BILL ANALYSIS Bill No: SB 1231 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2009-2010 Regular Session Staff Analysis SB 1231 Author: Corbett As Introduced: February 19, 2010 Hearing Date: March 23, 2010 Consultant: Art Terzakis SUBJECT Public Contracts: sweatshop labor: slave and sweat free code of conduct DESCRIPTION SB 1231 makes the following substantive and clarifying changes to existing provisions of the Public Contract Code (Section 6108) related to "sweatfree" procurement policy and code of conduct: 1. Expands the scope of the Sweatfree Code of Conduct to include abusive forms of labor performed by all persons, not just child labor. 2. Requires contractor certification to include all raw materials in the supply chain used to produce or manufacture the goods produced. 3. Applies the state's Sweatfree Code of Conduct provisions to public works projects if the contract for building materials is in excess of $20,000 . Also, prohibits a contractor from splitting a contract into separate accounts to avoid the minimum threshold. 4. Extends the time frame (sanction) from one year to two years that a contractor may be removed from the bidder's list if he/she knew or should have known any products were laundered or produced by abusive labor. SB 1231 (Corbett) continued Page 2 5. Renames the Sweatfree Code of Conduct to read the Slave and Sweat Free Code of Conduct and makes other conforming code maintenance changes. 6. Deletes the requirements that the appropriate agency, in consultation with the Director of Industrial Relations, employ an approach to implement the Slave and Sweat Free Code of Conduct and that the Department explore mechanisms to ensure that businesses that contract with state agencies are in compliance with this body of law. 7. Requires contractors whose manufacturing and assembly locations are outside the United States to comply with international laws or treaties binding on their countries. EXISTING LAW Existing law generally provides the Department of General Services (DGS) with the governing authority related to state procurement activities, including acquisition of materials, supplies and services. Existing law requires every contract entered into by a state agency for the procurement of equipment, materials, supplies, apparel, garments, and accessories and the laundering thereof, excluding public works contracts, to require a contractor to certify that no equipment, materials, supplies, apparel, garments, or accessories provided under the contract are produced by sweatshop labor, forced labor, convict labor, indentured labor under penal sanction, abusive forms of child labor, or exploitation of children in sweatshop labor. The law provides for misdemeanor liability in the case of a knowing false certification. Existing law provides that if a contractor knew or should have known the specified products furnished to the state were laundered or produced by the specified types of prohibited labor, the contractor may be removed from the bidder's list for 360 days. Existing law requires the Department of Industrial Relations to establish a contractor responsibility program, on or before February 1, 2004, including a Sweatfree Code of Conduct. SB 1231 (Corbett) continued Page 3 Existing law also requires the appropriate procurement agency, in consultation with the Director of Industrial Relations, to employ an approach to implement the Sweatfree Code of Conduct, as specified. Additionally, Existing law requires the Department of Industrial Relations to explore mechanisms to ensure that businesses that contract with state agencies are in compliance with this section, as prescribed. BACKGROUND Human Trafficking: Human trafficking is the modern-day practice of slavery. It's one of the fastest growing criminal industries in the world, consisting of the subjugation, recruitment, harboring, and/or transportation of people for the purpose of forced or coerced labor or commercial sexual exploitation. Every year traffickers generate billions of dollars by exploiting those seeking to cross international borders in search of a better life as well as those vulnerable within the United States, including within the State of California. Since passage of the Trafficking Victims Protection Act in 2000 and the United Nations Palermo Protocol, international awareness of human trafficking has increased and new human trafficking laws have been introduced in over half of the countries around the world. The International Labor Organization estimates that over 12 million people worldwide are working in some form of forced labor on bondage and that more than 200 million children are at work, many in hazardous forms of labor. Hilda Solis, the U.S. Secretary of Labor, recently stated the "most vulnerable persons - including women, indigenous groups, and migrants - are the most likely to fall into these exploitive situations and the current global economic crisis has only exacerbated their vulnerability." In 2005, Congress passed the Trafficking Victims Protection Reauthorization Act, directing the Secretary of Labor and the Department of Labor's Bureau of International Labor Affairs (ILAB) to compile "a list of goods that ILAB has reason to believe were produced using forced labor or child labor" in order to provide consumers and firms with this sort of information. SB 1231 (Corbett) continued Page 4 Purpose of SB 1231: In December of 2009, the Senate Judiciary and the Senate Labor and Industrial Relations Committees held a joint informational hearing on the subject of human trafficking and supply chains - the basis for this measure arose from the discussions at that hearing. As noted above, existing law, the Sweatfree Code of Conduct, Public Contract Code Section 