Morris Manning & Martin, LLP

The Federal Government Reinstates the Nondisplacement Rule and Raises the Federal Contractor Minimum Wage to $15 an Hour


On November 18, 2021 the White House issued an Executive Order (EO) reinstating requirements for federal contractors to extend offers of employment to incumbent contractor service employees in follow-on contracts for the same or similar services. The same requirement was revoked in a 2019 Executive Order issued by former President Trump.

The new EO contains a contract clause for agencies to include in-service contracts and must be flowed down to subcontracts. The text of the contract clause is largely similar to the nondisplacement rule as first introduced in 2009 and revoked in 2019. Namely, the clause requires contractors and subcontractors to give incumbent service employees (other than management and supervisory personnel) a right of first refusal of employment for follow-on work. As part of this process, incumbent contractors must provide a list of incumbent employees to the contracting officer prior to the end of the contract term. A contractor’s willful failure to comply with the requirement may lead to debarment.

Like the prior version, the contract clause will not be required for contracts under the simplified acquisition threshold, although there are fewer types of contracts excepted from coverage than the prior version. For example, contracts with non-profits that support disabled or blind workers are no longer categorically exempt. Additionally, under the 2021 EO, the process required for an agency to authorize an exception to include the new requirement is more onerous for the procuring agency.

In addition, on November 22, 2021 the Department of Labor announced a final rule to implement Executive Order 14026, “Increasing the Minimum Wage for Federal Contractors.” The final rule raises the minimum wage to $15 an hour for federal contractor employees working on, or in connection, with a contract to which the Service Contract Act or Davis-Bacon Act apply. Unlike previous federal contractor minimum wage increases, this raise will apply to options exercised on existing contracts as well as new contracts. The final rule will impose a flow down requirement to service subcontractors for applicable contracts as well. The final rule takes effect on January 30, 2022.

If you have any questions about these new developments please contact the MMM Government Contracts group