BILL ANALYSIS SENATE JUDICIARY COMMITTEE Senator Ellen M. Corbett, Chair 2009-2010 Regular Session SB 367 Senator Negrete-McLeod As Amended August 31, 2009 Hearing Date: September 8, 2009 Civil Code GMO:jd PURSUANT TO SENATE RULE 29.10 SUBJECT Unruh Civil Rights Act: Discrimination: Consumer Discounts DESCRIPTION This bill would clarify that the Unruh Civil Rights Act, which prohibits discrimination on the basis of sex, race, color, religion, ancestry, national origin, disability, or medical condition, and prohibits other forms of arbitrary discrimination in business establishments, does not impose liability when a business offers or confers a discount or other benefit to a consumer or prospective consumer because the consumer or prospective consumer has suffered loss of employment or reduction of wages. This bill is an urgency measure. BACKGROUND SB 367 responds to recent reports of threatened legal action against businesses that offered discounted goods or services to state workers who had been furloughed. The media reports of threatened legal action include one against the Ikea store in West Sacramento, which served free breakfasts to furloughed state of California employees on specified Fridays, another against a ski resort that offered discounted lift tickets to workers who showed state IDs, and several actions targeting carmakers who have advertised plans to aid customers who lose their jobs. (The Recorder, July 8, 2009.) (more) SB 367 (Negrete-McLeod) Page 2 of ? This bill intends to clarify that a discount or other privilege or advantage benefiting a consumer who has suffered a loss of employment or reduction in wages is not arbitrary discrimination in violation of the Unruh Civil Rights Act, regardless of whether the consumer was an employee in the private or public sector. The contents of SB 367 relating to trusts and estates that were heard and passed by this committee on May 5, 2009, have been amended out of the bill. SB 367 is now in this committee pursuant to Senate Rule 29.10. CHANGES TO EXISTING LAW Existing law , the Unruh Civil Rights Act, provides that all persons within the jurisdiction of this state are free and equal, and, regardless of their sex, race, color, religion, national origin, ancestry, disability, or medical condition, are entitled to full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind. (Civ. Code Sec. 51.) Existing case law has extended the application of the Unruh Civil Rights Act to other forms of arbitrary discrimination by business establishments. (See, e.g., Stoumen v. Reilly (1951) 37 Cal.2d 713, 715-716; In re Cox (1970) 3 Cal.3d 205; Hubert v. Williams (1982) 133 Cal.App.3d, Supp.1, 5; Harris v. Capital Growth Investors XIV (1991) 52 Cal.3d 1142; and Marina Point, Ltd. v. Wolfson (1982) 30 Cal.3d 721.) This bill would provide that any discount or other benefit offered to or conferred on a consumer or prospective consumer by a business because the consumer or prospective consumer has suffered the loss or reduction of employment or reduction of wages would not be considered an arbitrary discrimination in violation of the Unruh Civil Rights Act. This bill contains an urgency clause. COMMENT 1. Need for the bill The author states: SB 367 (Negrete-McLeod) Page 3 of ? In the current unprecedented economic climate, many individuals are seeing reductions in pay or loss of employment. Some private businesses have generously offered these individuals discounts for services. It has come to my attention that some of these businesses have been threatened with legal action under the Unruh Civil Rights Act. This is not the type of discrimination that the Legislature intended the Act to protect against. SB 367 would clarify that offering discounts or benefits to individuals that have seen a reduction or elimination of employment is not considered arbitrary discrimination under the Unruh Civil Rights Act. 2. Protection against arbitrary discrimination extended by the courts In case after case, the California Supreme Court has rejected the argument that the ban on discrimination under the Unruh Civil Rights Act (Unruh Act or Act) reaches only the specific characteristics or classifications enumerated in Civil Code Section 51. In fact, the Court has made it abundantly clear that the Unruh Act also prohibits other arbitrary discrimination, such as discrimination based on sexual orientation, physical appearance, and family status. (See Harris v. Capital Growth Investors XIV (1991) 52 Cal.3d 1142, delineating a three-part test for cognizable Unruh Act violations; Marina Point, Ltd. v. Wolfson (1982) 30 Cal.3d 721, to protect families who were denied housing because they had minor children; In re Cox (1970) 3 Cal.3d 205, violation to deny services to a customer because his companion has an unconventional appearance; Isbister v. Boys' Club of Santa Cruz, Inc. (1985) 40 Cal.3d 72, to defend girls denied access to a boys-only club based solely on their gender.) In Harris, the California State Supreme Court enumerated a three part test for determining whether a claim not enumerated in the statute or previously added by judicial construction should be cognizable under the Unruh Act. Courts must take into account: 1) the language of the statute; 2) the legitimate business interest of the defendants; and 3) the consequences of allowing the new discrimination claim. The sponsor of SB 367, the Consumer Attorneys of California (CAOC), contends that if the Harris test were applied in court to the business practice of SB 367 (Negrete-McLeod) Page 4 of ? providing discounts or special prices to those suffering from loss or reduced employment, it would fail the test (and thus not be considered a violation of the Act) because of the legitimate business interest and of the significant consequences of allowing this kind of benefit to be considered a violation. In Long v. Valentino (1999) 216 Cal.App. 3d, 1287, the appellate court even recognized occupational status as a protected class: "[A]n announcement, such as 'You can't eat at my diner because you are a lawyer, bricklayer, female, or Indian chief' would be actionable under the Unruh Act." (Long, at 1297.) The Ninth Circuit has also recognized the reach of the Unruh Act in McCalden v. California Library Ass'n (9th Cir. 1990) 955 F.2d 1214, 1221, where it noted that protected classes under the Unruh Act have been broadly defined to include "students, families with children, welfare recipients, and occupational groups." And, more recently, in Sisemore v. Master Financial, Inc. (2007) 151 Cal.App.4th 1386, the court concluded that a family day care operator denied a mortgage on that basis stated a viable cause of action for occupational status discrimination. In fact, the courts have interpreted the categories or classes enumerated in the Unruh Act to be "illustrative" rather than "restrictive," and this is borne by the intent language adopted by the Legislature in reorganizing and consolidating various civil rights statutes in 2005 (AB 1400, Laird, Ch. 420, Stats. 