Montgomery County Displaced Service Workers Act Takes Effect December 21, 2012

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Effective December 21, 2012, the Montgomery County Displaced Service Workers Act will require companies that successfully bid on service contracts within the County to provide continued employment to a predecessor contractor’s service employees for a 90-day transition period.

General Overview of the Law

Under the Act, companies that are awarded contracts in Montgomery County to perform security, janitorial, building maintenance, food preparation or non-professional health services 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 contract is terminated, whichever is earlier.  The Act provides some narrow exceptions to this duty to offer employment; for instance, if fewer employees are required for the successor contract or if the employees cannot pass a pre-existing employment test administered by the successor contractor.   The successor contractor also is prohibited from discharging a service employee in the 90-day transition period without just cause.

The Act requires the company that has awarded the service contract to ensure that the terminated contractor posts a notice regarding the pending termination and employee rights under the Act at all affected worksites.

Specific Provisions of the Law

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

  • private schools;
  • hospitals, nursing care facilities, or other health provider;
  • institutions such as a museum, convention center, area, airport, or music hall;
  • multi-family residential building or complex with more than 30 units; or
  • a commercial building or office building occupying more than 75,000 square feet.

Excluded contracts are those with the Federal government, the State of Maryland, municipal governments, and common ownership communities (such as Montgomery Village).

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

  • building service employees including a janitor, security officer, groundskeeper, door staff, 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;
  • non-professional employee performing health care or related service.

A “successor contractor” under the Act is as 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 County 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.

Excluded from the definition of “service employee” are individuals who are FLSA-exempt executive, administrative, or professional employees; employees who make more than $30 per hour; or employees who are regularly scheduled to work less than 10 hours per week.

Obligations to Employees Under the Act

The company that is awarding the contract is obligated, at least 15 days before a service contract is terminated, to request that the terminated contractor give 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 company also must, as noted above, ensure that the terminated contractor conspicuously posts at any affected worksite a written notice to all affected service employees describing the pending termination of the service contract and employee rights provided by the Act.

The successor contractor must make 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 contract need not make offers to all employees at the site if it discovers 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.  In addition, if the employer has pre-employment hiring tests that all employees must satisfy as a condition of employment (such as passing a criminal background check or drug test) the employer may deny employment to service employees who fail to satisfy the condition.  However, the test must have been adopted as part of a written policy prior to bidding on the service contract.

Employees who are not offered employment or who are discharged during the transition period may file complaints with the Montgomery County Office of Human Rights.  Violations under the Act are subject to the same administrative process as employment discrimination claims, although there is no provision for a right of action in court.  Damages (other than punitive damages) including compensation for lost wages, may be awarded by the Commission.

Practical Considerations

The Displaced Service Workers Protection Act does not limit the right of service contract companies in Montgomery County 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.  Montgomery County 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 County law make certain contracting opportunities in Montgomery County no longer desirable.