6108, prohibits state agencies from procuring goods and services from contractors and subcontractors who use abusive forms of labor is limited to child labor. In summary, this measure would expand the scope of the Sweatfree Code of Conduct to prohibit the abusive labor of all persons, not just children. It is modified to include slavery and sweatshop labor, and the procurement of all raw materials used in the supply chain. SB 1231 would also apply the state's "sweat free" procurement policies to public works projects that cost over $20,000. Public works projects have been exempted to date. The author has chosen to include such materials and supplies because bricks, glass and other such materials used in public works projects appear on the U.S. Department of Labor's list of tainted goods (goods produced through child labor). The author's office emphasizes that businesses have asserted in the past that it is too burdensome and difficult to monitor supply chains. However, the author's office contends that there are a number of businesses which already monitor supply chains in order to promote good labor practices with their subcontractors. Arguments in Opposition : Opponents concern with this measure is limited to the inability of a public works contractor to know where all of the materials or supplies used in a construction project were produced and the characteristics of the workforce used in their production. Opponents point out that many construction materials, supplies and equipment are produced overseas and pass through multiple intermediary business entities (exporter, importer, distributor, retailer) before they are acquired by a contractor for use in a public works project. In addition, public works contracts often involve multiple SB 1231 (Corbett) continued Page 5 specialty contractors, each of whom would have to certify to the prime contractor that all the materials, supplies, and equipment they brought to the project were not produced by sweatshop labor. Opponents also argue that a public works contractor is essentially at the end of a long supply chain and in most cases has no contractual relationship with the manufacturer of the components used in a construction project and therefore lacks leverage to force the manufacturer to meet labor standards. Furthermore, opponents believe that SB 1231 would result in new and expensive compliance burdens for small business, create new opportunities for protesting and delaying construction project awards and encourage more litigation against contractors. PRIOR/RELATED LEGISLATION SB 657 (Steinberg) 2009-10 Session. Would, among other things, beginning January 1, 2011, require retail sellers and manufacturers doing business in the state to develop, maintain, and implement policies related to their compliance with federal and state trafficking from their supply chain. (Pending in Assembly Judiciary Committee) SB 1649 (Steinberg), 2007-08 Session. Substantively similar to SB 657 (Steinberg) of 2009-10 Session. (Died in Assembly Appropriations Committee) SB 180 (Kuehl), Chapter 239, Statutes of 2005. Established the California Alliance to Combat Trafficking and Slavery (California ACTS) Task Force. AB 22 (Lieber), Chapter 240, Statutes of 2005. Established civil and criminal penalties for human trafficking and allowed for forfeiture of assets derived from human trafficking. SB 578 (Alarcon) Chapter 711, Statutes of 2003. Enacted non sweatshop labor guidelines to state procurement policies to ensure that goods and services purchased by the State of California are produced in workplaces that adhere to minimum standards for protecting workers. SB 1888 (Hayden) Chapter 891, Statutes of 2000. Extended existing law that prohibited state agencies from procuring SB 1231 (Corbett) continued Page 6 foreign goods made by forced labor, convict labor, or indentured labor to include goods made by abusive forms of child labor or exploitation of children in sweatshop labor. AB 2457 (Figueroa) Chapter 1149, Statutes of 1996. Required every contract entered into by a state agency for the procurement of equipment, materials or supplies to specify that no foreign-made equipment, materials or supplies furnished to the state may be produced by forced labor, convict labor or indentured labor under penal sanction (forced labor). Also, required contractors to agree to comply with this provision, and imposed sanctions on contractors who violate this provision, as specified. SUPPORT: As of March 19, 2010: Alliance to Stop Slavery and End Trafficking California Conference Board of the Amalgamated Transit Union California Conference of Machinists California Teamsters Public Affairs Council Engineers and Scientists of California, IFPTE Local 20 International Longshore and Warehouse Union Professional and Technical Engineers, IFPTE Local 21 United Food and Commercial Workers Western States Council UNITE-HERE SB 1231 (Corbett) continued Page 7 OPPOSE: As of March 19, 2010: American Council of Engineering Companies Associated General Contractors California Association of Sheet Metal & Air Conditioning Contractors California Business Properties Association California Chamber of Commerce California Chapter of the American Fence Association California Fence Contractors Association California Independent Grocers Association California Landscape Contractors Association California Nevada Cement Association Construction Employers Association Engineering Contractors Association Engineering and Utility Contractors Association Flasher Barricade Association Marin Builders Association National Federation of Independent Business Southern California Contractors Association Western Electrical Contractors Association FISCAL COMMITTEE: Senate Appropriations Committee **********