BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015 - 2016 Regular Session
SB 703 (Leno)
Version: February 27, 2015
Hearing Date: April 21, 2015
Fiscal: Yes
Urgency: No
TMW
SUBJECT
Public contracts: prohibitions: discrimination
DESCRIPTION
This bill would prohibit a state agency from entering into any
contract for the acquisition of goods or services in the amount
of $100,000 or more with a contractor that, in the provision of
benefits, discriminates between employees on the basis of the
employee's or dependent's actual or perceived gender identity,
including, but not limited to, the employee's or dependent's
identification as transgender. This bill would provide
specified waivers, and authorize a person alleging a violation
by a contractor to file a complaint with the Department of
General Services.
BACKGROUND
California was the first state to pass legislation creating an
equal benefits statute. Citing the importance of having the
state take the lead and not "subsidize this discrimination with
taxpayer-funded contracts," AB 17 (Kehoe, Chapter 752, Statutes
of 2003), among other things, made it unlawful for a state
agency to enter into a public contract with a vendor or
contractor for goods or services if that vendor or contractor
did not provide the same benefits to an employee and his or her
registered domestic partner as those provided to an employee and
his or her spouse. Proponents argued that the state should not,
in the bidding process, disadvantage a company that recognizes
the need for equity in the workplace. AB 17 included certain
exceptions as well as circumstances when this requirement could
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be waived. For example, the requirement can be waived by
showing that "all reasonable measures" were taken to find a
compliant contractor.
To further equal benefits, the California Insurance Equality Act
(AB 2208 (Kehoe, Chapter 488, Statutes of 2004)) prohibited
discrimination in the provision of health care and insurance
benefits on the basis of domestic partner status. Similarly, AB
1586 (Koretz, Chapter 421, Statutes of 2005) prohibited
discrimination on the basis of sex in the provision of life,
disability, and health care insurance service plans, and
provided protection regarding a person's gender identity and
gender related appearance and behavior, whether or not
stereotypically associated with the person's assigned sex at
birth. Subsequently, AB 887 (Atkins, Chapter 719, Statutes of
2011) clarified these protections for gender, gender identity,
and gender expression.
This bill seeks to prohibit the implicit endorsement of
discrimination by prohibiting the state from entering into a
contract over $100,000 with a contractor who, in the provision
of benefits, discriminates on the basis of gender identity.
This bill was heard by the Senate Governmental Organization
Committee on April 14, 2015, and passed out on a vote of 7-3.
CHANGES TO EXISTING LAW
Existing law , the Unruh Civil Rights Act, generally prohibits
business establishments from discriminating on the basis of sex,
race, color, religion, ancestry, national origin, disability, or
medical condition, marital status, or sexual orientation and
provides civil remedies for violations of its provisions. (Civ.
Code Sec. 51 et seq.) That Act defines "sex" to include gender,
gender identity and gender expression, which is a person's
gender-related appearance and behavior whether or not
stereotypically associated with the person's assigned sex at
birth. (Civ. Code Sec. 51(e)(5).)
Existing law , the Fair Employment and Housing Act (FEHA),
prohibits discrimination or harassment in employment or housing
on the basis of, among other things, a person's gender, gender
identity, and gender expression. (Gov. Code Sec. 12940(j)(1).)
Existing law prohibits a health care service plan or specialized
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health care service plan from refusing to enter into any
contract or shall cancel or decline to renew or reinstate any
contract because of the race, color, national origin, ancestry,
religion, sex, which includes gender, marital status, sexual
orientation, or age of any contracting party, prospective
contracting party, or person reasonably expected to benefit from
that contract as a subscriber, enrollee, member, or otherwise.
(Health & Saf. Code Sec. 1365.5.) Existing law defines "gender"
to mean sex, and includes a person's gender identity and gender
expression. "Gender expression" means a person's gender-related
appearance and behavior whether or not stereotypically
associated with the person's assigned sex at birth. (Pen. Code
Sec. 422.56(c).)
Existing law prohibits an admitted insurer, licensed to issue
life or disability insurance, from failing or refusing to accept
an application for that insurance, issuing that insurance to an
applicant therefor, or issuing or canceling that insurance,
under conditions less favorable to the insured than in other
comparable cases, except for reasons applicable alike to persons
of every race, color, religion, sex, gender, gender identity,
gender expression, national origin, ancestry, or sexual
orientation. (Ins. Code Sec. 10140(a).) Existing law defines
"sex" to mean gender and includes a person's gender identity and
gender expression, which is a person's gender-related appearance
and behavior whether or not stereotypically associated with the
person's assigned sex at birth. (Ins. Code Sec. 10140(h).)
