BILL ANALYSIS Ó SB 548 Page A Date of Hearing: July 8, 2015 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair SB 548 (De León) - As Amended June 1, 2015 SENATE VOTE: 25-12 SUBJECT: Child care: family child care providers: bargaining representative. SUMMARY: Authorizes family child care providers to form, join and participate in "provider organizations" for purposes of negotiating with state agencies on specified matters, among other provisions. Specifically, this bill: 1)Defines "family child care provider" as a child care provider that participates in a state-funded child care program and is either of the following: a) A family day care home provider who is licensed. b) An individual who meets both of the following: i) Provides child care in his or her own home or in the home of the child receiving care. SB 548 Page B ii) Is exempt from licensing requirements. 2)Gives family child care providers the right to form, join, and participate in provider organizations of their own choosing for the purpose of being represented. 3)Extends the state action antitrust exemption to the activities of the family child care providers and their representatives. This bill also states, however, that the status of family child care providers as independent business owners does not change, nor does this bill classify family child care providers as public employees. 4)Creates a right for family child care providers to form provider organizations. Child care providers would retain the right to join or not join such an organization. 5)Requires that, within ten days of receipt of a request from a provider organization, the State Department of Social Services (DSS) must make available to that provider organization information regarding licensed family child care providers, including each provider's contact information. 6)Requires that, within 30 days of receipt of a request from a provider organization, the California Department of Education (CDE), with the assistance of the relevant organization, must collect information regarding family child care providers, including each provider's contact information. The provider organization must bear the reasonable costs of collecting the information. SB 548 Page C 7)Requires that, upon written request of a family child care provider, the CDE and the DSS must remove the family child care provider's home address and telephone number from the above-described lists. 8)Provides that a unit of provider organizations may choose to designate the provider organization that shall be the exclusive representative for negotiations with the state. In order for a unit of provider organizations to be considered appropriate, the unit must be statewide and include all family child care providers. 9)Provides that the Public Employment Relations Board (PERB) must conduct an election to certify the provider organization as the exclusive bargaining representative. PERB is also required to receive and act upon challenges, petitions for unit certification, and other representation issues. A provider organization petitioning for an election to be certified is required to include in its petition proof of a 30 percent showing of interest designating the provider organization to act as the exclusive representative. The provider organization must pay the reasonable costs of verifying this showing of interest. 10) Empowers PERB to contract with a neutral third party to conduct all necessary elections and other representation requests. 11) Provides that there shall be no more than one bargaining unit at any time. A certified provider organization may file a request with the PERB for an election to add providers to an existing unit. 12) Provides that the child care organization would SB 548 Page D represent all child care providers in negotiations with the Governor and state agencies on issues that fall within the child care provider organization's scope of representation. 13) Provide that issues within the scope of representation include: a) The administration of laws and regulations governing licensing for providers. b) Joint labor-management committees. c) Contract grievance arbitration. d) Expanded access to professional development and training opportunities for providers. e) Benefits for providers. f) Payment procedures for child care subsidy programs. g) Reimbursement rates for providers participating in a child care subsidy program including, but not limited to, rate add-ons for providers who complete extra training. h) Expanded access to and funding for food and nutrition programs. i) The deduction of membership dues and fair share fees. SB 548 Page E j) Expanded access to state-funded child care program to families in need of subsidies. aa) Any changes to current practice other than those listed in above that would improve recruitment and retention of child care providers, quality of child care programs, additional education of qualified child care providers, and the promotion the health and safety of providers and the children in their care. 14) Requires that the Governor, through the Department of Personnel Administration, in consultation with the Superintendent of Public Instruction (SPI), other state agencies that administer state-funded child care programs, and their contractors, must meet and confer in good faith regarding all matters within the scope of representation with representatives of a certified provider organization. 15) Provides that if an agreement is reached between the Governor, through the Department of Personnel Administration, and the certified provider organization, they jointly shall prepare a written memorandum of understanding. 