BILL ANALYSIS Ó SB 959 Page 1 Date of Hearing: August 3, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair SB 959 (Lara) - As Amended May 31, 2016 ----------------------------------------------------------------- |Policy |Higher Education |Vote:|10 - 3 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Accountability and | | 6 - 2 | | |Administrative Review | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill, effective January 1, 2018, requires bidders on University of California (UC) contracts for specified types of personal services to certify that their employees' total SB 959 Page 2 compensation does not significantly undercut the total compensation of UC employees doing comparable work. Specifically, this bill: 1)Applies the cost standard described above to the following types of contracts: building maintenance, cleaning or custodial services, call centers services, clerical services, dining and food services, gardening, grounds keeping, and plant nursery services, laborer services, mailroom services, parking, shuttle bus, and transportation services, security services, storekeeper services, patient care technical employee services, patient billing services, medical transcribing services, patient escort services, or nursing assistance services. 2)Requires a bidder to certify the following: a) That its total employee compensation package, including fringe benefits, that is valued on a per-employee basis, does not materially undercut UC's total compensation for employees doing comparable work at the relevant campus, medical center, or laboratory by more than five percent. b) That the bidder has not been found liable for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order Issued by the Industrial Welfare Commission for specified amounts, within the prior five years. 3)Requires the bidder to provide the UC: a) spreadsheets showing all applicable compensation and benefits, as specified, for each position and employee supplied to the University; b) an organization chart showing the bidder's supervisory structure; SB 959 Page 3 and, c) any applicable collective bargaining agreements and all employee handbooks applicable to the contracted employees. 4)Requires a successful bidder, once under contract, to notify the UC of any changes to the information provided within 30 days of the change, and provide UC copies of notices provided to employees in compliance with existing labor code provisions outlining the obligations of the employer prior to the employees beginning UC campus work. 5)Requires UC to include in its request for proposals, a calculation of the average per-employee value of total compensation for UC employees relevant to a particular contract, and to incorporate all known cost escalators for projecting the rate of growth of average per-employee compensation. 6)Declares the records provided by the bidder/contractor to be subject to Public Records Act laws and authorizes the UC to redact any confidential information and to delay responses to public records requests until after a bid process is complete, if applicable. 7)Stipulates that, effective January 1, 2018, the current requirement that UC service contracts-other than for personal or professional services-involving expenditures of $100,000 or more annually be awarded to the lowest responsible bidder, includes the renewal or extension of such contracts. FISCAL EFFECT: UC estimates that its total annual spending on service contracts of the types that would be subject to the provisions of this SB 959 Page 4 bill is $345 million, with just over one half of this amount representing contracts at UC's 10 campuses and the remainder representing contracts at UC's five medical centers. Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits and a 12.5% increase in costs related to wage parity, total annual costs would be $88 million. These costs will come from a variety of UC fund sources, including the State General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers. In addition to increased contract costs, UC will incur administrative costs of several hundred thousand dollars to calculate average per-employee compensation for every type of contract and to factor in all known cost escalators to project future per-employee costs. There will be additional administrative costs, likely in the millions of dollars over time, associated with revising contract bid specifications, maintaining information provided by prospective and successful bidders for potential Public Records Act requests, and performing additional bidding due to the bill's restrictions on contract renewals or extensions. COMMENTS: 1)Purpose. According to the author, this bill "seeks to address the growing challenge to California of the use of contingent workers to replace employees, and the consequential effect it has on wages and worker protections." The author further states such workers generally receive lower wages and less workplace protections, and that government must assume some of the burden of providing benefits and support to these employees. In support, the American Federation of State, County, and Municipal Employees (AFSCME) contends that, "If enacted, this SB 959 Page 5 bill would help to stem the troubling and growing trend of depressed wages and labor abuse among contracted out workers, by requiring California's third-largest employer, the University of California, to hold contract labor firms accountable around compensation and treatment of workers." 2)Opposition. In July 2015, UC announced its Fair Wage/Fair Work plan, which will established the minimum wage for contract workers at $13 per hour starting October 2015, increasing to $15 per hour as of October 1, 2017. This plan also involves a monitoring and compliance program to ensure contractors are complying with UC policies and all federal, state, and local laws. Finally, the program includes annual compensation audits of all contracts and spot audits of selected contracts. UC notes that it only contracts out for services when there is a need for special expertise or experience, for short-term or temporary staffing needs, for special services and equipment that are not available internally, or for services at a leased facility where the services are provided by the owner. UC argues that, in addition to increasing costs, the bill will create administrative burdens, in part by requiring an analysis to determine per-employee compensation for every type of contract and factoring in all known cost escalators to project future per-employee costs. UC also asserts the bill will hinder its ability to make its contracting more efficient by using systemwide rather than site-specific contracts. 3)Prior Legislation. In 2015, SB 376 (Lara), which was very similar to this bill, though lacking some of the administrative requirements of SB 959, was vetoed. Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081 SB 959 Page 6