BILL ANALYSIS
AB 1531
Page 1
Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 1531 (Portantino) - As Introduced: February 27, 2009
SUBJECT : State contracts: employment clauses.
SUMMARY : Requires a public contract entered into between the
state and another person or entity for services, goods, or
materials to include a clause stating that a person or entity
that contracts with the state is prohibited from imposing a
condition of employment that would prohibit or penalize an
employee subject to the contract or personal services contractor
from seeking or accepting employment with the state.
EXISTING LAW , under the State Contract Act, governs contracting
between state agencies and private contractors, and sets forth
requirements for the bidding, awarding, and overseeing of
contracts for projects, which it defines to include the
construction or other improvements to a state structure or
building, that will exceed a total specified cost threshold.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "The
state has entered into contracts to provide specific staff
services, in this case in response to a court order in our
prison system, at a cost of 90% higher than an equivalent state
employee. The contracted psychologist in this case wanted to
become a state employee and the contractor wanted several months
of pay and tried to prohibit him from becoming a state employee.
The state could preclude such contractors from prohibiting such
clauses in employment contracts, particularly when the contracts
are prompted by court order at such an excessive cost to the
state."
Background . The California Legislature and state Supreme Court
have repeatedly stated that covenants not to compete are void
and unenforceable, subject to several exceptions. B&P Code
section 16600 states, "Except as provided in this chapter, every
contract by which anyone is restrained from engaging in a lawful
profession, trade, or business of any kind is to that extent
AB 1531
Page 2
void." Non compete clauses may only be applied when an
individual sells the goodwill of a business, an owner sells all
of his or her ownership interest, or a partnership or limited
liability company dissolves, as specified. Current case law
also prohibits employers from narrowly tailoring a non compete
agreement that penalizes an employee for working for a
competitor.
Nevertheless, companies frequently insert such clauses into
employment agreements to dissuade their employees from accepting
employment with competitors.
Arguments in support . AFSCME 2620 writes in support, "AB 1531
(Portantino) would make it financially possible for contracted
clinicians to accept state employment to perform the same
service. Today the agencies with whom the state contracts
include so-called 'non-compete' clauses in their own employment
contracts which preclude or significantly penalize any clinician
who may prefer going to work for the state directly.
"The state already faces a steep recruitment problem in terms of
hiring clinical staff directly due to the state's inability as
well as the competitive wages and benefits offered. The last
thing the state should be doing is guaranteeing that taxpayers
will pay two or three times the amount necessary for a
particular worker, especially if that worker is willing to work
for the state directly."
Suggested technical amendment . The committee recommends adding
the following to conform with current law:
On page 2, line 1, delete "Notwithstanding any other provision
in law" and add
"In accordance with Business and Professions Code 16600"
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County, and Municipal Employees
(AFSCME) Local 2620, AFL-CIO (sponsor)
Opposition
AB 1531
Page 3
None on file.
Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301