BILL NUMBER: AB 1061 CHAPTERED 10/12/03 CHAPTER 844 FILED WITH SECRETARY OF STATE OCTOBER 12, 2003 APPROVED BY GOVERNOR OCTOBER 11, 2003 PASSED THE ASSEMBLY SEPTEMBER 3, 2003 PASSED THE SENATE AUGUST 28, 2003 AMENDED IN SENATE AUGUST 18, 2003 AMENDED IN SENATE JULY 1, 2003 AMENDED IN ASSEMBLY APRIL 28, 2003 AMENDED IN ASSEMBLY APRIL 10, 2003 AMENDED IN ASSEMBLY MARCH 26, 2003 INTRODUCED BY Assembly Member Firebaugh FEBRUARY 20, 2003 An act to amend Sections 10200, 10201, and 10205 of the Unemployment Insurance Code, relating to unemployment insurance. LEGISLATIVE COUNSEL'S DIGEST AB 1061, Firebaugh. Unemployment insurance: Employment Training Panel: small businesses. Existing law provides for the establishment of an employment training program and the Employment Training Panel in the Employment Development Department. Existing law requires the panel, among other duties, to establish a 3-year plan that is updated annually, as provided, to maintain a system to continuously monitor economic and other data required under the plan, and to report annually to the Legislature on projects operating during the previous state fiscal year. This bill would additionally require the panel to publish a list of training projects the panel funded in high unemployment areas and a description of the policies and procedures the panel used to designate geographic regions and municipalities as high unemployment areas and to report to the Legislature regarding strategies identified through pilot demonstration projects to increase the access of small businesses to panel programs, as provided. Existing law requires that each 3-year plan include, among other things, the panel's goals and operational objectives for meeting the needs of small business employers. This bill would require that those goals and objectives include strategies, which may include pilot demonstration projects, to enable the panel to increase small businesses' access to the Employment Training Panel program and services. This bill would also make certain findings and declarations related to the operation of the Employment Training Panel and allocation of its funds. This bill would also make certain findings and declarations regarding the new federal requirements imposed on aerospace and defense prime contractors. This bill would also make a finding and declaration that it is the intent of the Legislature to request the Employment Training Panel to continue current efforts to assist aerospace and defense suppliers, as provided. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature finds and declares all of the following: (a) According to a November 1, 2001, report, issued by the California Research Bureau entitled "California's Job Training, Employment and Vocational Education Programs," millions of California' s working adults need to upgrade their educational and work skills in order to secure employment at a living wage. (b) More than 2.5 million California workers, or nearly one in five adults in the workplace, lack a high school diploma. (c) Assisting workers in enhancing their skills and in qualifying for high paid employment is critical if the state is to maintain a competitive advantage in today's global economy. (d) The Employment Training Panel, the state's major job training program for employed workers, funds a variety of workforce training services, including vocational training, industry-specific skills training, job related literacy training, and retraining of workers. (e) According to a two-year study conducted in 1999 and 2000 by California State University, Northridge, Employment Training Panel-sponsored training increased worker earnings, reduced unemployment, increased growth of California companies, and stimulated economic expansion in the state. This study also found that firms participating in the panel's single employer contracts have increased wages by approximately 25 percent and experienced a 15-percent increase in job growth. (f) The Employment Training Panel has established a Small Business Pilot Project designed to target companies who do not have access to the panel through traditional funding processes. The Small Business Pilot Project is designed to serve small firms. (g) According to the panel's annual 2001-02 report, 18 percent of all retrainees and 65 percent of all new hires were employed by firms with 100 or fewer employees, and 36 percent of the panel's total funds were used to train workers in small businesses employing 100 or fewer workers. (h) The Employment Training Panel is statutorily required to fund only certain projects, including projects that foster creation of high-wage, high-skilled jobs in a manufacturing industry and other industries threatened by out-of-state competition. (i) The Los Angeles County Economic Development Corporation's Semiannual Economic Forecast and Industry Outlook for the five county Los Angeles region cited high growth in regional aerospace and defense industries as a result of increased federal defense spending and homeland security efforts. The corporation's report also cited significant competition from other states for federal aerospace and defense contracts. SEC. 2. It is the intent of the Legislature to do all of the following: (a) Enhance access to the funds and services of the panel for California firms employing 100 or fewer workers. (b) Authorize the Employment Training Panel to initiate pilot demonstration projects to identify new strategies to increase small firms' access to Employment Training Panel programs and services. Strategies may include, but not be limited to, recommendations for improved small business outreach and a streamlined process for application, administration, and monitoring of contracts funded by the Employment Training Panel. (c) Require the Employment Training Panel to identify in its annual report, required by subdivision (a) of Section 10205 of the Unemployment Insurance Code, the pilot projects that were established in accordance with subdivision (b) and to describe the strategies that were identified through these projects to increase access by small businesses to Employment Training Panel training contracts. SEC. 3. Section 10200 of the Unemployment Insurance Code is amended to read: 10200. The Legislature finds and declares the following: (a) California's economy is being challenged by competition from other states and overseas. In order to meet this challenge, California's employers, workers, labor organizations, and government need to invest in a skilled and productive workforce, and in developing the skills