BILL ANALYSIS Ó
AB 356
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Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 356 (Hill) - As Amended: April 25, 2011
SUBJECT : Public works projects: local hiring policies.
SUMMARY : Prohibits a local agency from mandating any portion or
percentage of work on a public works projects from being
performed by local residents or persons who reside within
particular geographic areas if any portion of that public works
projects will take place outside the geographical boundaries of
the local agency. Specifically, this bill :
1)Prohibits a local agency from mandating any portion or
percentage of work on a public works projects from being
performed by local residents or persons who reside within
particular geographic areas if any portion of that public
works projects will take place outside the geographical
boundaries of the local agency.
2)Requires, if a local agency receives funding from the state
for a public works project located entirely within the
geographical boundaries of the local agency and the local
agency implements a policy of hiring only local residents, any
increase in the cost of the public works project attributable
to the local resident hiring policy to be funded with local
funds.
3)Defines the following terms:
a) "Local agency" means a city, county, city and county, or
any other local public agency.
b) "Local resident" means an individual who is domiciled
within the jurisdiction of the local agency.
c) "Public works project" means the acquisition and
improvement of sites, construction, modification, and
alteration of public buildings, airports, water supply
systems, and other publicly owned and operated facilities.
EXISTING LAW sets forth, under the Local Agency Public
Construction Act, the procedures local agencies are required to
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use when soliciting and evaluating bids or proposals for the
construction of a public work or improvement.
FISCAL EFFECT : None
COMMENTS :
1)According to the author, San Francisco's Local Hiring Policy
for Construction (Policy), adopted December 14, 2010, requires
contractors and subcontractors performing public works
projects worth $400,000 or more to hire local residents. This
Policy includes city projects that are located up to 70 miles
beyond the jurisdictional limits of the city, such as Hetch
Hetchy reservoir and San Francisco International Airport. The
author says six of the nine Bay Area counties have higher
unemployment rates than San Francisco. The Bay Area is a
mobile and economically interdependent region, the author
says, and no one benefits from pitting neighboring communities
against each other. According to the State Employment
Development Department, the author points out, those outlying
areas are home to more than 60% of the estimated 14,700
construction workers employed in San Francisco. The author
says AB 356 seeks to place parameters on San Francisco's
Policy so it does not extend outside of the city's
geographical boundaries."
2)With the goal of increasing employment opportunities for
residents, cities and counties nationwide have established
programs to encourage and, in some cases, to require
developers of construction projects to hire locally for
skilled and unskilled labor. In fact, under guidelines for
projects funded by federal stimulus dollars under the American
Recovery and Reinvestment Act, it was advised: "Promoting
local hiring: Departments and agencies should seek to maximize
the economic benefits of a Recovery Act-funded investment in a
particular community by supporting projects that seek to
ensure that the people who live in the local community get the
job opportunities that accompany the investment." However,
most local hiring ordinances only require a "good faith"
effort to meet the goal. Many have cited San Francisco's
ordinance as the strictest in the country.
3)On the other hand, the Article IV, Section 2, of the federal
constitution prohibits state discrimination based on
residence, stating: "The Citizens of each State shall be
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entitled to all Privileges and Immunities of Citizens in the
several States." The federal Supreme Court has interpreted
this provision as limiting the ability of a state to
discriminate against those from out of state with regard to
fundamental rights or important economic activities. In Hague
v. Committee for Industrial Organization (1939) 307 U.S. 496,
511, the Supreme Court said: "The section, in effect, prevents
a State from discriminating against citizens of other States
in favor of its own."
Most cases argued under the privileges and immunities clause
involve challenges to state and local laws that discriminate
against those from out of state with regard to their ability
to earn a livelihood. This type of discrimination will be
allowed by the Supreme Court only if it substantially relates
to achieving a substantial state interest. For example, in
United Building & Construction Trades Council v. Mayor and
Council of Camden (1984) 465 U.S. 208, the federal Supreme
Court applied the privileges and immunities clause to a city's
ordinance requiring that at least 40% of the employees of
contractors and subcontractors working on city construction
projects be residents of the city. The court found, "the
pursuit of common calling is one of the most fundamental of
those privileges protected by the Clause. Many, if not most,
of our cases expounding the Privileges and Immunities Clause
have dealt with this basic and essential activity." (Id. at
223). In Hicklin v. Orbeck (1978) 437 U.S. 518, the court
invalidated an Alaskan law giving preference for employment on
oil and gas contracts to Alaska residents. The court said
reducing unemployment in the state was not a sufficient
justification for the law. The court also said the state of
Alaska had not shown nonresidents actually caused local
unemployment, and it was doubtful whether a state could
discriminate against nonresidents to solve an unemployment
problem whatever the substantial reason.
