Labor Department Ditches Rules Protecting Workers on Service Contracts
Published Date: 12/22/2025
Rule
Summary
Starting December 22, 2025, the Department of Labor is canceling rules that protected workers from being replaced when service contracts change hands. This affects companies with federal service contracts and the workers they hire. The change means fewer job protections for these workers, following a presidential order to roll back previous rules.
Analyzed Economic Effects
3 provisions identified: 2 benefits, 1 costs, 0 mixed.
Contractor and Agency Cost Savings
The Department estimates Year 1 undiscounted net cost savings from the rescission of $39.12 million and average annualized net cost savings of $11.13 million over 10 years using a 7% discount rate. These savings reflect avoided contractor implementation and recordkeeping costs and reduced contracting‑agency burdens from removing the nondisplacement requirements.
Right‑of‑First‑Refusal Job Rule Removed
Starting December 22, 2025, the Department of Labor is rescinding the rule that would have required successor contractors on covered Federal service contracts to offer qualified employees a right of first refusal of employment. The rule applied to contracts covered by the McNamara‑O'Hara Service Contract Act (SCA) and contracts at or above the simplified acquisition threshold; the Department also states the FAR Council never implemented matching FAR provisions and it is unaware of any solicitations that incorporated the rule.
Small Business Savings and Familiarization Costs
The Department estimates the number of potentially affected small firms ranges from 74,097 to 329,470. It estimates per‑small‑firm cost savings of $128.45 (comprised of $71.35 implementation savings + $57.10 recordkeeping savings) and regulatory familiarization costs per small firm of about $18.08, resulting in total undiscounted net cost savings to small firms of $4.28 million.
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Key Dates
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