Trump Revokes "Right of First Refusal" for Employees on Predecessor Contracts

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On October 31, 2019, President Trump signed Executive Order (EO) 13897 – “Improving Federal Contractor Operations by Revoking Executive Order 13495.” Taking effect immediately, EO 13897 revokes EO 13495 previously issued by the Obama administration in January 2009. EO 13495, titled “Nondisplacement of Qualified Workers Under Service Contracts,” required successor contractors to an expired service contract to offer a right of first refusal of employment to those “qualified” employees from the predecessor contract if the follow-on contract is awarded for the same service, at the same location.

Intent of EO 13495

The stated rationale behind EO 13495 was that “[t]he Federal Government’s procurement interests in economy and efficiency” are furthered when employees from a previous contract are retained because it “reduces disruption to the delivery of services during the period of transition between contractors and provides the Federal Government the benefits of an experienced and trained work force that is familiar with the Federal Government’s personnel, facilities, and requirements.” Despite the underlying rationale for EO 13495, it received criticism from contractors in the government contracting industry since it was issued. Many contractors felt the requirements from EO 13495 unnecessarily curtailed their discretion to make their own informed hiring decisions and resulted in unfit employees being retained simply to comply with the requirements. Furthermore, successor contractors felt the requirements from EO 13495 were unnecessary because it was already the industry norm to regularly retain proficient and capable employees from the antecedent contract.

Requirements of EO 13897

The newly issued EO 13897 directs the Secretary of Labor, as well as other heads of executive departments and agencies, to “promptly move to rescind any orders, rules, regulations, guidelines, programs, or policies implementing or enforcing Executive Order 13495.” Additionally, EO 13897 directs the Secretary of Labor to immediately terminate any investigations or compliance actions based on EO 13495. Because of the immediate revocation of EO 13495, any pending solicitations and new contract awards should no longer be subject to the requirements of EO 13495. Moreover, going forward, government contractors will now have the latitude to develop a workforce for their contract proposals according to their own business acumen and will no longer be required to use incumbent workers.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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