BILL ANALYSIS                                                                                                                                                                                                    ”

                                                                     SB 599

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          599 (Mendoza)

          As Introduced  February 27, 2015

          Majority vote

          SENATE VOTE:  23-14

          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |Labor           |5-2  |Roger HernŠndez, Chu, |Harper, Patterson   |
          |                |     |Low, McCarty,         |                    |
          |                |     |Thurmond              |                    |
          |                |     |                      |                    |
          |Appropriations  |12-5 |Gomez, Bloom, Bonta,  |Bigelow, Chang,     |
          |                |     |Calderon, Nazarian,   |Gallagher, Jones,   |
          |                |     |Eggman, Eduardo       |Wagner              |
          |                |     |Garcia, Holden,       |                    |
          |                |     |Quirk, Rendon, Weber, |                    |
          |                |     |Wood                  |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |

          SUMMARY:  Extends a 10% bid preference for bidders on public  


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          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 10%  
            preference to any bidder who agrees to retain the employees of  
            the prior contractor or subcontractor.

          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 10 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  


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            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.

          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 Assembly Appropriations  
          Committee, costs from this measure are unknown, but potentially  
          significant, to the extent state contracts are awarded to other  
          than the lowest bidder due to the preference.  The only transit  


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          contract currently awarded by the state appears to be the  
          transit operation at Hearst San Simeon State Historical Monument  
          (Hearst Castle).  Hearst Castle's current transit contract is  
          valued at roughly $22 million and is up for renewal in 2023.   
          For illustration, assuming the subsequent contract is for the  
          same amount and duration, the 10% bid preference could lead to  
          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.

          The author notes that the current 10% 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 10% 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  


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          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) of the 2013-14  
          Regular Session.  SB 263 was held under submission in the  
          Assembly Appropriations Committee.  This bill is also identical  
          to the introduced version of SB 232 (Monning) from 2013.   
          However, SB 232 was subsequently substantially amended by the  
          author and used for a different purpose.  

          Analysis Prepared by:                                             
                          Ben Ebbink / L. & E. / (916) 319-2091  FN: