DOL Requires Federal Contractors to Hire Predecessor’s Workers

On Dec. 13, the U.S. Department of Labor released a final rule aimed at retaining workers when federal contracts shift. The workers on a federal contract will have the right of first refusal to the job if the contract changes hands. They will have 10 business days to accept or reject the employment offer. Successor contractors will not have to give the right of first refusal to workers whose past performance indicates there would be just cause for discharge.

The predecessor contractor will have to give the successor contractor updated lists of their employees at least 10 business days before completing the contract. The successor contractor will have to recognize and bargain with any existing unions. The rule will take effect around Feb. 12, which is 60 days after being published in the Federal Register.

The rule implements an executive order that President Joe Biden issued on Nov. 18, 2021.

The executive order stated its goal is to “reduce disruption in the delivery of services during the period of transition between contractors, maintain physical and information security, and provide the federal government with the benefits of an experienced and well-trained workforce that is familiar with the federal government’s personnel, facilities and performance.”

Opponents Criticize the Proposal

Some business groups voiced their opposition to the rule.

In public comments to the DOL, the Professional Services Council, an Arlington, Va.-based trade group representing federal contractors, said the hiring requirements are too burdensome and “would likely result in different and inconsistent combinations of workplace culture, wages and benefits, and workforce practices.” Hiring decisions are “best made organically without regulatory regimes that impose an arbitrary definition of qualified employees,” the council said.

The federal Service Contract Act does not authorize the DOL or the U.S. president to require successor contractors to hire the incumbent employees of their predecessors, argued Associated Builders and Contractors, a construction industry trade association based in Washington, D.C., in public comments to the DOL. The trade group said the rule would create “gross inefficiencies in the procurement process” and would disproportionately affect small businesses.

It also called the 10-day time frame for furnishing lists of employees “impracticable and unworkable.”

Supporters Tout Retention Benefits

Supporters viewed the rule’s likely outcomes differently. In practice, the rule will reduce turnover, save taxpayer money and make federal procurement more efficient, according to the Economic Policy Institute, a nonprofit, nonpartisan think tank based in Washington, D.C.

The final rule will improve productivity and provide stability for workers and their families, so they won’t be replaced by lower-paid workers, according to the National Employment Law Project (NELP), a New York City-based nonprofit advocacy organization for workers’ rights, in its public comments to the DOL.

“Despite a longstanding recognition that good, stable jobs for federal contract workers benefit the federal government, more needs to be done to promote this stability when contracts change hands,” NELP said. “Too often, calls for efficiency in contracting have been conflated with paying a bargain basement price. As a result, public revenues end up paying for high turnover, inexperienced workers, repeated basic job training and poor management.”