BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 703| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 703 Author: Leno (D) Amended: 8/31/15 Vote: 21 SENATE GOVERNMENTAL ORG. COMMITTEE: 7-3, 4/14/15 AYES: Hall, Block, Galgiani, Hernandez, Hill, Lara, McGuire NOES: Berryhill, Gaines, Vidak NO VOTE RECORDED: Hueso SENATE JUDICIARY COMMITTEE: 5-1, 4/21/15 AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski NOES: Anderson NO VOTE RECORDED: Moorlach SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NOES: Bates, Nielsen SENATE FLOOR: 25-13, 6/3/15 AYES: Allen, Beall, Block, De León, Galgiani, Glazer, Hall, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Roth, Wieckowski, Wolk NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Huff, Moorlach, Morrell, Nguyen, Nielsen, Runner, Stone, Vidak NO VOTE RECORDED: Cannella, Hancock ASSEMBLY FLOOR: 53-24, 9/2/15 - See last page for vote SUBJECT: Public contracts: prohibitions: discrimination SOURCE: Author SB 703 Page 2 DIGEST: This bill adds a new section of law to the Public Contract Code that prohibits a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits. Assembly Amendments delete the requirement imposed on the Department of General Services to include the listing of contracts on its website. ANALYSIS: Existing law: 1) Authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by the Department of General Services (DGS) and establishes rules governing the awarding of contracts by state agencies, including general requirements for competitive bidding on contracts for the acquisition of goods or services. 2) Sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits. 3) Provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void. 4) Makes a willful violation of the above requirements and prohibitions a misdemeanor. This bill: 1) Prohibits a state agency from entering into a contract for the acquisition of goods or services in the amount of SB 703 Page 3 $100,000 or more with a contractor 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. 2) Provides that the term "contract" includes contracts with a cumulative amount of $100,000 or more per contractor in each fiscal year. 3) Provides that an employee health plan is discriminatory if the plan is not consistent with specified sections of law (Section 1365.5 of the Health and Safety Code and Section 10140 of the Insurance Code). 4) Stipulates that the transgender nondiscrimination requirements referenced above shall apply only to those portions of a contractor's operations that occur under any of the following conditions: a) Within the State of California. b) 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. c) Elsewhere in the United States where work related to a state contract is being performed. 5) Requires 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. 6) Provides that the requirements of this bill may be waived under any of the following circumstances: a) There is only one prospective contractor willing to enter into a specific contract with the state agency. SB 703 Page 4 b) The contract is necessary to respond to an emergency that endangers public health, welfare, or safety, or the contract is necessary for the provision of essential services and no entity that complies with the requirements is capable of immediately responding to the emergency. c) The requirements violate, or are inconsistent with, the terms and conditions of a grant, subvention, or agreement and the agency has made a good faith effort to change those terms and conditions. d) The contractor is providing wholesale or bulk water, power, or natural gas, or ancillary services, as required for ensuring reliable services in accordance with good utility practice, if the purchase of the same cannot practicably be accomplished through standard competitive bidding procedures and the contractor is not providing direct retail services to end users. 7) Stipulates that a contractor shall not be deemed to discriminate in the provision of benefits if: (a) the contractor, in providing the benefits, pays the actual costs incurred in obtaining the benefit or (b) the contractor is unable to provide a certain benefit, despite taking reasonable measures to do so. 8) Requires every contract subject to this bill to contain a statement by which the contractor certifies that the contractor is in compliance with the bill's provisions. If a contractor falsely certifies compliance, the contract with that contractor shall be subject to certain penalties and remedies unless, within a time period specified by DGS or other contracting agency, the contractor provides proof that it has complied, or is in the process of complying. 9) Stipulates that the bill's provisions shall be construed so as not to conflict with applicable federal laws, rules, or regulations. Also, contains a severability provision, as specified. 