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 SB 703 (Leno) Page 2 of ? 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 SB 703 (Leno) Page 3 of ? 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 SB 703 (Leno) Page 4 of ? 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 SB 703 (Leno) Page 5 of ? 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 SB 703 (Leno) Page 6 of ? 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, SB 703 (Leno) Page 7 of ? 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 SB 703 (Leno) Page 8 of ? 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 SB 703 (Leno) Page 9 of ? 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. SB 703 (Leno) Page 10 of ? 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 SB 703 (Leno) Page 11 of ? 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 SB 703 (Leno) Page 12 of ? 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) **************