Now You See It; Now You Don’t – the Nondisplacement Executive Order 13495 Is Gone

 We live in a moment of history where change is so speeded up that we begin to see the present only when it is already disappearing.

— R.D. Laing

Out of the blue, on October 31, 2019 President Trump issued a new Executive Order revoking the Obama  Executive Order 13495 on Nondisplacement. See https://www.whitehouse.gov/presidential-actions/executive-order-improving-federal-contractor-operations-revoking-executive-order-13495/.

The Obama era requirement gave a first right of refusal to contractor employees in certain successor contractor situations. As everyone knows, President Trumps hates and wants to undo all things Obama. And, of course, if you live by executive orders, you can also die by them, since they exist at the whim of the then executive in charge. It thus was perhaps surprising that at the start of the Trump Administration, the Nondisplacement Executive Order wasn’t on the chopping block. But now the political ping pong game continues with the Republicans revoking the Democratic Party executive action, and directing the nonenforcement of the existing regulations, all without any notice and comment rulemaking. Perhaps the only surprise here is that it took the Trump Administration three years to take this action. It looks likely that former DOL Secretary of Labor Acosta was the roadblock to this taking step in the early years of the current administration. With the confirmation of Secretary Scalia as his replacement, the Labor Department  has clearly moved towards more conservative, deregulatory, and business friendly positions.

Looking at the Executive Order, it says:

Sec. 2.  Agency Implementation.  The Secretary of Labor (Secretary), the Federal Acquisition Regulatory Council, and heads of executive departments and agencies shall, consistent with law, promptly move to rescind any orders, rules, regulations, guidelines, programs, or policies implementing or enforcing Executive Order 13495.

Sec. 3.  Enforcement.  The Secretary shall terminate, effective immediately, any investigations or compliance actions based on Executive Order 13495.

That means  the rules will be revoked in due course, and any DOL investigations will be dropped immediately. Thus, the plain intent is to make the Order is effective immediately. And given that there will be no further DOL compliance enforcement, contractors likely do not have to abide by the existing first right of refusal rules. 

Most nondisplacement issues arise at the start of the contract or within the first 90 days performance. But for contractors performing existing government service contracts, the nondisplacement issue could still arise later in performance when a subcontractor is displaced, and a new subcontractor takes over or the prime contractor assumes responsibility for the scope of work in-house. Exactly what will happen in these situations to existing subcontracts covered by the Nondisplacement Executive Order clause, is not explicitly answered by the President’s direction, albeit it clear intent is to eviscerate the Order and not to enforce it.  

Of course, the absence of executive agency enforcement doesn’t mean that some plaintiff’s lawyer might claim that he/she can enforce the rules which are still on the books by a private action. But the Executive Order 13495 was always exclusively enforced by the DOL and not by private enforcement. Even though rules remain on the books, the enforcement of those rules by a private course of action thus would be dubious.

Alternatively, clever counsel might try to enforce nondisplacement provisions found in existing government contracts under a third party beneficiary theory. That isn’t as dubious, but it is a strategy that would have a limited shelf life as the Nondisplacement Executive Order clause and regulations are revoked by DOL and the implementation in the FAR is withdrawn.

As for the practical effect of this change, it really isn’t all that great. Most successor contractors hire the predecessor’s work force on mass for service contracts even before they were covered by the Nondisplacement Executive Order. If they don’t do so, they lose the skills and experience of that work force. And they experience higher recruitment costs. The Nondisplacement Executive Order only impacted a few workers on the margins. The areas where the nondisplacement requirement generally kicked in were to protect union organizers from retaliation by the successor contractor, and to protect low performing or unlikeable workers. It hasn’t been uncommon for the government to point out low performing, or difficult  workers and to informally request or make known a preference that that they not be engaged by the successor contractor. But up until now, such government demands created some risks to the contractor should they not provide a first right of refusal to such employees. And that perhaps is the area where this change will have the most impact.

Here in the interregnum before the rules are formally repealed, Contractors effective immediately arguably should push back against the inclusion of new nondisplacement clauses put in their pending solicitation. Historically, in similar situations, there has sometimes been a continuing problem with procurement personnel who persist in putting the defunct regulatory required contract clauses in the government contract because they are found still technically in the FAR. (The FAR has other “relic” provisions where we have seen similar problems.) Thus, the contracting officers are stuck between some conflicting regulatory guidance. As a result, they often plead they are only following the FAR and must do so until it is changed. Accordingly, in the interim, there may be some contracting confusion in pending solicitations. It may behoove contractors to protest the nondisplacement clause (if they care), assuming it continues to make its way into the solicitations, or to take exception to the clause in their proposals.