Offshoring of Jobs - Proposed "Jobs for America Act" Would Affect Outsourcing and Shared Services WARN Act Amendment 

Commentary and Explanation by Bierce & Kenerson, P.C.

© Bierce & Kenerson, P.C. All rights reserved

    On February 12, 2004, Senator Tom Daschle (D., South Dakota) and 14 other Senators sponsored a bill, S.2090, the "Jobs for America Act of 2004," to protect American jobs from offshore outsourcing. 

    Co-sponsored by two 2004 Democratic Party Presidential candidates (and perhaps a third, Hillary Clinton, for 2008), this legislation will serve as a lightning rod for debate on domestic economic policy issues during the Presidential election of 2004.  The driving concepts are to establish transparency in the offshoring of jobs and to extend from 60 to 90 days the period of wage protection for Americans who lose their jobs to declared offshore outsourcing. 

   Impact of the Proposed Legislation.  The overall effect would be to delay layoffs for mass layoffs, plant closings and offshoring of jobs, increase the costs of such layoffs, and enable greater intervention, at an earlier stage, by local legislators, tax administrators, regional development administrators and other regulators at all levels of state, local and federal government. 

   The draft law clearly targets outsourcing of jobs to India.  But the draft covers all offshoring of jobs, including to Canada, Mexico and the European Union.   It includes both outsourcing to external service providers and to foreign "shared services organizations" established by a U.S. multinational that wishes to continue as employer abroad.  Also covered are internal shifting of jobs between existing international subsidiaries of the same global enterprise. 

    The law extends the notification procedures to cover a broader number of employers, focusing on small to mid-sized employers and not merely large multinationals.  Venture capitalists, bank lenders, secured lenders, turnaround specialists and attorneys all need to become familiar with the risk for statutory liability as an "employer" under recent jurisprudence governing the WARN Act.  One recent case is instructive for startup service providers funded by venture capitalists as well as for mature service providers being acquired by a private equity fund for portfolio investment. Read more at:
http://www.outsourcing-law.com/articles/WARN_Act_Employer_Defined.asp
(Free Registration Required)

    Scope and Terms of Proposed Legislation.  Under the Jobs for America Act of 2004, if enacted, the Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act") would be amended to:

1. include "offshoring of jobs" as an event requiring employers to give advance notice to their employees and competent local officials;
   

2. extend the reach of the WARN Act to employers of 50 employees, instead of 500 employees;
   

3. extend the 60 day period to 90 days for all notifications required under the WARN Act;
   

4. requiring notification to the federal Department of Labor, with ongoing federal regulatory review and reporting to Congress on the mass layoffs, plant closings and offshoring of jobs, including which countries are most involved, the number of jobs affected and the underlying causes of outsourcing; and
   

5. requiring employers to post notices of employee rights under the WARN Act.

   Legality of Proposed Legislation.   This draft legislation would rely upon Congress's right to legislate and regulate trade between the states and between the United States and foreign countries.  Since 1988, there has been apparently no objection to Congressional authority to enact a law governing mass layoffs and plant closings.

   However, in light of U.S. obligations under treaties and conventions, if enacted, this draft law might be subject to attack under various international commitments undertaken by the United States in its pursuit of globalization of trade, such as:

• the World Trade Organization multilateral trade agreements that prohibit certain restrictions on trade in services;
  

• the North American Free Trade Agreement, with similar undertakings;
  

• bilateral investment treaties that mandate both national treatment and most-favored nation treatment.  For example, the U.S.-Bolivia Bilateral Investment Treaty of April 17, 1998 provides:

With respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of covered investments, each Party shall accord treatment no less favorable than that it accords, in like situations, to investments in its territory of its own nationals or companies (hereinafter "national treatment") or to investments in its territory of nationals or companies of a third country (hereinafter "most favored nation treatment"), whichever is most favorable (hereinafter "national and most favored nation treatment").   Art. I.

Most-favored nation treatment might be violated by bilateral agreements governing the same issues.   

Bilateral investment treaties also prohibit the United States from imposing any measures

to achieve a particular level or percentage of local content, or to purchase, use or otherwise give a preference to products or services of domestic origin or from any domestic source.   BIT, US-Bolivia, Art. VI(a).

This draft legislation is subject to a possible claim by a foreign country, with whom the United States has a bilateral investment agreement, under the theory that a requirement of 90-days' notice and an explanation of where the work will be done constitutes a "preference to ... services of domestic origin or from any domestic source."  

    Further Information.  If you are interested in the possible application of any of such trade agreements to this draft legislation, or other legal or business implications, for further advice and information, contact Bierce & Kenerson, P.C.  212 840 0080.

Posted: February 15, 2004

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Congressional Record

INTRODUCTION OF BILLS AND JOINT RESOLUTIONS -- (Senate - February 12, 2004)

[Congressional Record, Page: S1285 (Feb. 12, 2004)] 

By Mr. DASCHLE (for himself, Mr. KENNEDY, Mr. HARKIN, Ms. MIKULSKI, Mrs. MURRAY, Mr. EDWARDS, Mr. AKAKA, Mr. DORGAN, Mr. FEINGOLD, Mr. WYDEN, Mr. CORZINE, Ms. STABENOW, Mr. SCHUMER, Mrs. CLINTON, Mr. KERRY, and Mrs. FEINSTEIN):

   S. 2090. A bill to amend the Worker Adjustment and Retraining Notification Act to provide protections for employees relating to the offshoring of jobs; to the Committee on Health, Education, Labor, and Pensions.

