Federal Service Contractors No Longer Required to Offer Employment to Predecessor’s Employees

Last month (Oct. 2019) President Trump signed Executive Order (EO) 13897 – “Improving Federal Contract Operations by Revoking EO 13495.”

It immediately revokes Executive Order 13495 – “Nondisplacement of Qualified Workers Under Service Contracts” issued by former President Barack Obama in January 2009. EO 13495 required contractors awarded contracts covered by the McNamara O’Hara Service Contract Act (SCA) successor contractors “a right of first refusal of employment” to workers of the predecessor’s contract.

Previously successor contractors were prohibited from hiring new workers until qualified workers performing on the prior contract were given first priority to accept a job with the successor. EO 13495 empowered those employees as they were experienced (previously on the contract) and familiar with the contract requirements.

The Intent of EO 13495

EO 13495 was put in place to protect qualified service workers on a service contract (SCA) from being displaced when the contract/contractor was replaced with a new contract/contractor for the same services at the same location.

EO 13495 received criticism from government contractors from its inception. While intended to “reduce disruption to the delivery of services during the period of transition between contractors and provides the Federal Government the benefits of an experienced and trained workforce that is familiar with the Federal Government’s personnel, facilities, and requirements.” Many contractors saw it as restricting their ability to make hiring decisions by having to retain previous workers simply to meet contract requirements.

EO 13897 directs the Secretary of Labor and other departments/agencies to, “promptly move to rescind any orders, rules, regulations, guidelines, programs, or policies implementing or enforcing EO 13495.” In addition, any related investigations or compliance actions are to be terminated immediately.

Greater Workforce Flexibility for Contractors

The EO 13495 revocation offers federal contractors more flexibility when selecting workers for their service contracts. It removes the burden of contractors having to compromise by offering jobs to workers (who can be largely unqualified) simply because they were attached to the previous contractor/contract.

Not only does this allow contractors to choose which predecessor workers to retain, they no longer have to provide notices which were required under EO 13495.

Incumbent contractors will also be able to better protect their workers from competitors through post-employment restrictions like non-competes. Under EO 13897 contractors would no longer be bound to union bargaining obligations which often required hiring more than 50% of the predecessor’s workers.