BILL ANALYSIS
AB 1680
Page 1
Date of Hearing: March 16, 2010
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 1680 (Salda?a) - As Introduced: January 25, 2010
As Proposed to be Amended
SUBJECT : HATE CRIMES: MANDATORY WAIVERS
KEY ISSUE : SHOULD THE CIVIL RIGHTS AND PROCEDURES ESTABLISHED
BY THE STATE'S HATE CRIMES LAWS BE PROTECTED AGAINST FORCED AND
INVOLUNTARY WAIVERS IN ORDER TO PRESERVE THE IMPORTANT PUBLIC
INTERESTS UNDERLYING THOSE STATUTES?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill governs contracts that require the waiver of civil
rights, remedies and procedures established by the state's
hate-crimes statutes. While the bill permits such waivers,
including pre-dispute arbitration clauses, it would require that
they be knowing and voluntary, not coerced or compelled as a
condition of doing business. Supporters argue that hate crimes
are fundamentally different types of wrongs than the kind of
commercial disputes that may be appropriate for contractual
private arbitration or other waiver agreements, and that the
state has an interest in preventing compulsory waiver of the
rights and procedures established by the hate crimes laws,
including diversion into secret and unregulated dispute
resolution systems. Opponents do not take issue with the
involuntary waiver of civil rights, but focus their arguments on
the claimed benefits of private arbitration, including that it
is fast, fair and economical, and therefore superior to the
public court system for the resolution of disputes. However,
opponents do not explain why they believe the bill would
prohibit all private arbitration agreements regarding hate
crimes if contracting parties could voluntarily elect
arbitration as an option, as they apparently would be free to do
under this bill. Opponents also contend that the bill is
pre-empted by the federal law.
SUMMARY : Restricts contractual waiver of certain civil rights
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statutes. Specifically, this bill :
1)Provides that no person shall require another person to waive
any legal right, penalty, remedy, forum, or procedure for
violation of the Ralph Civil Rights Act or the Bane Civil
Rights Act as a condition of entering into a contract for the
provision of goods and services, including the right to file
and pursue a civil action or complaint with or otherwise
notify the Attorney General or any other public prosecutor or
any law enforcement agency, the Department of Fair Employment
and Housing, or any court or other governmental entity.
2)Provides that no person shall refuse to enter into a contract
with, or refuse to provide goods or services to, another
person on the basis that the other person refuses to waive any
legal right, penalty, remedy, forum, or procedure for
violation of these civil rights acts.
3)Provides that the exercise of a person's right to refuse to
waive any legal right, penalty, remedy, forum or procedure for
a violation of these civil rights laws shall not affect any
otherwise legal terms of a contract or an agreement.
4)Requires that any waiver of any legal right, penalty, remedy,
forum, or procedure for violation of these civil rights acts
shall be knowing and voluntary, and in writing, and expressly
not made as a condition of entering into the contract or as a
condition of providing or receiving goods and services, and
that any person who seeks to enforce such a waiver shall have
the burden of proving that it was knowing and voluntary and
not made as a condition of the contract or of providing or
receiving the goods or services.
5)Provides that the foregoing protections apply to any agreement
to waive any legal right, penalty, remedy, forum or procedure
for a violation of these civil rights laws entered into,
altered, modified, renewed, or extended on or after January 1,
2011.
EXISTING LAW :
1)Establishes the Ralph Civil Rights Act, which provides that
all persons within the jurisdiction of this state have the
right to be free from any violence, or intimidation by threat
of violence, committed against their persons or property
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because of political affiliation, or on account of [sex, race,
color, religion, ancestry, national origin, disability,
medical condition, marital status, or sexual orientation] or
position in a labor dispute, or because another person
perceives them to have one or more of those characteristics.
(Civil Code section 51.7.)
2)Provides that a person who violates the Ralph Civil Rights Act
or aids, incites, or conspires in that act, is liable for each
and every offense for the actual damages suffered by any
person denied that right, as well as a civil penalty of
$25,000, exemplary damages and attorney's fees. (Civil Code
section 52(b).)
