Should Publicly-Traded Companies Disclose Their Employees’ Locations in Annual Reports to Curb Outsourcing? (H.R. 3624)

What is H.R. 3624?

(Updated September 6, 2020)

This bill — the Outsourcing Accountability Act of 2019 — seeks to curb the practice of corporate outsourcing, in which companies transfer U.S. jobs overseas to save money. To this end, it would require publicly-traded companies registered with the Securities and Exchange Commission (SEC) to disclose their employees’ locations (by state and country) in their annual reports. Currently, publicly-traded companies aren’t required to list where their employees are located. Companies that are emerging growth companies (generally defined as newly public companies with revenues below a specified threshold) would be exempt from this bill’s disclosure requirement.

Additionally, this bill would help ensure that workers have access to Trade Adjustment Assistance (TAA), a program that provides American workers with support and training if they can certify that they were laid off due to outsourcing.  

Argument in favor

Requiring publicly-traded companies to disclose their employees’ locations will give American customers and investors better information on their outsourcing practices. This transparency will allow American customers who want to buy from companies that hire American workers identify and patronize those companies.

Argument opposed

Unfairly demonizing companies for making smart decisions that deliver value for shareholders, which is their primary responsibility, is bad for business and the economy. These disclosures wouldn’t tell the full story about why companies outsource certain jobs, and could discourage companies from going public.

Impact

Workers laid off due to outsourcing; publicly traded companies; publicly traded companies’ annual reports; the SEC; and Trade Adjustment Assistance (TAA).

Cost of H.R. 3624

The CBO estimates that implementing this bill would cost less than $500,000 over the 2019-2023 period to issue new rules and process the new disclosures. Because the SEC is authorized to collect fees to offset its annual appropriation, the CBO estimates that any net change in discretionary spending over the 2019-2024 period would be negligible.

Additional Info

In-Depth: Rep. Cynthia Axne (D-IA) introduced this bill to hold corporations accountable for outsourcing: 

“In our increasingly global economy, Iowa workers are constantly at risk of losing their jobs to lower paid workers overseas, a practice that is hurting Iowa families and consumers. In order to protect their public image, it is far too common for corporations to deceive laid off workers and the American public when they ship jobs overseas. By holding companies accountable for outsourcing, this bill will help disincentivize the practice and give Iowans the information they need to make informed decisions about supporting companies that support Iowa jobs.” 

After this bill’s passage through the House Financial Services Committee in July 2019, Rep. Axne said: 

“Corporations are shipping jobs overseas to protect their bottom line, then deceiving the public to protect their image. My legislation protects hardworking Iowans. The Outsourcing Accountability Act will increase transparency on corporate outsourcing to give Iowans the information they need to make informed decisions about supporting companies that support Iowa jobs.” 

Rep. Axne’s office hopes that this bill will disincentivize outsourcing by increasing transparency and allowing the American public to identify which companies are outsourcing jobs overseas instead of hiring American workers. In an interview with KMA’s “Morning Line” program, Rep. Axne argued that lack of information is a “big problem” that prevents consumers from being to choose to support companies that hire American workers: 

“The issue with that is that American workers are constantly at risk of losing their jobs to lower paid workers overseas. Right now, we have a lack of information about how many jobs we've lost to outsourcing--and it is a big problem. So, this is a bill that's a step closer to getting that information… This is an easy report to produce. It will Americans to understand which companies are supporting the creation of American jobs, and not outsourcing them. So, it's not only good for supporters, it's good for consumers who want to support companies who are creating jobs in America, and not outsourcing them."

House Financial Services Committee Republicans opposed this bill in its committee vote. In their minority views report, they argue that the disclosures this bill requires would “tell an incomplete story” and discourage companies from going public:

“[T]he information sought by [this bill] would, at best, tell an incomplete story, and at worst could be deeply misleading. In either case, these mandatory disclosures would yield information that is useless for investors trying to make sound investment decisions. As such, the only plausible use for the information required to be disclosed under [this bill] is to name and shame companies perceived to be outsourcing jobs. While Committee Democrats claim this bill is designed to protect American workers and American jobs, the only jobs [this bill] will create and protect are jobs for regulatory lawyers and accountants that companies hire in order to comply with yet another mandatory disclosure. American jobs are not created by piling on more disclosure requirements for public companies. If anything, such misguided policy will likely have the opposite effect by adding unnecessary compliance costs that deter companies from expanding and going public. Companies that decide to go public increase their workforces by forty-five percent relative to private companies. To facilitate job creation within public companies, we should be focusing on policies that make companies want to expand and go public, not onerous policies that saddle them with more burdens and incentivize them to stay private.”

Proponents of outsourcing argue that it helps U.S. companies remain competitive in the global marketplace, sell to foreign markets through overseas branches, keep labor costs low by hiring in emerging markets with lower standards of living. This ultimately allows them to provide goods to American customers at the lowest possible prices.

Outsourcing’s defenders also contend that many types of jobs that are outsourced can’t return to the U.S. For example, many foreign employees have foreign language skills that American workers don’t have — so those jobs can’t be returned to the U.S. In the case of unskilled labor, such as factory work, outsourcing proponents argue that the low wages paid in these positions wouldn’t appeal to American workers. This would force companies to pay higher wages, which would be passed on to customers in the form of higher product prices.

This legislation passed the House Financial Services Committee by a 33-25 vote with the support of one House cosponsor, Rep. Jerry McNerney (D-CA). Its Senate companion, sponsored by Sen. Gary Peters (D-MI), has four Democratic Senate cosponsors.

Of Note: Rep. Axne first started looking into outsourcing as an issue after a March 12, 2019 House Financial Services Committee hearing in which she questioned former Wells Fargo CEO Tim Sloan about the bank’s layoff of 400 Des Moines workers in late 2018. When Rep. Axne asked Sloan if the jobs were moved overseas, he said now; however, her office later heard from both current and former Wells Fargo employees who said they were told to train replacements in India.

Media:

• Sponsoring Rep. Cynthia Axne (D-IA) Press Release
  
• Sponsoring Rep. Cynthia Axne (D-IA) Press Release (Context)
  
• CBO Cost Estimate
  
• House Financial Services Committee Report