Existing law prohibits a state agency from entering into a
contract of $100,000 or more for goods or services with a vendor
or contractor that does not provide the same benefits to an
employee with a registered domestic partner that it provides to
an employee with a spouse. (Pub. Contract Code Sec. 10295.3.)
Existing law provides that a contractor is not in violation of
that provision if the contractor does any of the following:
offers the same benefits to employees with domestic partners
and employees with spouses and offers the same benefits to
domestic partners and spouses of employees;
provides the same benefits to individuals that are provided to
employees' spouses and employees' domestic partners;
provides benefits on a basis unrelated to an employee's
marital status or domestic partnership status, including, but
not limited to, allowing each employee to designate a legally
domiciled member of the employee's household as being eligible
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for benefits; or
does not provide benefits to employees based on their marital
status or domestic partnership status, or does not provide
benefits to employees' spouses and to employees' domestic
partners. (Pub. Contract Code Sec. 10295.3.)
Existing law provides that these requirements may be waived in
specified circumstances, including when there is only one
contractor willing to contract with the state or when the
contract is necessary to respond to an emergency and no entities
that are capable of responding and that comply with this section
are available. (Pub. Contract Code Sec. 10295.3.)
This bill would prohibit a state agency from entering into a
contract of $100,000 or more for goods or services with a
contract that, in the provision of benefits, discriminates
between employees on the basis of an employee's or dependent's
actual or perceived gender identity, including, but not limited
to, the employee's or dependent's identification as transgender.
This bill would provide that an employee health plan is
discriminatory if it is not consistent with corresponding
statutes under the Health and Safety Code and the Insurance
Code.
This bill would apply only to those portions of a contractor's
operations that occur under any of the following conditions:
within the state;
on real property outside the state if the property is owned by
the state or if the state has a right to occupy the property,
and if the contractor's presence at that location is connected
to a contract with the state; or
elsewhere in the United States where work related to a state
contract is being performed.
This bill would require contractors to treat as confidential, to
the maximum extent allowed by law or by the requirement of the
contractor's insurance provider, any request by an employee or
applicant for employment benefits or any documentation of
eligibility for benefits submitted by an employee or applicant
for employment.
This bill would specify that after taking all reasonable
measures to find a contractor that complies with this section,
as determined by the state agency, the requirements of this bill
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may be waived under any of the following circumstances:
there is only one prospective contractor willing to enter into
a specific contract with the state agency;
the contract is necessary to respond to an emergency, as
determined by the state agency, that endangers the public
health, welfare, or safety, or the contract is necessary for
the provision of essential services, and no entity that
complies with the requirements of this section capable of
responding to the emergency is immediately available;
the requirements of this section violate, or are inconsistent
with, the terms or conditions of a grant, subvention, or
agreement, if the agency has made a good faith attempt to
change the terms or conditions of any grant, subvention, or
agreement to authorize application of this section; or
the contractor is providing wholesale or bulk water, power, or
natural gas, the conveyance or transmission of the same, or
ancillary services, as required for assuring reliable services
in accordance with good utility practice, if the purchase of
the same cannot practically be accomplished through the
standard competitive bidding procedures and the contractor is
not providing direct retail services to end users.
This bill would provide that a contractor would not be deemed to
discriminate in the provision of benefits if the contractor, in
providing the benefits, pays the actual costs incurred in
obtaining the benefit.
This bill would allow a contractor, who is unable to provide a
certain benefit, despite taking reasonable measures to do so, to
not be deemed to discriminate in the provision of benefits.
This bill would require every contract subject to this bill to
contain a statement by which the contractor certifies that the
contractor is in compliance.
This bill would require the Department of General Services (DGS)
or other contracting agency to enforce this bill pursuant to its
existing enforcement powers.
This bill would provide that if a contractor falsely certifies
that it is in compliance with, the contract with that contractor
shall be subject to specified remedies and penalties, including
voidance of the contract, unless, within a time period specified
by DGS or other contracting agency, the contractor provides to
DGS or agency proof that it has complied, or is in the process
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of complying.
This bill would provide that the application of specified
remedies or penalties to a contract would not preclude the
application of any existing remedies otherwise available to DGS
or other contracting agency under its existing enforcement
powers.
This bill would not apply to the contracting practices of any
local jurisdiction.
This bill would limit its construction so as not to conflict
with applicable federal laws, rules, or regulations. In the
event that a court or agency of competent jurisdiction holds
that federal law, rule, or regulation invalidates any clause,
sentence, paragraph, or section of the Public Contracts Code or
the application thereof to any person or circumstances, the
court or agency could sever that clause, sentence, paragraph, or
section so that the remainder of the bill would remain in
effect.
