BILL ANALYSIS Ó AB 2570 Page 1 ASSEMBLY THIRD READING AB 2570 (Hill) As Introduced February 24, 2012 Majority vote BUSINESS & PROFESSIONS 6-3 APPROPRIATIONS 11-5 ----------------------------------------------------------------- |Ayes:|Hayashi, Allen, Butler, |Ayes:|Fuentes, Blumenfield, | | |Eng, Hill, Ma | |Bradford, Campos, Davis, | | | | |Gatto, Hall, Hill, Lara, | | | | |Mitchell, Solorio | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Bill Berryhill, Hagman, |Nays:|Harkey, Donnelly, | | |Smyth | |Nielsen, Norby, Wagner | | | | | | ----------------------------------------------------------------- SUMMARY : Prohibits licensees of any board, bureau or program under the Department of Consumer Affairs (DCA) from including any "regulatory gag clause" in civil settlement agreements. Specifically, this bill : 1)Provides that no licensee who is regulated by a board, bureau, or program within DCA, nor an entity or person acting as an authorized agent of a licensee, shall include or permit to be included a provision in an agreement to settle a civil dispute, whether the agreement is made before or after the commencement of a civil action, that prohibits the other party in that dispute from contacting, filing a complaint with, or cooperating with the DCA, board, bureau, or program or that requires the other party to withdraw a complaint from the DCA, board, bureau, or program. 2)Provides that a provision of the nature as described above is void as against public policy, and any licensee who includes or permits to be included a provision of that nature in a settlement agreement is subject to disciplinary action by the board, bureau, or program. 3)Provides that any board, bureau, or program within the DCA that takes disciplinary action against a licensee or licensees based on a complaint or report that has also been the subject AB 2570 Page 2 of a civil action and that has been settled for monetary damages providing for full and final satisfaction of the parties may not require its licensee or licensees to pay any additional sums to the benefit of any plaintiff in the civil action. 4)Specifies that the term "board" means the board in which the administration of the above provisions are vested, and unless otherwise expressly provided, shall include bureau, commission, committee, department, division, examining committee, program, and agency, and specifies that "license" means license, certificate, registration, or other means to engage in a business or profession. FISCAL EFFECT : According to Assembly Appropriations Committee, minor and absorbable enforcement costs for the various DCA boards and bureaus to enforce the provisions of this legislation. COMMENTS : According to the author, "Regulatory gag clauses inhibit the ability of regulatory agencies to comprehensively and conscientiously perform their oversight function. The regulatory boards of the DCA cannot adequately 'protect consumers from unscrupulous and unqualified individuals' (quote from the DCA website) if they are unable to communicate with individuals filing complaints or who have been victimized. Furthermore, pressuring aggrieved consumers and injured parties into agreeing to such clauses enables potentially dangerous licensees to continue operating. "Settlement agreements are an important and valuable mechanism for parties to willingly resolve differences. However, the inclusion of gag clauses into settlement agreements allows a perilous veil of secrecy to envelop licensees. Denying regulators the ability to exercise their disciplinary discretion not only allows the conduct to continue, but potentially endangers future consumers." A regulatory gag clause requires a plaintiff to agree, as a condition of a malpractice or misconduct settlement with the licensee, to the inclusion of a provision prohibiting the plaintiff from contacting or cooperating with the defendant's regulator (or requiring the plaintiff to withdraw a pending complaint before that regulator). AB 2570 Page 3 A regulatory gag clause is not to be confused with secret settlements, which are agreements that make certain types of information in a settlement agreement confidential and preclude that information from being introduced as evidence in a court action. Prohibiting regulatory gag clauses does not prohibit, or affect, the ability of parties to a civil action to agree to a secret settlement, regardless of whether or not either party is required to hold a professional license issued by DCA. Prohibiting regulatory gag clauses merely prohibits professionals licensed by DCA from hiding activities related to their license from DCA. Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916) 319-3301 FN: 0003670