BILL ANALYSIS Ó
SB 1194
Page 1
Date of Hearing: August 24, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
SB 1194(Hill) - As Amended August 19, 2016
SENATE VOTE: 39-0
SUBJECT: Professions and vocations: board actions and
regulations.
SUMMARY: Authorizes the director of the Department of Consumer
Affairs (DCA) to review, veto, or modify actions and decisions
of DCA boards to ensure such actions or decisions conform with
public policy, and specifies settlement authority for treble
damages, as specified.
EXISTING LAW:
1)States that "board" as used in any provision of the Business
and Professions Code (BPC), refers to the board in which the
administration is vested, and unless otherwise provided,
includes "bureau," "commission," "committee," "department,"
"division," "examining committee," "program," and "agency"
2)Makes decisions of any board within the DCA pertaining to
setting standards, conducting examinations, passing
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candidates, and revoking licenses final, except as specified,
and provides that those decisions are not subject to review by
the director of the DCA. (BPC Section 109 (a))
3)Provides that the director may initiate an investigation of
any allegations of misconduct in the preparation,
administration, or scoring of any examination which is
administered by a board, or in the review and qualifications
which are part of the licensing process of any board. (BPC
Section 109 (b))
4)Provides that the director may intervene in any matter of any
board where an investigation by the Division of Investigation
discloses probably cause to believe that the conduct or
activity of a board, or its members or employees constitutes a
violation of criminal law. (BPC Section 109 (c))
5)Authorizes the director to audit and review, upon his or her
own initiative, or upon the request of a consumer or licensee,
inquiries and complaints regarding licensees, dismissals of
disciplinary cases, the opening, conduct, or closure of
investigations, informal conferences, and discipline short of
formal accusation by the Medical Board of California, the
allied health professional boards, and the California Board of
Podiatric Medicine and the Director may make recommendations
for changes to the disciplinary system to the appropriate
board, the Legislature, or both. (BPC Section 116 (a))
6)Requires the director to annually report to the chairpersons
of certain committees of the Legislature information regarding
findings from any audit, review, or monitoring and evaluation.
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(BPC Section 116 (b))
THIS BILL:
1)Deletes the exemption for the decisions of any of the boards
comprising the Department of Consumer Affairs (DCA) with
respect to setting standards, conducting examinations, passing
candidates, and revoking licensees from review by the director
of the DCA, except where provided.
2)Defines "action" to include nonministerial formal actions as
voted on by a board and nonministerial informal decisions made
by staff as a result of explicit or implied delegated
authority to act on behalf of the board.
3)States that notwithstanding any other law, "board" for
purposes of this bill, means a board, committee, or commission
within the DCA.
4)Defines "market-sensitive actions" to mean those actions that
create barriers to market participation and restrict
competition, including but not limited to, examination passage
scores, advertising restrictions, price regulation, enlarging
or restricting their scope of practice qualifications for
licensure, and a pattern or program of disciplinary actions
affecting multiple individuals that create barriers to market
participation.
5)Specifies that "clearly articulated and affirmatively
expressed state policy" includes federal statute and
regulations, state statutes and regulations, department
policies, and executive orders.
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6)Specifies that within 60 days of an action taking place, the
director may, upon his or her own initiative, and upon request
by the board making the decision or the Legislature, review
any action by a board to determine if the action is a market
sensitive action.
7)Requires the director, if the action is found to be
market-sensitive action, within 90 days of receiving a request
for a review or initiating a review, further determine whether
that market-sensitive action furthers a clearly articulated
and affirmatively expressed state policy.
8)Requires the director, if he or she initiates a review of an
action, to notify the relevant board of the review and
indicate whether the review resulted from a contact made by a
specific member of the Legislature, a specific organization,
or a member of the public.
9)States that the director's decision to review an action serves
to cease implementation of the action until the review is
finalized and the action is found to further a clearly
articulated and affirmatively expressed state policy.
10)Requires any review by the director to include a full
substantive review of the board action based upon all the
relevant facts in the record provided by the board and any
additional information identified by the director.
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11)Requires the director to take one of the following actions
upon completion of the review:
a) Approve the action or decision upon determination that
it furthers a clearly articulated and affirmatively
expressed state policy; or,
b) Disapprove the action or decision if it does not further
a clearly articulated and affirmatively expressed state
policy; where upon disapproval, the director may recommend
modifications to the board action that the board may vote
to accept and resubmit for review, if the board rejects the
modification, no action will take effect.
12)States that 2) through 11) above do not apply to any action
taken by a board prior to January 1, 2017.
13)Requires the director to issue and post on the department's
Internet website his or her final written decision on the
board action with an explanation of the reasons that action or
decision does or does not further a clearly articulated and
affirmatively expressed state policy and the rational for the
director's decision.
14)States that 2) through 11) above do not apply to the review
of any regulation promulgated by a board, singular
disciplinary action, official positions on legislation or
legislative proposals, or any other sanction or citation
imposed by a board upon a single licensee unless it is part of
a pattern or program of disciplinary actions affecting
multiple individuals that create barriers to market
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participation.