This bill would authorize any person to file a complaint with
DGS alleging that a contractor is in violation of, or a contract
or other transaction has been entered into in violation of this
bill, and would require DGS to investigate any complaints it
receives.
This bill would require DGS to maintain an easily accessible
list on its Internet Web site of contracts for the acquisition
of goods or services in the amount of $100,000 or more that are
entered into on or after January 1, 2016.
COMMENT
1. Stated need for the bill
The author writes:
In most circumstances, California already requires gender
nondiscrimination in regard to employee benefits. This bill
builds on previous nondiscrimination law and will ensure that
California does business only with companies that provide
equal benefits.
When individuals have health insurance that covers their care,
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they are less likely to use state funded services, saving
taxpayers money. Moreover, studies show that having health
insurance that covers essential healthcare for oneself and
one's family reduces stress and improves effectiveness on the
job.
Treating all workers with respect improves employee morale and
retention. Reducing discrimination is beneficial to both
employers and employees, and by only contracting with entities
that don't discriminate, the State of California will improve
the quality of goods and services purchased with public
dollars.
SB 703 will level the playing field in state contracting
between in-state and out-of-state companies while also
ensuring that state tax dollars are used in a cost effective
manner.
2. Extending discrimination protection
This bill would prohibit a state agency from entering into a
contract in the amount of $100,000 or more with any contractor
that discriminates based on gender identity by failing to offer
equal benefits to all employees and their dependents, regardless
of their gender identity, or perceived gender identity,
including, but not limited to, the employee's or dependent's
identification as transgender. Existing law provides a similar
prohibition on state contracts with vendors or contractors who
discriminate in benefits to domestic partners.
The National Center for Lesbian Rights, co-sponsor, argues that
although the California Insurance Gender Nondiscrimination Act
of 2006 outlawed discriminatory exclusions in health plans, some
insurance companies persisted in limiting care based on an
individual's transgender status. Further, co-sponsor Equality
California notes that Oregon, Colorado, and the District of
Columbia and San Francisco and Berkeley have bans on transgender
exclusions in health insurance. They also note that over 25
percent of Fortune 500 companies have followed suit by offering
health care equality for transgender employees. The Transgender
Law Center (TLC), co-sponsor, contends that denying transgender
people equal access to health care puts them at serious risk for
negative health outcomes and financial hardship. Further, TLC
argues that providing equal benefits will help protect
transgender workers and our families. TLC also states that this
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bill makes economic sense for the state and employers, which
will benefit from increased employee morale, productivity, and
retention.
Notably, California has already established a public policy
against discriminating in benefits on the premise of gender
identity. In addition to general protections for transgender
individuals provided under the Unruh Civil Rights Act and the
Fair Employment and Housing Act, discriminating against an
individual on the basis of gender identity with respect to life
and disability insurance and health care service plans. The
author argues that, although California has established these
protections, out-of-state companies or self-insured in-state
companies contracting with California public agencies are not
complying with these prohibitions on gender identity
discrimination. This bill arguably builds on those protections
by prohibiting a state agency from contracting for services in
the amount of $100,000 or more with companies that are not
complying with California law.
It is important to note that under this bill, a contractor, who
does not provide benefits as required, could avoid being deemed
to discriminate in the provision of benefits provided to
transgender employees or dependents if the contractor pays the
actual costs incurred in obtaining the benefit. Additionally,
if a contractor is unable to provide a certain benefit, despite
taking reasonable measures to do so, the contractor would not be
deemed to discriminate in the provision of benefits. These
provisions contemplate scenarios when the contractor is willing
to provide the benefit, but is unable to do so. In this way,
the bill would provide benefit equality while acknowledging
circumstances beyond the contractor's control.
Further, this bill would only apply to a contractor's operations
occurring within the state, on real property outside the state
if the property is owned by the state or if the state has a
right to occupy the property and the contractor's presence at
that location is connected to a contract with the state, or
elsewhere in the United States where work related to a state
contract is being performed.
Supporters argue that "[t]his legislation closes an outdated gap
in state law that has allowed some private companies to treat
transgender people unfairly. No employee should be denied equal
medical coverage or other benefits simply because of who they
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are." Supporters also argue that reducing discrimination is
beneficial to both employers and employees, and will improve the
quality of goods and services purchased with public dollars.
