BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:  August 3, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          SB 959  
          (Lara) - As Amended May 31, 2016


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          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  








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          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;  








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            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  








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          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  








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            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










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