BNA Daily Labor Report

Andrew M. Ballard


May 19, 2004



Implementation of Anti-Outsourcing Law Said Key to Whether Tennessee Challenged


RALEIGH, N.C. -- How Tennessee implements a new law requiring preferential treatment in awarding certain state contracts for companies employing U.S. workers is likely to determine whether its provisions are challenged, the head of a policy research organization told BNA May 18.


If the new law results in state contract work being provided solely to companies that use only U.S. workers, it could face legal challenges, according to Stuart Anderson, executive director of the National Foundation for American Policy. NFAP is an Arlington, Va.-based public policy research group that has analyzed state legislation to prevent outsourcing to foreign countries.


Tennessee's bill (S.B. 2344) was signed by Gov. Phil Bredesen (D) May 10.


Under the law (Public Act 04-630), the Department of Finance and Administration is required to promulgate regulations that provide a preference when awarding state data-entry or call-center service contracts to companies that employ U.S. citizens or residents, or people authorized to work in the United States under federal law.


As introduced, the legislation would have required state contracts to be awarded exclusively to companies that employ U.S. citizens or residents, or people authorized to work in the United States under federal law. The bill was revised during consideration by the Senate.


The legislation was unanimously approved by the House, and passed the Senate with one dissenting vote.


"Tennessee is one of the first states to legislate a preference against state contract work being done overseas," Stuart told BNA. Maryland's governor April 27 signed a similar bill (2004 Md. Laws 197).


Stuart co-authored a report issued by NFAP in April that said state legislation aimed at preventing the outsourcing of jobs to foreign countries is likely to be unconstitutional and to violate the United States' international trade agreements (75 DLR A-9, 4/20/04).


"Whether or not this is a violation of the U.S. Constitution or of U.S. trade obligations would depend on how this provision is implemented in practice," Stuart said.


The Tennessee Department of Finance and Administration, likely will implement the new law by providing additional points for bidders that meet its requirements, spokeswoman Lola Potter said. Different point structures exist for various state contract award systems, and all will need revising, she said.


Although the state's fiscal year begins July 1, Potter told BNA she doubted the department would have new contract award systems in place by that time. "Anytime you change your [contracting] procedures, it will involve a lot of lawyers," she said. The preference provisions are likely be implemented by the end of the year, she said.


According to Potter, the changes will not bar companies using foreign workers from participating in Tennessee's public contracts. "It doesn't mean that someone that has an offshore contractor or subcontractor won't be given a [state] contract," she said.

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