01.18.2013 Final Rule Protecting First Refusal Rights of Incumbent Service Contract Workers Take Effect January 18, 2013



On December 22, 2012, the Federal Acquisition Regulation (FAR) Councils published the long awaited final rule implementing the President’s January 30, 2009 Executive Order protecting Service Contract Act (SCA) workers from job loss upon termination of a covered federal contract absent exceptional circumstances.   The FAR rule, which takes effect 1/18/13, incorporates by reference the DOL final rule published in August 2011. 


Covered contracts include any oral or written action that results in the purchase, rent or lease of supplies or equipment, services, or construction using appropriated dollars over the micro-purchase threshold (currently $150,000.00), or modifications to such contracts regardless of dollar value, with the exception of set aside contracts for blind and disabled workers and contracts specifically exempted by the head of the contracting agency in advance of solicitation.  DOL estimates that the outplacement rule will apply to approximately 40,000 contracts and subcontracts annually.


In general, the new non-displacement rule requires successor contractors and subcontractors to extend “bona fide” job offers to all qualified SCA personnel employed by one or more predecessor contractors and subcontractors at the time their contracts or subcontracts terminate.  To meet compliance requirements, the offers must contain a promise to pay the required wages and fringe benefits for the occupation in question under the applicable SCA area prevailing wage determination and must remain open for a period of not less than 10 days.  Certain narrowly tailored exceptions apply to the mandatory job offer rule – but a successor contractor or subcontractor who utilizes such an exception must be prepared to demonstrate that its actions were not undertaken with the intent to undermine the non-displacement rights of protected workers. 


If a successor contractor or subcontractor fails to comply with its obligations under the non-displacement rule, an aggrieved worker may file a complaint with the Administrator of the DOL Wage and Hour Division, who has authority to conduct an enforcement investigation.  If non-displacement violations are found, the Administrator will order the contractor to hire aggrieved protected workers with full back pay retroactive to the start date of the successor’s contract, direct the contracting agency to withhold future contract payments pending satisfaction of the back wage award, and may even order the contractor debarred from future contract awards – subject to exhaustion of the contractor’s right of appeal.  Aggrieved workers also have appeal rights should the Administrator fail to find a violation, which could embroil contractors in litigation notwithstanding the Administrator’s dismissal of the complaint. 


The new non-displacement rule requires particular attention to the SCA classification rules and exemptions for computer, professional, administrative, and managerial employees.  Properly classified exempt personnel are not protected under the non-displacement rule.


The rule is incorporated in new FAR subpart 22.12 entitled “Nondisplacement of Qualified Workers Under Service Contracts,” and is implemented in new FAR clause 52.222-17.  The new requirements will be included in solicitations issued on or after January 18, 2012, and Contracting Officers are expected to seek bilateral modifications to incorporate the new FAR clause into existing service contracts.


If you are a federal contractor and have questions regarding coverage, liability or compliance issues under the SCA non-displacement rule and related wage and overtime rules, please feel free to call or email Mary Pivec, Esq., in the Firm’s Washington, D.C. office for assistance.  Mary’s direct dial number is (202) 293-8128.  Her email address is