In a Long-Anticipated Move, the Trump Administration Revokes Executive Order 13495, Giving Service Contractors More Flexibility when Hiring Predecessor Contractor Employees

Federal ProcurementOn October 31, 2019, the Trump Administration revoked Executive Order 13495, Nondisplacement of Qualified Workers Under Service Contracts (“EO 13495”), removing the requirement for federal service contractors to offer employment to employees of predecessor contractors.

Issued by President Obama on January 30, 2009, EO 13495 required federal contractors awarded contracts covered by the McNamara-O’Hara Service Contract Act (“SCA”) to offer employees working under predecessor contracts “a right of first refusal of employment,” with some limited exceptions.  EO 13495 only applied to successor contracts where the work would be performed at the same location on the same contract.  Successor contractors were generally restricted from hiring new employees to work on a recently awarded service contract until provided job offers to qualified employees of the predecessor contractor and kept those open for at least ten days.  EO 13495 also required contractors to provide employees with a workplace notice informing them o their rights or with notices delivered to the employees individually.

Although many anticipated that EO 13495 would be promptly rescinded after President Trump was elected, it surprisingly took three years for the Trump administration to rescind it. The new order requires the government to promptly remove all “orders, rules, regulations, guidelines, programs, or policies implementing or enforcing Executive Order 13495,” and it halts all existing investigations or compliance actions based on EO 13495.

Practical Implications

The revocation of EO 13495 is a welcome development for federal service contractors as it gives them more flexibility to select employees to work on their service contracts.  In practice, even before EO 13495, successor service contractors usually hired many, if not all, predecessor employees because it allowed for a smoother transition and retained experienced workers with prior training and familiarity with government personnel, facilities, and contract requirements.

Many contractors, however, found EO 13495 unnecessarily burdensome because it tied their hands in hiring predecessor employees, and often pressured contractors to offer jobs to employees who were largely unqualified or may have been partially responsible for the predecessor losing the contract.   With the removal of EO 13495, contractors once again have the option to choose which predecessor employees to retain.  It also frees contractors from having to post or provide notices required by the order.

Predecessor contractors also now have more ability to enforce noncompetition agreements for employees seeking to go to successors who are competitors, assuming they still are valid under applicable law.  In some instances, employees moving to successor contractors used EO 13495 to argue that noncompetition agreements were unenforceable since it contravened the public policy under EO 13495.

This change also reduces the risk of having to accept a predecessor’s collective bargain agreement.   Because EO 13495 required successors to offer jobs to predecessor employees, it made it easier for unions representing predecessor employees to contend that the successor was automatically bound by the collective bargaining contracts as perfectly clear successors under labor law.

*Victoria Dalcourt Angle is a member of Morrison & Foerster’s government contracts practice group.  She is not yet admitted to the D.C. bar.