Amended in Senate April 20, 2016

Senate Bill No. 1228

Introduced by Senator Runner

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(Coauthors: Senators Bates and Berryhill)

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February 18, 2016

An act to add begin delete Chapter 4 (commencing with Section 550) to Title 7 of Part 2 of the Code of Civil Procedure, and to add end delete Chapter 3.7 (commencing with Section 11367) to Part 1 of Division 3 of Title 2 of the Government Code, relating to small business.

LEGISLATIVE COUNSEL’S DIGEST

SB 1228, as amended, Runner. Small business: California Small Business Regulatory Fairness Act.

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Existing law generally requires that all administrative remedies are exhausted before a court may inquire into the validity of any final administrative order or decision and authorizes the court to inquire whether the agency proceeded without, or in excess of, the agency’s jurisdiction, whether there was a fair hearing, and whether the was any prejudicial abuse of discretion, as specified.

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This bill would authorize a court, after administrative remedies are exhausted, to grant equitable relief in the interest of justice to a small business, as defined, and requires the court to consider mitigating factors when granting the equitable relief including, but not limited to, that the small business engaged in subsequent action to correct the violation. The bill would, notwithstanding any other law, authorize a small business, before exhausting all administrative remedies, to seek judicial review and the stay of an order issued by a state agency if the small business would suffer irreparable harm in the absence of the court granting a stay of the state agency’s order or the state agency issuing the order has not complied with a specified section of law. The bill would, if the court grants the stay of the order, deem the small business to have exhausted all administrative remedies and would require the court to hear the case sitting without a jury. The bill would require the court to review the evidence and facts de novo and make its own independent judgment on the merits of the case. The bill would exempt any order from the Franchise Tax Board or the State Board of Equalization from these provisions.

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Existing law, the Administrative Procedure Act, governs the procedures for the adoption, amendment, or repeal of regulations by state agencies and requires, among other things, that a state agency make available to the public facts, evidence, documents, testimony, or other evidence on which the state agency relies begin delete on end delete to support the agency’s determination that the proposed action will not have a significant adverse impact on business. Existing law establishes the Office of Small Business Advocate, within the Governor’s Office of Business and Economic Development, and establishes the duties and functions of the Director of the Office of Small Business Advocate including, among other duties, representing the views and interests of small businesses before other state agencies whose policies and activities may affect small businesses. Existing law requires each state agency that significantly regulates small business or that significantly impacts small business to designate at least one person who is required to serve as a small business liaison.

This bill would require a state agency to assist a small business, as defined, in complying with all statutes and regulations administered by the state begin delete agency, end delete begin insert agency and end insert in any enforcement action by the state begin delete agency, and in participating in the rulemaking process under the Administrative Procedure Act, as specified. The bill would require a state agency to include certain information on any notice of regulatory violation, penalty assessment, or other punitive action sent to a small business, including, among others, the contact information for the agency’s small business liaison. The bill would, notwithstanding any other law, require a state agency, before assessing any administrative penalties or fines on a small business, to provide no less than 30 days actual notice to the small business and to provide the small business with an opportunity to comply with the law or remedy the violation if ignorance of the violation is reasonable under the circumstances and the violation does not constitute a crime or a basis for strict liability. end delete begin insert agency. end insert The bill would, begin delete no end delete begin insert not end insert later than December 31, 2017, require a state agency to create a policy, as specified, that provides for the reduction, and under certain circumstances waiver, of civil penalties for a small business based upon begin delete principles of equity and fairness, and requires a state agency to consider end delete mitigating factors begin delete when adopting the policy, end delete including, but not limited to, that the violation by the small business begin delete was committed inadvertently or without knowledge of the requirements for compliance with the law. end delete begin insert did not pose an imminent health, safety, or environmental threat. end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

This act shall be known, and may be cited, as the
California Small Business Regulatory Fairness Act.

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SEC. 2.  

Chapter 4 (commencing with Section 550) is added
to Title 7 of Part 2 of the Code of Civil Procedure, to read:

 

Chapter  4. California Small Business Regulatory
Fairness Act

 

550.  

(a) A court may, after administrative remedies are
exhausted, grant equitable relief to a small business from a final
order of a state agency in the interest of justice.

(b) When granting equitable relief under this section, the court
shall consider mitigating factors including, but not limited to:

(1) The small business has not been subject to previous
enforcement actions by the state agency.

(2) The violation by the small business did not involve willful
or criminal conduct.

(3) The violation by the small business did not pose an imminent
health, safety, or environmental threat.

(4) The violation by the small business was committed
inadvertently or without knowledge of the requirements for
compliance with the law.

(5) The small business is unable to pay the penalty or the penalty
would impair the ability of the small business to conduct business
or compete effectively.

(6) The small business has a low degree of culpability when its
conduct is judged in light of its size, length of operation, and the
sophistication of its owners or managers.

(7) The small business cooperated during any investigation by
the state agency.

(8) The small business engaged in subsequent action to correct
the violation.

(c) The court may take into consideration any other mitigating
factors the court finds relevant. The court shall not be required to
weigh the mitigating factors equally.