16) Provides the child care provider organization with the right to enter an agreement with the state for the deduction of membership dues and fair share fees from child care subsidy payments made to providers. 17) Prohibits the child care provider organization from directing or calling a strike. The bill would also allow for disputes to be submitted to the California State Mediation and Conciliation Service for mediation. SB 548 Page F 18) Requires, if a family child care provider organization is certified, the state and the certified provider organization to establish a training partnership consisting of a Joint Partnership on Child Care Training, Education, and Quality Improvement. The membership of the Joint Partnership is to include representatives of the certified provider organization and designees of the Governor. 19) Requires the partnership to make recommendations regarding, and oversee, the expenditures. Authorizes the partnership to consult with other early education and care advocates, the SPI or designees, representatives of community colleges, higher education institutions, resource and referral networks, unions that operate training programs, apprenticeship programs, and early education and care employers. Requires the certified provider organization to carry out the recommendations of the partnership. 20) Requires the partnership to meet to identify gaps in the training available to family child care providers and barriers that prevent family child care providers from gaining greater skills and accessing postsecondary education, and issue recommendations on an annual basis to improve the quality of care offered by licensed and license-exempt family child care providers. 21) Requires the partnership to play a coordinating role in ensuring that the training offered to providers: a) Meets the State's needs for the child care workforce. b) Satisfies the health, safety and educational standards SB 548 Page G prescribed by the State. c) Aligns with the State's quality rating systems. d) Identifies and works to eliminate barriers to providers accessing training. 22) Authorizes the partnership's recommendations to include, but not be limited to: a) Ways to access federal and private funding for training to expand capacity to existing State training resources, such as general education classes and English language learner classes. b) Ways to expand and improve provider training and skills on subjects including but not limited to child literacy, children with special needs, and children's social and emotional development. c) Ways to support providers who seek to obtain training or higher education credentials in child development or a related field. d) Ways to work with existing training providers and educational institutions, including but not limited to resource and referral networks, community colleges, and apprenticeship programs. e) Ways to make training and education, which may include unit-bearing courses and training, available to child care SB 548 Page H workers and other workers employed by child care centers and schools. 23) States it is the intent of the Legislature to allocate $1 million in the 2015 Budget to carry out the initial recommendations of the partnership, and that in subsequent years, the recommendations of the partnership be funded by contributions agreed to for that purpose in the memorandum of understanding between the provider organization and the Governor. 24) Requires the Governor or designee to conduct a study of best practices for engaging families in their children's early care and education in family child care settings, and of federal and other funding that could support parental engagement efforts without reducing the availability and affordability of child care. 25) Requires the Governor or designee to report to the Legislature and Department of Finance, by January 1, 2017, with the findings and a proposed framework of priorities in which to invest. 26) Requires the Governor or designee, in conducting the study, to consult with stakeholders, including the DSS, First 5 California, and organizations that represent parents with young children, particularly lower income and non-English speaking families, to consider how best to engage and support those families in a culturally competent manner. 27) States it is the intent of the Legislature to create an unspecified number of additional slots in alternative payment programs for children living in extreme poverty, defined as 50% of the federal poverty level, if funding is SB 548 Page I allocated in the Budget. EXISTING LAW: 1 Authorizes the Superintendent of Public Instruction to develop standards for quality child care programs and to enter into contracts with child care centers and family child care homes for the provision of child care and development services. Family child care is provided by someone who resides in the home where care is provided. 