businesses ABC May 18 filed comments with the Department of Labor (DOL) Wage and Hour Division in opposition to a notice of proposed rulemaking on Executive Order 13495, or Nondisplacement of Qualified Workers Under Service Contracts.  

Under the proposed rule, federal agencies are required to include in contracts for projects covered by the McNamara-O’Hara Service Contract Act of 1965 (SCA) clauses that require contractors and subcontractors to offer employment to any employees (other than managerial or supervisory employees) that worked on predecessor contracts or subcontracts.  

ABC opposed the proposed rule due to the negative impact it would have on small businesses, particularly ABC members that operate small construction firms and are covered by the SCA when performing certain maintenance and other post-construction responsibilities.  ABC pointed out that the proposed rule conflicts with the language in the SCA and that two courts have held that the SCA does not require successor contractors to hire their predecessors’ incumbent employees, and that neither the president nor DOL have the authority to override statutory language.  

In addition, ABC expressed concerns that the proposed rule would significantly increase inefficiency in the federal procurement process by forcing new contractors to hire employees that may not be familiar with their work practices.  The proposed rule requires predecessor contractors to furnish information about their employees at least 10 days before the contract is over and requires the incoming contractor to give displaced workers at least 10 days to accept the offer, creating a situation where the incoming contractor may face a workforce shortage on the first day of a contract.  Without sufficient time and information to determine predecessor employees’ work history and talents, ABC voiced concerns that under the proposed rule, successor contractors would be forced into hiring potentially poor-performing employees.  

“The addition of the proposed rule’s logistical complexity to an already complicated and burdensome federal contracting process works to the detriment of small businesses and could result in delays in service to federal agencies,” ABC stated. “Furthermore, and perhaps most importantly, the notice of proposed rulemaking will provide added disincentive for small businesses to engage in federal contracting.”