2005). This bill would clarify that a discount, benefit, or other privilege or advantage given by a business to a consumer who has suffered a loss of income due to loss or reduction of employment or reduction of wages, is not arbitrary discrimination in violation of the Unruh Act. 3. Relevant arguments This bill is sponsored by the Consumer Attorneys of California (CAOC). The CAOC believes clarifying the application of the Unruh Civil Rights Act to legitimate business activities identified in the media as the target of litigation is necessary in order to preserve the integrity of the Act and to continue to protect countless Californians from suffering true arbitrary discrimination. "The Act provides that all persons are entitled to equal treatment by business establishments regardless of their 'sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation.' Cal. Civ. Code Sec. 51. In its correct SB 367 (Negrete-McLeod) Page 5 of ? application, the Act has ensured that Californians do not suffer arbitrary discrimination on the basis of the enumerated personal characteristics in the Act, as well as some other judicially expanded categories. The expansion of the act by the judiciary has included only personal characteristics. Hessians Motorcycle Club v. J.C. Flanagans, 86 Cal.App.4th 833, 836 (2001)." The CAOC also contends that even if the type of discrimination claim addressed by this bill were found to satisfy the Harris test (see Comment 2 above), it is unlikely that it would be held to be an "arbitrary class based generalization" as required under Pizarro v. Lamb's Players Theatre (2006) 135 Cal.App.4th 1171, 1174. The sponsor however supports clarifying the law, to address any misconceived belief of some that offering these types of discounts or benefits are a violation of the Unruh Civil Rights Act. "Businesses providing discounts to groups who are suffering economically are not arbitrarily discriminating against consumers. In contrast, these discounts apply across the board to persons of all personal characteristics (race, sex, color, religion, etc.) and further the good public policy of providing a benefit to a group of people who would not otherwise be able to afford certain services. Furthermore, these discounts help stimulate an incredibly depressed economy. Unemployment levels are at record highs and many other Californians are facing forced reductions in employment. For example, starting in July, more than 200,000 state workers will be forced to take three unpaid days off per month. Those businesses who wish to lend a helping hand should be commended." In support of SB 367, the California Chamber of Commerce states," [w]e believe it is imperative that these businesses are protected from unwarranted lawsuits brought by lawyers inappropriately seeking benefit from the generosity and compassion of businesses in this economic downturn. This bill will simply clarify current law, establishing that it is not a violation of the Unruh Civil Rights Act when a business provides discounts to people who have suffered a loss or reduction in employment." The California Retailers Association (CRA) also supports SB 367 because it would clarify retailers' ability to offer discounts and specials (e.g., the "Furlough Friday" special discount or special price) to customers who have experienced a loss or reduction in employment. "Current law prohibits discrimination based on a number of factors and SB 367 states that discounts or promotions offered to those customers do not constitute SB 367 (Negrete-McLeod) Page 6 of ? discrimination. Given the tough economic climate, California retailers are looking for new ways to provide customers with discounts and incentives and this legislation is needed to protect them from the threat of frivolous and costly litigation." Although not opposed to SB 367, the attorney who had written a letter to Squaw Valley Ski Lift challenging the "Furlough Friday" discounted tickets for state workers promotion, suggested elimination of "arbitrary discrimination" in all types of business-offered discounts, such as "Ladies' Night" promotions, so that "Men's Night" or other group night or day activities at discounted rates may also escape characterization as arbitrary discrimination. It should be noted that a bona fide business reason or interest could overcome a charge of "arbitrary discrimination" against a business promotional scheme. 4. Urgency measure The bill was most recently amended to add an urgency clause, making it effective immediately upon passage and the Governor's signature. The rationale provided for the urgency mirrors the arguments presented by the sponsor and the author of the bill, i.e., that the economic condition of the state and the loss or imminent loss of employment by tens of thousands of Californians constitute the necessity to support businesses that are providing discounts to those suffering from loss or reduction of employment by clarifying such discounts are not in violation of the Unruh Civil Rights Act. Support : California Chamber of Commerce; California Retailers' Association Opposition : None Known HISTORY Source : Consumer Attorneys of California (CAOC) Related Pending Legislation : None Known Prior Legislation : None Known Prior Vote : SB 367 (Negrete-McLeod) Page 7 of ? Previous votes in the Senate not relevant Assembly Judiciary (Ayes 10, Noes 0) Assembly Floor (Ayes 78, Noes 0) **************