3)Further provides that whenever there is reasonable cause to
believe that any person or group of persons is engaged in
conduct of resistance to the full enjoyment of any of the
foregoing rights the Attorney General, any district attorney
or city attorney, or any person aggrieved by the conduct may
bring a civil action. (Civil Code section 52(c).)
4)Establishes the Bane Civil Rights Act, which provides that if
a person interferes by threats, intimidation, or coercion, or
attempts to interfere by threats, intimidation, or coercion,
with the exercise or enjoyment by any individual of rights
secured by the Constitution or laws of the United States, or
of the rights secured by the Constitution or laws of this
state, the Attorney General, or any district attorney or city
attorney may bring a civil action for a civil penalty,
injunctive and other appropriate equitable relief in the name
of the people of the State of California, in order to protect
the peaceable exercise or enjoyment of the right or rights
secured. Likewise, an individual whose exercise or enjoyment
of rights secured by the Constitution or laws of the United
States, or of rights secured by the Constitution or laws of
this state, has been so interfered with, or attempted to be
interfered with, may institute and prosecute in his or her own
name and on his or her own behalf a civil action for damages,
injunctive relief, and other appropriate equitable relief to
protect the peaceable exercise or enjoyment of the right or
rights secured. (Civil Code section 52.)
5)Establishes the California Arbitration Act which provides that
agreements to arbitrate shall be valid, irrevocable, and
enforceable, except such grounds as exist at law or in equity
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for the revocation of any contract. (Code of Civil Procedure
section 1280 et seq.)
6)Similarly establishes the Federal Arbitration Act (FAA) which
provides that agreements to arbitrate shall be valid,
irrevocable, and enforceable, except such grounds as exist at
law or in equity for the revocation of any contract. (9 USC
Section 1 et seq.)
7)Provides that trial by jury is an inviolate right and shall be
secured to all. (Cal. Const. Article 1, Section 16.)
8)Permits arbitrators to disregard the law and/or the evidence
in rendering their decisions. Awards may be enforced by the
court, even if they are legally and factually erroneous.
(Moncharsh v. Heily & Blase et al (1992) 3 Cal.4th 1.)
9)Allows private arbitrators to issue binding decisions that are
legally enforceable but essentially not reviewable by a court;
there is no appeal from an arbitrator's decision to a public
court unless the arbitration agreement expressly provides for
judicial review. (Crowell v. Downey Community Hospital
Foundation (2002) 95 Cal. App. 4th 730; Cable Connection, Inc.
v. DIRECTV, Inc., 44 Cal. 4th 1334 (2008).)
10) Permits enforcement of private arbitration agreements that
preclude not only access to the courts but also access to
other governmental bodies responsible for enforcing state
laws, such as administrative complaint procedures regarding
employment laws. (Sonic-Calabasas A, Inc. v. Moreno, 174 Cal.
App. 4th 546 (2009), rev. granted, 99 Cal. Rptr. 3d 866
(2009).)
11) Allows arbitrators to conduct arbitrations without
allowing for discovery, complying with the rules of evidence,
or explaining their decisions in written opinions. (Code of
Civil Procedure Sections 1283.1, 1282.2, 1283.4.)
12) Permits arbitrations to be conducted in private with no
public scrutiny. (Ting v. AT&T (2002) 182 F.Supp. 2d 902
(N.D. Cal.), affirmed, 319 F.3d 1126 (9th Cir 2003.))
13) Allows arbitrators substantial if not absolute immunity
from civil liability for acts relating to their decisions,
even in the case of bias, fraud, corruption or other violation
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of law. (Baar v. Tigerman (1983) 140 Cal. App. 3d 979.)
14) Limits the relief that a court may grant to a party in
arbitration, no matter what misconduct has taken place in the
arbitration, to potential vacatur of the award and returning
the parties to further arbitration, perhaps with the same
arbitrator or arbitration company. The grounds on which an
arbitrator's decision may be vacated are narrow and the
standards for vacatur are high. (Code of Civil Procedure
Section 1282.6.)
