her duties within ten days of receiving a complaint

from an employee of the predecessor contractor. LIUNA suggests that if

the matter is not resolved within ten days, the contracting officer

should have ten additional days to obtain the statements from the

parties and prepare a report to submit to the Wage and Hour Division.

SEIU recommends that where a contracting officer has failed to gather

information and report to Wage and Hour within ten days, an employee

may go directly to the Wage and Hour Division to file a complaint. SEIU

also suggests that when the contracting officer files his/her report

with Wage and Hour, the statements of position submitted by the parties

should be included.

The Department agrees with the thrust of these comments and has

modified the regulations to establish a time frame of 30 days for the

contracting officer to forward to Wage and Hour any unresolved

complaints, together with the contracting officer's summary of the

relevant facts and issues and the statements of the parties. In

addition, the regulation is revised to permit an employee to file a

complaint directly with Wage-Hour if the complaint has not been timely

forwarded to Wage-Hour.

Role of the Department of Labor (9.101, 9.102)

If the contracting officer cannot resolve the dispute, proposed

Sec. 9.100(b) provided that the contracting officer will submit a

report to the Wage and Hour Division. Based on the contracting

officer's report, Wage and Hour could attempt to resolve the dispute

through conciliation procedures; however, if that is not successful,

Wage and Hour would investigate as necessary to determine the facts and

issue a determination as to whether a violation occurred. The proposed

regulations also provided that the Administrator has the authority to

conduct an investigation on his or her own initiative, without a

complaint.

SEIU contends the proposed regulations regarding conciliation

efforts are inadequate as they do not set a time limit on how long the

conciliation efforts should continue. SEIU believes conciliation

procedures should not drag on unnecessarily and recommends the final

regulations place a ten day limitation on conciliations, with a caveat

that this period can be extended by the mutual consent of the parties.

LIUNA also favors a ten day limit.

SEIU and LIUNA suggest that there ought to be a 30-day time limit

from the date the conciliation effort is over for issuance of a written

determination by the Administrator. LIUNA also states that if any time

limits set forth in this section are not met, the complainant should

have an automatic right to appeal to the next level of the complaint

procedure and at the same time there should be an automatic employment

offer to the employee who is the subject of the complaint. According to

LIUNA, these revisions would ensure that the rights of employees are

not rendered meaningless by a delay in the complaint procedures.

The Department is committed to prompt resolution of complaints

under the Executive Order because employees' jobs and livelihood are at

issue. Therefore Secs. 9.101 and 9.102 are amended to provide that an

investigation shall be commenced within 15 days of receipt of the

contracting officer's report or the complaint unless the parties agree

that the investigation should be delayed so that conciliation efforts

can be completed.

However, the Department believes that setting a 30-day limit from

the date a conciliation effort is terminated for issuance of a written

determination by the Administrator is not appropriate. Where the

conciliation effort is unsuccessful and the Department undertakes an

investigation, 30 days may not be sufficient to conduct a thorough

investigation and issue the Administrator's determination. Finally, the

Department cannot concur with the suggestion that the contractor be

required to hire an employee if the government fails to meet regulatory

deadlines. This section, therefore, remains as proposed with minor

clarification.

SEIU and LIUNA also suggest that Sec. 9.102(c) should state how an

aggrieved party may appeal a decision of the Administrator, how the

request is made, and how long an aggrieved party has to file that

appeal. Both commenters also state that the last sentence of this

section should be clarified to make sure that copies of the

Administrator's determination are given by certified mail to the

complainant's representative, as well as to the successor contractor

and the successor contractor's representative. They assert that under

the proposed regulations, it is unclear whether there is a requirement

to give copies to the complainant's representative.

The parties' concern in Sec. 9.102(c) regarding appeal procedures

are addressed in Sec. 9.103. The Department concurs with the suggestion

to clarify that copies of the Administrator's decision are to be sent

to the complainant's representative(s) and the regulations are amended

accordingly.

Hearing Procedures (9.103-9.107)

The proposed regulations provided that the Administrator's

determination becomes a final order of the Secretary unless a request

for a hearing is filed within 20 days of the date of the determination

or, where the Administrator determines that relevant facts are not in

dispute, a petition for review is filed with the Board of Service

Contract Appeals (BSCA). Section 9.103 provided the procedures and time

frames for appeal to the BSCA.

SEIU and LIUNA urge the Department to include clarifying language

indicating that the Administrator will notify the

[[Page 28184]]

employee representative, if any, of her determination if there is no

relevant issue of fact. The language of the regulations was intended to

provide such notice. However, for the sake of clarification,

Sec. 9.103(b) of the regulations now expressly provides that the

Administrator will notify the parties and their representatives, if

any, ``where no relevant facts are in dispute.'' In addition,

Sec. 9.102(c) is clarified by providing that the notice of

determination of a violation will be given to the parties and their

representatives, if any. Finally, Sec. 9.103(a) is clarified to provide

that ``the Administrator shall advise the parties'' including their

representatives, that the notice of determination shall become final

unless a hearing is requested.

Sections 9.103, 9.106 and 9.107 have been amended to provide for

review by the Administrative Review Board (ARB). (Effective May 3,

1996, the Administrative Review Board was established within the

Department of Labor as a reorganization and consolidation of the

functions of the former Board of Service Contract Appeals, the Wage

Appeals Board, and the Office of Administrative Appeals, which prepared

decisions for the Secretary in all other programs). See Secretary's

Order 2-96, 61 FR 19,978 (May 3, 1996).

Consistent with the Executive Order's directive to favor the

resolution of disputes by efficient and informal alternative dispute

methods, Sec. 9.104 encourages parties to utilize settlement judges to

mediate settlement negotiations prior to an Administrative Law Judge

(ALJ) hearing. The general ALJ regulations, 29 CFR part 18, Sec. 18.9,

already provide settlement judge procedures, and these procedures have

been expressly adopted for use under the Executive Order.

Like the Department's ``whistleblower'' proceedings under 29 CFR

part 24, it is anticipated that complainants may often appear pro se.

Therefore Sec. 9.105(f)(1) has been amended to provide that the ALJ's

Rules of Evidence shall not apply. See 29 CFR 24.5(e).

If a complaint cannot be resolved informally through the

conciliation or the settlement judge process, then Sec. 9.105 provides

procedures for a hearing before an ALJ. In most cases it is envisioned

that the parties to the proceeding will be the contractor and the

complainant (if any). However, the Wage-Hour Administrator may appear

in any proceeding as a party or as amicus curiae, and will appear as a

party in all cases in which ineligibility sanctions have been sought.

The contracting agency may also appear as amicus curiae.

As provided in Sec. 9.106, the ALJ shall issue a decision within 60

days after the proceeding at which evidence was submitted. If the ALJ

determines that a violation has occurred, the ALJ may order appropriate

relief (Sec. 9.106(c)). Section 9.107 provides the procedures for

appealing an ALJ decision to the ARB.

The proposed regulations provided for assessment of costs and

stated in the preamble that the Department was considering providing

for payment of attorney fees or costs where the complainant prevails.

