BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                        SB 599|
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          Bill No:  SB 599
          Author:   Mendoza (D)
          Vote:     21  

           SENATE LABOR & IND. REL. COMMITTEE:  4-1, 4/8/15
           AYES:  Mendoza, Jackson, Leno, Mitchell
           NOES:  Stone

           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           SENATE FLOOR:  23-14, 6/1/15
           AYES:  Allen, Beall, Block, De León, Galgiani, Hall, Hancock,  
            Hernandez, Hertzberg, Hill, Jackson, Lara, Leno, Leyva, Liu,  
            McGuire, Mendoza, Monning, Pan, Pavley, Roth, Wieckowski, Wolk
           NOES:  Anderson, Bates, Berryhill, Cannella, Fuller, Gaines,  
            Huff, Moorlach, Morrell, Nguyen, Nielsen, Runner, Stone, Vidak
           NO VOTE RECORDED:  Glazer, Hueso, Mitchell

           ASSEMBLY FLOOR:  52-28, 9/1/15 - See last page for vote

           SUBJECT:   Employment: public transit service contracts

          SOURCE:    California Teamsters Public Affairs Council
                     International Longshore and Warehouse Union

          DIGEST:  This bill applies an existing 10 percent bid preference  
          to transit contracts for the State of California when a  
          contractor voluntarily decides to retain the employees of the  
          previous contractor.  


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          Existing law, under Labor Code § 1072:

          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)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. 

          3)Requires 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 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. 

          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.  

          Existing law, under Labor Code § 1073:


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                                                                    Page  3

          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 backpay, including the value of  
            benefits, for each day of violation, as well as reasonable  
            attorney fees.  

          Existing law, under Labor Code § 1074:

          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.

          This bill makes the 10 percent 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. 

          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  


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          drivers, leading to their unemployment and loss of benefits. 

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee, the fiscal  
          impacts of SB 599 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  

          SUPPORT:   (Verified10/26/15)

          California Teamsters Public Affairs Council (co-source)
          International Longshore and Warehouse Union (co-source)
          California Conference Board of the Amalgamated Transit Union
          California Conference of Machinists
          California Labor Federation 
          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

          OPPOSITION:   (Verified10/26/15)

          None received


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          ARGUMENTS IN SUPPORT:     Proponents argue that the existing bid  
          preference, which impacts public agencies that contract out for  
          transit services, has a nearly 10-year history of success on the  
          local level.  Proponents 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.   
          Proponents believe that this bid preference should be extended  
          to state transit contracts. Proponents bring attention to a case  
          at Hearst Castle where a new contractor took over the transit  
          services, resulting in the loss of employment and benefits for  
          many drivers.


               I am returning Senate Bill 599 without my signature.

               This bill expands a local bid preference requirement to the  
               state for public transit services.

               By simply expanding this local requirement to the state,  
               this bill would significantly limit the state's current  
               contracting authority to determine who would be eligible  
               for the bid preference and how to calculate it if applied.  
               I do not believe such a broad change is needed at this  

          ASSEMBLY FLOOR:  52-28, 9/1/15
          AYES:  Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon,  
            Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd,  
            Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto,  
            Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández,  
            Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty,  
            Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon,  
            Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone,  
            Thurmond, Ting, Weber, Williams, Wood, Atkins


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          NOES:  Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,  
            Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper,  
            Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes,  
            Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner,  
            Waldron, Wilk

          Prepared by:Deanna Ping / L. & I.R. / (916) 651-1556
          11/13/15 16:03:39

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