June 18, 2019

June 18, 2019

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June 17, 2019

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New FAR Provision Implements Sweeping Definition of “Recruitment Fees” in Human Trafficking Prohibition

On January 22, 2019, a new rule went into effect providing much-needed guidance on the definition of “recruitment fees” under the FAR human trafficking prohibition.  Many government contractors may be surprised to learn that a wide range of seemingly-innocent policies requiring employees or applicants to pay (whether upfront, through deduction, or in any other way) the employer for costs relating to hiring, recruitment, or training may now qualify as impermissible “human trafficking” and subject the contractor to potentially rigorous penalties under the FAR.

Since March 2015, all federal government contracts and solicitations have included a clause prohibiting human trafficking pursuant to FAR 22.1705 and 52.222-50.  One of the prescribed forms of trafficking-related conduct is charging “recruitment fees” to employees or potential employees.  While “recruitment fees” were previously undefined in the FAR, the new rule makes clear that the term has a sweeping definition, encompassing “fees of any type” that are “associated with the recruiting process.” 

The rule takes a functional approach and makes clear that the manner, form, or timing of the payment is not relevant.  Charges can be recruitment fees if they are paid up front by the employee or potential employee, deducted from the person’s wages, or even if they are collected by a third-party such as a labor broker, recruiter, staffing firm, or agent.  The rule and its agency commentary are clear, however, that contractors may require employees or applicants to incur charges themselves in connection with the recruiting process, so long as the payment is not made to the contractor or any of its agents.

The new rule lists several categories of exemplary recruitment fees, including fees for:

  • Soliciting, identifying, considering, interviewing, referring, retaining, transferring, selecting, training, providing orientation to, skills testing, recommending, or placing employees or potential employees;

  • Advertising;

  • Obtaining labor certifications, visas, or processing applications or petitions;

  • Acquiring photographs and identity or immigration documents, such as passports;

  • Medical examinations and immunizations;

  • Background, reference, and security clearance checks and examinations;

  • The employer’s recruiters, agents, or attorneys;

  • Language interpretation or translation;

  • Government-mandated fees such as border crossing fees, levies, or worker welfare funds;

  • Transportation and subsistence costs;

  • Security deposits, bonds, and insurance; and

  • Equipment charges.

Contractors should note that the listed categories are only examples, and other charges “associated with the recruiting process” qualify even if the specific type of charge is not listed. 

Because every federal government contract prohibits contractors from charging these fees and some require annual certifications and compliance plans, contractors should review their hiring processes to ensure that no such fees are being charged to employees or potential employees, including applicants.  The penalties for non-compliance with the human trafficking clause can range from the suspension of contract payments to contract or subcontract termination or even debarment. Because contractors are responsible under the rule for fees charged by agents like recruiters (or even sub-recruiters), contractors should ensure that their contracts with recruiters, staffing agencies, or others prohibit passing along any recruitment costs to employees or applicants.

© Polsinelli PC, Polsinelli LLP in California

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About this Author

Erin Felix, Associate, Polsinelli
Associate

Erin Felix learned the government contracts industry from the inside out. For 15 years prior to practicing law, Erin managed government and commercial contracts and subcontracts for one of the largest defense contractors in the United States. This unique, hands-on experience in the government contracts industry allows her to ‘speak the client’s language’ and gives her an intimate understanding of contractors’ business priorities and challenges. Clients value Erin’s practical approach to problem resolution and the innovative ideas she brings to the table. 

Erin counsels government...

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Associate

Jack Blum is an associate in the firm’s Employment Disputes, Litigation, and Arbitration practice, where he represents employers in connection with a wide range of employment law issues. Jack has extensive experience in defending employers against claims by their employees in federal and state courts, as well as before government agencies like the EEOC, Department of Labor, and state human rights commissions. Jack aggressively defends his client’s personnel practices and decisions while not losing sight of their underlying business goals and objectives. Jack represents clients in all aspects of complex employment litigation and has advised and defended employer clients regarding a wide variety of employee claims, including:

• Employment discrimination, harassment, and retaliation
• Wage and hour
• Employment contract disputes
• Independent contractor/employee misclassification audits 
• Tort claims arising out of the employment relationship

Jack also has extensive experience representing parties in litigation arising from employee mobility, including claims involving non-competition, non-solicitation, and confidentiality agreements as well as the misappropriation of trade secrets. Significantly, Jack has experience in both prosecuting and defending these claims and is, therefore, able to offer clients a well-rounded assessment of their options and courses of action. Jack also has experience redressing employee data breaches under the Computer Fraud and Abuse Act.

Jack also has a background in employment counseling, where he has worked closely with in-house counsel, human resources personnel, and business executives to craft personnel policies that meet the client’s business requirements while complying with applicable laws. Jack has particular experience in assisting clients with issues relating to employee/independent contractor classifications, and regularly advises clients regarding the defensibility of classifications, drafts independent contractor agreements to provide the strongest possible arguments in support of the classification, and defends misclassification claims asserted by employees and government agencies. Jack also walks clients through sensitive personnel actions to reduce the potential for litigation or at least best position the client in the event that litigation is inevitable. Jack draws heavily upon this counseling experience in representing clients in litigation.

During law school, Jack served as a legal intern in the U.S. Securities and Exchange Commission’s Office of the Inspector General where he contributed to several high-profile internal investigations, and also interned with the Maryland Attorney General’s Office.

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