The Department of Labor has announced its final rule [pdf] implementing Executive Order 13495 [pdf], which addresses nondisplacement of qualified workers under federal service contracts. Under the DOL rule, federal contractors and subcontractors on service contracts over the $150,000 simplified acquisition threshold will be required to offer employment to non-managerial employees whose employment would otherwise end at the close of the predecessor contract.

The final rule appears to conflict with the National Labor Relations Board’s successorship guidelines. NLRB’s “perfectly clear” doctrine imposes a collective bargaining obligation when a successor employer intends to hire a majority of the incumbent employees under a union contract. A perfectly clear successor is required to accept all of the terms and conditions of the predecessor’s collective bargaining agreement. A successor that is not perfectly clear may establish new terms and conditions for its employees. Obviously, a successor employer will prefer to begin bargaining without having the entire agreement roll over. Section 4(c) of the Service Contract Act (41 U.S.C. § 353(c)) requires a successor employer to maintain the wages and fringe benefits that would have been paid under a predecessor’s collective bargaining agreement, but it does not impose all of the predecessor’s terms and conditions.

Under NLRB guidelines, the terms of employment offered by the successor are significant factors in determining a successor’s status under the perfectly clear doctrine. It is often not “perfectly clear” that a majority of the predecessor’s employees will become employees of the successor, for example, if they are offered new terms of employment. The DOL’s final rule seems to conflict with the NLRB’s perfectly clear doctrine, suggesting DOL’s belief that successor employers should not have the flexibility to specify new terms of employment.  Hopefully, the FAR Councils will include additional guidance on this subject when they issue regulations implementing the DOL final rule.

UPDATE:  We discuss the new FAR rule implementing the Executive Order 13495 and the DOL Rule on nondisplacement of qualified workers here.