Action Brief - Wagner Peyser Funded Activities Under WIA

Cost savings required

In several states, including Maryland, Maine, Connecticut, and California, legislation has been enacted that helps control against privatization. Most importantly, these laws require that the contracts establish a set level of cost savings.

In Maryland, for example, the costs savings must be at least 20% (Md. Ann. Code Art. 64A Section 57A-63). In California, the cost savings may not be based solely on lower contractor pay rates or benefits and wages and may not significantly undercut state pay rates (Cal. Government Code Sections 19130-19132). These state laws also regulate what may be considered "included costs" for the purposes of calculating proposed savings. Next, as discussed in more detail below, these laws include significant protections against displacement of current workers or, alternatively, the agency seeking to contract out must submit a plan of assistance to the adversely affected workers, which includes efforts to place the workers in other government jobs, provisions for the contractor to hire displaced workers, advance notice and other measures.

Other proposed protections

A range of other legal protections may also be included, such as strong control mechanisms to insure that the contract terms are upheld, guarantees that government affirmative action efforts are not adversely affected, language to the effect that the economic advantage to privatization must not be outweighed by the public's interest in having in-house services, participation on the part of the unions reviewing proposed contracts including documentation of cost savings, etc., and specific provisions pertaining to the quality of the staff. These suggestions are described in more detail in a piece prepared by the Service Employees International Union, entitled "Suggestions for State Privatization Language."

Another useful precedent is the San Jose Living Wage resolution, passed by the City Council last year. "A Resolution of the Council of the City of San Jose Adopting the Living Wage Policy" (Resolution No. 68554.) City contractors submit to the Living Wage resolution must also abide by a number of labor protections that target the growing reliance on contractors and subcontractors by City government as an effort to undermine the bargaining power of municipal workers and their unions. If the contract is for services that are currently being offered, the contractor or subcontractor is required to provide for continued employment of the workers subject to the "employee retention requirements" of the resolution. For example, employment "shall be offered to all qualified retention workers" and qualified workers of the prior employer cannot be discharged without good cause for at least 90 days. Equally important, the resolution requires that all contracts subject to a competitive bidding process are subject to "third tier review," where the City considers the bidder's history as an employer and working condition commitments in evaluating the proposals. This includes, most notably, a "service disruption\labor peace" provision that specifically requires the City to make a determination as to "the level of vulnerability of the proposed contract to service or labor disputes and the degree to which labor peace is essential to the proprietary interests of the City."