BILL ANALYSIS Ó
SB 950
Page 1
Date of Hearing: June 28, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
SB
950 (Nielsen) - As Amended April 27, 2016
As Proposed to be Amended
SENATE VOTE: 39-0
SUBJECT: EXCLUDED EMPLOYEES: ARBITRATION
KEY ISSUE: Should an organization that represents "excluded
employees" - primarily managerial and supervisory employees who
are not represented by unions - be permitted to request binding
arbitration for an aggriEved employee if prior levels of
administrative review have not resolved the grievance to THE
employee's satisfaction?
SYNOPSIS
Under existing law, certain classifications of employees - most
notably managerial, executive, and supervisory employees - are
excluded from the provisions of Ralph Dills Act, which
guarantees the collective bargaining right of state employees.
To provide some level of representation to these employees, in
1990, the Legislature enacted the Excluded Employee Bill of
Rights (EEBR), which permits excluded employee organizations to
SB 950
Page 2
represent excluded employees who have to file a grievance with
their state employer. According to the author, however, this
existing process under EEBR is not very effective or efficient.
EEBR establishes four "levels of review," which in practice
appears to consist of an employee filing a written grievance,
the employer usually issuing a denial, and the employee filing
an appeal of the denial, until it reaches the fourth level of
review, where the employee generally appeals to the Department
of Personnel Administration. After the fourth level the
aggrieved employee's only option is to bring an action in the
appropriate Superior Court. This bill would effectively create
a fifth level of review by allowing an employee organization to
request binding arbitration as an alternative to bringing an
action in court. The bill also sets forth a process for
selecting arbitrators from a designated panel, requires the
arbitrator to issue a written decision within 45 days of the
completion of the hearing, and provides that the non-prevailing
party shall pay the costs of arbitration, as specified. As
proposed to be amended today in this Committee, the bill would
also, most significantly, specify that the withdrawal of an
arbitration request does not bar pursuit of other remedies
available under law; that a party to the arbitration has a right
to have a certified reporter transcribe the proceeding; and that
the arbitrator shall apply applicable California law to the
facts. The bill is supported by several law enforcement groups
and professional associations. There is no opposition to this
bill, which recently passed out of the Assembly Committee on
Public Employees, Retirement, and Social Security on 6-0 vote
with one member not voting. The bill summary and analysis
reflect the amendments that will be taken in Committee today.
SUMMARY: Enacts the Excluded Employee Arbitration Act in order
to permit an organization that represents excluded employees, as
defined, to request arbitration of an employee grievance, as
specified. Specifically, this bill:
1)Creates the Excluded Employee Arbitration Act which authorizes
SB 950
Page 3
an employee organization that represents an excluded employee
to request binding arbitration when the following conditions
are met:
a) The excluded employee has filed a grievance with the
California Department of Human Resources (CalHR) alleging a
violation of Title 2, California Code of Regulations.
b) The grievance has not been resolved satisfactorily at
the fourth level of review.
c) In cases where there is no fourth level of review, the
employee organization requests arbitration in writing to
CalHR within 21 days of a decision rendered at the third
level of review.
2)Defines arbitration to mean the binding ruling that resolves
an excluded employee grievance at the fifth level of the
excluded employee grievance process.
3)Requires CalHR and the employee organization, following a
request for arbitration, to designate a standing panel of at
least 20 arbitrators to be made available for resolving
arbitrations authorized by this bill and sets forth a process
by which the employee organization and employer may select
arbitrators from the panel.
4)Provides that if the employee organization does not submit its
choice of an arbitrator within 45 days after requesting
arbitration, the request for arbitration shall be considered
withdrawn. However, a withdrawn request shall not be
construed to prevent the employee from pursuing other
grievance procedures available under law.
SB 950
Page 4
5)Provides that a party to the arbitration has the right to have
a certified shorthand reporter transcribe the proceeding and
specifies that the transcript shall be the official record of
the proceeding.
6)Requires the arbitrator to issue a written decision within 45
days of the conclusion of the hearing. Specifies that
arbitrator shall apply California law to the facts and that
the decision shall be based solely on the written record in
the grievance, the grievance response, and the oral
presentations made at the arbitration. Specifies that the
arbitrator's decision shall be legally binding.