SEIU urged that Secs. 9.106(c) and 9.107(f) of the final

regulations be amended to empower the ALJ and the ARB to award attorney

fees to a prevailing complaining employee. The SEIU further suggests

that an award of attorney fees should be mandatory where the employee

prevails.

LIUNA also commented that the ALJ should be expressly permitted to

assess attorney fees, since it would be a permissible interpretation of

the Executive Order's requirements and a reasonable means to enforce

the Executive Order. LIUNA further states that Sec. 9.107(f) should

contain a similar provision to allow an employee to pursue his or her

appeal rights.

Russell Willis commented that express statutory authority is

necessary to provide for payment of attorney fees and costs.

The Supreme Court has held that under the American Rule, which

governs the award of attorney's fees in the United States, the

prevailing party may not recover attorney's fees as costs or otherwise

absent statute or enforceable contract. See Alyeska Pipeline Service

Co. v. The Wilderness Society, 421 U.S. 240, 245-247 (1975). Because

neither the Executive Order nor any statutes provide for the award of

attorney fees, there is an insufficient legal basis to provide for

attorney fees by regulation in disputes arising under the Executive

Order. Sections 9.106(c) and 9.107(f) have been clarified by expressly

excluding attorney fees from an assessment of costs by the

Administrative Law Judge or the Administrative Review Board.

Finally, the legislative history of the Equal Access to Justice Act

(EAJA), 5 U.S.C. 504, indicates that the Act excludes from coverage

those hearings which are not required by an underlying statute.

Similarly, the EAJA regulations promulgated by the Department of Labor

exclude from coverage those proceedings which are established by

regulation, but are not required by the governing statute. See 29 CFR

part 16. Neither the underlying statute, nor Executive Order 12933,

require hearings. Accordingly, in any proceeding conducted pursuant to

the provisions of Secs. 9.105-9.107, the Administrative Review Board

shall have no power or authority to award attorney fees and/or other

litigation expenses pursuant to the Equal Access to Justice Act.

Appropriate language has been included in the regulations.

Remedies/Ineligibility Sanction (9.108-9.109)

Section 5 of the Executive Order provides that the Secretary has

the authority to prescribe appropriate remedies, including orders

requiring employment and payment of wages lost. Proposed Sec. 9.108

also set forth withholding procedures to obtain wages due, and a

provision for suspension of payments if the predecessor fails to

provide the contracting officer with a list of employees on the

contract. Furthermore, where a contractor has failed to comply with any

order of the Secretary or has committed willful violations of the

Executive Order or its regulations, the contractor and its responsible

officers, and any firm in which the contractor has a substantial

interest, shall be ineligible to be awarded any contract or subcontract

of the United States for a period of up to three years. Since debarment

is only imposed for the most serious of violations--i.e., violations

that are willful or failure to comply with an order of the Secretary,

which in itself is a willful violation--the proposed regulations at

Sec. 9.109 prescribed a three-year period for debarment in all cases.

SEIU stated that the ineligibility sanctions should be mandatory

whenever there are violations unless the contractor can show that it

acted in good faith; LIUNA suggested that the regulation specify that

all violations are presumed to be willful.

The plain language of the Executive Order grants the Secretary the

discretion to impose debarment where a contractor fails to comply with

any order of the Secretary or has committed a willful violation. Thus,

the standard proposed by the commenters is not consistent with that

provided by the Executive Order and is not adopted in the final rule.

Definitions (9.200)

The regulations include definitions of several important terms. The

definition of ``service employee'' is based on the Service Contract

Act, as the Executive Order provides. Coverage under the

[[Page 28185]]

Executive Order, however, applies only to those service employees

performing recurring building services, and not to other employees on

contracts subject to SCA.

LIUNA suggested that the term ``contract'' and ``building service

contract'' should include ``subcontracts.''

Because the language of the Executive Order does not specifically

refer to subcontracts, and because the requirements are not practical

as applied to subcontracts, the regulations contain no ``flow-down''

requirements for subcontractors. No amendment is made to this

provision.

Dates of Applicability

The clauses contained in Sec. 9.6 must be included in all contracts

awarded after the effective date of these regulations. In addition, the

regulations shall apply as of the effective date to all contracts

awarded prior to the effective date which contain the clauses set forth

in section 4 of the Executive Order (Sec. 9.6 (a), (b), (c), and (e) of

the regulations), and those contracts should be amended where

practicable to incorporate the additional clauses set forth in the

regulations (Sec. 9.6 (d), (f), (g), and (h)).

In order to provide successor contractors with the convenience of a

list of names from the predecessor contractor earlier than the SCA

requirement of 10 days before completion of the contract, all existing

contracts (whether or not they contain the clauses of the Executive

Order) should be amended to include the clause in Sec. 9.6(c).

Executive Order 12866/Sec. 202 of the Unfunded Mandates Reform Act of

1995/Executive Order 12875/Small Business Regulatory Enforcement

Fairness Act

Because this rule provides the initial implementing regulations for

an Executive Order issued by the President, it is being treated as a

``significant regulatory action'' within the meaning of Executive Order

12866. However, no economic analysis is required because the rule will

not have a significant economic impact. For the same reason, the rule

is not a major rule within the meaning of the Small Business Regulatory

Enforcement Fairness Act. The total value of Federal contracts covered

by Executive Order 12933 is less than $100 million, and only a small

fraction of that total may involve terminations of predecessor

employees. General Services Administration data for Fiscal Year 1994

indicate that no more than 88 new building service contract actions

were taken, with a value of $39.2 million. Since only a very small

percentage of that dollar value involves terminations, the economic

impact of the Executive Order is minimal.

In addition, the rule does not require a Sec. 202 statement under

the Unfunded Mandates Reform Act of 1995. Although State, local, and

tribal governments are not precluded from receiving Federal contracts

to provide building services at public buildings, the Department is not

aware of any governmental entities that are performing public building

service contracts within the purview of this rule. Thus this rule would

not result in a mandate upon a State, local, or tribal government for

purposes of Executive Order 12875. The Executive Order simply requires

contractors to the Federal Government to follow the practice which is

currently followed in most cases in any event as a good business

practice, and will improve Government efficiency and economy in those

few cases where the practice would not otherwise have been followed by

decreasing or eliminating the loss of productivity that may occur when

experienced employees are terminated.

Regulatory Flexibility Analysis

The Regulatory Flexibility Act of 1980 (RFA) requires agencies to

prepare regulatory flexibility analyses, and to develop alternatives,

whenever possible, in drafting regulations that will have a

``significant economic impact on a substantial number of small

entities.'' The Department has determined that such an analysis is not

required for this rulemaking. This conclusion is based on the fact that

the Executive Order mandates a practice which is already followed in

almost all cases. Accordingly, this regulation will not have a

significant economic impact on a substantial number of small entities

within the meaning of the RFA. The Administrator has certified to the

Chief Counsel for Advocacy of the Small Business Administration to this

effect. Therefore, no regulatory flexibility analysis is required.

