Justin A. Chiarodo and Stephanie M. Harden
In the latest regulatory action targeted at human trafficking, the Federal Acquisition Regulatory Councils (“FAR Councils”) on May 11, 2016 issued a proposed rule to include a sweeping new definition of the term “recruitment fees.” The proposed definition would cover nearly any conceivable charge related to recruiting, hiring, and onboarding of employees, no matter the location of the employee, the skill level of the job, or customary business practices in the industry. Contractors should pay close attention, given that the rule also makes them responsible for recruitment fees collected by third parties, including subcontractors at all tiers, recruiters, and staffing firms.
Recognizing the far-reaching consequences the rule will have, the FAR Councils have flagged key open questions for contractors to comment upon. Given the potential sweeping change, contractors should think carefully about how the proposed rule will impact their hiring practices.
The Proposed Definition
Though the human trafficking clause, FAR 52.222-50, has been lauded for advancing important policy objectives since it went into effect in January 2015, its prohibition on recruitment fees has come under fire from the U.S. Government Accountability Office, Congress, and many contractors for being overly vague. The new proposed definition of recruitment fees will add much needed clarity in this area, although its sweeping breadth may also disrupt ordinary contractor hiring practices that may have never been thought to constitute human trafficking.
The proposed definition prohibits nearly any charge to an employee or potential employee—no matter the form—that is associated with the recruiting or hiring process. Covered items included charges for:
- Soliciting, considering, interviewing, referring, retaining, transferring, selecting, testing, training, providing new-hire orientation, recommending, or placing employees or potential employees;
- Any activity related to obtaining permanent or temporary labor certifications;
- Processing petitions;
- Visas and any fee that facilitates an employee obtaining a visa such as appointment and application fees;
- Government-mandated costs such as border crossing fees;
- Procuring photographs and identity documentation, including any nongovernmental passport fees;
- Items that are a condition of access to the job opportunity, such as procuring medical examinations and immunizations, obtaining background, reference, and security checks and examinations, or obtaining additional certifications;
- An employer’s recruiters, agents or attorneys, or other notary or legal fees; and,
- Language interpreters or translators.
Key Takeaways for Contractors
In addition to its broad scope, the proposed rule is noteworthy because it makes contractors liable for fees collected by third parties, including agents, recruiters, staffing firms, subsidiaries and affiliates of the employer, any agent or employee of such entities, and subcontractors at all tiers. Thus, the major takeaways for contractors are that the U.S. Government expects you to root out illegal human trafficking practices at all tiers of your supply chain and that nearly any conceivable charge in connection with the recruiting or hiring of employees cannot be passed through to the employee.
An open question is whether the proposed rule strikes the right balance. The FAR Councils have highlighted the following issues (among others) for public comment:
- Are all costs and fees associated with bringing an employee on board properly treated as recruitment fees?
- Are there any additional charges that should be considered recruitment fees?
- Should the definition of a recruitment fee vary depending on whether the job is a professional high-paying, high-skill job or an unskilled, low-paying job? Is the location of the job a factor?
These are important questions that contractors would be well-advised to carefully consider and comment upon before the final rule is issued.
While the definition may be appropriate in the context of overseas work involving unskilled or lower-paying jobs, the rule is not limited to those circumstances. Thus, contractors should consider how it will impact other practices, such as the hiring of professionals who may routinely pay to maintain their own professional certifications or permitting applicants to pay optional government fees to expedite visa or passport applications. Contractors should also think carefully about how to revamp their hiring practices to better ensure their own employees and those in the rest of their supply chain are recruited and hired in a manner consistent with these policies.