CH2M Hill alleged employee poaching leads to lawsuit

Annette Cary, Tri-City HeraldJuly 25, 2013 

Hanford contractor CH2M Hill Plateau Remediation Co. has been sued over its plan to end key subcontracts but then hire many of the subcontractor employees.

Babcock Services has filed a lawsuit in Benton County Superior Court claiming that CH2M Hill improperly ended its subcontract and violated an agreement not to solicit Babcock employees to work directly for CH2M Hill.

Babcock is asking for $13 million plus damages from the loss of skilled employees.

CH2M Hill has not filed a response in court, but said in a statement that it stands by its new subcontracting strategy.

"We do not believe we are in breach of our shared services agreement nor do we believe we are in breach of the nonsolicitation provision with Babcock Services," CH2M Hill said.

Babcock is one of 11 subcontractors with special status with CH2M Hill as subcontractors that were part of the CH2M Hill team, rather than bidding for work, when it began its contract for environmental cleanup at Hanford.

CH2M Hill's initial five-year contract, which expires Sept. 30, has been extended for a second five years.

But in a June 2012 letter, Department of Energy wrote that its consent for using preselected subcontractors was limited to CH2M Hill's first contracting period.

Those preselected subcontractors now have 413 workers assigned to CH2M Hill projects at Hanford. That includes about 100 Babcock workers.

"The lack of price competition for teaming and preselected subcontracts significantly increases administrative burden associated with award and administration" by CH2M Hill and the federal government, the letter said.

In response to the letter, CH2M Hill announced a new subcontracting strategy in early 2013, according to the lawsuit. It said it would extend certain subcontracts and invite the balance of the subcontractor work force to join CH2M Hill.

The change would provide opportunities to reduce costs and increase competition for subcontracted work, it said.

But Babcock said it had an agreement with CH2M Hill to perform work through fall 2018 with an estimated value of about $157 million. The agreement says that the subcontract may be terminated if both CH2M Hill and also Babcock decide to end it or if DOE withdraws the work, according to the lawsuit.

However, CH2M Hill unilaterally decided not to extend Babcock's subcontract for another five years through fall 2018, the lawsuit said.

At CH2M Hill's request Babcock froze salaries during the initial five years of its subcontracts to help CH2M Hill cut costs.

Babcock agreed to reduce its prices, as well as invest time and money, because the agreement between the two companies was intended to last 10 years, the lawsuit said.

Among Babcock's investments was $320,000 to help CH2M Hill prepare its winning bid to become a DOE prime contractor, it said.

The agreement between the companies also said that neither company would solicit employees from the other, according to the lawsuit.

But shortly after CH2M Hill announced its new subcontracting strategy in January 2013, it held a meeting with employees of subcontractors, including Babcock. During the meeting CH2M Hill said it had created a list of Babcock employees it wanted to hire and emailed invitations to join CH2M Hill to almost all Babcock employees performing work at Hanford, according to the lawsuit.

CH2M Hill then asked Babcock to waive the nonsolicitation provision in their joint agreement, and CH2M Hill subcontractors also were asked to waive nonsolicitation provisions, according to the lawsuit.

Babcock refused, and when it believed CH2M Hill continued to solicit its employees anyway, it sent CH2M Hill a notice of violation threatening legal action.

About a week later on June 6, CH2M Hill revised its subcontracting strategy, but not enough for Babcock to believe it is adhering to the nonsolicitation agreement.

CH2M Hill said it would post job openings on its website, but also said that hiring preferences would be given to subcontractor employees currently performing duties.

Managers have been told they cannot solicit current subcontractor employees.

But Babcock says managers have been told that to make subcontractor employees aware of the desire to hire them, managers may encourage them to read communications and make workers aware of the hiring process.

In an all-employee memo, CH2M Hill listed job postings that were in job categories now filled only by Babcock and other subcontractor employees, the lawsuit said.

CH2M Hill's other preselected subcontractors include Fluor, which said earlier this month that about 90 to 100 workers now performing work for CH2M Hill are being laid off but given the opportunity to apply for their jobs at CH2M Hill and will be given preference in hiring.

-- Annette Cary: 582-1533; acary@tricityherald.com; Twitter: @HanfordNews

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