Document Preparation

This document was prepared under the direction and control of John

R. Fraser, Acting Administrator, Wage and Hour Division, Employment

Standards Administration, U.S. Department of Labor.

List of Subjects in 29 CFR Part 9

Employment, Federal buildings and facilities, Government contracts,

Labor, Law enforcement.

Signed at Washington, DC, on this 16th day of May, 1997.

John R. Fraser,

Acting Administrator, Wage and Hour Division.

Accordingly, for the reasons set out in the preamble, 29 CFR part 9

is added as follows:

PART 9--NONDISPLACEMENT OF QUALIFIED WORKERS UNDER CERTAIN

CONTRACTS

Subpart A--How is Executive Order 12933 Applied?

Covered Contracts Generally

Sec.

9.1 What is the purpose of Executive Order 12933?

9.2 Which contracts are covered by Executive Order 12933?

9.3 What is a ``building service contract?''

9.4 What is a ``public building?''

9.5 Which contracts are not covered by Executive Order 12933?

Contract Clauses

9.6 What contract clauses must be included in covered contracts?

Contractor Obligations

9.7 May a contractor employ persons other than the predecessor

contractor's employees?

9.8 Must the successor contractor offer a right of first refusal to

all employees of the predecessor contractor?

9.9 In what manner must the successor contractor offer employment?

9.10 What constitutes a bona fide offer of employment?

9.11 What are the obligations of the predecessor contractor?

Notice to Employees

9.12 How will employees learn of their rights?

Subpart B--What Enforcement Mechanisms does Executive Order 12933

Provide?

Complaint Procedures

9.100 What may employees do if they believe that their rights under

the Executive Order have been violated?

9.101 What action will the Wage and Hour Division take to try to

resolve the complaint?

9.102 How are complaints resolved if conciliation is unsuccessful?

9.103 How are decisions of the Administrator appealed?

Administrative Law Judge Procedures

9.104 How may cases be settled without formal hearing?

9.105 What procedures are followed if a complaint cannot be

resolved through conciliation or settlement agreement?

9.106 What rules apply to the decision of the administrative law

judge?

[[Page 28186]]

Appeal Procedures

9.107 How may an administrative law judge's decision or the

Administrator's determination be appealed?

Enforcement Remedies

9.108 What are the consequences to a contractor of not complying

with the Executive Order?

9.109 Under what circumstances will ineligibility sanctions be

imposed?

Subpart C--Definitions

9.200 Definitions

Appendix to Part 9--Notice to Building Service Contract Employees

Authority: Secs. 4-6, Executive Order 12933; 5 U.S.C. 301.

Subpart A--How is Executive Order 12933 Applied?

Covered Contracts Generally

Sec. 9.1 What is the purpose of Executive Order 12933?

The Government's procurement interests in both economy and

efficiency are furthered when a successor contractor carries over an

existing work force. A carryover work force minimizes disruption in the

delivery of services during a period of transition and provides the

Government the benefit of an experienced and trained work force.

Executive Order 12933 therefore generally requires that successor

contractors performing building service contracts for public buildings

offer a right of first refusal to employment under the contract to

those employees under the predecessor contract whose employment will be

terminated as a result of the award of the successor contract.

Sec. 9.2 Which contracts are covered by Executive Order 12933?

(a) The Executive Order and these rules apply to ``building service

contracts'' for ``public buildings'' where the contract is entered into

by the United States in an amount equal to or greater than the

simplified acquisition threshold of $100,000, as set forth in section

4(11) of the Office of Federal Procurement Policy Act (41 U.S.C.

403(11)).

(b)(1) Except as provided in paragraph (b)(2) of this section, a

contract which includes a requirement for recurring building services

is subject to the Executive Order and these regulations even if the

contract also contains other non-covered services or non-service

requirements, such as construction or supplies, and even if the

contract is not subject to the McNamara-O'Hara Service Contract Act, 41

U.S.C. 351 et seq. However, the requirements of the Executive Order

apply only to the building services portion of the contract, and only

to those buildings for which services were provided under a predecessor

contract.

(2) The requirements of the Executive Order do not apply to

building services which are only incidental to a contract for another

purpose, such as incidental maintenance under a contract to operate a

day-care center.

(i) Building service requirements will not be considered

incidental, and therefore will be subject to the Executive Order, where

(A) the contract contains specific requirements for a substantial

amount of building services or it is ascertainable that a substantial

amount of building services will be necessary to the performance of the

contract (the word ``substantial'' relates to the type and quantity of

building services to be performed and not merely to the total value of

such work, whether in absolute dollars or cost percentages as compared

to the total value of the contract); and

(B) the building services work is physically or functionally

separate from, and as a practical matter is capable of being performed

on a segregated basis from the other work called for by the contract.

(ii) Building services performed on a building being leased to the

Government pursuant to a lease-purchase contract are considered

incidental and not covered unless the services are being performed

under a contract directly with the Government.

Sec. 9.3 What is a ``building service contract?''

(a) A building service contract is a contract for recurring

services related to the maintenance of a public building. Recurring

services are services which are required to be performed regularly or

periodically throughout the course of a contract, and throughout the

course of the succeeding or follow-on contract(s) at one or more of the

same buildings. Examples of building services contracts include, but

are not limited to, contracts for the recurring provision of custodial

or janitorial services; window washing; laundry; food services; guard

or other protective services; landscaping and groundskeeping services;

and inspection, maintenance, and repair of fixed equipment such as

elevators, air conditioning, and heating systems.

(b)(1) Contracts which provide maintenance services only on a non-

recurring basis are not ``building service contracts'' within the

meaning of the Executive Order and are not subject to its provisions.

For example, a contract to perform servicing of fixed equipment once a

year, or to mulch a garden on a one-time or annual basis, is a non-

recurring maintenance contract that is not covered by the Executive

Order.

(2) Contracts for the provision of services which may be performed

in a public building but are not ``building service contracts'' as

defined in paragraph (a) of this section are not covered by the

Executive Order and these rules. For example, a contract for day care

services in a Federal office building would not be subject to the

Executive Order.

Sec. 9.4 What is a ``public building?''

(a) A public building is any building owned by the United States

which is generally suitable for office or storage space or both for the

use of one or more Federal agencies or mixed ownership corporations,

together with its grounds, approaches, and appurtenances. Public

buildings shall include:

(1) Federal office buildings;

(2) Customhouses;

(3) Courthouses;

(4) Border inspection facilities;

(5) Warehouses;

(6) Records centers;

(7) Appraiser stores;

(8) Relocation facilities; and

(9) Similar Federal facilities.

(b)(1) Public buildings do not include any building on the public

domain. The public domain includes only: those public lands owned by

the United States and administered by the Department of Interior,

Bureau of Land Management; and the National Forest System administered

by the Department of Agriculture, U.S. Forest Service. The public

domain does not include Federal buildings, such as office buildings in

cities or towns, which are occupied by the Bureau of Land Management or

U.S. Forest Service where such buildings are not on lands administered

by those agencies.

