BILL ANALYSIS                                                                                                                                                                                                    Ó




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                                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
          








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          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  








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             $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.








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              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  








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             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  








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          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










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          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.  









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          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


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