BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 1890 (Dodd) - Discrimination:  equal pay:  state contracting
          
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          |Version: June 21, 2016          |Policy Vote: G.O. 8 - 2         |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: August 1, 2016    |Consultant: Mark McKenzie       |
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          This bill meets the criteria for referral to the Suspense File.



          Bill  
          Summary:  AB 1890 would require employers with 100 or more  
          employees and a state contract of $50,000 or more to submit a  
          nondiscrimination program, including specified aggregated  
          workforce data, and periodic compliance reports to the  
          Department of Fair Employment and Housing (DFEH).  The bill  
          would also authorize DFEH to require other state contractors to  
          comply with these provisions, and to require approval and  
          certification of nondiscrimination programs. 


          Fiscal  
          Impact:  
           DFEH administrative costs of approximately $350,000 annually  
            to collect and store specified workforce data on state  
            contractors, and to process additional Public Records Act  
            requests for that data.  (General Fund)

           Major DFEH General Fund cost pressures, to the extent the  







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            department exercises the authority to require approval and  
            certification of contractors' nondiscrimination programs.   
            DFEH would require substantial staff augmentations to support  
            those efforts.  There could be additional information  
            technology costs of approximately $1 million one-time and  
            $160,000 ongoing, if DFEH were to collect and sort data on  
            contractors' workers by job category, race/national origin,  
            gender, wages, and hours worked.  These cost pressures could  
            be substantially higher if DFEH further extended the  
            requirements of the bill to subcontractors and to smaller  
            businesses.  (see staff comments)


          Background:  Existing law, the Unruh Civil Rights Act, generally prohibits  
          discrimination on the basis of sex, race, color, religion,  
          ancestry, national origin, disability, medical condition,  
          marital status, or sexual orientation, and provides civil  
          remedies for violations of its provisions. Existing law also  
          prohibits discrimination in the provision of health care and  
          insurance benefits on the basis of numerous factors, including  
          sex, domestic partner status, or gender, gender identity, and  
          gender expression.  Existing law authorizes state agencies to  
          enter into contracts for the acquisition of goods or services  
          and establishes rules governing the awarding of contracts by  
          state agencies, including general requirements for competitive  
          bidding.  Businesses that wish to contract with the state must  
          comply with various nondiscrimination requirements.
          Existing law specifies that employers may be required to submit  
          a nondiscrimination program to DFEH for approval and  
          certification prior to becoming a contractor or subcontractor  
          with the state.  An employer may also be required to submit  
          periodic reports of compliance with that program.  DFEH does not  
          currently approve and certify contractor and subcontractor  
          nondiscrimination programs.


          In response to a Presidential Memorandum pertaining to pay  
          equity, the Office of Federal Contract Compliance Programs  
          (OFCCP) under the U.S. Department of Labor issued a Notice of  
          Proposed Rulemaking on August 6, 2014 that would require certain  
          federal contractors and subcontractors that have more than 100  
          employees to submit an annual "Equal Pay Report" on employee  
          compensation to the OFCCP.  The rulemaking is designed to  
          require affected entities to supplement an existing Employer  








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          Information Report with summary information on compensation paid  
          to employees, as contained in W-2 forms, by sex, race,  
          ethnicity, and specified job categories, as well as other  
          relevant data points such as hours worked, and the number of  
          employees.  The OFCCP intends to compile the data electronically  
          and use the information to target compliance enforcement  
          efforts.  The final proposal is currently open for public  
          comment until August 15, 2016.  It is unclear when a final rule  
          will be adopted.




          Proposed Law:  
            AB 1890 would enact the Equal Pay for Equal Work Act of 2016.   
          Specifically, this bill would:
           Require an employer with 100 or more employees that has a  
            state contract of $50,000 or more to submit a  
            nondiscrimination program to DFEH and periodic reports, no  
            more than annually, on compliance with that program, prior to  
            becoming a contractor or subcontractor with the state.
           Authorize DFEH to also require employers with fewer than 100  
            employees and a contract of less than $50,000 to submit a  
            nondiscrimination report and other requirements for larger  
            employers, as specified.
           Require DFEH to make any nondiscrimination programs and  
            reports available to the Commission on the Status of Women and  
            Girls.
           Authorize DFEH to require approval and certification of a  
            nondiscrimination program.
           Require DFEH to define "employee" for purposes of these  
            requirements.
           Specify that an employee in the construction industry covered  
            by a valid collective bargaining agreement that includes  
            specified provisions are excluded from the calculation of the  
            number of employees for purposes of the bill's requirements.
           Authorize an employer to submit a specified employee  
            compensation report subject to review and approval by a  
            federal compliance agency to DFEH in lieu of a  
            nondiscrimination program.
           Require a nondiscrimination program to include policies and  
            procedures that ensure equal employment opportunities for all  
            applicants and employees, a description of employment  
            selection procedures, and employee compensation data that  