2) Establishes a reimbursement system for subsidized child care in which: a) Parents can choose a licensed center or family child care home, and the state reimburses the provider the same rate that the provider charges a family who is not subsidized, up to a ceiling established by the state. b) Parents can choose a provider who is not required to be licensed (usually a relative, neighbor or friend), and the state reimburses that provider a rate set within each county based on the mean cost of licensed care in the county. c) Parents can enroll their children in a center or network of family child care homes that has a direct contract with the State Department of Education. Child care in these programs is reimbursed at a daily rate established in the contract. For most contractors, the daily rate is the Standard Reimbursement Rate, set in statute and adjusted by the Legislature to reflect changes in the cost of living. d) The daily rate for direct contractors is adjusted by a statutory formula for infants, school-aged children, children with disabilities, children at-risk of abuse or neglect, children who have limited English proficiency and SB 548 Page J children who spend less than six hours per day in care or more than eight-and-one-half hours per day in care. FISCAL EFFECT: According to the Senate Appropriations Committee, this bill would impose major costs to the state attributed to various state agencies being involved in the collective bargaining process, potential increases in provider wages and benefits derived from negotiations, potential additional child care slots, the establishment of a training partnership committee, the intent to provide $1 million to implement initial committee recommendations, and a best practices study for parent engagement. COMMENTS: This bill proposes to enact the Raising Child Care Quality and Accessibility Act. The bill states that it is intended: "to promote quality, access, and stability in the child care system by increasing the number of child care slots available to California's neediest children; by authorizing an appropriate unit of family child care providers to choose a provider organization to act as their exclusive representative for purposes of the meet and confer process set forth in this article and the administration and enforcement of any resulting memorandum of understanding; by establishing a training partnership between the state and that exclusive representative; and by conducting a study of best practices for parent engagement in home-based early care and education. It is also the purpose of this article to promote full communication between family child care providers and the state by permitting a provider organization certified as the representative of family child care providers to meet and confer with the state regarding the state's child care system." Brief Background on Child Care in California SB 548 Page K The state's subsidized child care system serves around 360,000 subsidized children. Care is provided to children in families currently or previously receiving CalWORKs, as well as to other working families subject to available resources. The state spends a total of approximately $2.2 billion on child care, which is made up of a mix of state funds and federal funds from the Temporary Assistance for Needy Families (TANF) and the Child Care and Development block grants. An estimated 300,000 eligible children are unserved because of a shortage of resources. The state's child care system has a dual purpose: caring for children while their parents work, and enhancing their developmental potential as they prepare for and attend school. Two state departments administer child care programs: the Department of Education (responsible for more than 2/3 of the funds) and the Department of Social Services (responsible for administering the first stage of child care for CalWORKs recipients). Families are eligible for subsidized care when their incomes are lower than 70% of the State Median Income (SMI). Above 50% of SMI, a graduated schedule of family fees applies, up to 8% of gross income. Slightly less than half of the total cost of subsidized child care is spent for current or former recipients of CalWORKs. Delivery of care for this population is provided through a 3-stage process. In Stage 1, CalWORKs applicants and recipients are provided care early in their welfare-to-work activities before their care situation becomes stabilized. In Stage 2, current and former recipients are guaranteed care while they continue to participate and for two years after they leave aid. Stage 3 has been provided since CalWORKs began, covering SB 548 Page L families after Stage 2 until they no longer need care or exceed the general subsidized care income eligibility limits. Child care to low-income families, whether in CalWORKs or not, is provided by a variety of entities: child care centers, which contract directly with the Department of Education (SDE) and must meet established educational and health and safety standards enforced by SDE; licensed family day care, which must meet health and safety standards enforced by the Department of Social Services; specialized care such as migrant care; and informal license-exempt care provided by relatives or for a single child or children from a single family. Alternative payment programs administer voucher payments, and resource and referral agencies provide education, training and support and help families find appropriate care. Providers are exempt from the licensing requirement if they provide care for the children of only one family in addition to his or her own children, or if they participate in a cooperative arrangement with other parents when no payment is involved and specified conditions are met. SDE estimates that there are approximately 48,000 license-exempt child care providers in the state (although this number may have decreased with recent budget cuts). A recent study<1> by the U.C. Berkeley Labor Center found that early care and education (ECE) is an important industry in California, serving more than 850,000 California children and their families and bringing in gross receipts of at least $5.6 billion