(2) Also not covered are any buildings:

(i) On properties of the United States in foreign countries;

(ii) On Native American and Native Eskimo properties held in trust

by the United States;

(iii) On lands used in connection with Federal programs for

agricultural, recreational, and conservation purposes, including

research in connection therewith;

(iv) On or used in connection with river, harbor, flood control,

reclamation, or power projects; or for chemical manufacturing or

development projects; or for nuclear production, research, or

development projects;

(v) On or used in connection with housing and residential projects;

(vi) On properties of the United States Postal Service;

[[Page 28187]]

(vii) On military installations (including any fort, camp, post,

naval training station, airfield, proving ground, military supply

depot, military school, or any similar facility of the Department of

Defense, but not including the Pentagon);

(viii) On installations of the National Aeronautic and Space

Administration, except regular office buildings; and

(ix) On Department of Veterans Affairs installations used for

hospital or domiciliary purposes.

(3) Buildings leased to the Government are not public buildings

unless the building is leased pursuant to a lease-purchase contract.

Sec. 9.5 Which contracts are not covered by Executive Order 12933?

(a) A contract is not covered by the Executive Order unless it

requires the provision of recurring building services, and unless the

contract succeeds a contract for similar work at one or more of the

same public building(s).

(b) The Executive Order expressly excludes:

(1) Contracts for services under the simplified acquisition

threshold ($100,000);

(2) Contracts for commodities or services produced or provided by

the blind or severely handicapped, awarded pursuant to the Javits-

Wagner-O'Day Act, 41 U.S.C. 46-48a, and any future enacted law creating

an employment preference for some group of workers under building

service contracts;

(3) Guard, elevator operator, messenger, or custodial services

provided to the Government under contracts with sheltered workshops

employing the severely handicapped as outlined in the Edgar Amendment,

section 505 of the Treasury, Postal Services and General Government

Appropriations Act, 1995, Pub. L.103-329;

(4) Agreements for vending facilities operated by the blind,

entered into under the preference provisions of the Randolph-Sheppard

Act, 20 U.S.C. 107; and

(5)(i) As explained in paragraph (b)(5) (ii) of this section,

services where the contractor's employees perform work at the public

building and at other locations under contracts not subject to the

Executive Order and these regulations, provided that the employees are

not deployed in a manner that is designed to avoid the purposes of the

Order.

(ii) The successor contractor is not required to offer a right of

first refusal for employment where a majority of the successor

contractor's employees performing the particular service under the

contract work at the public building and at other locations under

contracts not subject to the Executive Order and these regulations.

Examples include, but are not limited to, pest control or trash removal

services where the employees periodically visit various Government and

non-Government sites, and make service calls to repair equipment at

various Government and non-Government buildings. This exclusion does

not apply, however, where the service employees' work on non-covered

contracts is not performed as a part of the same job as their work on

the Federal contract in question, or where they separately apply for

work on the non-Federal contracts. This exclusion also does not apply

where the employees are deployed in a manner that is designed to avoid

the purposes of the Executive Order. In making this determination, all

the facts and circumstances are examined, including particularly the

manner in which the predecessor contractor deployed its workforce to

perform the services, the manner in which the work force is typically

deployed to perform such services, and the manner in which the contract

is structured.

Contract Clauses

Sec. 9.6 What contract clauses must be included in covered contracts?

The clauses set forth in paragraphs (a) through (h) of this section

shall be included in full by the contracting agency in every

solicitation and contract entered into by the United States equal to or

in excess of the simplified acquisition threshold of $100,000, where

the contract requires the provision of building services and succeeds a

contract for the performance of similar services at one or more of the

same public building(s), except that such clauses need not be included

in any contract which is excluded from coverage of the Executive Order

pursuant to paragraph (b) (2), (3) or (4) of Sec. 9.5 of this part.

(a) Consistent with the efficient performance of this contract, the

contractor shall, except as otherwise provided herein, in good faith

offer those employees (other than managerial and supervisory employees)

under the predecessor contract whose employment will be terminated as a

result of award of this contract or the expiration of the contract

under which the employees were hired, a right of first refusal to

employment under the contract in positions for which the employees are

qualified. The contractor shall determine the number of employees

necessary for efficient performance of this contract and may elect to

employ fewer employees than the predecessor contractor employed in

connection with performance of the work. Except as provided in

paragraph (b) of this section, there shall be no employment opening

under the contract, and the contractor shall not offer employment under

the contract, to any person prior to having complied fully with this

obligation. The contractor shall make an express offer of employment to

each employee as provided herein and shall state the time within which

the employee must accept such offer, but in no case shall the period

within which the employee must accept such offer be less than 10 days.

(b) Notwithstanding the contractor's obligation under paragraph (a)

of this section, the contractor:

(1) May employ on the contract any employee who has worked for the

contractor for at least 3 months immediately preceding the commencement

of this contract and who would otherwise face lay-off or discharge, and

(2) Is 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 McNamara-O'Hara Service Contract Act, 41

U.S.C. 357(b), and

(3) Is not required to offer a right of first refusal to any

employee(s) of the predecessor contractor who the contractor reasonably

believes, based on the particular employee's past performance, has

failed to perform suitably on the job.

(c) In accordance with paragraph (n) of the clause of this contract

entitled ``Service Contract Act of 1965, as Amended'' and 29 CFR

4.6(l)(2), the contractor shall, no less than 60 days before completion

of this contract, furnish the Contracting Officer with a certified list

of the names of all service employees working at the Federal facility

at the time the list is submitted. The list shall also contain

anniversary dates of employment on the contract either with the current

or predecessor contractors of each service employee, as appropriate.

The Contracting Officer will provide the list to the successor

contractor and the list shall be provided on request to employees or

their representatives. Compliance with this paragraph shall constitute

compliance with paragraph (n) of the clause entitled ``Service Contract

Act of 1965, as Amended'' and 29 CFR 4.6(l)(2).

(Approved by the Office of Management and Budget under control

numbers 1215-0150 and 1215-0190)

[[Page 28188]]

(d) The requirements of this clause do not apply to services where

a majority of the contractor's employees performing the particular

services under the contract work at the public building and at other

locations under contracts not subject to Executive Order 12933,

provided that the employees are not deployed in a manner that is

designed to avoid the purposes of the Executive Order.

(e) If it is determined, pursuant to regulations issued by the

Secretary of Labor, that the contractor is not in compliance with the

requirements of this clause or any regulation or order of the

Secretary, appropriate sanctions may be imposed and remedies invoked

against the contractor, as provided in Executive Order No. 12933, the

regulations of the Secretary of Labor at 29 CFR part 9, and relevant

orders of the Secretary of Labor, or as otherwise provided by law.

(f) The Contracting Officer shall withhold or cause to be withheld

from the prime contractor under this or any other Government contract

with the same prime contractor such sums as an authorized official of

the Department of Labor requests, upon a determination by the

Administrator, the Administrative Law Judge, or the Administrative

Review Board, that the prime contractor failed to comply with the terms

of this clause, and that wages lost as a result of the violations are

due to employees or that other monetary relief is appropriate.