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            includes:
               o      The total number of workers in a specific job  
                 category identified by worker race or national origin,  
                 and sex.
               o      The total wages reported on W-2 forms for all  
                 workers in a specific job category identified by worker  
                 race or national origin, and sex.
               o      The total annual hours worked for all workers in a  
                 specific job category identified by worker race or  
                 national origin, and sex, as specified.




          Related  
          Legislation:  This bill is similar to AB 1354 (Dodd), which was  
          vetoed by Governor Brown last year.  The veto message included  
          the following statement:
               Currently, the department requires all state contractors to  
               develop and implement a nondiscrimination program meeting  
               certain requirements and also certify that they have done  
               so, under penalty of perjury. Furthermore, the department  
               has existing authority to require a contractor to submit  
               this information prior to contracting with the state, if  
               noncompliance is suspected. In light of these factors, I do  
               not believe this bill is necessary at this time.




          Staff  
          Comments:  This bill would require specified employers that  
          contract with the state to prepare and submit to DFEH a  
          nondiscrimination program, including specified workforce data  
          that could be used to identify wage disparities by race,  
          ethnicity, and gender.  Insofar as the bill is permissive with  
          respect to DFEH authority to approve and certify  
          nondiscrimination programs, and there are no requirements for  
          DFEH to compile or analyze the aggregated worker data submitted  
          by employers, the bill would only impose minor direct costs onto  
          DFEH to receive nondiscrimination programs and self-reported  
          compliance efforts.  To the extent the bill authorizes DFEH to  
          require approval and certification of contractors'  
          nondiscrimination programs, however, the bill would create major  








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          cost pressures.  Staff notes DFEH currently has the authority to  
          require employers to submit nondiscrimination programs for  
          approval and certification prior to contracting with the state,  
          but the department has not exercised that authority to date. 
          AB 1890 contains a provision indicating that the Legislature  
          intends this bill to promote pay equity and nondiscrimination,  
          and to obtain better data on pay equity to more wholly address  
          the problem.  In order for the workforce data submitted by  
          employers to be used to meaningfully address pay equity issues,  
          DFEH would need to collect and compile the information in a  
          sortable database that could be used in nondiscrimination  
          enforcement efforts or to better inform policymakers in order to  
          affect change.  DFEH indicates that, although the bill does not  
          explicitly require collection of aggregated data, if it were to  
          compile electronic contractor and subcontractor workforce data,  
          it would need a new software system with sortable capabilities  
          at a one-time cost of approximately $1 million, and ongoing  
          costs of approximately $160,000.  Absent such a system, the  
          workforce information would likely be simply collected by DFEH  
          and filed in hard copy.


          As an option to submitting a nondiscrimination program, the bill  
          authorizes contractors to submit an "EEO-1" report subject to  
          review by the U.S. Equal Employment Opportunity Commission.  As  
          outlined in the background above, this report would include  
          aggregated workforce data that could be used by the federal  
          government target compliance enforcement efforts against  
          employers who contract with the federal government.  The federal  
          contractor requirements are not yet finalized.


          The bill could also have secondary impacts that may potentially  
          increase in state contracting costs, to the extent contractors  
          and subcontractors build the costs to prepare a  
          nondiscrimination program and compile aggregated workforce data  
          into bid prices.  Contracting costs could also be impacted by a  
          reduction in eligible contractors or subcontractors, to the  
          extent some businesses fail to comply with the bill's  
          requirements and are deemed ineligible to contract with the  
          state.  Reduced competition for state contracts could lead to  
          higher bid prices.










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