Baltimore City Enacts Displaced Service Workers Protection Ordinance

The Baltimore City Council recently passed a bill that grants broad protections to service employees working on contracts that are taken over by a new company.

General Overview of the Law

Under the Ordinance, companies that are awarded contracts to perform security, janitorial, building maintenance, or food preparation must make offers of employment to any predecessor contractor’s service employees employed at an affected site for a 90-day transition period or until the successor no longer provides services at that site, whichever is earlier. The Ordinance provides a narrow exception to this duty to offer employment, if fewer employees are required to perform work for the successor contract. The successor contractor also is prohibited from discharging a service employee in the 90-day transition period without just cause. At the end of the 90-day period, the successor contractor is required to perform a written performance evaluation for each employee and offer continued employment to those whose performance is satisfactory.

The Ordinance requires the entity that has awarded the service contract to ensure that the terminated contractor posts a notice regarding the pending termination and employee rights under the Ordinance at all affected worksites, except in case of public universities.

Specific Provisions of the Ordinance

A covered “service contract” is a contract for security, janitorial, building maintenance, food preparation or non-professional health care services at the following facilities:

• a private elementary or secondary school;
• a public or private college or university;
• an institution such as a museum, casino, convention center, arena, stadium, or music hall;
• multi-family residential building or complex with more than 30 units;
• a commercial building or office building occupying more than 50,000 square feet;
• an industrial facility, such as a pharmaceutical laboratory, research and development facility, or product fabrication facility; or
• a distribution center.

Covered “service employees” include full-time or part-time employees in the following categories:

• building service employee, including a janitor, security officer, groundskeeper, concierge, door staffer, maintenance technician, handyman, superintendent, elevator operator, window cleaner or building engineer
• food service worker, including a cafeteria attendant, line attendant, cook, butcher, baker, server, cashier, catering worker, dining attendant, dishwasher, or merchandise vendor

It does not include a managerial or confidential employee, or an employee who works in an executive, administrative or professional capacity.

A “successor contractor” under the Ordinance is any contractor that employs more than 20 employees companywide and that:

• is awarded a service contract to provide, in whole or in part, services that are substantially similar to those provided at any time during the previous 90 days;
• has purchased or acquired control of a property in the City where service employees were employed at any time during the previous 90 days; or
• terminates a service contract and hires service employees as its direct employees to perform services that are substantially similar.

Obligations to Employees Under the Ordinance

The entity that is awarding the contract is obligated, at least 15 days before a service contract is terminated, to request that the terminated contractor give to both that entity and the successor contractor a complete list of the name, date of hire, and job classification of each service employee working on the service contract. The awarding entity also must, as noted above, ensure that the terminated contractor conspicuously posts at any affected worksite (with the exception of public universities) a written notice to all affected service employees describing the pending termination of the service contract and employee rights provided by the Ordinance.

The successor contractor must make, at least 10 days before commencing work on the contract, written offers of employment to the terminated contractor’s employees, with a copy to any labor union that represents the employees. The offer must state the date by which the service employee must accept the offer, and allow the service employee at least 10 days after receiving the notice to accept the offer. A successor contractor need not make offers to all employees at the site if it determines that fewer employees are needed to perform the work than were employed by the predecessor. In that case, the successor contractor must retain employees by seniority within each job classification, maintain a preferential hiring list of those employees not retained and, if additional workers are needed in the initial 90-day period, rehire from the list.

Enforcement

Employees who are not offered employment or who are discharged during the transition period may file complaints with the Baltimore City Wage Commission. The Commission may also file a complaint against a contractor. The Commission investigates complaints, and makes a finding as to whether or not probable cause exists for the complaint. The Commission has the authority to issue subpoenas for witnesses and documents.

If the Commission finds no probable cause for the complaint, it is dismissed. If the Commission finds probable cause, however, it will engage in a settlement conference to “persuade” the contractor to cease its illegal action, reinstate any affected employees, and pay those employees all wages and other compensation they would have otherwise received.

If no settlement agreement is reached within 30 days or the contractor fails to comply with any agreement, the Commission may issue a final order requiring reinstatement, wages plus 10% interest, and injunctive relief. In addition, a penalty may also be imposed, with each day that a violation continues constituting a separate offense: $250 per violation for a 1^st offense; $500 per violation for a 2^nd offense; and $1000 per violation thereafter.

Practical Considerations

The Displaced Service Workers Protection Ordinance is strikingly similar to a 2012 law passed in Montgomery County. Like the Montgomery County law, the Ordinance does not limit the right of service contract companies in Baltimore City to set the initial terms of any employment offer (e.g. wage rates, fringe benefits, hours of work), although the right of such employers to hire whomever they choose has been constrained by the law. Baltimore City also has legislatively abrogated the at-will nature of the employment relationship between a successor employer and any employee hired from the terminated contractor’s staff – at least for the first 90 days of a service contract. Terminations during this period will have to be justified by “just cause.”  If the predecessor contractor was terminated because it failed to address inadequate service by its employees, the successor will have to document and, if challenged, defend terminations under the law as it deals with the inherited problem.

Finally, where the employees performing under a service contract are represented by a union, the obligation to offer all of the predecessor’s employees employment will translate to a duty to recognize and bargain with their union if, as is likely, a majority of them continue employment with the successor. This is because a successor’s duty to recognize a union with whom the predecessor had a bargaining relationship is triggered if a majority of the new hires are union-represented. As such, service contracting companies that have historically staffed contracts with crews comprised mostly of their own established employees (and, consequently, been able to remain non-union) may find that the potential collective bargaining consequences of this City Ordinance make certain contracting opportunities in Baltimore City no longer desirable.