of frontline workers. For purposes of this section, "frontline worker" means a worker who directly produces or delivers goods or services. The purpose of this chapter is to establish a strategically designed employment training program to promote a healthy labor market in a growing, competitive economy that shall fund only projects that meet the following criteria: (1) Foster creation of high-wage, high-skilled jobs, or foster retention of high-wage, high-skilled jobs in manufacturing and other industries that are threatened by out-of-state and global competition, including, but not limited to, those industries in which targeted training resources for California's small and medium-sized business suppliers will increase the state's competitiveness to secure federal, private sector, and other nonstate funds. Provide for retraining contracts in companies that make a monetary or in-kind contribution to the funded training enhancements. (2) Encourage industry-based investment in human resources development that promotes the competitiveness of California industry through productivity and product quality enhancements. (3) Result in secure jobs for those who successfully complete training. All training shall be customized to the specific requirements of one or more employers or a discrete industry and shall include general skills that trainees can use in the future. (4) Supplement, rather than displace, funds available through existing programs conducted by employers and government-funded training programs, such as the Workforce Investment Act of 1998, the Carl D. Perkins Vocational Education Act, CalWORKs, the Enterprise Zone Act, and the Stewart B. McKinney Homeless Assistance Act, the California Community Colleges Economic Development Program, or apportionment funds allocated to the community colleges, regional occupational centers and programs, or other local educational agencies. In addition, it is further the intention of the Legislature that programs developed pursuant to this chapter shall not replace, parallel, supplant, compete with, or duplicate in any way already existing approved apprenticeship programs. (b) The Employment Training Panel, in funding projects that meet the requirements of subdivision (a), shall give funding priority to those projects that best meet the following goals: (1) Result in the growth of the California economy by stimulating exports from the state, and the production of goods and services that would otherwise be imported from outside the state. (2) Train new employees of firms locating or expanding in the state that provide high-skilled, high-wage jobs and are committed to an ongoing investment in the training of frontline workers. (3) Develop workers with skills that prepare them for the challenges of a high performance workplace of the future. (4) Train workers who have been displaced, have received notification of impending layoff, or are subject to displacement, because of a plant closure, workforce reduction, changes in technology, or significantly increasing levels of international and out-of-state competition. (5) Are jointly developed by business management and worker representatives. (6) Develop career ladders for workers. (7) Promote the retention and expansion of the state's manufacturing workforce. (c) The program established through this chapter is to be coordinated with all existing employment training programs and economic development programs, including, but not limited to, programs such as the Workforce Investment Act of 1998, the California Community Colleges, the regional occupational programs, vocational education programs, joint labor-management training programs, and related programs under the Employment Development Department and the Technology, Trade, and Commerce Agency. SEC. 4. Section 10201 of the Unemployment Insurance Code is amended to read: 10201. As used in this chapter: (a) "Department" means the Employment Development Department. (b) "Employer" or "eligible employer" means any employer subject to Part 1 (commencing with Section 100) of Division 1, except any public entity, or any nonprofit organization which has elected an alternate method of financing its liability for unemployment insurance compensation benefits pursuant to Article 5 (commencing with Section 801), or Article 6 (commencing with Section 821) of Chapter 3. Any public entity or nonprofit organization that has elected an alternate method of financing its liability for unemployment insurance compensation benefits pursuant to Article 5 (commencing with Section 801), or Article 6 (commencing with Section 821) of Chapter 3, shall be deemed to be an employer only for purposes of placement of new hire trainees who received training as an incidental part of a training project designed to meet the needs of one or more private sector employers. (c) "Eligible participant" means any person who, prior to beginning training or employment pursuant to this chapter, is any of the following: (1) Unemployed and has established an unemployment insurance claim in this state, or has exhausted eligibility for unemployment insurance benefits from this state within the previous 24 months. (2) Employed for a minimum of 90 days by his or her employer, or if employed for less than 90 days, met the conditions of paragraph (1) at the time of hire, had received a notice of layoff from the prior employer, or was employed by an employer for a period of not less than 90 days during the 180-day period prior to the employee's current employment. (d) "Executive director" means the executive director appointed pursuant to Section 10202. (e) "Fund" means the Employment Training Fund created by Section 1610. (f) "Job" means employment on a basis customarily considered full time for the occupation and industry. The employment shall have definite career potential and a substantial likelihood of providing long-term job security. Furthermore, the employment shall provide earnings, upon completion of the employment requirement specified in subdivision (f) of Section 10209, equal to 50 percent, in the case of new hire training, or 60 percent, in the case of retraining, of the state or regional average hourly wage. However, in no case shall the employment result in earnings of less than 45 percent of the state average hourly wage for new hire training and 55 percent of the state average hourly wage for retraining. The panel may consider the dollar value of health benefits that are voluntarily paid for by an employer when computing earnings to meet the minimum wage requirements. (g) "New hire