In response to growing public concerns over outsourcing and offshoring, state legislators across the country have recently introduced a spate of bills intended to crack down on businesses that move call center operations out of state. Many of these bills require employers to provide advance notice to the state of impending relocations and impose significant penalties for failure to comply. The proposals also typically obligate state officials to create and publish a list of employers transferring jobs out of state and render those employers ineligible for tax or other incentives for several years. Some bills also authorize government agencies to recoup incentives previously given to employers that relocate call center jobs.
More than 20 call center relocation bills were introduced in state legislatures during the last three years, with varying degrees of success. Some measures failed, including a California proposal vetoed in 2019.1 A handful are currently pending, including bills introduced this year in Arizona, Indiana, Kentucky, Virginia, Washington, and West Virginia.
As discussed below, several states adopted laws related to this topic. The new laws in two such states—New York and New Jersey—are quite complex and take effect in less than six months. This article summarizes the various measures seen as part of this apparent trend. Call center employers should bear in mind that, depending on the specific circumstances, these new laws may apply in addition to the federal Worker Adjustment and Retraining Notification Act (federal WARN) and/or any state "mini-WARN" statutes.
On January 2, 2020, New York State enacted the New York Call Center Jobs Act (NYCCJA), S 1826. The law will go into effect on June 30, 2020, and the commissioner of labor will be charged with promulgating rules and regulations as needed to implement the new law.
Notice and Penalty. The NYCCJA requires employers to notify the commissioner at least 100 days before relocating any call center out of New York to a foreign country or another state, and before reducing call center call volume within the state by 30% or more with the similar intention of relocating those operations outside the state.2 The law applies to employers that employ: (a) 50 or more employees at a call center, excluding part-time employees;3 or (b) " or more employees that in the aggregate work at least 1,500 hours per week, excluding overtime hours," to staff a call center. Under the NYCCJA, a "call center" is defined as a facility or other operation where employees take customer service phone calls or other electronic communications to assist customers.
Call center employers that fail to notify the commissioner of covered relocations or reductions face penalties of up to $10,000 for each day they are in violation. The commissioner may reduce this penalty if an employer can show just cause.
Public List and Disincentives. The commissioner will create a list, annually, of employers that relocate or reduce call center jobs, which must be "made available to the public." The law requires the commissioner to prominently post a link to the list on the agency's website.
A call center employer that appears on the commissioner's list must pay back "the unamortized value of any grant or guaranteed loans, or any tax benefits or other governmental support it has previously received in the last five years." This recoupment provision applies only to such benefits and state financial assistance entered into on or after the effective date of the NYCCJA. The state may exempt a company from this requirement, however, if remitting the loan or grant would threaten state or national security, or cause substantial job loss or environmental harm.
Companies on the list also are banned from receiving new state assistance—including "any direct or indirect state grants, state guaranteed loans, tax benefits, or other financial governmental support"—for five years after the list is published. Employers are not prohibited, however, from receiving state grants or loans for the purpose of training employees or assisting employees deemed to be especially in need, due to the transfer or relocation of the call center jobs.
Relatedly, the law explicitly states that it does not affect employees' entitlement to "payments, compensation, or benefits under any other state law," including, for example, unemployment compensation. The NYCCJA does not create a private right of action for employees who allege violations of the law.
State Contracts. The NYCCJA requires that "all state-business-related contracts for call center and customer service work be performed by state contractors or other agents or subcontractors entirely within the state of New York." State contractors currently maintaining operations outside New York have two years to comply; however, if new call center employees are added in the meantime to work on state contracts, they must be employed immediately in New York. In addition, if the terms of an existing contract (that predates the NYCCJA effective date) will continue to apply after the two-year mark, the requirements of the NYCCJA will apply once the contract is up for renewal.