(g) The contractor shall cooperate in any investigation by the

contracting agency or the Department of Labor into possible violations

of the provisions of this clause and shall make records requested by

such official(s) available for inspection, copying, or transcription

upon request.

(h) Disputes concerning the requirements of this clause shall not

be subject to the general disputes clause of this contract. Such

disputes shall be resolved in accordance with the procedures of the

Department of Labor set forth in 29 CFR part 9. Disputes within the

meaning of this clause include disputes between or among any of the

following: The contractor, the contracting agency, the U.S. Department

of Labor, and the employees under the contract or its predecessor

contract.

Contractor Obligations

Sec. 9.7 May a contractor employ persons other than the predecessor

contractor's employees?

(a) There shall be no employment openings under a contract subject

to the Executive Order and the successor contractor shall not offer

employment under the contract until it fully complies with its

obligation to offer a right of first refusal, except as provided under

paragraph (b) of this section and Sec. 9.8.

(b) A successor contractor may employ on the contract any employee

who the contractor demonstrates has worked for that contractor for at

least 3 months immediately preceding the commencement of the contract

and would face lay-off or discharge if not employed on the subject

contract.

Sec. 9.8 Must the successor contractor offer a right of first refusal

to all employees of the predecessor contractor?

(a)(1) Except as provided in this section, a successor contractor

shall offer employment under the contract (i.e., a ``right of first

refusal'') to those employees of the predecessor contractor who, in the

final month of the contract, provided recurring building services

similar to the services to be performed at one or more of the same

public building(s) under the successor contract, and whose employment

will be terminated as a result of the award of the successor contract

or expiration of the contract under which the employees were hired.

(2) Unless the predecessor contractor (either directly or through

the contracting agency) or the individual employee in question provides

evidence to the contrary, the successor contractor must presume that

all service employees of the predecessor contractor who are working at

the same public building during the final month of contract performance

will be terminated when the contract ends.

(b)(1) A successor contractor is not required to offer a right of

first refusal to any managerial or supervisory employee or to any

employee of the predecessor contractor who is not a service employee

within the meaning of the McNamara-O'Hara Service Contract Act, 41

U.S.C. 357(b). ``Managerial and supervisory'' employees and employees

who are not ``service employees'' are those persons engaged in the

performance of services under the contract who are employed in a bona

fide executive, administrative, or professional capacity, as those

terms are defined in the Fair Labor Standards Act regulations, 29 CFR

part 541.

(2) The successor contractor must presume that all employees

working under the predecessor contract in the last month of performance

performed suitable work on the contract. However, a successor

contractor is not required to offer a right of first refusal to an

employee of the predecessor contractor if the successor contractor is

able to demonstrate its reasonable belief that the employee in fact

failed to perform suitably on the predecessor contract--for example,

through evidence of disciplinary action taken for poor performance or

evidence directly from the contracting agency that the particular

employee did not perform suitably. The successor contractor must

demonstrate that its belief that an employee has failed to perform

suitably on the predecessor contract is reasonable and based upon

credible information provided by a knowledgeable source such as the

predecessor contractor, the employee's supervisor, or the contracting

agency. Information regarding the general performance of the

predecessor contractor is not sufficient.

(3) The successor contractor is not required to offer a right of

first refusal for employment where a majority of the contractor's

employees performing the service in question under the contract work

both at the public building and at other locations under contracts not

subject to the Executive Order and these regulations. See

Sec. 9.5(b)(5)(ii) of this part.

(c) The successor contractor shall determine the number of

employees necessary for the efficient performance of the contract. The

contractor may, for bona fide staffing or work assignment reasons,

employ fewer employees than the predecessor contractor. Thus, the

successor contractor need not extend the right of first refusal to all

employees of the predecessor contractor, but must offer employment only

to the number of eligible employees it believes necessary to meet its

anticipated staffing pattern, except that:

(1) Where a successor contractor offers a right of first refusal to

fewer employees than were employed by the predecessor contractor, its

obligation to offer employment under the contract to the predecessor's

employees continues for three months after commencement of the contract

to fill vacancies created by employee termination, either voluntarily

or for cause. For example, a contractor with eighteen (18) employment

openings and a list of twenty (20) predecessor contractor's employees

must continue to offer a right of first refusal to individuals on the

list until eighteen (18) of the employees accept the contractor's

employment offer, or until all of the employees have either accepted or

refused the job offer. Further, if an employee quits or is terminated

within three months of contract commencement and the contractor

determines that it must hire an additional employee to sufficiently

perform the contract requirements, the contractor must first offer a

right of first

[[Page 28189]]

refusal to an eligible employee of the predecessor contractor and must

continue to offer a right of first refusal to the predecessor's

employees until one of the employees accepts the contractor's

employment offer, or, except as otherwise provided in this Section,

until all of the employees have refused a job offer.

(2) If a successor contractor raises its staffing level within

three months of the commencement of contract performance, its

obligation to offer employment under the contract to eligible employees

continues until the higher staffing level is reached. For example, if a

contractor determines two months into the contract period that it must

hire an additional ten (10) employees to sufficiently perform the

contract requirements, the contractor must first offer a right of first

refusal to ten (10) eligible employees of the predecessor contractor

(or to all of the employees of the predecessor contractor who have not

previously been offered a right of first refusal if less than ten

remain), and must continue to offer a right of first refusal to the

predecessor's employees until ten (10) of the employees accept the

contractor's employment offer, or, except as otherwise provided in this

Section, until all of the employees have refused a job offer.

Sec. 9.9 In what manner must the successor contractor offer

employment?

(a) Except as provided in Sec. 9.7 and 9.8 of this part, a

successor contractor must make a bona-fide express offer of employment

to each of the predecessor contractor's employees before offering

employment on the contract to any other person. The successor

contractor must offer employment to each employee, either individually

in writing or orally at a meeting attended by a group of the

predecessor contractor's employees. In order to ensure that the offer

is effectively communicated, the successor contractor should take

reasonable efforts to make the offer in a language that each worker

understands, for example, by having a co-worker or other person fluent

in the worker's language at the meeting to translate or otherwise

assist an employee who is not fluent in English.

(b) For a period of one year, the contractor must maintain 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 and a copy of any written notice

which may have been distributed, and the names of the predecessor

contractor's employees to whom an offer was made. The contractor must

provide copies of such documentation upon request of any authorized

representative of the contracting agency or Department of Labor.

(Approved by the Office of Management and Budget under control

number 1215-0190)

(c) The contractor shall state the time within which an employee

must accept an employment offer, but in no case may the period in which

the employee has to accept the offer be less than 10 days.

(d) The successor contractor's obligation to offer a right of first

refusal exists even if the successor contractor has not been provided a

list of the predecessor contractor's employees, or the list does not

contain the names of all persons employed during the final month of

contract performance.

Sec. 9.10 What constitutes a bona fide offer of employment?

(a) As a general matter, an offer of employment will be presumed to

be a bona fide offer of employment. An offer of employment need not be

to a position similar to that which the employee previously held, but

the employee must be qualified for the position. Information regarding

an employee's qualifications shall ordinarily come directly from the

employee. If a question arises concerning an employee's qualifications,

that question shall be decided based upon the employee's education and

employment history with particular emphasis on the employee's

experience on the predecessor contract.

