Service Contractors Must Hire Incumbent Employees

There is a proposed rule published today that will require, under "service contracts", successor contractors to hire the incumbent employees. A service contract is any Government contract where the principal purpose is to furnish services through the use of service employees.

Specifically, the proposed rule states that

When a service contract succeeds a contract for performance of the same or similar services at the sale location, the successor contractor and its subcontractors are required to offer those employees (other than managerial and supervisory employees) that are employed under the predecessor contract, and whose employment will be terminated as a result of the award of the successor contract, a right of first refusal of employment under the contract in positions for which they are qualified. 

This proposed regulation is being formulated to implement an Executive order for non-displacement of qualified workers under service contracts (E.O. 13495 dated January 30, 2009).

There would be a few limited exceptions to this proposed rule and there is also a waiver authority when the application of it would "impair the ability of the Government to procure services on an economical and efficient basis or would not serve the purposes of the Executive Order.

Thirty days before the old contract ends, the old contractor must provide a listing of employees qualified to work on the successor contract. The contracting officer, in turn, must provide the listing to the new contractor. There is also a lot of verbiage concerning the rights of the incumbent employees and avenues of recourse if they feel they have inappropriately lost their jobs.

We didn't see anything in the proposed rule that requires a successor contractor to match the pay and benefit levels of the old contractor but other rules might apply (such as Service Contracting Act) in some circumstances.