COMMENTS : The author explains the reason for the bill as
follows:
The purpose of AB 1680, the Hate Crimes Protection Act, is
to ensure that a contract requiring the waiver of rights or
procedures under the hate crimes statute is a matter of
voluntary consent and not coercion.
The Ralph Civil Rights Act provides civil penalties and
remedies to victims of hate-based violence and threats of
violence. A central feature of the Ralph Act affords an
individual the opportunity to file a private civil action,
as well as a complaint with the Department of Fair
Employment and Housing (DFEH).
However, it is becoming common for contracts to mandate
wavier of these rights, including clauses that mandate
private arbitration of any legal controversy or claim. A
person who signs such a contract but later becomes the
victim of a hate crime is forced to privately arbitrate the
hate crime violation, rather than bring the civil action to
court.
While voluntary agreements for arbitration are appropriate,
many contracts make accepting a mandatory arbitration
provision a condition of entering into a contract which
cannot be refused without invalidating the entire
agreement. When waiving the right to go to redress under
the law is made a condition of entering into a contract,
rather than as a term that can be knowingly and freely
accepted or rejected, statutory enforcement of the rights
of Californians to be free from hate-based violence is
undermined.
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AB 1680 is narrow in its scope to address only hate crimes,
not other types of employment or consumer disputes, and to
ensure that the waiver of any legal rights under the hate
crimes laws is knowing and voluntary, not imposed as a
condition of entering into the contract. It also prohibits
refusing to enter into a contract on the basis that the
other person declines to waive his/her rights under the
hate statutes. However, the bill does not prohibit all
waivers, or even all pre-dispute waivers, when the parties
voluntarily believe it is in their interest to do so.
This Bill Responds To A Controversial Appeals Court Decision In
A Hate Crimes Case Against A Student Wrongly Perceived To Be
Gay. The impetus for the bill is the controversy arising out of
a recent incident involving alleged threats of violence against
a young man identified by his initials, "D.C.," who was a
student at Harvard-Westlake School, a private educational
institution in Los Angeles. With his parents, D.C. attempted to
sue Harvard-Westlake and others under the hate crimes law.
According to the facts recited in the court opinion, several
students at Harvard-Westlake, using its computers, went to
D.C.'s web site and posted death threats against D.C. and made
derogatory comments about him. One post read, "I'm going to
pound your head in with an ice pick." Another said, "Faggot,
I'm going to kill you." A third stated, "You are an oversized
faggot ... . I just want to hit you in the neck--hard. ... [
G]o to the 405 [freeway] bridge and jump." A fourth read, "I
hate fags ... . You need to be stopped." One student wrote,
"I am looking forward to your death." Another commented, "Not
only are you a massive fagmo, but must absolutely quit showing
your face at my school. You are now officially wanted dead or
alive." One post read, "I want to rip out your fucking heart
and feed it to you." Several other posts couched threats with
references to D.C.'s misperceived sexual orientation as a
homosexual. The students who posted the threats sought to
destroy D.C.'s life, threatened to murder him, and wanted to
drive him out of Harvard-Westlake and the community in which he
lived.
The school newspaper, The Chronicle, ran more than one article
on the matter. When D.C.'s father read the threats at the Web
site, he immediately informed Harvard-Westlake of the problem,
believing that some of its students were responsible. The
father also contacted the Los Angeles Police Department, which,
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in turn, notified the Federal Bureau of Investigation. On the
advice of the police, D.C. withdrew from Harvard-Westlake. He
and his family moved to another part of California, where he
went to a different educational institution. The Chronicle ran
an article disclosing D.C.'s new residential location and the
name of the school he was attending. The article also disclosed
that postings at the Web site had referred to D.C. as a
"faggot." The faculty advisor to the staff of The Chronicle
approved the article before publication. Harvard-Westlake did
not suspend or expel any of the students who admitted posting
the threats.
