BILL ANALYSIS                                                                                                                                                                                                    



                                                                     SB 376  


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          Date of Hearing:  August 26, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 376  
          (Lara) - As Amended August 18, 2015


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill requires bidders on University of California (UC)  
          contracts for specified types of personal services to certify  
          that their employees' total compensation does not undercut the  








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          compensation of UC employees doing comparable work.  
          Specifically, this bill:


          1)Applies the cost standard described above to the following  
            types of contracts: building maintenance, cleaning or  
            custodial services, call centers services, clerical services,  
            dining and food service, gardening, grounds keeping, and plant  
            nursery services, laborer services, mailroom services,  
            parking, shuttle bus, truck driving or transportation  
            services, security services, storekeeper services, patient  
            care technical employee services, patient billing services,  
            medical transcribing services, patient escort services, or  
            nursing assistance services.


          2)Requires a bidder to certify that its total employee  
            compensation package, including fringe benefits and valued on  
            a per-employee basis, does not materially undercut UC's total  
            compensation for employees doing comparable work at the  
            relevant campus, medical center, or laboratory.


          3)Requires UC to include in its request for proposals, a  
            calculation of the average per-employee value of total  
            compensation for UC employees relevant to a particular  
            contract, and to incorporate all known cost escalators for  
            projecting the rate of growth of average per-employee  
            compensation.


          4)Stipulates that the current requirement that UC service  
            contracts-other than for personal or professional  
            services-involving expenditures of $100,000 or more annually  
            be awarded to the lowest responsible bidder, includes the  
            renewal or extension of such contracts.


          FISCAL EFFECT:








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          UC estimates that, of its total annual spending on service  
          contracts ($1.2 billion), about $120 million (10%) are for the  
          specific types of services that would be subject to the  
          requirements of this bill. Assuming a 30% increase in costs  
          related to providing parity in benefits, total annual costs  
          would be $36 million. The additional costs to provide wage  
          parity, assuming a 10% to 20% cost impact, would be $12 million  
          to $24 million. This impact should diminish over time due to  
          implementation of UC's Fair Wage/Fair Work plan (See Comment  
          #2), which will be applied to new contracts and as existing  
          contracts are renewed/extended. These costs will come from a  
          variety of UC fund sources, including the State General Fund,  
          federal funds, auxiliary funds, and enterprise funds, such as  
          from the medical centers.





          COMMENTS:


          1)Purpose. According to the author, this bill "seeks to address  
            the growing challenge to California of the use of contingent  
            workers to replace employees, and the consequential effect it  
            has on wages and worker protections." The author further  
            states that "these arrangements are bad for workers, who  
            receive lower wages and less workplace protections, bad for  
            taxpayers as government shoulders the burden of providing  
            benefits and support to these employees, and bad for  
            conscientious employers who are placed at a competitive  
            disadvantage in the market."

            This bill is supported by the American Federation of State,  
            County, and Municipal Employees (AFSCME), and by the  
            California Labor Federation, which argues that UC continues to  
            contribute to the problem of regularly relying on "a  








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            subcontracted worker model, risking the jobs and putting  
            downward pressure on wages of direct hire employees."

          2)Opposition. In July UC announced its Fair Wage/Fair Work plan,  
            which will establish the minimum wage for contract workers at  
            $13 per hour starting October 2015, increasing to $15 per hour  
            as of October 1, 2017. This plan will also involve a  
            monitoring and compliance program to ensure contractors are  
            complying with UC policies and all federal, state, and local  
            laws. Finally, the program will include annual compensation  
            audits of all contracts and spot audits of selected contracts.  
            UC contends that this plan "substantially addresses the  
            concerns that prompted the introduction of SB 376, in a way  
            that is financially feasible to the university."

            UC argues that, in addition to increasing costs, the bill will  
            create administrative burdens, in part by requiring an  
            analysis to determine per-employee compensation for every type  
            of contract and factoring in all known cost escalators to  
            project future per-employee costs. UC also asserts the bill  
            will hinder its ability to make its contracting more efficient  
            by using systemwide rather than site-specific contracts.

            Finally, UC notes that some of its collective bargaining  
            agreements contain provisions stating that the UC will not  
            contract out for services solely on the basis that savings  
            will result from lower contractor pay rates and benefits for  
            services customarily performed by bargaining unit employees or  
            that result in layoff of bargaining unit employees. These  
            agreements specify the instances in which UC may contract out  
            for services including, when there is a need for special  
            expertise or experience, for short-term or temporary staffing  
            needs, for special services and equipment that are not  
            available internally, or for services at a leased facility  
            where the services are provided by the owner.

          Analysis Prepared by:Chuck Nicol / APPR. / (916)  
          319-2081









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