(b) An offer of employment to a position providing lower pay or

benefits than the employee held with the predecessor contractor will be

considered bona fide if the contractor shows valid business reasons

(not related to a desire that the employee refuse the offer, or that

other employees be hired). Where the timing of an employee's

termination suggests that the offer of employment may not have been

bona fide, the facts and circumstances of the offer and the termination

will be closely examined to be sure the offer was bona fide.

Sec. 9.11 What are the obligations of the predecessor contractor?

(a) Not less than 60 days before completion of its contract, the

predecessor contractor must furnish the contracting officer with a

certified list of the names of all service employees working for the

contractor at the Federal facility at the time the list is submitted,

together with their anniversary dates of employment. The contracting

officer in turn shall provide the list to the successor contractor and,

if requested, to employees of the predecessor contractor or their

representatives.

(b) Unless the predecessor contractor (either directly or through

the contracting agency) or the individual employee in question provides

evidence to the contrary, the successor contractor must presume that

all service employees of the predecessor contractor who are working at

the same public building during the final month of contract performance

will be terminated when the contract ends.

(Approved by the Office of Management and Budget under control

numbers 1215-0150 and 1215-0190)

Notice to Employees

Sec. 9.12 How will employees learn of their rights?

Where the successor contract is a contract subject to the Executive

Order and these regulations, the contracting officer (or designee) will

provide written notice to service employees of the predecessor

contractor who are engaged in building services of their possible right

to an offer of employment. Such notice may either be posted in a

conspicuous place at the worksite or may be delivered to the employees

individually. Contracting officers may either use the notice set forth

in Appendix A to this part or another form with the same information.

Subpart B--What Enforcement Mechanisms does Executive Order 12933

Provide?

Complaint Procedures

Sec. 9.100 What may employees do if they believe that their rights

under the Executive Order have been violated?

(a) Any employee of the predecessor contractor who believes he or

she was not offered employment by the successor contractor as required

by the Executive Order and these regulations may file a complaint with

the contracting officer of the appropriate Federal agency.

(b) Upon receipt of a complaint, the contracting officer (or

designee) shall provide information to the employee(s) and the

successor contractor about their rights and responsibilities under the

Executive Order. If the matter is not resolved through such actions,

the contracting officer shall, within 30 days from receipt of the

complaint, obtain statements of the positions of the parties and

forward the complaint and statements, together with a summary of the

issues and any relevant facts known to the contracting officer, to the

nearest District Office of the Wage and Hour

[[Page 28190]]

Division, Employment Standards Administration, U.S. Department of

Labor, with copies to the contractor and the complaining employee(s).

(c) If the contracting officer has not forwarded the complaint to

the Wage and Hour Division within 30 days of receipt of the complaint,

as required by paragraph (b) of this section, the complainant may

refile the complaint directly with the nearest District Office of the

Wage and Hour Division.

Sec. 9.101 What action will the Wage and Hour Division take to try to

resolve the complaint?

After obtaining the necessary information from the contracting

officer regarding the alleged violations, the Wage and Hour Division

may promptly contact the successor contractor and attempt, through

conciliation procedures, to obtain a resolution to the matter which is

satisfactory to both the complainant(s) and the successor contractor

and consistent with the requirements of the Executive Order and these

regulations. The Wage and Hour Division will commence an investigation

in accordance with Sec. 9.102 of this part if the dispute has not been

satisfactorily resolved within 15 days of receipt of the contracting

officer's report or the complaint, unless the successor contractor and

the complainant(s) agree to a delay in the commencement of the

investigation.

Sec. 9.102 How are complaints resolved if conciliation is

unsuccessful?

(a) Upon receipt of a contracting officer's report or a complaint

filed in accordance with Sec. 9.100(c) of this part, the Wage and Hour

Division, U.S. Department of Labor, will investigate as necessary to

gather sufficient data concerning such case unless the dispute has been

resolved through conciliation between the parties. Such an

investigation will be commenced within 15 days of receipt of the

contracting officer's report or the complaint unless conciliation

efforts are still underway and the complainant(s) and the successor

contractor have agreed to a delay in the investigation so that

conciliation efforts may be completed. The Administrator may also

initiate an investigation at any time on his or her own initiative. As

part of the investigation, the Administrator may inspect the records of

the predecessor and successor contractors (and make copies thereof),

may question the predecessor and successor contractors and any

employees of these contractors, and may require the production of any

documentary or other evidence deemed necessary to determine whether a

violation of the Executive Order (including conduct warranting

imposition of ineligibility sanctions pursuant to Sec. 9.109 of this

part) has been committed.

(b) The contractor and the predecessor contractor shall cooperate

in any investigation conducted pursuant to this subpart, and shall not

interfere with the investigation or intimidate, blacklist, discharge,

or in any other manner discriminate against any person because such

person has cooperated in an investigation or proceeding under this

subpart or has attempted to exercise any rights afforded under this

part.

(c) Upon completion of the investigation, the Administrator shall

issue a written determination of whether a violation has occurred which

shall contain a statement of findings and conclusions. A determination

that a violation occurred shall address appropriate relief and the

issue of ineligibility sanctions where appropriate. Notice of the

determination shall be given by certified mail to the complainant (if

any) and his/her representatives (if any), and to the successor

contractor and their representatives (if any).

(d) The Administrator may conduct a new investigation or issue a

new determination if the Administrator concludes circumstances warrant,

such as where the proceedings before an Administrative Law Judge reveal

that there may have been violations with respect to other employees of

the predecessor contractor, where imposition of ineligibility sanctions

is appropriate, or where the contractor has failed to comply with an

order of the Secretary.

Sec. 9.103 How are decisions of the Administrator appealed?

(a) Except as provided in paragraph (b) of this section, the

determination of the Administrator shall advise the parties (ordinarily

the complainant (if any), the successor contractor, and their

representatives (if any)), that the notice of determination shall

become the final order of the Secretary and shall not be appealable in

any administrative or judicial proceeding unless, within 20 days of the

date of the determination of the Administrator, the Chief

Administrative Law Judge receives a request for a hearing. Any

aggrieved party may file a request for a hearing. The request for a

hearing shall be accompanied by a copy of the Administrator's

determination and may be filed by U.S. mail, facsimile (FAX), telegram,

hand delivery, or next-day delivery service. At the same time, a copy

of any request for a hearing shall be sent to the complainant(s) or

successor contractor, and their representatives, if any, as

appropriate; the Administrator of the Wage and Hour Division; and the

Associate Solicitor, Division of Fair Labor Standards, U.S. Department

of Labor, Washington, DC 20210. The Administrator's failure or refusal

to seek ineligibility sanctions shall not be appealable.