7)Requires the arbitrator to order that the non-prevailing party
pay the cost of the arbitration, including the costs of a
certified shorthand reporter. The arbitrator is prohibited
from ordering the excluded employee to pay the costs of
arbitration or reporter and specifies that the costs of
arbitration and reporter cannot be passed on to the excluded
employee.
8)States that it is the intent of the Legislature that state
excluded employees shall have the right to arbitration as a
fifth step to the excluded employee grievance procedure; that
the present grievance procedure leaves too many grievances
unresolved; and that this lack of resolution has caused more
cases to be filed in California's courts, which should have
been resolved at a lower level.
EXISTING LAW:
1)Permits, under the Excluded Employee Bill of Rights, an
SB 950
Page 5
excluded employee organization to represent an excluded
employee in their employment relations, including grievances,
with the state. (Government Code Section 3525 et seq.)
2)Defines "excluded employees," for purposes of the above, to
include all managerial employees, confidential employees,
supervisory employees, and specified employees of the
Department of Personnel Administration, the Department of
Finance, the Controller's office, the Legislative Counsel
Bureau, the Bureau of State Audits, the Public Employment
Relations Board, the Department of Industrial Relations, and
the State Athletic Commission. (Government Code Section
3526.)
3)Establishes the Ralph C. Dills Act (Dills Act) which sets
forth a framework that governs labor relations between the
state and state employees. Defines "state employee" for
purposes of the Dills Act so as to exempt managerial
employees, confidential employees, supervisory employees, and
other employees, as specifed. (Government Code Section 3512
et seq.)
4)Establishes, pursuant to Title 2 of the California Code of
Regulations, a grievance procedure and time line by which an
excluded employee and his or her state employer may attempt to
resolve an employee grievance. The procedures provide for
four levels of review, ranging from informal discussions, to
formal written grievances and written responses, to appeal to
the Director of Department of Personnel Administration or his
or her designee. (2 CCR Section 559.859 (d) (1)-(6).)
FISCAL EFFECT: As currently in print this bill is keyed fiscal.
COMMENTS: Justice Brennan once said that, "courts are the
SB 950
Page 6
central dispute-setting institutions of our society. They are
bound to do equal justice under the law, to rich and poor
alike." It comes as no surprise then that the phrase, "Equal
Justice Under Law," is engraved above the entrance to our
nation's highest court. And so it seems, we put a great deal of
faith in our courts - but would we expect any less? We
anticipate our courts to apply the law in a fair, neutral, and
open manner. We hold judges to high standards, and ask that
they avoid even the appearance of impropriety. We count on our
judiciary to advance the law, issue orders, and render written
opinions. And yet, we acknowledge that our system isn't perfect
and that despite their best efforts, courts sometimes get it
wrong. Acknowledging the imperfection of our justice system is
undoubtedly one reason why it has safeguards. We remember that
decisions of courts are reviewed by appellate courts and indeed,
reviewed by our elected branches. In order to facilitate the
right to appeal, we provide a record of the proceedings, in
criminal matters at least. And so, when our families, friends,
and neighbors are injured, wronged, or have a dispute, we rely
upon that faith that our courts-the institution we trust upon to
promote fairness-will deliver equal justice under the law.
As this Committee is well-aware, arbitration is a form of
alternative dispute resolution held outside of courts where a
third-party (rather than a judge) makes a binding (and rarely
appealable) award. Because most arbitration is created by
entering into a contract (usually a contract that is adhesive or
take-it-or-leave-it), the arbitration agreement will lay-out the
procedures that will be followed during the arbitration hearing.
For example, the terms of the arbitration agreement may
stipulate that the award need not be written or justified
(unlike in court), and that the entire process be kept in secret
(rather than in public view). Arbitrators do not need to be
lawyers, nor do they need to be trained in the law. Arbitrators
who issue favorable awards to a particular company can be
SB 950
Page 7
repeatedly-hired by that same company to serve as the
arbitration-neutral without ever notifying the public about that
award-history. It's easy to predict the calls if you can hire
the umpire.
Last year, the New York Times issued a three-part series titled,
"Beware the Fine Print" - a special report examining how
arbitration clauses buried in contracts deprives Americans of
their fundamental constitutional rights:
Over the last 10 years, thousands of businesses across the
country - from big corporations to storefront shops - have
used arbitration to create an alternate system of justice.
