Nondisplacement of Qualified Workers Under Service Contracts; Rescission of Regulations

<RULE> DEPARTMENT OF LABOR <SUBAGY>29 CFR Part 9</SUBAGY> <DEPDOC>[Docket No. WHD-2025-0034]</DEPDOC> <RIN>RIN 1235-AA45</RIN> <SUBJECT>Nondisplacement of Qualified Workers Under Service Contracts; Rescission of Regulations</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Wage and Hour Division, Department of Labor. <HD SOURCE="HED">ACTION:</HD> Final rule; rescission of regulations. <SUM> <HD SOURCE="HED">SUMMARY:</HD> On January 20, 2025, President Trump issued an Executive order rescinding certain Executive orders and actions, which revoked an Executive order concerning nondisplacement of qualified workers under Federal service contracts and directed the heads of each agency to take immediate steps to effectuate the revocations listed. In accordance with this directive, the Department of Labor is issuing a final rule to rescind the regulations on nondisplacement of qualified workers under service contracts, which were promulgated solely pursuant to the authority provided by the revoked Executive order. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This rule is effective December 22, 2025. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Daniel Navarrete, Director, Division of Regulations, Legislation, and Interpretation, Wage and Hour Division (WHD), U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-free number). Alternative formats are available upon request by calling 1-866-487-9243. If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services. Questions of interpretation or enforcement of the agency's existing regulations may be directed to the nearest WHD district office. Locate the nearest office by calling the WHD's toll-free help line at (866) 4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time zone, or log onto WHD's website at <E T="03">https://www.dol.gov/agencies/whd/contact/local-offices</E> for a nationwide listing of WHD district and area offices. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Executive Summary</HD> On January 20, 2025, President Trump issued Executive Order 14148, “Initial Rescissions of Harmful Executive Orders and Actions” (90 FR 8237 (Jan. 28, 2025)). Executive Order 14148 directs the heads of each agency to take immediate steps to effectuate the revocations listed in the Executive Order, including Executive Order 14055 of November 18, 2021, “Nondisplacement of Qualified Workers Under Service Contracts” (86 FR 66397 (Nov. 23, 2021)). Accordingly, the Department of Labor (Department) issues this final rule rescinding 29 CFR part 9 as these regulations implement Executive Order 14055. <HD SOURCE="HD1">II. Background</HD> Executive Order 14055 provided that qualified employees on a Federal service contract be given the right of first refusal of employment with a successor contractor if they would otherwise lose their jobs as a result of expiration of the contract. The implementing regulations, 29 CFR part 9, were promulgated solely in accordance with the terms of Executive Order 14055 and were published in the <E T="04">Federal Register</E> on December 14, 2023 (88 FR 86736). On January 20, 2025, President Trump issued Executive Order 14148, <E T="03">Initial Rescissions of Harmful Executive Orders and Actions.</E> Executive Order 14148 directs the heads of each agency to take immediate steps to effectuate the revocations listed in the Executive Order, including Executive Order 14055. <HD SOURCE="HD1">III. Procedural Matters</HD> Section 553(b)(B) of the Administrative Procedure Act (APA) provides that an agency is not required to publish a notice of proposed rulemaking in the <E T="04">Federal Register</E> and solicit public comments when the agency has good cause to find that doing so would be “impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C. 553(b)(B). Section 553(d) of the APA further provides that substantive rules should take effect not less than 30 days after the date they are published in the <E T="04">Federal Register</E> unless “otherwise provided by the agency for good cause found[.]” 5 U.S.C. 553(d)(3). Since the sole authority for the regulations at 29 CFR part 9 no longer exists, the Department finds that good cause exists to dispense with public notice-and-comment rulemaking procedures in this final rule because such procedures are unnecessary. Executive Order 14055 was the sole authority for those regulations. Further, the express purpose of the regulations was to administer and implement that executive order (29 CFR 9.1(a)). With the rescission of Executive Order 14055, the nondisplacement regulations are ultra vires and serve no purpose. No public comment could affect those underlying considerations and therefore such public process is unnecessary. <E T="03">See EME Homer City Generation, L.P.</E> v. <E T="03">E.P.A.,</E> 795 F.3d 118, 134 (D.C. Cir. 2015) (upholding agency's invocation of the “unnecessary” prong where “commentators could not have said anything during a notice and comment period that would have changed” the need to issue the rule in response to a court order). For the same reason, the Department similarly finds good cause under 5 U.S.C. 553(d)(3) to make this final rule immediately effective. Furthermore, this final rule is considered a deregulatory action for the purposes of Executive Order 14192, <E T="03">Unleashing Prosperity Through Deregulation,</E> 90 FR 9065. Details on reduced burdens and cost savings of this final rule can be found in the rule's economic analysis. <HD SOURCE="HD1">IV. Paperwork Reduction Act</HD> The information collection requirements contained in the regulations at 29 CFR part 9 were previously approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1980 (Pub. L. 96-511) and assigned OMB Control Number 1235-0033. In light of the rescission of these regulations, the Department has submitted a request to OMB to discontinue the information collection under OMB control number 1235-0033. <HD SOURCE="HD1">V. Executive Order 12866, Regulatory Planning and Review; Executive Order 13563, Improved Regulation and Regulatory Review</HD> Under Executive Order 12866, OMB's Office of Information and Regulatory Affairs (OIRA) determines whether a regulatory action is significant and, therefore, subject to the requirements of the Executive Order and OMB review. <SU>1</SU> <FTREF/> Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as a regulatory action that is likely to result in a rule that may: (1) have an annual effect on the economy of $100 million or more, or adversely affect in a material way a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities (also referred to as economically significant); (2) create serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. OIRA has determined this rule to be “economically significant” under Executive Order 12866 section 3(f)(1), and is therefore subject to review under section 6(a)(3)(C) of that order. <FTNT> <SU>1</SU>   <E T="03">See</E> 58 FR 51735, 51741 (Oct. 4, 1993). </FTNT> Executive Order 13563 directs agencies to, among other things, propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs; that it is tailored to impose the least burden on society, consistent with obtaining the regulatory objectives; and that, in choosing among alternative regulatory approaches, the agency has selected those approaches that maximize net benefits. Executive Order 13563 recognizes that some costs and benefits are difficult to quantify and provides that, when appropriate and permitted by law, agencies may consider and discuss qualitatively values that are difficult or impossible to quantify, including equity, human dignity, fairness, and distributive impacts. The analysis below outlines the impacts that the Department anticipates may result from this rescission and was prepared pursuant to the above-mentioned executive orders. <HD SOURCE="HD2">A. Background</HD> On December 14, 2023, the Department published the “Nondisplacement of Qualified Workers Under Service Contracts” final rule (Nondisplacement final rule) exclusively to implement Executive Order 14055. <SU>2</SU> <FTREF/> The rule required that contractors and subcontractors performing on covered Federal service contracts must in good faith offer service employees employed under the predecessor contract a right of first refusal of employment. The order applied to contracts that are covered by the McNamara-O'Hara Service Contract Act (SCA) and are at or above the simplified acquisition threshold. Because section 11 of Executive Order 14055 stated that the Executive order applied to solicitations issued on or after the effective date of the final regulations issued by the FAR Council, and because the Federal Acquisition Regulatory Council (FAR Council) never promulgated regulations to implement the requirements of Executive Order 14055 as part of the Federal Acquisition Regulation (FAR), the Department's rule effectively never became applicable. <SU>3</SU> <FTREF/> The Department is unaware of any solicitations that incorporated the provisions outlined by either Executive Order 14055 or the Department's implementing re ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 43k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━