annually. The study reported that the industry not only --------------------------- <1> MacGilvray, Jennifer and Laurel Lucia. "Economic Impacts in Early Care and Education in California." U.C. Berkeley Center for Labor Research and Education (August 2011). SB 548 Page M benefits the children who receive care, but also strengthens the California economy as a whole by promoting and facilitating parents' ability to participate in the paid workforce, something that is especially important during this time in which California is struggling with high unemployment and a weak economic recovery. In particular, the study noted that analyses of the costs and benefits of ECE have found impressive returns on investments to the public, ranging from $2.69 to $7.16 per dollar invested. Antitrust Issues and the "State Action" Doctrine This bill seeks to allow family child care providers to engage in specified collective activity under the "state action doctrine" to federal and state antitrust laws. Therefore, as a preliminary matter it is necessary to discuss some general principals of antitrust law and the state action doctrine: Antitrust Issues Under Federal Law The primary purpose of federal and state statutory antitrust law is to prevent businesses from creating unjust monopolies or competing unfairly in the marketplace. However, at common law throughout the nineteenth century, most courts regarded labor unions as unlawful conspiracies in restraint of trade, punishable civilly or criminally. In 1890, Congress passed the Sherman Anti-Trust Act, the basic federal antitrust statute, which declared illegal "every contract, combination?or conspiracy in restraint of trade." In the years following passage of the Sherman Act, the courts proceeded to hold unions liable for antitrust violations in more instances than businesses, which were the primary objects of concern under the Act. SB 548 Page N Application of the federal antitrust laws to organized labor culminated in the Supreme Court decision in Loewe v. Lawlor (1908) 208 U.S. 274, the famous "Danbury Hatters" case, in which the Court upheld the applicability of the Sherman Act to unions and union activities. Resentment generated by the "Danbury Hatters" case placed substantial pressure on Congress for a labor exemption to the Sherman Act, and in 1914 the Clayton Act was passed. The labor exemption was further articulated with the passage of the Norris-LaGuardia Act in 1932. Both of these provisions declare that labor unions are not combinations or conspiracies in restraint of trade, and specifically exempt certain union activities such as secondary picketing and group boycotts from the application of federal antitrust laws. Antitrust Issues Under State Law California's general antitrust law, known as the Cartwright Act, generally prohibits combinations of two or more persons' capital, skill, or acts to restrict trade or commerce, reduce the production of merchandise, increase the price of a commodity, prevent competition, or control or fix at a standard or figure any commodity. (California Business and Professions Code Section 16600, et seq.) Like its federal counterpart, the Cartwright Act contains a labor exemption. This exemption is found in Business and Professions Code Section 16703, which provides: "Within the meaning of this chapter, labor, whether skilled or unskilled, is not a commodity." Like its federal Clayton Act counterpart, Section 16703 was intended to insulate from antitrust liability concerted activities by workers seeking to improve their working SB 548 Page O terms and conditions. Interplay Between Federal and State Regulation: The "State Action" Doctrine The "state action" doctrine recognizes that the federal government did not intend to supersede the authority of the states through antitrust regulation. This doctrine was first articulated by the Supreme Court in 1943 in the case of Parker v. Brown, 317 U.S. 341, in which the Court declared that the Sherman Act was not intended to apply to the activities of the States. Under this doctrine, a state acting within its own domain may structure its economic market as it sees fit. The state may allow completely unfettered competition, or substitute a competitive market structure with regulation. The state action doctrine provides that a private party is immune from federal antitrust law if it can show that the state has displaced competition via regulation. As articulated in Parker v. Brown, a two-part test is utilized to show requisite state action. First, the conduct is exempt if it is undertaken pursuant to a "clearly articulated" state law that displaces competition with a regulatory scheme. Second, the conduct is exempt if it is "actively supervised" by the state. This latter requirement is generally seen as ensuring that the private parties are acting to fulfill the state's objectives, rather than for purely self-motivated purposes. Similar Efforts in Other States Establishing collective bargaining rights for the child care workforce is not entirely without precedent. Nationally, a small percentage of child care centers and Head Start programs have been unionized for decades. What is relatively new is the SB 548 Page P effort to begin organizing home-based child care providers. A recent report by the National Women's Law Center<2> discussed recent developments in other states to authorize home-based child care providers to join unions and negotiate with the state for better compensation and working conditions. The report noted that home-based child care providers are not in a traditional