training" means employment training, including job-related literacy training, for persons who, at the start of training, are unemployed. (h) "Panel" means the Employment Training Panel created by Section 10202. (i) "Retraining" means employment related skill and literacy training for persons who are employed and who meet the definition of paragraph (2) of subdivision (c) prior to commencement of training and will continue to be employed by the same employer for at least 90 days following completion of training. (j) "State average hourly wage" means the average weekly wage paid by employers to employees covered by unemployment insurance, as reported to the Employment Development Department for the four calendar quarters ending June 30 of the preceding calendar year, divided by 40 hours. (k) "Trainee" means an eligible participant. (l) "Training agency" means any private training entity or local educational agency. SEC. 5. Section 10205 of the Unemployment Insurance Code is amended to read: 10205. The panel shall do all of the following: (a) Establish a three-year plan that shall be updated annually, based on the demand of employers for trained workers, changes in the state's economy and labor markets, and continuous reviews of the effectiveness of panel training contracts. The initial three-year plan shall be submitted to the Governor and the Legislature not later than January 1, 1994. The initial update of the plan shall be submitted not later than July 1, 1994, and annual updates of the plan thereafter shall be submitted not later than July 1 of each year. In carrying out this section, the panel shall review information in the following areas: (1) Labor market information, including the state-local labor market information program in the Employment Development Department, and economic forecasts. (2) Evaluations of the effectiveness of training as measured by increased security of employment for workers and benefits to the California economy. (3) The demand for training by industry, type of training, and size of employer. (4) Changes in skills necessary to perform jobs, including changes in basic literacy skills. (5) Changes in the demographics of the labor force and the population entering the labor market. (6) Proposed expenditures by other agencies of federal Workforce Investment Act funds and other state and federal training and vocational education funds on eligible participants. (b) Maintain a system to continuously monitor economic and other data required under this plan. If this data changes significantly during the life of the plan, the plan shall be amended by the panel. Each plan shall include all of the following: (1) The panel's objectives with respect to the criteria and priorities specified in Section 10200 and the distribution of funds between new-hire training and retraining. (2) The identification of specific industries, production and quality control techniques, and regions of the state where employment training funds would most benefit the state's economy and plans to encourage training in these areas, including specific standards and a system for expedited review of proposals that meet the standards. (3) A system for expedited review of proposals that are substantially similar with respect to employer needs, training curriculum, duration of training, and costs of training, in order to encourage the development of proposals that meet the needs identified in paragraph (2). (4) The panel's goals, operational objectives, and strategies to meet the needs of small businesses, including, but not limited to, those small businesses with 100 or fewer employees. These strategies proposed by the panel may include, but not be limited to, pilot demonstration projects designed to identify potential barriers that small businesses may experience in accessing panel programs and workforce training resources, including barriers that may exist within small businesses. (5) The research objectives of the panel that contribute to the effectiveness of this chapter in benefiting the economy of the state as a whole. (6) A priority list of skills that are in such short supply that employers are choosing to not locate or expand their businesses in the state or are importing labor in response to these skills shortages. (c) Solicit proposals and write contracts on the basis of proposals made directly to it. Contracts for the purpose of providing employment training may be written with any of the following: (1) An employer or group of employers. (2) A training agency. (3) A local workforce investment board with the approval of the appropriate local elected officials in the local workforce investment area. (4) A grant recipient or administrative entity selected pursuant to the federal Workforce Investment Act of 1998, with the approval of the local workforce investment board and the appropriate local elected officials. These contracts shall be in the form of fixed-fee performance contracts. Notwithstanding any provision of law to the contrary, contracts entered into pursuant to this chapter shall not be subject to competitive bidding procedures. Contracts for training may be written for a period not to exceed 24 months for the purpose of administration by the panel and the contracting employer or any group of employers acting jointly or any training agency for the purpose of providing employment training. (d) Fund training projects that best meet the priorities identified annually. In doing so, the panel shall seek to facilitate the employment of the maximum number of eligible participants. (e) Establish minimum standards for the consideration of proposals, which shall include, but not be limited to, the identification of employers who have been contacted by the contractor and who have provided reasonable assurance that they will employ successful trainees, the number of jobs available, the skill requirements for the identified jobs, the projected cost per person trained, hired, and retained in employment, the wages paid successful trainees upon placement, and the curriculum for the training. No proposal shall be considered or approved that proposes training for employment covered by a collective bargaining agreement unless the signatory labor organization agrees in writing. (f) Develop a process by which local workforce investment boards may apply for marketing resources for the purpose of identifying local employers that have training needs that reflect the priorities of the panel. The panel may delegate its authority to approve contracts for training to local workforce investment