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Government Contracts Monitor

Rare DOL Nondisplacement Decision Holds that Incumbent's Certified Employee List Is Not Determinative, and Awardee Must Consider Agency's "Credible Evidence" as to Incumbent Employee's Qualifications and First Refusal Offer Entitlement

February 14, 2019

By: Hopewell Darneille

Every awardee under qualifying federal government service contracts faces difficult issues and choices under Executive Order 13495, “Nondisplacement of Qualified Workers under Service Contracts,” and the implementing Department of Labor (DOL) Regulations at 29 C.F.R. Part 9, which require awardees to offer incumbent employees “a right of first refusal for employment under the contract in positions for which they are qualified.”  Unfortunately, while the Executive Order and Regulations were issued in 2009 and 2011 respectively, there has been little caselaw shedding light on these issues.  DOL’s Office of Administrative Law Judges (OALJ) recently issued a decision providing important guidance as to the non-binding effect of the incumbent’s certified employee list, the awardee’s obligation to determine whether an incumbent employee is qualified for the position at issue and thus entitled to a first refusal right, and the awardee’s right and obligation to consider credible evidence in such regard, including evidence offered by the contracting agency.  Administrator, Wage & Hour Division, U.S. Department of Labor v. Metropolitan Security Services, Inc., d/b/a Walden Security (“Walden”), DOL/OALJ Case No. 2016-NQW-0001, issued Dec. 19, 2018.

The case involved a procurement by the U.S. Marshals Service (USMS) for Court Security Officers (CSOs) for Federal courthouses in the U.S. Eighth Judicial Circuit, which was awarded to Walden on September 11, 2015.  The Statement of Work (SOW) required, inter alia, that each CSO have successfully completed or graduated from a certified Federal, state, county, local or military law enforcement training academy or program that provides instructions on the use of police powers in an armed capacity while dealing with the public, and that the certificate must be recognized by a Federal, state, county, local or military authority and provide evidence that an individual is eligible for employment as a law enforcement officer.

In compliance with the Nondisplacement Clause [FAR 52.222-17], the incumbent contractor provided Walden a list of some 350 incumbent employed CSOs, including Rick Dean, one of the most senior CSOs who had been employed at the Ft. Smith, Arkansas Courthouse for more than 19 years.  Shortly after award, Walden held a so-called town hall meeting for incumbent CSOs who wanted to be retained to meet the Walden transition team and complete an employment application, including providing a copy of the required training certificate.  Prior to that meeting, the U.S. Marshall and his Chief Deputy met with and informed Walden that one individual – Mr. Dean – was not qualified to be on the contract.  When interviewed, Mr. Dean told Walden that he had never graduated from a law enforcement agency academy nor had he worked for a law enforcement agency.  Mr. Dean subsequently provided a certificate of completion as to an “Intermittent Deputy U.S. Marshal [IDM] Training #301,” a 7-10 day training course providing a general overview of the position, including weapons testing, fitness testing and a written exam.  Despite several chances both before and after contract start-up, Mr. Dean did not provide Walden any other proof of his eligibility.  Finding the provided IDM training certificate insufficient, Walden did not extend Mr. Dean a right of first refusal.

Mr. Dean filed a complaint with DOL’s Wage and Hour Division (WHD) on December 15, 2015.  After investigating and failing to conciliate the issues, WHD determined, on June 24, 2016, that Mr. Dean should have been offered a right of first refusal and was entitled to back pay.  Walden requested a hearing before OALJ.  An evidentiary hearing was held on April 11-12, 2017, followed by post-hearing briefing completed on August 11, 2017.  After considering the record and arguments, the OALJ Judge ruled in Walden’s favor – determining (1) that Mr. Dean was, in fact, not qualified for the subject position, under the SOW despite his 19 years of service in that position, and (2) Walden therefore did not violate the nondisplacement requirements by failing to offer Mr. Dean a first refusal right.  The Judge therefore vacated WHD’s determination and dismissed the case.

At the outset, the decision notes that the Nondisplacement Clause and first refusal right extend only to positions for which the incumbent employee is qualified.  The ultimate question therefore was whether Mr. Dean was qualified for the CSO position that he had been performing for 19 years.  However, before getting to that central issue, the decision addresses several key issues having implications for all awardees having to address and comply with the nondisplacement requirements. 

First, the Judge rejected WHD’s argument that the certified list of incumbent employees is dispositive as to the qualification of the listed employees, and that a contractor should simply accept the same and not take any other investigative efforts.  The Judge stated that this position is contrary to the Regulations, since 29 C.F.R. § 9.12(a)(3) explicitly states that “While a person’s entitlement to a job offer … usually will be based on whether he or she is named on the certified list … a contractor must also accept other credible evidence” (emphasis added).

Second, the Judge agreed with WHD’s position that the contractor is required to determine whether to make an offer, and held that, as a corollary to the above, the contractor must determine whether the incumbent employee is qualified for the specific position, and, in such regard, must consider “other credible evidence.”  The Judge rejected WHD’s argument that the provided regulatory examples relate only to situations expanding the employee’s ability to establish qualifications, and held that the obligation to consider “other credible evidence” extends to both sides of the qualification issue (i.e., whether the employee is, or is not, qualified).

Third, the Judge held that the information provided by the USMS as to whether Mr. Dean was qualified was “credible evidence” that Walden was required to consider in making its decision, noting that the USMS not only drafted the qualification criteria, but also had the final say as to whether an employee could work under the awarded contract.

Turning to the central issue, the Judge held that neither the 7-10 day IDM training, nor a 104-hour Arkansas Auxiliary Police Course subsequently shown by Mr. Dean as having been previously completed, was equivalent to the certified law enforcement training program of at least some 500 hours contemplated by the SOW.  The Judge rejected WHD’s contrary argument as “not well taken,” and adopted the USMS’s interpretation, stating that he could not imagine any more authoritative source than the agency that not only conducts the IDM training, but also drafted the Contract and has final say as to whether a person is qualified to work thereunder.  The Judge also rejected WHD’s argument that Mr. Dean should have been found qualified since another offered incumbent assertedly also did not have the required certificate.  The Judge noted that the record did not establish that Walden was aware of any issue as to the other individual at the time of making offers, and that, in any event, even assuming Walden erroneously retained another individual, such error would not compel or permit a waiver of the SOW qualification requirements as to Mr. Dean.

The Judge stated that, at the end of the day, the underlying crux of WHD’s position was that, as an incumbent CSO with 19 years experience, Mr. Dean should have been offered a position to continue performing those duties.  In rejecting this premise, the Judge unequivocally stated that “there simply is no requirement – whether in [the Executive Order, the implementing DOL Regulations or the Nondisplacement Clause] -- that all of the predecessor contractor’s employees be offered employment on the successor contract.  The only requirement is that the predecessor’s employees who are qualified for the positions be offered employment.”  (Emphasis in original.)

This decision provides helpful guidance to contractors seeking to understand and comply with their nondisplacement obligations.  Most importantly, the decision emphasizes that the contractor is not bound by the incumbent’s certified list, and must make the contractor’s own determination as to whether each employee is qualified.  In such regard, the contractor must consider “other credible evidence,” including any credible information provided by the contracting agency.

Ultimately, the decision provides a discouraging example as to the time and effort that may be required to resolve nondisplacement complaints.  However, it does, at least, show that a contractor willing to stand firm and undertake the effort can ultimately prevail in defeating such a claim.  Walden is due great credit for standing firm here, and other contractors need to learn and benefit from Walden's efforts and the important resulting decision guidance.


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