employer- employee relationship that permits them to unionize. Most are independent contractors and need special legal authority to organize into unions that can bargain with the state over rates, benefits, and similar matters. According to the report, 14 states have authorized child care providers to organize and negotiate with the state. These states include Illinois, Washington, Oregon, Iowa, New Jersey, Michigan, Wisconsin, New York, Pennsylvania, Kansas, Maryland, Ohio, Maine and New Mexico. The legal authority needed for child care providers to unionize and negotiate with the state generally has been derived from an executive order from the governor, state legislation, or both. The executive order or legislation granting legal authority generally defines the bargaining unit (which type of providers may be organized and how they are grouped together for representation and bargaining); specifies the process for electing a representative, if not covered by existing state law; identifies the issues the union may bargain over; and defines the strength of the bargaining mandate and the enforceability of any negotiated agreement. Agreements often create institutional arrangements to ensure that providers have some voice in policy and regulatory changes that affect their interests. --------------------------- <2> Blank, Helen, Nancy Duff Campbell and Joan Entmacher. "Getting Organized: Unionizing Home-Based Child Care Providers (2010 Update)." National Women's Law Center (June 2010). SB 548 Page Q OTHER KEY PROVISIONS OF THE BILL In addition to the provisions discussed above related to provider organizations and collective bargaining, this bill also contains provisions related to training, best practices, and additional child care slots. Joint Partnership on Child Care Training, Education and Quality Improvement According to the author, existing training opportunities are limited and unavailable or inaccessible to early education and care providers in many areas of the state. Therefore, this bill requires a certified child care provider organization and the state to establish a training partnership consisting of a Joint Partnership on Child Care Training, Education, and Quality Improvement. The membership of the Joint Partnership is to include representatives of the certified provider organization and designees of the Governor. Among other things, the bill requires the partnership to meet to identify gaps in the training available to family child care providers and barriers that prevent family child care providers SB 548 Page R from gaining greater skills and accessing postsecondary education, and issue recommendations on an annual basis to improve the quality of care offered by licensed and license-exempt family child care providers. Best Practices for Parent Engagement This bill requires the Governor or designee to conduct a study of best practices for engaging families in their children's early care and education in family child care settings, and of federal and other funding that could support parental engagement efforts without reducing the availability and affordability of child care. The bill requires the Governor or designee to report to the Legislature and Department of Finance, by January 1, 2017, with the findings and a proposed framework of priorities in which to invest. In addition, the bill requires the Governor or designee, in conducting the study, to consult with stakeholders, including the DSS, First 5 California, and organizations that represent parents with young children, particularly lower income and non-English speaking families, to consider how best to engage and support those families in a culturally competent manner. According to the sponsors, parent engagement is a crucial part of children's success in early care, in school and later in life. Family child care providers' role in the state's child care program gives them unique insight into how quality, access, and stability could be improved for children and families. Many parents choose home-based providers due to shared values, language, and cultural background, close personal relationships, and provider flexibility with erratic work schedules. Under this bill, the state will sponsor a study of best practices for culturally competent parent engagement in home-based early care and education to determine how to most effectively ensure that parents are involved with their children's development and are better able to provide learning and other developmental SB 548 Page S opportunities for their children at home. Additional Child Care Slots This bill states legislative intent to create an unspecified number of additional slots in alternative payment programs for children living in extreme poverty, defined as 50% of the federal poverty level, if funding is allocated in the budget. The recently-enacted budget contained a substantial increase in funding and slots for child care. As described by the Legislative Analyst Office (LAO): "[T]he budget funds almost 23,000 (7 percent) more preschool and child care slots in 2015-16 compared to 2014-15. This includes about 17,400 (9 percent) additional slots in non-CalWORKs programs and 5,600 (4 percent) additional slots in the CalWORKs programs. Of the increase in slots for non-CalWORKs programs, about 7,500 are full-day preschool slots and 2,900 are part-day preschool slots. (These reflect annualized slots, as the budget funds additional slots for the full- and part-day programs starting at different times.) The budget also funds 6,800 additional Alternative Payment Program slots. For the CalWORKs