In response to the suit by D.C. and his parents, the school
filed a petition to compel arbitration of all claims. The
petition was based on the contents of Harvard-Westlake's
"Enrollment Contract," signed by D.C.'s father. The Enrollment
Contract consisted of five pages. One provision stated, "I
recognize that alteration of any wording in this Agreement will
nullify this offer of enrollment." Under "TERMS AND
CONDITIONS," the contract contained an arbitration provision,
stating: "I understand that any legal and actionable controversy
or claim arising out of or relating to this Agreement (including
but not limited to the determination of the scope and
applicability of this Agreement to arbitrate), the student's
enrollment in/departure from Harvard-Westlake or the student's
educational experience at Harvard-Westlake (including, but not
limited to academic matters and extracurricular activities and
community service) shall be submitted to final and binding
arbitration to be held in Los Angeles County, California, before
a single, neutral arbitrator in accordance with JAMS'
Comprehensive Arbitration Rules and Procedures. This
arbitration agreement applies during the term of this enrollment
agreement and survives after the termination of the enrollment
agreement." Also under "TERMS AND CONDITIONS" was an attorney's
fees provision, stating: "In the event of any arbitration or
litigation between the parties arising out of this agreement, or
which relates in any way to the enrollment of the student at
Harvard-Westlake, the prevailing party therein shall be allowed
all reasonable attorneys' fees expended or incurred in such
arbitration or litigation, to be recovered as part of the costs
therein."
The trial court granted the petition to compel arbitration, the
case went to a private arbitrator retained by JAMS as specified
in the enrollment contract, the arbitrator found for the school
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on all counts, and the arbitrator ordered the parents to pay the
school over half a million dollars in attorney's fees and
arbitration costs. The school then filed a petition to confirm
the arbitrator's award - in essence, to convert it from a
private agreement into a court order. The court upheld the
order to arbitrate and confirmed the arbitrator's award in favor
of the school, although the award of money to the school was
reversed by the court.
Private Arbitration Is Essentially Unregulated And Highly
Controversial When It Is Mandatory, Rather Than Voluntary . As
supporters of this bill contend, and this Committee has
frequently discussed in recent years, private arbitration is a
mostly anything-goes private "court" industry which is often
costly and allegedly unreceptive to consumers. There is little
if any regulation, oversight or legal accountability to the
parties or the public.
Surprisingly to some, arbitrators are not regulated in any
fashion; they need not be trained in the law, or even apply the
law in a particular dispute, or render a decision consistent
with the evidence presented to them. What evidence is presented
may, in fact, be incomplete because parties in arbitration have
no legal right to obtain evidence in support of their claims or
defenses, or the claims or defenses of the other party, contrary
to the longstanding discovery practice in public courts.
Indeed, unlike judges, arbitrators need not explain or defend
the rationale for their decisions. There is no need to justify
his or her decision because the law and the evidence need not be
followed and because there is no right for any party to appeal
or obtain an independent review of the arbitrator's ruling
unless the contract expressly so provides. Regardless of the
level or type of mistake, or even misconduct, by the arbitrator,
the most relief a court may grant to a party in arbitration is
to vacate the award and return the parties to further
arbitration, perhaps with the same arbitrator or arbitration
company. The grounds on which an arbitrator's decision may be
vacated, however, are extremely narrow and the standards for
vacatur are stringent. Neither may the parties generally obtain
any remedy against the arbitrator for misconduct because
arbitrators are afforded substantial if not absolute immunity
from civil liability for acts relating to their decisions, even
in the case of bias, fraud, corruption or other violation of
law.
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Arbitration's radical differences from the public justice system
are believed to be appropriate where parties with relatively
equal bargaining power have voluntarily chosen to have their
dispute and legal rights resolved by a method other than the
courts. By the same token, parties to a contract might choose
to simply flip a coin to resolve their disputes, and public
policy may favor holding them to that bargain. Private
arbitration becomes more controversial, however, when it is
imposed by more powerful parties without negotiation or the
right to withhold consent to unfair terms.