(b) If the Administrator concludes that no relevant facts are in

dispute, the parties and their representatives, if any, will be so

advised and will be further advised that the determination shall become

the final order of the Secretary and shall not be appealable in any

administrative or judicial proceeding unless, within 20 days of the

date of the determination of the Administrator, a petition for review

is filed with the Administrative Review Board pursuant to Sec. 9.107 of

this part. The determination will further advise that if an aggrieved

party disagrees with the factual findings or believes there are

relevant facts in dispute, the aggrieved party may advise the

Administrator of the disputed facts and request a hearing by letter,

which must be received within 20 days of the date of the determination.

The Administrator will either refer the request for a hearing to the

Chief Administrative Law Judge, or notify the parties and their

representatives, if any, of the Administrator's determination that

there is no relevant issue of fact and that a petition for review may

be filed with the Administrative Review Board within 20 days of the

date of the notice, in accordance with the procedures at Sec. 9.107 of

this part.

(c) If any party desires review of the determination of the

Administrator, including judicial review, a request for an

administrative law judge hearing (or petition for review by the

Administrative Review Board) must first be filed in accordance with

paragraph (a) (or (b)) of this section. If a timely request for hearing

(or petition for review) is filed, the determination of the

Administrator shall be inoperative unless and until the administrative

law judge or the Administrative Review Board issues an order affirming

the determination.

Administrative Law Judge Procedures

Sec. 9.104 How may cases be settled without formal hearing?

(a) In accordance with the Executive Order's directive to favor the

resolution of disputes by efficient and informal alternative dispute

resolution methods, the parties are encouraged to resolve disputes in

accordance with the conciliation procedures set forth in

[[Page 28191]]

Sec. Sec. 9.100 and 9.101 of this subpart, or, where such efforts have

failed, to utilize settlement judges to mediate settlement negotiations

pursuant to 29 CFR part 18, Sec. 18.9. At any time after commencement

of a proceeding, the parties jointly may move to defer the hearing for

a reasonable time to permit negotiation of a settlement or an agreement

containing findings and an order disposing of the whole or any part of

the proceeding.

(b) A settlement judge may be appointed by the Chief Administrative

Law Judge upon a request by a party or the presiding administrative law

judge. The Chief Administrative Law Judge has sole discretion to decide

whether to appoint a settlement judge, except that a settlement judge

shall not be appointed when a party objects to referral of the matter

to a settlement judge.

Sec. 9.105 What procedures are followed if a complaint cannot be

resolved through conciliation or settlement agreement?

(a) If the case is not stayed to attempt settlement, the

administrative law judge to whom the case is assigned shall within

fifteen (15) calendar days following receipt of the request for

hearing, notify the parties and their representatives, if any, of the

day, time and place for hearing. The date of the hearing shall not be

more than 60 days from the date of receipt of the request for hearing.

(b) The administrative law judge may, at the request of a party, or

on his/her own motion, dismiss a challenge to a determination of the

Administrator upon the failure of the party requesting a hearing or

his/her representative to attend a hearing without good cause; or upon

the failure of said party to comply with a lawful order of the

administrative law judge.

(c) At the Administrator's discretion, the Administrator has the

right to participate as a party or as amicus curiae at any time in the

proceedings, including the right to petition for review of a decision

of an administrative law judge in a case in which the Administrator has

not previously participated. The Administrator shall participate as a

party in any proceeding in which the Administrator's determination has

sought imposition of ineligibility sanctions.

(d) Copies of the request for hearing and documents filed in all

cases, whether or not the Administrator is participating in the

proceeding, shall be sent to the Administrator, Wage and Hour Division,

and to the Associate Solicitor, Division of Fair Labor Standards, U.S.

Department of Labor, Washington, DC 20210.

(e) A Federal agency which is interested in a proceeding may

participate as amicus curiae at any time in the proceedings, at the

agency's discretion. At the request of a Federal agency which is

interested in a proceeding, copies of all pleadings in a case shall be

served on the Federal agency, whether or not the agency is

participating in the proceeding.

(f)(1) The rules of practice and procedure for administrative

hearings before the Office of Administrative Law Judges at 29 CFR part

18 shall be applicable to the proceedings provided by this section,

except that the Rules of Evidence at 29 CFR part 18, subpart B shall

not apply. Rules or principles designed to assure production of the

most probative evidence available shall be applied. The administrative

law judge may exclude evidence which is immaterial, irrelevant, or

unduly repetitive.

(2) To the extent the rules in 29 CFR part 18 are inconsistent with

a rule of special application provided by these regulations or the

Executive Order, these regulations and the Executive Order are

controlling.

Sec. 9.106 What rules apply to the decision of the administrative law

judge?

(a) The administrative law judge shall issue a decision within 60

days after completion of the proceeding at which evidence was

submitted. The decision shall contain appropriate findings,

conclusions, and an order and be served upon all parties to the

proceeding.

(b) Upon the conclusion of the hearing and the issuance of a

decision that a violation has occurred, the administrative law judge

shall issue an order that the successor contractor take appropriate

action to abate the violation, which may include hiring the affected

employee(s) in the same or a substantially equivalent position(s) to

that which the employee(s) held under the predecessor contract,

together with compensation (including lost wages), terms, conditions,

and privileges of that employment. Where ineligibility sanctions have

been sought by the Administrator, the order shall also address whether

such sanctions are appropriate.

(c) If an order is issued finding that the contractor violated the

Executive Order and these regulations, the administrative law judge may

assess a sum equal to the aggregate amount of all costs (not including

attorney fees) and expenses reasonably incurred by the aggrieved

employee(s) in the proceeding.

(d) A proceeding under subpart B of this part is not subject to the

Equal Access to Justice Act, as amended, 5 U.S.C. 504. In such a

proceeding, the administrative law judge shall have no authority to

award attorney fees and/or other litigation expenses pursuant to the

provisions of the Equal Access to Justice Act.

(e) The decision of the administrative law judge shall become the

final order of the Secretary unless a petition for review is timely

filed with the Administrative Review Board.

Appeal Procedures

Sec. 9.107 How may an administrative law judge's decision or the

Administrator's determination be appealed?

(a) The Administrative Review Board has jurisdiction to hear and

decide in its discretion appeals concerning questions of law and fact

from determinations of the Administrator pursuant to Sec. 9.103(b) of

this part and from decisions of administrative law judges pursuant to

Sec. 9.106 of this part.

(b) Any aggrieved party desiring review of a decision of the

administrative law judge (or of the Administrator, pursuant to

Sec. 9.103(b)) shall file a petition for review, in writing, with the

Administrative Review Board. No administrative or judicial review shall

be available unless a timely petition for review to the Administrative

Review Board is first filed. To be effective, such a petition for

review must be received within 20 days of the date of the decision of

the administrative law judge (or Administrator), and shall be served on

all parties and the Chief Administrative Law Judge (where the case

involves an appeal from an administrative law judge's decision). If a

timely petition for review is filed, the decision of the administrative

law judge (or Administrator) shall be inoperative unless and until the

Administrative Review Board issues an order affirming the decision or

declining review of the matter. If a petition for review concerns only

the imposition of ineligibility sanctions, however, the remainder of

the decision shall be effective immediately.

(c)(1) A petition for review shall refer to the specific findings

of fact, conclusions of law, or order at issue.

