Jobs/Training Programs
First Source Employment Agreement

Roderick L. Woodson, Esq.
Holland & Knight LLP

 

Last year on these pages (Pipeline, June/July 2002), I co-authored a discussion on the evolution of the First Source Employment Program and its relationship to the Apprenticeship Program, both of which are DC Government initiatives. The genesis of these programs is founded in a laudable goal of improving opportunities for DC residents to obtain work-force employment with enterprises doing business within the District. The First Source Employment Program is designed to give DC residents first access to new jobs created through projects receiving funding or certain types of regulatory approvals by the DC Government. The law enacting this program calls for mandatory compliance. Unlike First Source, however, the Apprenticeship Program is intended to provide a means for DC residents to obtain training in a skilled trade, and compliance with this law has historically been voluntary. The concern has been linking a mandatory obligation (First Source Employment) with a voluntary program (Apprenticeship) through the contractual arrangement known as the "First Source Employment Agreement ("Agreement").

In recent years, this Agreement has become more widely known to those who do business within the District. Businesses of almost every kind have been required to sign this document in order to obtain an ever-widening scope of work from, or approval by, the DC Government. For example, the Agreement must be signed for almost every type of procurement of goods or services; i.e., zoning actions, street and alley closings, bond issuances, housing construction or renovation, administrative permits, leaseholds of one year or more, and many other types of governmental activity. Regardless of the requirements of the First Source legislation, or the underlying law that triggers government approval (zoning, alley closing, etc.), applicants are mandated to sign the Agreement.

The evolving content of this Agreement, and its indiscriminate use, has begun to take on a more troubling character. Earlier iterations of the Agreement tended to focus on construction projects and job-site employment. Since then, the Agreement has begun to require elaborate and detailed reporting on a monthly basis, such as payroll and employment records (including, apparently, social security numbers) for all employees. Moreover, any job openings the employer may have in the metropolitan area are subject to the Agreement. The Department of Employment Services ("DOES") interprets this to include not only nearby cities and adjacent suburban counties, but also areas as distant as Stafford, Clarke, Warren, Spotsylvania and King George counties in Virginia; Frederick and Calvert counties in Maryland; and Berkeley and Jefferson counties in West Virginia. Under these terms, signing a First Source Agreement for a job of any size in DC submits the employer's entire workforce throughout the region to DOES regulation.

The most recent modifications to the Agreement have raised the stakes significantly — DOES will now seek penalties for failure to comply with the 51% DC residents new hires and 51% DC resident apprenticeship training thresholds.

Over the last several years, the DOES has sought to amend the law on the Apprenticeship Program (not the First Source Program) to impose penalties for lack of compliance by employers. The matter of compliance has been an issue because the underlying apprenticeship law calls for employers to adopt such programs on a voluntary basis. To remedy this "gap in regulation," DOES has, over the last several years, called for the DC Council to adopt legislation called the "Apprenticeship Enforcement Amendment Act." The Council did not take action on this measure during the last legislative period, which ended in December of 2002, and a similar bill was re-introduced earlier this year and is currently pending before the Council (Bill 15-150). Among other things, this measure would impose a five percent (5%) penalty of the direct and indirect labor costs of the project for failure to comply with any aspect of the Apprenticeship Program.

Not content to await Council action on this legislation, however, DOES decided to take action of its own. Thus, several months ago DOES modified the form of the First Source Employment Agreement and simply inserted penalty provisions into the text of that Agreement. The modifications now permit unspecified "penalties" to be imposed, including a monetary charge of 5% of the direct and indirect labor costs for (i) a "breach" of the Agreement (b) failure to submit the monthly reports or (c) deliberate submission of "falsified data" to DOES.

This result represents a complete circumvention of the regular DC legislative processes for changing the requirements of law through a bald contractual sleight-of-hand by DOES.

The First Source Employment Agreement is, in attorney parlance, a "contract of adherence" – that is, an agreement which cannot be avoided and is generally non-negotiable. Such contracts may be challenged in the courts on a number of grounds and the courts often enforce contracts of adherence only narrowly. Use of the Agreement to impose obligations not relevant to the First Source Employment Program (such as the Apprenticeship Program) raises some eyebrows. And to then add financial penalties for non-compliance with such irrelevant obligations seems to push the envelope a bit far.

The Department of Employment Services should explore ways to operate these employment and training programs with private employers in a more cooperative atmosphere. The current approach seems to create a combative, costly and ultimately unproductive regulatory system.

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