programs, the 4 percent increase in caseload primarily is due to more families projected to participate in welfare-to-work activities and, as a result, use Stage 1 child care. In light of this budget action, the author has agreed to eliminate this language from the bill in the Assembly Appropriations Committee. ARUMENTS IN SUPPORT SB 548 Page T According to the author, "The current subsidized child care system encompasses more than 120 different agencies contracting with the state as middlemen, who in turn administer access to the system for subsidized families and reimburse providers who care for children whose families receive subsidies. Low income children have uneven access to quality child care. Given low reimbursement rates and a fragmented system, there is also extremely high turnover among providers. One of the primary work-related costs that providers struggle to afford is higher education and training to increase their knowledge of child development and stay current on the latest theory and practice of early education and care." The sponsors state that our current system of child care is fragmented, standards vary greatly, and it is plagued by high turnover among providers, as approximately 40% of providers are leaving the profession each year. In addition, the sponsors note that income inequality is at the forefront of the nation and our state. They state that, according to data from the U.S. Census Bureau, 47% of California's poor children live in single-mother families and that the majority of California's single-mother households earned less than 200% of the poverty threshold. Noting these two factors, the sponsors argue that California must implement policies that support families in achieving economic stability and ensure they can access a stable, affordable, quality child care system so that they can find work and stay employed. The sponsors believe that this bill will help achieve this by creating more child care slots and allowing childcare providers to organize, creating a more stable workforce and allowing family child care providers to join together on matters that affect their profession. ARGUMENTS IN OPPOSITION SB 548 Page U The National Right to Work Committee opposes this bill, arguing that it would force childcare providers to join a union, depriving childcare providers of the right to negotiate workplace conditions for themselves. The National Right to Work Committee argues that allowing childcare workers to organize will increase state costs and hurt taxpayers, childcare providers, and the State of California. PRIOR AND RELATED LEGISLATION AB 641 (Rendon) of 2013, among other things, authorized family child care providers to form, join, participate in, and to seek the certification of, a provider organization to act as their exclusive representative on matters related to child care subsidy programs. AB 641 was held on the Senate Floor. This bill is similar, but not identical to AB 2573 (Furutani) of 2012. AB 2573 was referred to, but never heard, in the Assembly Committee on Labor and Employment. This bill is also similar to AB 101 (John A. Pérez) of 2011. AB 101 was vetoed by Governor Brown, who stated the following in his veto message: "Maintaining the quality and affordability of childcare is a very important goal. So too is making sure that working conditions are decent and fair for those who take care of our children. Balancing these objectives, however, as this bill attempts to do, is not easy or free from dispute. Today California, like the nation itself, is facing huge budget challenges. Given that reality, I am reluctant to SB 548 Page V embark on a program of this magnitude and potential cost." This bill is also similar, but not identical to SB 867 (Cedillo) of 2008. SB 867 was vetoed by Governor Schwarzenegger, who, in his veto message stated, "Given California's significant budget challenge, I cannot consider bills that would add significant fiscal pressures to the state's structural budget deficit." Other similar prior legislation includes AB 1164 (De León) of 2007 (which was vetoed by Governor Schwarzenegger), SB 697 (Kuehl) of 2006 (which was vetoed by Governor Schwarzenegger), SB 1600 (Kuehl) of 2006 (which was held under submission by the Senate Committee on Appropriations), and SB 1897 (Burton) of 2004 (which was vetoed by Governor Schwarzenegger). REGISTERED SUPPORT / OPPOSITION: Support 9to5-CA Chapter American Association of University Women American Federation of State, County and Municipal Employees (co-sponsor) BANANAS SB 548 Page W Berkeley City Council Black Women for Wellness California Alliance for Retired Americans California Labor Federation, AFL-CIO California National Organization for Women California Women Lawyers Child Care Law Center Children Now Children's Defense Fund - CA Community Coalition Community Education Partnerships Congressman Ted Lieu Consumer Attorneys of California SB 548 Page X Councilmember Magdalena Carrasco, City of San Jose Courage Campaign, CA Educators Excellence Equal Rights Advocates InnerCity Struggle Monterey County Board of Supervisors National Council of Jewish Women California Numerous Individuals Our Family Coalition Parent Institute for Quality Education Service Employees International Union - CA (sponsor) Special Needs Network St. Paul Lutheran Church SB 548 Page Y UAW Local 2865 UAW Local 5810 UDW/AFSCME Local 3930 Western Center on Law & Poverty Western Regional Advocacy Project Young Invincibles Opposition National Right to Work Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091 SB 548 Page Z