15)Requires the director to report to the Chairs of the Senate
Committee on Business, Professions and Economic Development
and the Assembly Committee on Business and Professions
annually, beginning March 1, 2017, regarding his or her
disapproval, and recommendations for modifications, as
specified.
16)States that the above provisions shall not be construed to
affect, impede, or delay any disciplinary actions of any board
except those actions that are under review as part of a
potential pattern or program of disciplinary actions affecting
multiple individuals that create barriers to market
participation or delay the availability of judicial review
under any other law, as specified.
17)Authorizes the director to audit and review, upon his or her
own initiative or upon the request of a consumer or licensee,
inquiries and complaints regarding licensees, dismissals of
disciplinary cases, the opening, conduct, or closure of
investigations, among others as specified, of any bureau or
board within the DCA instead of only the Medical Board of
California, the allied health professional boards, and the
California Board of Podiatric Medicine.
18)Requires the director to submit a specified report regarding
his or her findings in 17) above to the Senate Committee on
Business, Professions and Economic Development, and the
Assembly Committee on Business and Professions annually
beginning March 1, 2017.
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19)Requires the director to review all rules, regulations, and
fee changes, as specified, and require the director to be
provided all relevant facts in the rulemaking record, which
may include data, public comments, or other documentary
evidence pertaining to the proposed regulation to determine
whether it furthers a clearly articulated and affirmatively
expressed state policy.
20)Requires the director, following the receipt of any final
rulemaking record to approve or disapprove a proposed rule or
regulation within in 60 days.
21)Adds a market-sensitive action that does not further a
clearly articulated and affirmatively expressed state policy
to the reasons a rule may be disapproved.
22)Requires a regulation which is a market-sensitive action that
does not further a clearly articulated and affirmatively
expressed state policy to be disapproved in writing.
23)Allows the director to propose modifications to a regulation
that does not further a clearly articulated and affirmatively
expressed state policy.
24)Requires, as specified, a public entity to pay for a
judgement or settlement for treble damage antitrust awards
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against a member of a regulatory board for an act or omission
occurring within the scope of his or her official capacity as
a member of a regulatory board.
25)Specifies treble damages awarded pursuant to 24) above.
26)Make other technical changes.
FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill seeks to revise the director's authority to
review specified board decisions, rules and regulations to
ensure that a mechanism exists for independent state review of
regulatory board actions is available. According to the author,
"[this bill] is the product of 8 months of collaborative
meetings between the Legislature, Governor's office, DCA, the
Attorney General's office, and other stakeholders. We are
pleased to present this bill which will shield California from
litigation by ensuring that the actions of our regulatory boards
are in the best interests of consumers."
Background. Joint Oversight Hearings and Sunset Review of the
DCA and the DCA Licensing Boards. In March of 2016, the
Assembly Business and Professions Committee and the Senate
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Business, Professions and Economic Development Committee
(Committees) conducted multiple joint oversight hearings to
review 11 regulatory boards within the DCA and one regulatory
entity outside of the DCA. The sunset bills are intended to
implement legislative changes recommended in the respective
background reports drafted by the Committee staff for the
agencies reviewed this year. As part of that review process,
issues are raised regarding the overall operations of the DCA as
the state agency under California's Business, Consumer Services,
and Housing Agency whose missions is: "to be the premier
consumer protection agency" and whose vision is: "to protect
consumers through effective enforcement activities and oversight
of California's licensed professionals."
One of the issues raised in the Committee's 2016 Background
Paper which reviewed the DCA, was the potential antitrust
liability for boards under the DCA. The author notes that, "The
bill aims to ensure that the DCA's regulatory boards are
functioning with appropriate active state supervision, thereby
preventing any litigation stemming from actions or decisions
that do not further state policy."
Potential Antitrust Liability for Boards under the DCA. In the
Committee's 2016 Background Paper it was noted that in 2010, the
FTC brought an administrative complaint against the North
Carolina State Board of Dental Examiners (Board) for excluding
non-dentists from the practice of teeth whitening. The FTC
alleged that the Board's decision was anticompetitive under the
FTC Act because the Board was not acting as a state agent. The
Board appealed to the Supreme Court, arguing that it was acting
on behalf of the government and should be afforded immunity from
antitrust lawsuits. The Supreme Court ruled in the FTC's favor,
stating that regulatory bodies comprised of active market
participants in the occupation regulated by that body may invoke
state-action antitrust immunity only if it is subject to active
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supervision by the state. The Supreme Court has stated that to
qualify as active supervision "the [state] supervisor must have
the power to veto or modify particular decisions to ensure they
accord with state policy." (N. Carolina State Bd., 135 S. Ct. at
1116)
In order to establish active supervision for California boards,
this bill builds upon the current authority of the director of
the DCA to review certain board decisions (except those relating
to disciplinary actions) in order to ensure they conform with
state policy. This bill also ensures that DCA board members are
not personally liable in the event they are sued in an antitrust
matter related to their board service.