There, rules tend to favor businesses, and judges and juries
have been replaced by arbitrators who commonly consider the
companies their clients. The change has been swift and
virtually unnoticed, even though it has meant that tens of
millions of Americans have lost a fundamental right: their day
in court. (Silver-Greenberg & Corkery, In Arbitration, a
Privatization of the Justice System, N.Y. Times (Nov. 1,
2015).)
In fact, some legal scholars have stated that, arbitration
"amounts to the whole-scale privatization of the justice
system." (Ibid.) In an effort to protect consumers and workers,
this Legislature has worked on legislation aimed at leveling the
playing field, a turf that has been used by corporate interests
SB 950
Page 8
to evade public scrutiny, and even, avoid the law. This is
because arbitrators do not need to be trained in the law, or
even apply the law, or render a decision consistent with the
evidence presented to them. What evidence is presented may, in
fact, be incomplete because parties in arbitration have no legal
right to obtain evidence in support of their claims or defenses,
or the claims or defenses of the other party, contrary to the
longstanding discovery practice in public courts. Advocates
continue to debate about the benefits and harms of
mandatory-arbitration. Proponents of arbitration say that
arbitration produces quicker results and reduces litigation
costs. Opponents argue that arbitration harms consumers and
workers because arbitration proceedings render unfair awards.
Labor arbitration. With all of this being said, public
arbitration of labor disputes seems to fall into a different
category and is generally seen as fair and protective of
employees. It has been noted in the legal community that
arbitration in the labor context is markedly different from
commercial arbitration. Indeed, according to one legal scholar,
"[g]rievance arbitration in the unionized workplace is part of
the continuing process of collective bargaining....[Involuntary]
employment arbitration in the nonunionized workplace does not
serve the same function." (Malin & Ladenson, Privatizing
Justice: A Jurisprudential Perspective on Labor and Employment
Arbitrartion from the Steelworkers Trilogy to Gilmer (1993) 44
Hastings L.J. 1187, 1239.) In fact, labor arbitration is so
favored that in many employment contracts between state
bargaining units and the State, both parties will agree to using
arbitration as an alternative forum for employees to resolve
grievances over their rights provided in the employment
contract.
SB 950
Page 9
Current employee rights. Current law authorizes CalHR to adopt
reasonable rules and regulations for the administration of
employer-employee relations. CalHR has adopted regulations that
set out a Grievance and Appeal Procedure for excluded employees.
Under Title 2, Section 599.859 of the California Code of
Regulations, supervisory employee organizations or individual
supervisors may pursue resolution of disagreements over issues
with their employer that fall within the jurisdiction of CalHR
through a grievance procedure that typically includes an
informal review and four formal levels of review by the employer
according to the following timeline:
Informal Level: Within 5 work days of the incident, an
informal discussion between the excluded employee and the
employee's supervisor or manager.
Level 1: If unsatisfied with the informal review, the
employee may file a formal grievance within 10 work days of
the incident and the employer's designee for the first level
of review must respond within 10 working days.
SB 950
Page 10
Level 2: The employee may appeal the employer's Level 1
decision within 10 work days of receipt of the employer's
response and the employer's designee for the second level of
review must respond within 15 work days.
Level 3: The employee may appeal the employer's Level 2
decision within 10 work days of receipt of the employer's
response and the employer's designee for the third level of
review must respond within 15 work days.
Level 4: The employee may appeal the employer's Level 3
decision to CalHR within 10 work days of receipt of the
employer's response and CalHR's designee for the fourth level
of review must responds within 20 work days.
Upon denial at the fourth level of review, the employee or the
employee organization representing the employee may pursue a
claim with the State Personnel Board, the Department of Fair
Employment and Housing, or the State Superior Court depending
on the issue in dispute.