New York Mini-WARN Statute. Call center employers in New York should recognize that New York's WARN law4 may overlap with the NYCCJA. The extent of any overlap will depend heavily on the specific circumstances of a given situation. It is possible, however, that an employer5 and employment loss6 covered by NY WARN may also be covered by the NYCCJA such that notice under both statutes may be required.
As a result, employers should familiarize themselves with the differences between the two laws. For example, NY WARN's advance notice period (90 days) is slightly shorter than the NYCCJA period (100 days). And, while the NYCCJA requires notice to the commissioner, NY WARN requires notice to the commissioner, affected employees, their representatives, and the local workforce investment board. Moreover, notice under NY WARN must include detailed information, which varies by recipient. In addition, NY WARN provides for different penalties, certain narrow exceptions, and a private right of action by aggrieved employees. Call center employers with potential plans to relocate or reduce operations should consider their obligations under NY WARN and federal WARN, as well as under the NYCCJA.
New Jersey enacted a slew of employment laws on January 21, 2020, including a call center relocation measure taking effect on July 1, 2020. The New Jersey Call Center Jobs Act (NJCCJA), A 1992, institutes notification procedures for companies relocating call centers from within the state to a foreign country and includes penalties for employers that do not comply. It also broadly requires that employers with call centers in New Jersey "maintain a staffing level capable of handling no less than 65% of customer volume of telephone calls, emails, or other electronic communications." The volume of customer calls, emails, or other electronic communications is measured "against the previous six month average volume of those operations," when they either originate in New Jersey or concern an account with a New Jersey address.
Notice and Penalty. The NJCCJA defines "employers" and "call center" in the same manner as the New York version. Unlike the NYCCJA, however, the NJCCJA notice duties differ based on the triggering circumstances.
Under the NJCCJA, if the call center staffing level falls below the amount needed to handle 65% of customer service requests, the employer must notify the Commissioner of Labor and Workforce Development immediately. On the other hand, if an employer relocates a call center, or transfers at least 20% of the center's total operating volume (as measured against the previous 12-month volume average), "to one or more foreign countries," the employer must notify the commissioner at least 90 days before the relocation or transfer.
An employer that violates the notification requirement is subject to a penalty of up to $7,500 per day. The commissioner is authorized to collect this penalty but may choose to waive it.
Public List and Disincentives. The commissioner is tasked with creating a list of all employers that notify it of call center job relocations, transfers or reductions, updating the list monthly, and posting a public link to the list on the Department of Labor and Workforce Development website. Employers will remain on the list for up to 36 months after each notification. While on the list, employers are "ineligible to receive any direct or indirect State grant, guaranteed loan, tax benefit, and any other financial support," except for grants or loans to assist with training or other employment assistance to employees within specified groups (i.e., employees affected by the decision, veterans, minority groups, and women). The NJCCJA does not obligate employers appearing on the list to remit the value of incentives previously provided by the state.
As with the New York law, the NJCCJA clearly states that no provision should be read "to permit the withholding or denial of payments, compensation, or benefits" to employees affected by the relocation of a call center—including unemployment, disability, or retraining benefits.
State Contracts. The NJCCJA instructs state departments and agencies to grant a preference for call center contracts "to qualified businesses located in the State and employing residents" of New Jersey. The commissioner must promulgate rules, pursuant to the state Administrative Procedure Act, to identify qualified businesses and the scope of the preference permitted.
New Jersey Mini-WARN Statute. New Jersey call center businesses contemplating any action covered by the NJCCJA should also closely analyze the potential applicability of the state mini-WARN law. Employers should further be aware that the New Jersey mini-WARN law was recently amended, with onerous new provisions taking effect on July 19, 2020.
Because the amended mini-WARN law and the NJCCJA diverge on many points, employers in the Garden State should ensure they are prepared to comply with both if needed. Employers should also be cognizant of the state mass layoff notification requirement7 and any federal WARN duties that might apply.
Other Call Center Relocation Laws
In addition to New York and New Jersey, other states have adopted varying approaches to deter the relocation of call centers or to track call center workforce data.