Joint Informational Hearing. In October of 2015, the Committees
held a joint informational hearing titled North Carolina State
Board of Dental Examiners v. Federal Trade Commission:
Implications for Department of Consumer Affairs (DCA) Boards.
The intent of the hearing was to explore the Court's decision,
apply its holding to the operations of DCA boards, and consider
recommendations. Some of the questions which guided the
presentations at the information hearing included: 1) What
constitutes a "controlling number" of active market
participants? 2) To what extent do California's existing
oversight mechanisms satisfy "active state supervision"? 3) What
laws or processes must be changed to guard against
anticompetitive behavior? 4) How can the state ensure that Board
members are indemnified? While this bill does not address all
questions raised at the hearing, it does attempt to address the
issue of state supervision by providing the DCA director with
certain authority related to anticompetitive behavior.
This bill provides the director with two avenues for the review
of a nonministerial market-sensitive action either at the
director's own determination or at the request of a board making
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the decision or the Legislature, except as specified, to
determine whether it furthers a "clearly articulated and
affirmatively expressed" state policy and to approve,
disapprove, or recommend modifications of the board action, as
specified.
In addition, this bill requires the director to post on the
department's website the director's final written decision and
the reasons for the decision. The director will be required to
report to specified policy committee of the Legislation
information regarding the director's disapprovals and
recommended modifications of board actions. This bill would
require the director to disapprove a proposed rule or regulation
that is a market-sensitive action that does not further clearly
articulated and affirmatively expressed state policy and
authorizes the director to recommend modifications.
This bill also requires a public entity to pay a judgment or
settlement for treble damage antitrust awards against a member
of a regulatory board for an act or omission occurring within
the scope of his or her employment as a member of a regulatory
board, as specified.
The author notes that it has worked closely with the DCA, the
Governor's, and Attorney General's offices in crafting the
provisions of bill.
Current Related Legislation. SB 1195 (Hill) of the current
Legislative Session, makes various changes that are intended to
improve the effectiveness of the Veterinary Medical Board (VMB),
extends the VMB's sunset dates. This bill also authorizes the
Director of the Department of Consumer Affairs (DCA) to review,
veto, or modify actions and decisions of DCA boards to ensure
such actions or decisions conform with public policy; and
prohibits any board executive officer (EO) from being an
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actively licensed member of the profession the board regulates.
STATUS: This bill was held on the Senate Inactive File.
ARGUMENTS IN SUPPORT:
The Center for Public Interest Law , writes that it supports this
bill if amended, "?SB 1194 aims to protects consumers and
provide a supervision mechanism by vesting the DCA Director with
supervisory authority over boards controlled by active market
participants. See Section 1, proposing amendments to Business
and Professions Code section 109. This proposed active state
supervision mechanism is generally in line with the North
Carolina decision with one critical exception - it does not
permit the supervisor to "modify" anticompetitive actions?
As currently phrased, the plain language of the bill contradicts
the North Carolina decision's prescription for "active state
supervision" because it does not allow the supervisor to modify
offending anticompetitive decisions. This contradiction
presents two problems: 1) the ability of the state supervisor
to protect the public from anticompetitive conduct is severely
weakened, and 2) the ability of the state to use the law as a
shield against a lawsuit is cast, at best, into uncertainty,
possibly defeating the key aim of the bill."
ARGUMENTS IN OPPOSITION:
The California Nurses Association and the National Nurses United
write in opposition, "[this bill] is a massive power grab
masquerading as a simple policy fix. The bill constitutes an
unprecedented, undemocratic, and dangerous transfer of authority
away from licensing board members and to a single bureaucrat-the
Director of the [DCA]. The proposed legislation would give the
DCA Director the authority to unilaterally overturn almost any
conceivable licensing board action or decision. This represents
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a major usurpation of decision-making authority from the board
members. Such a shift will severely undermine the ability of
the boards, and especially the Board of Registered Nursing
(BRN), to operate with efficiency and take actions that promote
public health and safety."
AMENDMENTS:
1)The following amendments should be made in order to clarify
that the director has 60 days, instead of 30, following the
receipt of any final rulemaking record to approve or
disapprove a proposed rule or regulation:
On page 10, line 32, strike: 30-day review period and replace
with: 60-day review period
On Page 11, line 16, strike: 30-day period and replace with:
60-day review period
2)The following technical amendment should be made:
On page 7, line 32, after the word "disapprovals" insert:
approvals
3)An amendment should be made to include a sunset provision of
four years to clarify that the director's authority, as
provided by this bill, is subject to review by the appropriate
policy committees of the Legislature.
REGISTERED SUPPORT:
None on file.
REGISTERED SUPPORT IF AMENDED:
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Center for Public Interest Law
REGISTERED OPPOSITION:
California Nurses Association
National Nurses United
Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301