10)Makes it explicit that the bill's provisions do not create SB 703 Page 5 any new enforcement responsibility for DGS or any other contracting agency. Background Purpose of SB 703. According to the author's office, this bill is simply intended to prohibit state agencies from doing business with companies that discriminate between the benefits offered to transgender employees and other employees. The author's office notes that discrimination in the provision of employee benefits has a tremendous economic cost impact. For example, when workers are denied health coverage or excluded from medically necessary procedures, costs are pushed on to state funded programs and services. One mechanism that has been used to combat these costs and to reduce discrimination is the state's market power through the contracting it does with the private sector. The author's office points out that California has a long history of ensuring that state agencies do not discriminate in the provision of employee benefits, including health insurance through a series of bills and administrative actions. Specifically, the author's office cites AB 17 (Kehoe, 2003) which prohibited state agencies from doing business with companies that discriminate in the benefits offered between employees with spouses and employees with registered domestic partners and also AB 2208 (Kehoe, 2004) which mandated that California health care service plans and health insurers provide equal benefits to domestic partners as to spouses. The author's office also references AB 1586 (Koretz, 2006), known as the California Insurance Gender Nondiscrimination Act, which outlawed discriminatory exclusions by health care service plans and health insurers based on an individual's gender identity. In 2012 the California Department of Insurance issued regulations to implement AB 1586 (Koretz). Also, in 2013, the Department of Managed Health Care similarly issued a letter to all plans under its jurisdiction, ordering them to remove blanket exclusions of coverage targeting health care needed by transgender people. Furthermore, the author's office notes that eight other states and the District of Columbia have banned transgender exclusions SB 703 Page 6 in health insurance and over 25% of Fortune 500 companies have also followed suit by offering equal health care benefits for transgender employees. Medi-Cal has also covered health care needed by transgender individuals since the 1970s and the federal Medicare system removed its discriminatory transgender exclusion in 2014. The author's office contends that despite these advances in prohibiting discrimination, companies that contract with the State of California that self-insure under federal law, or that are based out-of-state, may offer insurance plans that don't comply with the same gender nondiscrimination requirements applied to other companies operating in California. Transgender employees at these companies are unfairly denied health coverage afforded to other employees. Prior/Related Legislation AB 1586 (Koretz, Chapter 421, Statutes of 2005) prohibited plans and insurers from denying an individual a plan contract or policy, or coverage for a benefit included in the contract policy, based on the person's sex, as defined. AB 2208 (Kehoe, Chapter 488, Statutes of 2004) required a health care service plan and a health insurer to provide coverage to the registered domestic partner of an employee, subscriber, insured, or policyholder that is equal to the coverage it provides to the spouse of those persons. AB 17 (Kehoe, Chapter 752, Statutes of 2003) prohibited a state agency from entering into a contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor who, in the provision of benefits, discriminates between employees with spouses and employees with domestic partners, or discriminates between the domestic partners and spouses of those employees, except under specified circumstances. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes SB 703 Page 7 According to the Assembly Appropriations Committee, by adding contracting requirements on bidders, this bill will to some extent reduce the number of bidders on state contracts, thus reducing competition and possibly increasing costs. The cost of these impacts is unknown, but given that the state contracts for several billion dollars for goods and services exceeding $100,000 annually, costs could be in the hundreds of thousands to millions of dollars annually. [General Fund and numerous special funds] Over time, assuming more contractors come into compliance, the cost impact of this bill would diminish. SUPPORT: (Verified 9/2/15) American Civil Liberties Union of California American Federation of Labor and Congress of Industrial Organizations American Federation of State, County and Municipal Employees California Communities United Institute Equality California National Center for Lesbian Rights Transgender Law Center OPPOSITION: (Verified 9/2/15) None received ARGUMENTS IN SUPPORT: Proponents state that over the past decade, California has prohibited discrimination in the provision of employee benefits, including health insurance, through a series of bills and administrative actions. This bill is intended to build on previous nondiscrimination law and ensure that California does business only with companies that provide equal benefits. Proponents emphasize that treating transgender employees differently is discrimination - this bill rewards companies that do not discriminate with the opportunity to do business with the state and prohibits a state agency from entering into a contract in the amount of $100,000 or more with a contractor who discriminates based on an employee's transgender status. SB 703 Page 8 Proponents claim that reducing discrimination is beneficial to both employers and employees, and by only contracting with entities that don't discriminate, California will improve the quality of goods and services purchased with public dollars. ASSEMBLY FLOOR: 53-24, 9/2/15 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, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Atkins NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Gray, Grove, Hadley, Harper, Jones, Kim, Lackey, Mathis, Melendez, Obernolte, Patterson, Wagner, Waldron, Wilk NO VOTE RECORDED: Linder, Mullin, Steinorth Prepared by: Arthur Terzakis / G.O. / (916) 651-1530 9/2/15 17:49:21 **** END ****