BILL ANALYSIS                                                                                                                                                                                                    ”

                                                                     SB 599

                                                                    Page  1

          Date of Hearing:   June 24, 2015


                               Roger HernŠndez, Chair

          599 (Mendoza) - As Introduced February 27, 2015

          SENATE VOTE:  23-14

          SUBJECT:  Employment: public transit service contracts.

          SUMMARY:  Extends a ten percent bid preference for bidders on  
          public transit contracts who agree to retain the employees of  
          the prior contractor of subcontractor to all public transit  
          contracts awarded by the State of California.

          EXISTING LAW:   

          1)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.

          2)Requires that an awarding authority letting a service contract  
            out to bid for public transit services shall give a ten  
            percent preference to any bidder who agrees to retain the  
            employees of the prior contractor or subcontractor.


                                                                     SB 599

                                                                    Page  2

          3)Requires a successor contractor or subcontractor for 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.

          4)Requires a successor contractor or subcontractor for public  
            transit services to 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 ten days, and does not need to be at the same  
            level of wages or benefits as provided by the previous  
            contractor or subcontractor.

          5)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.

          6)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 back pay, including the value of  
            benefits, for each day of violation, as well as reasonable  
            attorney fees.


                                                                     SB 599

                                                                    Page  3

          7)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:

             a)   The contractor or subcontractor has substantially  
               breached the contract; and

             b)   The awarding authority holds a public hearing within 30  
               days of the receipt of the request or its announcement of  
               its intention to terminate.

          8)Provides that 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.
          FISCAL EFFECT:  According to the Senate Appropriations Committee  
          the fiscal impacts of this bill are unknown, but potentially  
          significant to the extent that state contracts are awarded to  
          other than the lowest bidder due to the preference.  The State  
          contracts out for relatively few transit services compared to  
          local agencies. Based on currently-available information, the  
          provisions of this bill appear only to affect the transit  
          operation at Hearst San Simeon State Historical Monument (Hearst  
          Castle). Hearst Castle's current transit contract is valued at  
          roughly $22 million over 10 years, and is up for renewal in  
          eight years. Assuming the subsequent contract is for the same  
          amount and duration, the 10 percent bid preferential could lead  
          to an increased costs to the Department of Parks and Recreation  
          of $2.2 million, or an average of $220,000 annually (special  

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


                                                                     SB 599

                                                                    Page  4

          The author notes that the current ten percent bid preference for  
          transit contracts applies to all public entities, except to the  
          State of California.  The author believes that this oversight  
          deserves to be revisited.  The author notes that this oversight  
          has already led to the lowest bidder of the transit services at  
          Hearst Castle terminating the employment of the existing  
          drivers, leading to their unemployment and loss of benefits.

          This bill seeks to address this concern by making the ten  
          percent bid preference for transit contracts also applicable  
          when the State of California contracts out for transit services.

          Supporters argue that the existing bid preference, which impacts  
          public agencies that contract out for transit services, has over  
          ten year history of success on the local level.  Supporters note  
          that the law does not protect 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.  Supporters 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.


          This bill is identical to SB 263 (Monning) from 2014.  SB 263  
          was held under submission in the Assembly Appropriations  


                                                                     SB 599

                                                                    Page  5

          This bill is also identical to the introduced version of SB 232  
          (Monning) from 2013, which passed this Committee.  However, SB  
          232 was subsequently gut and amended by the author and used for  
          a different purpose.  



          California Conference Board of the Amalgamated Transit Union

          California Conference of Machinists

          California Labor Federation, AFL-CIO 

          California Teamsters Public Affairs Council (co-sponsor)

          Engineers and Scientists of California

          International Longshore and Warehouse Union (co-sponsor)

          Northern CA District Council of the International Longshore and  
          Warehouse Union (co-sponsor)

          Professional and Technical Engineers, Local 21


                                                                     SB 599

                                                                    Page  6

          UNITE HERE!

          Utility Workers Union of America, Local 132


          None on file.

          Analysis Prepared by:Ben Ebbink / L. & E. / (916)