BILL ANALYSIS                                                                                                                                                                                                    

                             Senator Tony Mendoza, Chair
                                2015 - 2016  Regular 

          Bill No:               SB 599       Hearing Date:    April 8,  
          |Author:    |Mendoza                                              |
          |Version:   |February 27, 2015                                    |
          |Urgency:   |No                     |Fiscal:    |Yes              |
          |Consultant:|Deanna Ping                                          |
          |           |                                                     |
               Subject:  Employment:  public transit service contracts

          KEY ISSUE
          Should the Legislature require a ten percent bid preference for  
          bidders who agree to retain the employees of the prior  
          contractor of subcontractor on all on public transit contracts  
          awarded by the State of California?

           Existing law  requires that when a public entity puts out to bid  
          a public service contract on public transit services, the bidder  
          must state as part of the bid for a service contract whether or  
          not he or she will retain the employees of the prior contractor  
          or subcontractor for a period of not less than 90 days.  (Labor  
          Code  1072)

           Existing law  also requires that an awarding authority letting a  
          service contract out to bid for public transit services shall  
          give a 10 percent preference to any bidder who agrees to retain  
          the employees of the prior contractor or subcontractor.  (Labor  
          Code  1072)

           Existing law  requires successor contractor or subcontractor for  


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          public transit services who agrees to retain employees must  
          retain employees who have been employed by the prior contractor  
          or subcontractors, except for reasonable and substantiated  
          cause, which includes the particular employee's performance or  
          conduct while working under the prior contract, as well as or  
          the employee's failure of any controlled substances and alcohol  
          test.  (Labor Code  1072)

           Existing law  requires successor contractor or subcontractor for  
          public transit services shall make a written offer of employment  
          to each employee to be rehired. That offer shall state the time  
          within which the employee must accept that offer, which may not  
          be less than 10 days, and does not need to be at the same level  
          of wages or benefits as provided by the previous contractor or  
          subcontractor.  (Labor Code  1072)
           Existing law  provides that if the successor contractor or  
          subcontractor for public transit services determines that fewer  
          employees are required than were required under the prior  
          contract or subcontract, the successor contractor must retain  
          qualified employees by seniority within the job classification.   
          The successor contractor is permitted to consider licensing  
          requirements when judging seniority.  (Labor Code  1072)

           Existing law  also provides that an employee who was not offered  
          employment or who has been discharged in violation of this  
          chapter, or his or her agent, may bring an action against the  
          successor contractor or subcontractor in any superior court  
          having jurisdiction over the successor contractor or  
          subcontractor. Upon finding a violation of this, the court must  
          order reinstatement to employment with the successor contractor  
          or subcontractor and award backpay, including the value of  
          benefits, for each day of violation, as well as reasonable  
          attorney fees.  
          (Labor Code  1073)

           Existing law  also provides that, upon its own motion or upon the  
          request of any member of the public, an awarding authority may  
          terminate any service contract if both of the following occur: 

             i.   The contractor or subcontractor has substantially  
               breached the contract; and 

             ii.   The awarding authority holds a public hearing within 30  
               days of the receipt of the


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                request or its announcement of its intention to terminate.

          A contractor or subcontractor terminated as described above must  
          be ineligible to bid on or be awarded a service contract or  
          subcontract with that awarding authority for a period of not  
          less than one year and not more than three years, to be  
          determined by the awarding authority.  
          (Labor Code  1074)

          This Bill  would apply the above-discussed bid preference to  
           state agencies.  


          1.  Need for this bill?

            The author notes that the current 10% bid preference for  
            transit contracts applies to all public entities,  except to  
            the State of California  and believes that extending this bid  
            preference will support the state's continued economic  
            recovery by rewarding contractors that retain the employees of  
            the previous contractor. The author contends that this  
            protects workers by giving them job stability while protecting  
            good contractors from cross-cutting measures. The author  
            specifically brings attention to an incident at Hearst Castle  
            where the lowest bidder of the transit services terminated the  
            employment of the existing drivers, leading to their  
            unemployment and loss of benefits. 

            SB 599 seeks to address this concern by making the 10% bid  
            preference for transit contracts also applicable when the  
            State of California contracts out for transit services and  
            when a contractor voluntarily decides to retain the employees  
            of the previous contractor. 

          2.  Proponent Arguments  :
            Proponents argue that the existing bid preference, which  
            impacts public agencies that contract out for transit  
            services, has a nearly ten year history of success on the  
            local level.  Proponents note that the law does not protect  


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            the wages or benefits of services, allowing those who seek the  
            contract to bid the service at any price, but frequently all  
            bidders decide to hire all of the incumbent employees in order  
            to compete with the other bidders on a level playing field.   
            Proponents believe that this bid preference should be extended  
            to state transit contracts, and they cite the loss of  
            employment and benefits by drivers formally employed at the  
            Hearst Castle when the transit services were contracted out.

          4.  Prior Legislation  :

            SB 263 (Monning) of 2014 was identical to this bill, but held  
            in Assembly Appropriations Committee. 

            SB 232 (Monning) of 2013 was identical to this bill. It passed  
            the Senate and the first policy committee in the Assembly but  
            was then amended to Military and Veterans code, relating to  
            the California Central Coast State Veterans Cemetery at Fort  
            Ord Endowment Fund. 

            SB 158 (Alarcon), Statutes of 2003, Chapter 103, created the  
            bid preference for contracted transit services for public  

          California Teamsters Public Affairs Council (Co-Sponsor)
          International Longshore & Warehouse Union (Co-Sponsor)
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Labor Federation, AFL-CIO
          Engineers and Scientists of California
          Professional and Technical Engineers, Local 21
          The Northern California District Council of the International  
          Longshore and Warehouse Union
          UNITE HERE!
          Utility Workers Union of America, Local 132

          None on File. 


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