Labor Dept. Pushes Non-Displacement Clauses in Contracts

Succeeding service contracts could all soon have a non-displacement clause. 

According to a July 15 Federal Register notice, the Labor Department has proposed a new rule to implement Executive Order 14055, which was signed into law in November 2021. 

The order establishes that “service contracts which succeed contracts for the same or similar services ... shall include a non-displacement clause.” The proposed clause would require the contractor to offer qualified employees working under the predecessor contract “a right of first refusal of employment under the successor contract.” 

“Using a carryover work force reduces disruption in the delivery of services during the period of transition between contractors,” reads the order. 

To help accomplish this, the proposed rule would require the preceding contractor to provide the successor with a list of names of all service employees working under the contract during the “last month of contract performance.”  

Some exclusions would be in play, specifically if the contract is less than $250,000 or if the contractor could reasonably believe that there would be just cause to discharge the employee “based on reliable evidence of the particular employee’s past performance.”