Alabama. Effective September 1, 2019, Alabama's call center law, SB 110, is similar to the NYCCJA in many respects.8 The Alabama law: (1) covers similar (though not identical) types of employers and operations;9 (2) applies to relocations of call centers out of the state, as well as relocations of operating units "consisting of at least 30 percent of the call center's total volume"; (3) imposes a penalty of up to $10,000 each day on employers that fail to provide the requisite notice;10 (4) requires maintenance of a list of employers that send call center jobs out of state, to be updated every six months; (5) authorizes the state to recapture the unamortized value of grants, loans, or tax credits received by employers appearing on that list;11 and (6) renders such employers ineligible for future incentives for five years.12 The law covers any contract entered into on or after its effective date. Like the above measures, it protects the rights of employees to receive compensation or benefits they may be due.
Unlike the NYCCJA and NJCCJA, however, the Alabama law requires employers to provide notice 120 days prior to the relocation of call center work. In addition, the list of employers created by the Director need not be posted publicly but rather must be immediately distributed "to each state agency and political subdivision of the state that provides the employers with any grants, loans, or tax credits."
Although Alabama does not have a mini-WARN statute, employers anticipating a "mass separation" may be obligated to notify the unemployment claims office nearest the worksite of the date and scope of the event. Alabama law defines "mass separation" as separation of 25 or more workers employed by a single establishment (permanently, or for an indefinite period, or for an expected duration of at least seven days) at or about the same time and for the same reason.13
Nevada. Nevada's call center relocation bill, AB 271, took effect on January 1, 2020.14 This law imposes notification requirements on employers that intend to relocate a call center, or "one or more facilities or operating units within a call center comprising at least 30 percent of the total operating volume of telephone calls or other electronic communications," from Nevada to a foreign country. Different requirements apply depending on whether the employer received economic incentives15 from the state in the 10 years immediately preceding the relocation of call center jobs.
If an employer received economic incentives from the state, it must notify the Nevada Labor Commissioner ("Labor Commissioner"), as well as the employees to be displaced, about the relocation and the number of workers affected, at least 90 days prior to the relocation. If timely notice is not provided, the Labor Commissioner may either: (a) impose a penalty of $5,000 per day that the violation continues; or (b) "require the employer to conduct a study," at its expense, "to determine the financial impact of the failure of the employer to provide the required notice on the community surrounding the call center and impose against the employer a civil penalty in an amount based upon the results of the study."
If an employer did not receive state incentives, it must provide notice to the Labor Commissioner and affected employees, containing information about the relocation as set forth by the federal WARN statute. Employers that fail to comply with this notice obligation face a civil penalty of $5,000 plus an additional penalty of $500 for each day the employer delays, up to a maximum of 30 days.
Under the Nevada law, all call center employers that have submitted relocation notices are ineligible for state agency incentives for five years. The Labor Commissioner may waive the ineligibility restriction if an employer demonstrates that the denial of the incentive would cause job loss or an adverse impact on the state. In addition, the Labor Commissioner is authorized to adopt regulations to implement the call center law.
As with the laws mentioned above, the Nevada statute should not be construed to allow the denial of benefits to employees affected by the relocation, including unemployment compensation. Finally, Nevada does not have generally applicable mini-WARN or mass layoff notification laws.
Colorado. Demonstrating yet another approach, Colorado adopted a call center jobs monitoring mechanism, effective August 2, 2019.16 The measure, HB19-1306, requires the state Department of Labor and Employment to annually report on call center workforce and wage analysis data it already collects as part of the State Measurement for Accountable, Responsive, and Transparent (SMART) Government Act. The data sought covers call centers with: (a) 50 or more customer service employees within the state, excluding those working less than 20 hours per week; or (b) 50 or more customer service employees who, in the aggregate, work at least 1,500 hours a week. Like Nevada, Colorado does not have a mini-WARN or other mass layoff notification requirement.17
Employers with call centers in any of the jurisdictions listed above should become familiar with the newly enacted laws and prepare to comply if necessary. In addition, they should not lose sight of any federal WARN, state mini-WARN, or other state notification duties that may apply when layoffs occur at a call center or any other facility.