The Revenue Incentives Of Private Arbitration Have Caused
Concerns About The Advantages Enjoyed By "Repeat-Players" And
The Disadvantages For Consumers . As this Committee has also
frequently discussed, not only is private arbitration
effectively unregulated, it has caused concerns because it is a
revenue-driven system where, critics contend, "repeat players"
have unfair advantages when they are involved in mandatory
arbitration against "one-shot" users, such as individual
consumers.
The favorable reputation arbitration has long enjoyed largely
grows out of its use in the resolution of labor disputes in the
first part of the 20th Century. In the labor-management
context, where the parties mutually choose the arbitrator from
among a small group of specialists, the arbitrator has an
incentive to be perceived as fair by both sides over the long
term. By contrast, critics contend, arbitrators have far less
incentive to be fair to both sides when they owe their
engagement (and future work) to the business that pre-selected
the arbitration company in the contract and who will repeatedly
appear before them, unlike the consumer party who did not choose
the arbitration company and is not likely to be the source of
future work for the arbitrator. This reluctance to offend the
source of repeat business may be particularly true where the
dispute involves stigmatizing allegations, such as the
hate-crimes charges at issue in this bill.
Is Mandatory Arbitration Appropriate For The Enforcement Of
Civil Rights Laws And Particularly Those Predicated On Access To
The Courts? Supporters of this bill contend that hate crimes
laws are fundamentally different from the type of commercial
disputes that may be appropriate for private arbitration. Nor
do hate crimes appear to generate concerns about "abusive
litigation" that have caused some business groups to defend the
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imposition of mandatory arbitration provisions in consumer
contracts.
While a party is free to waive the advantage of a law intended
solely for his or her benefit, a law established for a public
reason cannot be waived by private agreement. (Civil Code
section 3513.) Both the Ralph Act and the Bane Act provide for
enforcement by the Attorney General and other public
prosecutors, as well as the Department of Fair Employment and
Housing (DFEH), in addition to private rights of action for both
equitable relief, civil penalties and damages - reflecting their
intent not only to vindicate individual rights, but to provide a
mechanism to redress the harms hate-based violence causes to the
larger community. The creation of civil causes of action was at
the heart of both of these civil rights acts. (Stamps v.
Superior Court, 136 Cal. App. 4th 1441 (2006).)
The court in DC v Harvard-Westlake recognized the fundamental
public nature of the hate crimes statutes in holding that the
rights they establish should not be subject to waiver by private
contracts. However, the court disregarded the effect of the
arbitration clause by failing to acknowledge that it required
the waiver of the right to have the allegations resolved by the
court system, with public judges and juries and all of the other
values established by that system for the guarantee of fairness
and due process and the protection and prosecution of civil
rights, including the right to appeal. In other words,
requiring a party to allow a private arbitrator to decide hate
crimes violations is, inherently, a waiver of rights and
procedures provided by the statutes.
Moreover, by mandating the arbitration of any issue involving
the parties, such as the contract clause in the DC case, private
arbitration may block not only individual access to the courts
but also public prosecution by the Attorney General or other
prosecutors or a complaint to the DFEH. (See Sonic-Calabasas A,
Inc. v. Moreno, 174 Cal. App. 4th 546 (2009), rev. granted, 99
Cal. Rptr. 3d 866 (2009)(private arbitration clause precluded
employee from making use of the enforcement mechanism of the
state Labor Commissioner for redress of alleged labor law
violation).)
Is Mandatory Arbitration Particularly Inappropriate Where
Temporary And Other Equitable Relief Is Fundamental To The
Statutory Scheme? Moreover, a fundamental feature of the hate
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crimes enforcement scheme is that immediate protective and/or
restraining orders may often be needed to prevent further abuse.