Subsequent cases, however, have allowed cities to detail
economic reasons that provide a substantial reason for
discriminating against nonresidents (United Building &
Construction Trades v. Camden (1984) 465 U.S. 208). This has
left the door open for city hiring preferences.
4)Prior to the enactment of the Policy, San Francisco required
contractors "to make a good faith effort ? to hire qualified
individuals who are residents of the City and County of San
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Francisco to comprise not less than 50% of each contractor's
total construction workforce, measured in labor work hours,
and to give special preference to minorities, women, and
economically disadvantaged individuals." However, a 2010
study by Chinese for Affirmative Action and Brightline Defense
Project found that, since 2003, the average local hire figures
on city-funded construction was less than 25% and actually
dipped below
20% for 2009.
Thus, on December 14, 2010, the San Francisco Board of
Supervisors passed the Policy, effective on March 25, 2011.
The Policy, among other things:
a) Applies to public work or improvement contracts with
contractors and subcontractors estimated to cost more than
$400,000 and constructed within 70 miles of the
jurisdictional boundary of the City and County of San
Francisco.
b) Requires an initial local hiring requirement with a
mandatory participation level of 20% of all project work
hours within each trade performed by local residents, with
no less than 10% to be performed by disadvantaged workers.
Subject to periodic review, the mandatory participation
level increases annually over seven years at increments of
5%, up to a mandatory participation level of 50%, with no
less than one-half to be performed by disadvantaged
workers.
c) Requires the "local" requirement to include San
Francisco residents and workers local to the area and
region where the work is located.
d) Requires, for city projects constructed within 70 miles
of the jurisdictional boundary of the City and County of
San Francisco, the percentage requirements to apply in
proportion to the city's actual cost after reimbursement
from non-city sources.
e) Authorizes the negotiation of reciprocity agreements
with other local jurisdictions that maintain local hiring
programs.
f) Exempts the following:
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i) Projects using federal or state funds if application
of the Policy would violate federal or state law, or
would be inconsistent with the terms or conditions of a
grant or contract with an agency of the United States or
the State of California;
ii) Project work hours performed by residents of states
other than California;
iii) Project labor agreements entered into by awarding
departments prior to the effective date of the Policy or
public work or improvement contracts advertised for bids
after the effective date of the Policy that are already
covered by existing project labor agreements, where the
terms of the existing agreement and the Policy are in
conflict; and,
iv) Special trades, as designated by the Office of
Economic and Workforce Development.
5)Support arguments: Supporters say the effectiveness of local
hiring policies have yet to be determined, and local
governments should not be able to impose a local hiring policy
that is outside of their geographical boundaries and that
financially penalizes employers.
Opposition arguments: Opposition argue AB 356 would turn back
the clock on community-labor-government partnerships and is
unclear on who would have to keep track of whether state funds
were used to fund a cost increase related to a local hiring
policy.
6)This bill was heard in the Business, Professions and Consumer
Protection Committee
on May 3, 2011, where it passed with a 5-0 vote.
REGISTERED SUPPORT / OPPOSITION :
Support
Associated Builders and Contractors of CA
County of San Mateo
Opposition
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A. Philip Randolph Institute, San Francisco Chapter
A. Philip Randolph Institute, Western Regional Chapters
Anders and Anders Foundation
Center on Policy Initiatives
Chinese for Affirmative Action
City and County of San Francisco
Coleman Advocates for Children and Youth
East Bay Alliance for a Sustainable Economy
Equal Justice Society
Filipino Community Center
Greenlining Institute
Kwan Wo Ironworks, Inc.
Los Angeles Alliance for a New Economy
Mission Hiring Hall
National Association for the Advancement of Colored People, San
Francisco Chapter
Osiris Coalition
Partnership for Working Families
POWER (People Organized to Win Employment Rights)
San Francisco Chinese Club
South of Market Community Action Network
Strategic Actions for a Just Economy
Urban Habitat
Young Community Developers, Inc.
Analysis Prepared by : Jennifer Klein Baldwin / L. GOV. /
(916) 319-3958