Although call center relocation measures have been proposed at the federal level repeatedly over recent years, the pending proposal is not gaining traction and is unlikely to advance in the current congressional climate. But as state legislatures continue to propose and pass these types of bills, call center employers across the country should stay tuned for further developments in this area.
1 Governor Gavin Newsom vetoed last year's California AB 1677 because of concerns that its "significant penalties and restrictions . . . might dissuade businesses that have no intention of moving their operations from making any further investments in California," at the expense of workers in the state. It remains to be seen whether California lawmakers will reintroduce legislation on this topic.
2 The volume of calls is measured as "the call volume of the previous calendar month compared to the average monthly call volume of the previous twelve months."
3 Part-time employees are defined as those working fewer than 20 hours per week on average or for fewer than six out of the last 12 months preceding the date of the notice required by the NYCCJA.
4 See N.Y. Lab. Law §§ 860 through 860-i.
5 NY WARN covers employers with either: (a) 50 or more full-time employees; or (b) 50 or more employees, including part-time employees who work at least 20 hours per week if the hours worked aggregate to at least 2,000 hours per week (including overtime hours).
6 NY WARN applies in the event of a mass layoff, plant closing, relocation, or other qualifying employment loss, as those terms are defined in the statute.
7 New Jersey law requires employers to notify the Director of the Division of Unemployment Insurance when there is a mass separation. See N.J. Admin. Code § 12:17-3.5. "Mass separation" means the separation of 25 or more employees in a single establishment (either permanently or for an indefinite period) at or about the same time and for the same reason, except where the separation or unemployment is due to a labor dispute.
8 Ala. Code §§ 41-23-230 through 41-23-235.
9 The Alabama law does not cover the state itself or its agencies or departments, as employers. The law also does not apply to locations in the state that handle customer inquiries using artificial intelligence.
10 In Alabama, notice is due to the Director of the Department of Economic and Community Affairs ("Director"). The penalty may be reduced by a court if the employer shows just cause for the delay in providing notice.
11 Employers notified of a recapture request will have only 30 days to repay the funds.
12 The Director may waive the disqualification for future benefits under certain circumstances (i.e., if it would cause "substantial job loss in the state," environmental harm, or "significant economic impact to the state").
13 Ala. Admin. Code r. 480-4-1-.06(ah).
14 Nev. Rev. Stat. §§ 613.700 through 613.780.
15 Such benefits include "any incentive from a state agency for economic development, including, without limitation, any grant, loan, tax credit or abatement."
16 Colo. Rev. Stat. § 24-4805-125.
17 Although not specifically directed at call center job losses, Louisiana and Maine have also made recent efforts to address concerns over the loss of jobs from their states. Louisiana Tax Code Amendment. Louisiana amended its tax code in 2018 with SB 259, which grants authority for the state secretary of the Department of Revenue to "claw back" all tax benefits, including nonrefundable tax credits, if those incentives are later disallowed. La. Stat. Ann. § 47:1561.3. Although the measure did not discuss call center operations, publicity surrounding the bill indicates that it was intended to recoup incentives granted to employers that subsequently did not fulfill employment expectations. Maine Mini-WARN Amendment. Maine lawmakers initially proposed a call center bill akin to the Alabama law, but the legislature ultimately proceeded with an amendment (HP 164 - LD 201) to the state's mini-WARN statute instead. Effective September 9, 2019, Maine lengthened its mini-WARN notice period from 60 to 90 days. Violators of the notice requirement face a fine of not more than $500. Maine employers should note that severance obligations may apply for eligible employees who are separated in connection with a "mass layoff," which is defined separately from a closing or relocation. See Me. Stat. tit. 26, § 625-B.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.