BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1890 (Dodd) - Discrimination: equal pay: state contracting ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 21, 2016 |Policy Vote: G.O. 8 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Mark McKenzie | | | | ----------------------------------------------------------------- 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 AB 1890 (Dodd) Page 1 of ? 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 AB 1890 (Dodd) Page 2 of ? 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 AB 1890 (Dodd) Page 3 of ? 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 AB 1890 (Dodd) Page 4 of ? 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. AB 1890 (Dodd) Page 5 of ? -- END --