Type: Law Bulletins
Date: 11/14/2019

Incumbent Contractor Employees' Right of First Refusal Rule Rescinded

On Oct. 31, 2019, the President issued Executive Order 13897 repealing a prior executive order from January 2009 that required government contractors to provide a right of first refusal to incumbent contractor employees when taking over a contract. The 2009 order, Executive Order 13495, was implemented in 2012 by FAR § 52.222-17, Nondisplacement of Qualified Workers, and 29 C.F.R. Part 9, Nondisplacement of Qualified Workers Under Service Contracts, and covered incumbent workers whose positions were subject to the Service Contract Act.

When Executive Order 13495 was issued in 2009, many government contractors complained that it was solving a problem that did not exist. That is, most contractors already had an established practice of hiring incumbent personnel when taking over a contract. The new layer of regulation created by Executive Order 13495 complicated proposal drafting and transition planning, perhaps leading to a decrease in efficiency; the complete opposite of its stated goal.

Executive Order 13897 seeks to revert to the standard practice before January 2009. It requires the Department of Labor and the FAR Council to rescind all orders, rules, regulations, guidelines, programs or policies implementing Executive Order 13495. It also requires the Department of Labor to terminate any compliance actions or investigations based on Executive Order 13495 immediately. Once the final rule implementing Executive Order 13897 is issued, successor contractors will have more control over structuring their workforce. They will once again have a choice in deciding whether to offer a position to incumbent personnel.

Although the Department of Labor has already removed its guidance regarding the Nondisplacement of Qualified Workers regulations from its website, how quickly the changes envisioned by Executive Order 13897 will take effect remains to be seen. As a result, contractors that are awarded new contracts which contain FAR § 52.222-17 or 29 C.F.R. Part 9 are cautioned to seek legal counsel for guidance during this transition period.

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