The Philadelphia Protection of Displaced Contract Workers Ordinance offers job protections to workers providing security, janitorial, building maintenance, food and beverage, hotel service, or health care services who are employed by service contractors, and are displaced when the service contract is terminated and awarded to another service contractor.¹  A recent amendment to the Ordinance significantly expands its scope to impose obligations on a business that decides to no longer utilize its own employees to provide a covered service, but instead decides to outsource that work to a separate entity – a service contractor.  Employees impacted by such decisions are now protected under the Ordinance.  Now, when an employer outsources its covered jobs to a service contractor, the service contractor must make written offers of employment to the employer’s former employees (or maintain a preferential hiring list by seniority within each job classification if hiring fewer workers) and retain those who accept the written offers for a 90-day transitional period, unless terminated “for cause.”  This amendment of the Displaced Contract Workers Ordinance is one of three parts of the Black Workers Matter Economic Recovery Package passed into law earlier this year.²   

Expanded Coverage

Coverage under the Displaced Contract Workers Ordinance is governed by the following definitions, which have been expanded as shown in italics:    

• Awarding Authority:  A person or entity that awards or otherwise enters into contracts for security, janitorial, building maintenance, food and beverage, hotel service, or health care services performed within the City of Philadelphia, including any subcontracts for these services. 

• Service Contract:  A contract, lease or concession agreement let to a contractor by the awarding authority for the furnishing of security, janitorial, building maintenance, food and beverage, hotel service, or non-professional health care services, including any services to be performed by registered nurses.

• Successorship Service Contract:  A service contract with the awarding authority where substantially the same services to be performed have previously been rendered to the awarding authority as part of the same program or at the same facility under another service contract that recently has been terminated or has ended within the previous 90 days, or have previously been rendered by the awarding authority’s own employees.

• Contractor:  A person or entity that enters into a service contract with an awarding authority, including subcontractors at any tier with at least 10 employees.

• Terminated or Ending Contractor:  A contractor whose service contract expires without renewal or whose contract is terminated and includes the awarding authority itself where work previously rendered by the awarding authority’s own employees is the subject of a successorship service contract.   This amendment significantly changes the scope of the Ordinance to provide protections to individuals whose jobs are outsourced in the first instance (rather than just to individuals employed by a service contractor whose contract has terminated).

• Employee:  Any person employed to provide services pursuant to a service contract and includes registered nurses, but does not include: managerial, supervisory, or confidential employees, including those who would be so defined under the Fair Labor Standards Act, or those who are employed less than 15 hours per week.  However, “employee” does include persons who work 15 hours or more per week during customary seasonal work but do not work an annualized average of 15 hours or more per week. 

• Customary Seasonal Work:  Work performed by an employee during only some approximate part of each calendar year, such as summer or winter.

Obligations Upon Termination of a Service Contract

Service contractors and awarding authorities have the following obligations:

1. Awarding Authority Must Give Notice of Termination and the Successor Contractor.  If terminating a service contract, the awarding authority must give notice to the service contractor (and its union, if any) that the service contract will be terminated or ended, and the name, telephone number, and address of the successor contractor(s).  This duty does not apply when an awarding authority is outsourcing work in the first instance.  

2. Terminating or Ending Contractor Must Provide Employee List to Successor Contractor. Within three days of receipt of notice, the terminated or ending contractor must provide the name, date of hire, and employment occupation classification of each employee (as limited in the definition above) employed at the site(s) covered by the predecessor contractor as of the date of receipt of the notice to the successor contractor (or if not identified, to the awarding authority who will be responsible for providing it to the successor contractor).  The terminated or ending contractor shall update this information on the end date of the service contract.  The Ordinance appears to contemplate—but does expressly state—that if the awarding authority is outsourcing work in the first instance, it must provide the employee list to the successor contractor when it is selected. 

3. Successor Contractor Must Retain Employees for 90-Day Transitional Employment Period. For a 90-day transitional employment period, the successor contractor or subcontractor shall retain all employees who have been employed by the terminated or ending contractor or its subcontractor (or awarding authority) at the site(s) covered by the service contract for at least the eight months immediately preceding the date on which the predecessor contract is terminated.  This means that to be entitled to a 90-day retention period, the individual must have been employed by the terminating or ending contractor (or awarding authority) both at the time of the notice of termination of the service contract, and also for at least the prior eight months.  This would seem to exclude seasonal employees who were employed at the time of the notice, as they would be unlikely to have been employed for the prior eight months.

If the successorship service contract lasts fewer than 90 days, then the subsequent successorship service contractor will be bound by these requirements for a new 90-day transitional employment period. 

4. Successor Contractor Must Make a Written Offer of Employment.  The successor contractor must hand-deliver a written notice to each displaced employee offering employment in the form of the notice specified by Section 9-2304 of the Ordinance, in the individual’s native language or another language in which the employee is fluent.  This notice must specify that the employee has at least 10 days within which to accept the offer, and the tenth day must be at least five days before the expiration of the predecessor contract. The Ordinance provides versions of the notice in English and Spanish.

5. Fewer Workers Needed.  If the successor contractor needs fewer workers than were employed under the predecessor contract, then employees must be retained by seniority within each job classification.  The successor contractor must maintain for 90 days a preferential hiring list of employees who are eligible for retention, who were not retained by the successor contractor from which the successor contractor is required to hire additional employees. 

6. For Cause Terminations Only.  During the 90-day transitional period, the retained employees may only be discharged for cause based on the employee’s own performance or conduct. 

Enforcement

Employees who are displaced or terminated in violation of the Ordinance may file a lawsuit in court against the awarding authority and the terminated or successor contractor, jointly or severally. If a court finds a violation it may award back pay, the value of lost benefits, reinstatement, and reasonable attorney’s fees and costs.  Penalties of $50 to $100 per employee per day may be imposed for knowing violations. 

Conclusion

The recent amendment of the protection of Displaced Contractor Workers Ordinance imposes significant burdens when businesses outsource security, janitorial, building maintenance, food and beverage, hotel service, or health care services work in Philadelphia.  Employers contemplating outsourcing such services should plan ahead to comply with the new obligations and timelines.  Service contractors need to be prepared to offer work and onboard its client’s employees for a 90-day transitional period.