According to the sponsor, California Correctional Supervisors
SB 950
Page 11
Organization, this bill is necessary because excluded employees
have legitimate grievances and do not have any options, other
than litigation, to seek redress for those grievances and
litigation does not provide a quick or economical way to resolve
routine disputes. The sponsor writes as follows in support of
the bill:
This bill would improve the excluded employee grievance
process to make it effective. Currently, the excluded
employee grievance system is virtually illusory for
excluded employees and is functioning at an unenforceable
level. Of all the grievances filed, 99% are denied because
there is no consequence for the state agency to not follow
the rules, and there is no objective oversight. As it
stands now, the state agencies will deny all grievances
because it's in their best interest and there is nowhere
for the excluded employee to go, it is a closed system. To
combat this, excluded employee organizations have been
going to Superior Court of the State Personnel Board. This
is very costly for the state and the employee organizations
and takes years to resolve. This means that a simple
low-cost or no-cost grievance can and has cost the stat
thousands of dollars because they do not want to admit when
they are wrong.
Currently, the excluded employee grievance system has
proved to be less than effective to the excluded employees
and is functioning at an unenforceable level. Of all the
grievances filed, most are denied. Consequently, the
excluded employee organizations have been going to Superior
Court or the State Personnel Board. This is very costly for
SB 950
Page 12
both the state and the employee organizations and takes
years to resolve.
This bill appears to mirror the voluntary arbitration process
that is provided to unionized employees, but includes additional
provisions to ensure fairness and reliability. Although this
bill applies to excluded employees, the arbitration procedures
created under this bill are similar to the procedures adopted
under traditional labor arbitration. For example, this bill
requires the arbitrator to issue a written decision, and
requires that the decision be based on the record, and
presentations made at the arbitration - common in labor
arbitration, but not required in commercial arbitration.
Furthermore, as proposed to be amended, the bill gives the
excluded employee the right to have a certified shorthand
reporter transcribe the proceeding, and makes the transcript the
official record of the proceeding; and requires an arbitrator,
when conducting an arbitration proceeding involving an excluded
employee, to "apply California law to the facts." These
provisions appear to further the author's goal of ensuring
fairness in the arbitration proceeding. Additionally, these
provisions enhance the integrity and reliability of the
arbitration process.
Author's statement: In support of the bill, the author writes:
SB 950 would improve the excluded employee grievance
process by transforming it to be more effective. The bill
seeks to resolve issues and problems swiftly and at a much
lower level. This will result in state taxpayer savings.
SB 950
Page 13
SB 950 is written in such a way that if the state were
correct when answering important excluded employee
grievances, they will not have to pay for the arbitration;
the excluded employee organization would pay the cost.
Making arbitration a part of the Excluded Employee Bill of
Rights would inspire state agencies to answer title two
grievances fairly and correctly. Only if there were a true
debatable disagreement where both sides feel right, would
these issues be taken to arbitration.
The inability to have arbitration has cost the state
unnecessary litigation costs. This bill will bring a more
meaningful effort to resolve issues and problems and at a
much lower level that will save taxpayer money.
Proposed author's amendments. The author proposes the following
technical and substantive amendments, the effect of which is
described above.
SB 950
Page 14
1)Page 2, line 6, strike "should" and insert: "could"
2)Page 3, line 33, after the period, insert: "A request that is
withdrawn shall not be construed to prevent the employee from
pursuing other grievance procedures available under the law."
3)Page 3, line 34, after (a), insert: "A party to the
arbitration has the right to have a certified shorthand
reporter transcribe the proceeding. The transcript shall be
the official record of the proceeding. (b) The arbitrator
shall apply California law to the facts."
4)Page 3, line 39, strike (b) and insert: "(c)"
5)Page 4, line 1, strike (c) and insert: "(d)"
6)Page 4, line 2, strike the period, and insert: ", including
the costs of a certified shorthand reporter."
7)Page 4, line 3, after "arbitration," insert: "or the costs of
a certified shorthand reporter"
8)Page 4, strike out line 4, and insert: "including the costs of
a certified shorthand reporter, shall not be passed on to the
SB 950
Page 15
excluded employee."
REGISTERED SUPPORT / OPPOSITION:
Support
California Correctional Supervisors Organization (sponsor)
Association for Los Angeles Deputy Sheriffs
California Association of Code Enforcement Officers
California College and University Police Chiefs Association
California Narcotic Officers Association
Civil Justice Association of California
Los Angeles County Professional Peace Officers Association
Los Angeles Police Protective League
Professional Engineers in California Government
Riverside Sheriffs Association
SB 950
Page 16
Opposition
None on file
Analysis Prepared by:Eric Dang and Thomas Clark / JUD. / (916)
319-2334