E.O. 13495 Final Rule Implementing for Service Contractors

San Ramon, CA — January 9, 2009 — President Obama signed E.O. 13495 — Non-displacement of Qualified Workers under Service Contracts. The Department of Labor, Wage and Hour Division, published its final rule implementing E.O. 13495; however, the rule will not take effect until the Federal Acquisition Regulatory Council issues the final regulations.


Section 1 of the Executive Order establishes a general policy concerning service contracts and solicitations for services contracts¹ for performance of the same or similar services at the same location. The policy requires the inclusion of a contract clause requiring the successor contractor or subcontractors to offer employees, other than management and supervisory staff, employed under the predecessor contract, whose employment would be terminated as a result of the award of the successor contract, a right of first refusal of employment under the successor contract in positions for which they are qualified. Unless the contract or contracting agency specifies, the contractor will not be able to evaluate or screen the predecessor’s employees and essentially has to pick up all of the previous employees working on the contract, unless they can demonstrate that the employee is not qualified.² The successor contractor may determine the number of employees it feels is necessary to perform the contract and may elect to employ fewer employees than the predecessor contractor employed. Section 1 also provides “that there shall be no employment openings under the contract until such right of first refusal has been provided.”

A bona fide offer of employment should be provided to each predecessor employee stating the time within which the employee must accept such offer, which must be no less than 10 days. In addition to the obligation to offer employment to existing employees, the successor contractor may employ under the contract any employee who has worked for the contractor for at least 3 months immediately preceding the commencement of the contract and who would otherwise face layoff or discharge.

Also, if the predecessor’s workforce is unionized, the successor company may be required to accept

Key Requirements/Provisions

  • No less than 10 days before completion of the contract, the predecessor contractor must furnish the Contracting Officer a certified list of the name of all service employees working under the contract and its subcontracts during the last month of contract performance. This list is then provided to the successor contractor.
  • Every subcontract entered into in order to perform services under the contract must include a provision that ensures that each subcontractor will honor the requirements of the clause in the prime contract with respect to the predecessor’s employees.
  • Complaints from aggrieved employees of the predecessor can be filed with the contracting agency or with the Department of Labor’s Wage and Hour Division.


The Secretary of Labor is responsible for investigating and ensuring compliance with the E.O. and has the authority to prescribe appropriate sanctions and remedies, including, but not limited to:

  • Employment and back wages;
  • Suspension of payment of contract funds to the predecessor contractor for failure to provide to the Contracting Officer a list of service employees working on the contract; or
  • Ineligibility to be awarded any contract of the U.S. for up to three years for willful violations.

For further information, contact Timothy Helm, Branch Chief, Division of Enforcement Policies and Procedures, Branch of Government Contracts Enforcement, Wage and Hour Division, U.S. Department of Labor, Room S-3014, 200 Constitution Avenue, N.W. Washington, DC 20210 or (202) 693-0064. http://www.gpo.gov/fdsys/pkg/FR-2011-08-29/pdf/2011-21261.pdf

¹ Any contract or subcontract for services entered into by the Federal Government or its contractors that is covered by the McNamara-O’Hara Service Contract Act of 1965, as amended, 41 U.S.C. 6701 and its implementing regulations. ^

² For the successor contractor to determine that the employee is not qualified, they must have “credible written information” from a “reliable source” showing that the employee has failed to perform adequately in their job. ^

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