(d) The court shall review all evidence and facts de novo and
make its own independent decision on the merits when granting
relief under this section.

551.  

(a) Notwithstanding any other law, a small business may
seek judicial review and a stay of an order of a state agency without
exhausting administrative remedies if either of the following apply:

(1) The small business would suffer irreparable harm in the
absence of the court granting a stay on the order of the state agency.

(2) The state agency issuing the order that is before the court
has not established the policy required by Section 11367.4 of the
Government Code.

(b) If a court grants relief to a small business under this section,
the small business shall be deemed to have exhausted all
administrative remedies and the case shall be heard by the court
sitting without a jury.

(c) The court shall review all evidence and facts de novo and
make its own independent decision on the merits.

(d) The decision of the court to decline review or deny relief
under this section shall not be appealable.

552.  

(a) For purposes of this chapter, “small business” has the
same meaning as set forth in Section 14837 of the Government
Code.

(b) For purposes of this chapter, “state agency” shall not include
the Franchise Tax Board or the State Board of Equalization.

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Chapter 3.7 (commencing with Section 11367) is added
to Part 1 of Division 3 of Title 2 of the Government Code, to read:

 

Chapter  3.7. California Small Business Regulatory
Fairness Act

 

11367.  

The following terms shall have the following meanings
for purposes of this chapter:

(a) “Small business” shall have the same meaning as set forth
in Section 14837 of the Government Code.

(b) “State agency” means any state agency except the Franchise
Tax Board or the State Board of Equalization.

11367.1.  

(a) A state agency shall do all of the following:

(1) Assist a small business in achieving compliance with statutes
and regulations administered by the state agency.

(2) Assist a small business during an enforcement action by the
state agency.

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(3) Assist a small businesses with participating in the rulemaking
process required by the Administrative Procedure Act (Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of
Title 2 of the Government Code). A state agency shall provide a
small business with information on how to participate in the
rulemaking process and shall provide the contact information of
any ombudsman or small business liaison that can assist the small
business, including, but not limited to, the Office of Small Business
Advocate.

(b) A state agency shall include all of the following information
on any notice of regulatory violation, penalty assessment, or other
punitive action sent to a small business:

(1) How the small business can comply with the law or remedy
the violation, pursuant to Section 11367.2.

(2) All administrative and judicial remedies available to the
small business.

(3) The Internet Web site, if available, and contact information
for all of the following:

(A) The Office of Small Business Advocate.

(B) Any applicable ombudsman that may assist the small
business.

(C) The small business liaison for the state agency.

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11367.2.  

(a) Notwithstanding any other law, before imposing
any civil penalties or administrative fines on a small business, a
state agency shall provide no less than 30 days actual notice to a
small business and shall provide the small business with an
opportunity to comply with the law or remedy the violation of the
law if ignorance of the violation is reasonable under the
circumstances and the violation does not constitute a crime or a
basis for strict liability.

(b) All other notices of regulatory violation, which result in
penalty assessment or other punitive action, sent to a small business
shall be delivered as expeditiously as possible to allow the small
business to comply with the law and mitigate any losses.

(c) Notices required under this section shall be delivered to the
small business in person by an authorized agent of the state agency
or by certified mail.

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begin delete 11367.4. end delete   

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(a) No

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begin insert (3) end insert begin insert   end insert begin insert Not end insert later than December 31, 2017, begin delete a state agency shall end delete
establish a policy to provide for reduction, and under certain
circumstances waiver, of civil penalties for a small business based
upon begin delete principles of equity and fairness. end delete begin insert mitigating factors including,
but not limited to: end insert

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(b) Mitigating factors that shall be considered by a state agency
when adopting the policy in subdivision (a) include, but are not
limited to:

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(1)

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begin insert (A) end insert  The small business has not been subject to previous
enforcement actions by the agency.

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(2)

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begin insert (B) end insert  The violation by the small business did not involve willful
or criminal conduct.

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(3)

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begin insert (C) end insert  The violation by the small business did not pose an imminent
health, safety, or environmental threat.

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(4) The violation by the small business was committed
inadvertently or without knowledge of the requirements for
compliance with the law.

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(5)

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begin insert (D) end insert  The small business is unable to pay the penalty or the
penalty would impair the ability of the small business to conduct
business or compete effectively.

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(6)

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begin insert (E) end insert  The small business has a low degree of culpability when its
conduct is judged in light of its size, length of operation, and the
sophistication of its owners or managers.

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(7)

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begin insert (F) end insert  The small business cooperated during any investigation by
the state agency.

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(8)

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begin insert (G) end insert  The small business engaged in subsequent action to correct
the violation.

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(c)

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begin insert (b) end insert  A small business shall not be required to meet all of the
mitigating factors adopted by a state agency to receive relief under
the policy. A state agency shall not require the mitigating factors
to be weighed equally when granting relief to a small business
under the policy.

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(d) A court may independently weigh, de novo, all relevant
mitigating factors when reviewing a decision by a state agency to
grant relief to a small business under the policy.

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