(2) Copies of the petition and all briefs shall be served on the

Administrator, Wage and Hour Division, and on the Associate Solicitor,

Division of Fair Labor Standards, U.S. Department of Labor, Washington,

DC 20210.

(d) The Board's final decision shall be issued within 90 days of

the receipt of the petition for review and shall be served upon all

parties by mail to the last known address, and on the Chief

[[Page 28192]]

Administrative Law Judge (in cases involving an appeal from an

administrative law judge's decision).

(e) If the Board concludes that the contractor has violated the

Executive Order, the final order shall order action to abate the

violation, which may include hiring the affected employee(s) in the

same or a substantially equivalent position(s) to that which the

employee(s) held under the predecessor contract, together with

compensation (including lost wages), terms, conditions, and privileges

of that employment. Where the Administrator has sought imposition of

ineligibility sanctions, the Board shall also determine whether an

order imposing ineligibility sanctions is appropriate.

(f) If a final order finding violations of the Executive Order is

issued, the Board may assess against the successor contractor a sum

equal to the aggregate amount of all costs (not including attorney

fees) and expenses reasonably incurred by the employee(s) in the

proceeding.

(g) In considering the matters within the scope of its jurisdiction

the Board shall act as the authorized representative of the Secretary

and shall act fully and finally on behalf of the Secretary concerning

such matters. The Board shall not have jurisdiction to pass on the

validity of any provision of this part. The Board is an appellate body

and shall decide cases properly before it on the basis of all relevant

matter contained in the entire record before it. The Board shall not

hear cases de novo or receive new evidence into the record.

(h) Proceedings under Executive Order 12933 are not subject to the

Equal Access to Justice Act (Pub. L. 96-481). Accordingly, in any

proceeding conducted pursuant to the provisions of Secs. 9.105-9.107,

the Administrative Review Board shall have no power or authority to

award attorney fees and/or other litigation expenses pursuant to the

Equal Access to Justice Act.

Enforcement Remedies

Sec. 9.108 What are the consequences to a contractor of not complying

with the Executive Order?

(a) The Executive Order provides that the Secretary shall have the

authority to issue orders prescribing appropriate remedies, including,

but not limited to, requiring employment of the predecessor

contractor's employees and payment of wages lost.

(b) After an investigation and a determination by the Administrator

that lost wages or other monetary relief is due, the Administrator may

direct that so much of the accrued payments due on either the contract

or any other contract between the contractor and the Government shall

be withheld in a deposit fund as are necessary to pay the moneys due.

Upon the final order of the Secretary that such moneys are due, the

Administrator may direct that such withheld funds be transferred to the

Department of Labor for disbursement.

(c) If the contracting officer or the Secretary finds that the

predecessor contractor has failed to provide a list of the names of

employees working under the contract in accordance with Sec. 9.6(c),

the contracting officer may take such action as may be necessary to

cause the suspension of the payment of funds until such time as the

list is provided to the contracting officer.

Sec. 9.109 Under what circumstances will ineligibility sanctions be

imposed?

(a) Where the Secretary finds that a contractor has failed to

comply with any order of the Secretary or has committed willful

violations of the Executive Order or these regulations, the Secretary

may order that the contractor and its responsible officers, and any

firm in which the contractor has a substantial interest, shall be

ineligible to be awarded any contract or subcontract of the United

States for a period of three years.

(b) Upon order of the Secretary, the names of persons or firms

found to be ineligible for contracts in accordance with this section

shall be added to the ``List of Parties Excluded from Federal

Procurement and Nonprocurement Programs,'' compiled, maintained and

distributed by the General Services Administration in accordance with

48 CFR 9.404. No contract of the United States shall be awarded to the

persons or firms appearing on this list or to any firm, corporation,

partnership, or association in which such persons or firms have a

substantial interest until three years have elapsed from the date the

persons' or firms' name was entered on the electronic version of the

list.

Subpart C--Definitions

Sec. 9.200 Definitions.

For purposes of this part:

Administrator means the Administrator of the Wage and Hour

Division, Employment Standards Administration, U.S. Department of

Labor, and includes any official of the Wage and Hour Division

authorized to perform any of the functions of the Administrator under

this part.

Contract means any prime contract subject wholly or in part to the

provisions of the Executive Order.

Contracting officer means the individual, a duly appointed

successor, or authorized representative who is designated and

authorized to enter into contracts on behalf of the Federal agency.

Executive Order or Order means Executive Order 12933 (59 FR 53559,

October 24, 1994).

Federal Government means an agency or instrumentality of the United

States which enters into a contract pursuant to authority derived from

the Constitution and the laws of the United States.

Secretary means the Secretary of Labor or his/her authorized

representative.

Service employee means any person engaged in the performance of

recurring building services other than a person employed in a bona fide

executive, administrative, or professional capacity, as those terms are

defined in part 541 of title 29, Code of Federal Regulations, and shall

include all such persons regardless of any contractual relationship

that may be alleged to exist between a contractor and such person.

United States means the United States and all executive

departments, independent establishments, administrative agencies, and

instrumentalities of the United States, including corporations, all or

substantially all of the stock of which is owned by the United States,

by the foregoing departments, establishments, agencies,

instrumentalities, and including non-appropriated fund

instrumentalities.

Appendix to Part 9--Notice to Building Service Contract Employees

The contract for (type of service) services currently performed

by (predecessor contractor) has been awarded to a new contractor.

(successor contractor) will begin performance on (date successor

contract begins) .

As a condition of the new contract(successor contractor) is

required to offer employment to the employees of (predecessor

contractor) working at (the contract worksite or worksites) except

in the following situations:

Managerial or supervisory employees on the current

contract are not entitled to an offer of employment.

(successor contractor) may reduce the size of the

current work force. Therefore, only a portion of the existing work

force may receive employment offers. However, (successor contractor)

must offer employment to the employees of (predecessor contractor)

if any vacancies occur in the first three months of the new

contract.

(successor contractor) may employ a current employee on the new

contract before offering employment to (predecessor contractor's)

employees only if the current employee has worked for (successor

contractor) for at least three months immediately preceding the

commencement of the new contract and would face layoff or

[[Page 28193]]

discharge if not employed under the new contract.

Where (successor contractor) has reason to believe,

based on credible information from a knowledgeable source, that an

employee's performance has been unsuitable on the current contract,

the employee is not entitled to employment with the new contractor.

If you are offered employment on the new contract, you

will have at least ten (10) days to accept the offer.

Any employee of (predecessor contractor) who believes that he or

she is entitled to an offer of employment with (successor

contractor) and has not received an offer, may file a complaint with

(contracting officer or representative), the contracting officer

handling this contract at: (address and telephone number of

contracting officer). If the contracting officer is unable to

resolve the complaint, the contracting officer shall promptly

forward a report to the U.S. Department of Labor, Wage and Hour

Division.

If you have any questions about your right to employment on the

new contract, contact: (Name, address, and telephone # for the

contracting officer or the contracting officer's representative)

[FR Doc. 97-13336 Filed 5-21-97; 8:45 am]

BILLING CODE 4510-27-P