3. Exceptions to gender identity discrimination protections
The Public Contract Code provides an elaborate scheme for state
procurement of materials, supplies, equipment and services,
including a competitive bidding process, procedures and
standards for professional consulting services and other
services contracts, a process for purchasing federal surplus
property, conflict of interest rules, and exemptions from these
rules. (Pub. Contract Code Sec. 10290 et seq.) Included in
that scheme are various exemptions for the following contracts
for materials, supplies, equipment, and services:
entered into by the Regents of the University of California
and the Trustees of the California State University;
involving information technology;
where the vendor/contractor is an exempted entity;
involving services provided by architects, engineers, land
surveyors, and construction project management firms;
where members of boards or commissions receive no compensation
except for payment for each meeting of the board or
commission, for preparatory time and for per diem; and
where the vendor/contractor employs spouses of state officers
and employees and the vendor does not benefit from decisions
made by the state officer or employee. (Pub. Contract Code
Sec. 10430.)
This bill would apply to all contractors for goods and services
that seek state contracts, subject to the exemptions enumerated
above.
The bill would also provide that, as long as the state agency
has taken "all reasonable measures" to find a contractor that
complies with benefit equality for transgender individuals, the
requirement may be waived, and a contract entered into, where
the contract is a single-source contract, a contract for
emergency services, a sole contract for essential services where
there are no qualified bidders, or a contract for a public
utility service that is not a retail service to consumers.
These exceptions are intended to provide a state agency with the
flexibility to enter into contracts where the prohibition would
result in a detriment to the public's welfare.
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4. Other provisions
a. Contract to contain certification of compliance
This bill would require every contract to contain a
certification by the contractor that it is in compliance with
the requirements of this bill. This would relieve the state
contracting agency from the duty to inquire and to evaluate
whether or not the contractor is in compliance. The bill
simply leaves it to the Department of General Services (DGS)
or the state contracting agency to use its existing
enforcement powers to enforce the provisions of this bill.
It is not clear what the agency's enforcement powers are when
it comes to public contracts. Usually, an agency's
enforcement powers have to do with the function of the agency,
whether to deliver services, regulate an area, implement
programs or a host of other functions. However, the bill also
provides for DGS enforcement should the contracting state
agency's enforcement power be limited.
With regards to a contract for goods or services, however, the
enforcement mechanism, regardless of the goods or services to
be delivered, is the rescission, cancellation or early
termination, reformation, or modification of the contract. In
addition to any enforcement powers of the DGS or the state
agency, this bill would also provide for remedies and
penalties applicable to all other state contracts. Further,
this bill would provide that a contractor who falsely
certifies its compliance is subject to those remedies and
penalties unless the contractor took steps within a specified
period of time to correct the condition regarding the employee
benefits that this bill intends to address.
b. Employee enforcement
This bill would authorize any person, which would include the
employee or employee's dependent, to file a complaint with DGS
alleging that a contractor is in violation of, or a contract
or other transaction has been entered into in violation of the
protections in this bill.
The author states that "there presently is not an easy way for
individuals to determine what entities have contracts with the
state and are covered by California's equal benefits law nor a
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way for individuals to alert the state if a contractor is not
fulfilling its obligations under the contract they entered
into pursuant to existing law." This bill would require DGS
to investigate any complaints it receives. In this way, the
bill would provide individuals, who may be the target of the
discrimination prohibited in the state agency contracts, the
ability to report the contractor to DGS. This provision would
act as a deterrent to a contractor who attempts to violate
this bill, but also make certain that the protections of the
bill continue to be carried out after the state agency has
entered into the contract.
c. Remaining provisions
The California Constitution and the California Public Records
Act provides the public with the right to access public agency
information. This bill would require DGS to disclose and
maintain on its Internet Web site an easily accessible list of
contracts for goods and services in the amount of $100,000 or
more entered into on or after January 1, 2016. This provision
would provide transparency of the contracts entered into by
the state agency so that the public is aware of how public
funds are being used.
This bill would also provide a severability clause so that if
any provision in the bill conflicts with applicable federal
laws, rules or regulations or if a court or agency of
competent jurisdiction finds that the federal law invalidates
any part of the bill, that part would be severed so that the
remainder of the bill may be given effect. This bill would
also require contractors to treat as confidential any request
made by an employee or employment applicant for employment
benefits or any documentation of eligibility for benefits
submitted by an employee or applicant.
Support : American Civil Liberties Union of California; American
Federation of State, County and Municipal Employees, AFL-CIO;
California Communities United Institute
Opposition : None Known
HISTORY
Source : Equality California; National Center for Lesbian
Rights; Transgender Law Center
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Related Pending Legislation : None Known
Prior Legislation :
AB 887 (Atkins, Ch. 719, Stats. 2011) See Background.
AB 1586 (Koretz, Ch. 421, Stats. 2005) See Background.
AB 2208 (Kehoe, Ch. 488, Stats. 2004) See Background.
AB 17 (Kehoe, Ch. 752, Stats. 2003) See Background.
Prior Vote : Senate Governmental Organization Committee (Ayes 7,
Noes 3)
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