boards, provided that no contract approved exceeds fifty thousand dollars ($50,000) per project without prior approval of the panel and all contracts meet the provisions of this chapter and are consistent with the annual priorities identified by the panel. (g) Ensure the provision of adequate fiscal and accounting controls for, monitoring and auditing of, and other appropriate technical and administrative assistance to, projects funded by this chapter. (h) Provide for evaluation of projects funded by this chapter. The evaluations shall assess the effectiveness of training previously funded by the panel to improve job security and stability for workers, and benefit participating employers and the state's economy, and shall compare the wages of trainees in the 12-month period prior to training as well as the 12-month period subsequent to completion of training, as reflected in the department's unemployment insurance tax records. Individual project evaluations shall contain a summary description of the project, the number of persons entering training, the number of persons completing training, the number of persons employed at the end of the project, the number of persons still employed three months after the end of the project, the wages paid, the total costs of the project, and the total reimbursement received from the Employment Training Fund. (i) Report annually to the Legislature, by November 30, on projects operating during the previous state fiscal year. These annual reports shall provide separate summaries of all of the following: (1) Projects completed during the year, including their individual and aggregate performance and cost. (2) Projects not completed during the year, briefly describing each project and identifying approved contract amounts by contract and for this category as a whole, and identifying any projects in which funds are expected to be disencumbered. (3) Projects terminated prior to completion and the reasons for the termination. (4) A description of the amount, type, and effectiveness of literacy training funded by the panel. (5) Results of complete project evaluations. (6) A description of pilot projects, and the strategies that were identified through these projects, to increase access by small businesses to panel training contracts. (7) A listing of training projects that were funded in high unemployment areas and a detailed description of the policies and procedures that were used to designate geographic regions and municipalities as high unemployment areas. In addition, based upon its experience in administering job training projects, the panel shall include in these reports policy recommendations concerning the impact of job training and the panel's program on economic development, labor-management relations, employment security, and other related issues. (j) Conduct ongoing reviews of panel policies with the goal of developing an improved process for developing, funding, and implementing panel contracts as described in this chapter. (k) Expedite the processing of contracts for firms considering locating or expanding businesses in the state, as determined by the Technology, Trade, and Commerce Agency, in accordance with the priorities for employment training programs set forth in subdivision (b) of Section 10200. (l) Coordinate and consult regularly with business groups and labor organizations, the California Workforce Investment Board, the State Department of Education, the office of the Chancellor of the California Community Colleges, the Employment Development Department, and the Technology, Trade, and Commerce Agency. (m) Adopt by regulation procedures for the conduct of panel business, including the scheduling and conduct of meetings, the review of proposals, the disclosure of contacts between panel members and parties at interest concerning particular proposals, contracts or cases before the panel or its staff, the awarding of contracts, the administration of contracts, and the payment of amounts due to contractors. All decisions by the panel shall be made by resolution of the panel and any adverse decision shall include a statement of the reason for the decision. (n) Adopt regulations and procedures providing reasonable confidentiality for the proprietary information of employers seeking training funds from the panel if the public disclosure of that information would result in an unfair competitive disadvantage to the employer supplying the information. The panel may not withhold information from the public regarding its operations, procedures, and decisions that would otherwise be subject to disclosure under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code). (o) Review and comment on the budget and performance of any program, project, or activity funded by the panel utilizing funds collected pursuant to Section 976.6. SEC. 6. The Legislature finds and declares all of the following: (a) As the President and Congress strive to strengthen the nation' s capacities in aerospace and defense in order to support military and governmental response to war against terrorism and to enhance homeland security, the United States Department of Defense requires prime contractors to achieve a 20 percent to 30 percent cost reduction. (b) Aerospace and defense prime contractors estimate that suppliers represent more than 50 percent of the cost of the prime contractor's final product. (c) In order for California's prime contractors to remain competitive for federal aerospace and defense contract awards, resources will be needed to improve California's supplier base through improvements impacting the supplier's entire business enterprise, including its leadership, operations, and workforce skills. (d) According to the California Small Manufacturers Association, in order for small manufacturers to achieve improvements through training, the company owners and leaders must learn to lead the changed organization. As more aerospace and defense manufacturing is outsourced, suppliers must assume additional responsibilities, including earlier and more involved participation in product development, management of inventory for customers, production of near-perfect quality products, and steady price reductions. (e) It is the intent of the Legislature to request the Employment Training Panel to continue current efforts to assist aerospace and defense suppliers, through workforce training to achieve competitiveness objectives including, but not limited to, quality and process improvement, just-in-time manufacturing and product delivery, and cost reductions.