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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