This week, the U.S. Department of Labor (DOL) issued final regulations implementing President Barack Obama’s Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts. The final rule will require successor government contractors to offer jobs to workers employed under a predecessor service contract. The effective date for this final rule is pending the Federal Acquisition Regulatory Council issuance of its own regulations on the matter, as required under the Order.

Executive Order 13495 provides that when a service contract expires and a follow-on contract is awarded for the same or similar services at the same location, the subsequent contract must include a clause requiring the new contractor and its subcontractors to offer the old contract’s employees a right of first refusal of employment under the new contract in positions for which they qualify. The offer of employment covers any workers who are not in managerial or supervisory roles and whose employment would be terminated as a result of the successor contract’s award. Moreover, the Order prohibits the filling of any employment openings under the new contract until all covered employees have been offered the right of first refusal.

According to Monday’s notice, the rule applies to entities that perform work on federal government service contracts or subcontracts of $150,000 or more and will likely cover some 15,000 service contracts per year.

Under the rule, contractors must give previous service employees at least 10 days to accept the offer to work under the new contract. The successor contractor and its subcontractors may employ fewer workers than the predecessor contractor did, but only if they determine that fewer workers are needed for efficient contract performance. Finally, under the rule, contractors are not required to offer a right of first refusal to the predecessor’s employees if the head of the contracting agency reasonably determines, based on credible evidence, that the entire predecessor contractor’s workforce failed to perform suitably on the job.