Draft Legislation

Jobs for America Act of 2004 (Introduced in Senate)
S 2090 IS

To amend the Worker Adjustment and Retraining Notification Act to provide protections for employees relating to the offshoring of jobs.

February 12, 2004

Mr. DASCHLE (for himself, Mr. KENNEDY, Mr. HARKIN, Ms. MIKULSKI, Mrs. MURRAY, Mr. EDWARDS, Mr. AKAKA, Mr. DORGAN, Mr. FEINGOLD, Mr. WYDEN, Mr. CORZINE, Ms. STABENOW, Mr. SCHUMER, Mrs. CLINTON, Mr. KERRY, and Mrs. FEINSTEIN) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions

To amend the Worker Adjustment and Retraining Notification Act to provide protections for employees relating to the offshoring of jobs.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Jobs for America Act of 2004'.

SEC. 2. AMENDMENTS TO THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT.

(a) DEFINITION- Section 2(a) of the Worker Adjustment and Retraining Notification Act (29 U.S.C. 2101(a)) is amended--


(1) in paragraph (3)(B), by striking `for--' and all that follows through `500 employees' in clause (ii), and inserting `for at least 50 employees';


(2) in paragraph (7), by striking `and' at the end;

(3) in paragraph (8), by striking the period and inserting `; and'; and

(4) by adding at the end the following:


`(9) the term `offshoring of jobs' means any action taken by an employer the effect of which is to create, shift, or transfer employment positions or facilities outside the United States and which results in an employment loss during any 30 day period for 15 or more employees.'.

(b) NOTICE- Section 3 of the Worker Adjustment and Retraining Notification Act (29 U.S.C. 2102) is amended--


(1) in subsection (a)--


(A) in the matter preceding paragraph (1), by striking `60-day' and inserting `90-day'; and


(B) in paragraph (1), by striking `and' at the end;


(C) in paragraph (2), by striking the period and inserting `;and'; and


(D) by inserting after paragraph (2), the following:


`(3) to the Secretary of Labor.';

(2) in subsection (b), by striking `60-day' each place that such appears and inserting `90-day'; and


(3) by adding at the end the following:


`(e) NOTICE FOR OFFSHORING OF JOBS- In the case of a notice under subsection (a) regarding the offshoring of jobs, the notice shall include, in addition to the information otherwise required by the Secretary with respect to other notices under such subsection, information concerning--


`(1) the number of jobs affected;


`(2) the location that the jobs are being shifted or transferred to; and


`(3) the reasons that such shifting or transferring of jobs is occurring.'.


(c) TECHNICAL AMENDMENTS- The Worker Adjustment and Retraining Notification Act (29 U.S.C. 2101 et seq.) is amended--


(1) by striking `plant closing or mass layoff' each place that such appears and inserting `plant closing, mass layoff, or offshoring of jobs';


(2) by striking `closing or layoff' each place that such appears and inserting `closing, layoff, or offshoring'; and


(3) in section 3--


(A) in the section heading by striking `plant closings and mass layoffs' and inserting `plant closings, mass layoffs, and offshoring of jobs';


(B) in subsection (b)(2)(A), by striking `closing or mass layoff' and inserting `closing, layoff, or offshoring'; and


(C) in subsection (d), by striking `section 2(a)(2) or (3)' and inserting `paragraph (2), (3), or (9) of section 2(a)';


(d) POSTING OF EMPLOYEE RIGHTS- The Worker Adjustment and Retraining Notification Act (29 U.S.C. 2101 et seq.) is amended by adding at the end the following:

`SEC. 11. POSTING OF NOTICE OF RIGHTS.

`(a) DEVELOPMENT- Not later than 60 days after the date of enactment of this section, the Secretary of Labor shall develop a notice of employee rights under this Act for posting by employers.

`(b) POSTING- Each employer shall post in a conspicuous place in places of employment the notice of the rights of employees as developed by the Secretary under subsection (a).'.

(e) ANNUAL REPORT- The Worker Adjustment and Retraining Notification Act (29 U.S.C. 2101 et seq.), as amended by subsection (d), is further amended by adding at the end the following:

`SEC. 12. CONTENTS OF ANNUAL REPORTS BY THE SECRETARY OF LABOR.

`(a) IN GENERAL- The Secretary of Labor shall collect and compile statistics based on the information submitted to the Secretary under subsections (a)(3) and (e) of section 3.

`(b) REPORT- Not later than 120 days after the date on which each regular session of Congress commences, the Secretary of Labor shall prepare and submit to the President and the appropriate committees of Congress a report on the offshoring of jobs (as defined in section 2(a)(9)). Each such report shall include information concerning--


`(1) the number of jobs affected by offshoring;


`(2) the locations to which jobs are being shifted or transferred;


`(3) the reasons why such shifts and transfers are occurring; and


`(4) any other relevant data compiled under subsection (a).'.

Reprinted at www.outsourcing-law.com, published Feb. 15, 2004