Even if an arbitrator were to believe that immediate
intervention was necessary, private arbitration does not allow
for such orders. For an arbitrator's order to be legally
enforceable, it must be confirmed by a court judgment - a time
consuming process that does not lend itself to immediate
injunctive relief.
Is This Bill Carefully Crafted to Avoid Federal Pre-Emption
Questions? As with other measures that have sought to prohibit
a business from conditioning benefits or services on a waiver of
statutory rights, this bill is opposed on the ground that it is
assertedly preempted by the Federal Arbitration Act (FAA)
because it conflicts with the FAA's policy of encouraging
arbitration and disapproving special impediments to the
enforcement of arbitration contracts. Proponents respond that
the bill as proposed to be amended is not arbitration-specific
because it applies to any waiver of legal rights or procedures
under the hate crimes statutes, regardless of how that waiver is
effected. Moreover, supporters note, the bill does not
single-out arbitration or other waiver agreements for special
encumbrances, but simply recognizes the application of a general
contract law principle of unconscionability, just as courts
routinely apply this same principle to invalidate some
arbitration or other waiver agreements. In addition, supporters
argue, this bill does not bar arbitration or other waiver
agreements; it simply makes it unlawful to seek an unknowing and
involuntary waiver of rights or procedures regarding abuse laws
prior to a dispute arising. Proponents point out that there is
no state or federal policy favoring involuntary waiver or
arbitration agreements. If this bill is pre-empted, it would
seem that the FAA would logically also then pre-empt courts from
applying unconscionability principles to any arbitration or
other waiver agreement. No court decision has been brought to
the attention of the Committee or discovered in the Committee's
own research lending support to such a far-reaching view of FAA
pre-emption.
ARGUMENTS IN OPPOSITION: A coalition of business interests
argues against the bill, based on a perception that bill would
outlaw arbitration agreements, contending as follows:
The bill prohibits the enforcement of an arbitration
agreement for a civil lawsuit that is based on
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discriminatory behavior prohibited under the Ralph Civil
Rights Act. In other words, it would prohibit enforcement
of an arbitration agreement if someone is being sued for a
hate crime.
This bill would affect a situation where an individual had
voluntarily engaged in a contract with another party that
includes an agreement to resolve future disputes through
arbitration. This bill does not affect stranger-on-stranger
hate crimes, which can (and should) be prosecuted
criminally and civilly. There is no reason that a
voluntary, pre-dispute agreement to resolve a future
dispute through arbitration is unfair.
Arbitration has evolved into a productive and useful method
of resolving disputes. In the modern economy,
organizations continue to look at more efficient ways of
conducting business. Arbitration is an alternative method
of resolving disputes derived from the need to more
efficiently handle conflicts.
The U.S. Supreme Court and California courts support
arbitration agreements in contracts. Businesses use
arbitration to save resources and reinvest back into the
economy. The use of pre-dispute arbitration benefits
California and is good public policy.
Arbitration is Quicker than Litigation. Arbitration brings
cases to resolution faster and at less expense to both
parties than traditional litigation.
Arbitration is Less Expensive than Litigation. A consumer
or employee who participates in arbitration can save money
due to the greater expenses of a lawsuit. The benefits
also apply to employers and merchants. Furthermore, the
state benefits by shifting the caseload to arbiters and
saving taxpayers money.
Arbitration Is More Satisfactory than Litigation. A study
conducted by the American Bar Association found arbitration
litigants were more satisfied than those involved in
lawsuits. Likewise, a survey conducted by Dispute
Resolution Times found that 83% of employees favored using
arbitration.
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Prohibiting Arbitration Agreements Puts California Out of
Step. Prohibiting these agreements would put California
out of the mainstream and place California at an economic
disadvantage.
Arbitration is a fair, useful, cost-efficient way to
resolve disputes.
The Civil Justice Association of California likewise argues:
This bill would prohibit the use of arbitration agreements
when the case deals with behavior that would constitute a
hate crime.
Assembly Bill 1680 states that no waiver of rights or
protections (like arbitration) under the Ralph Civil Rights
Act may be a condition of a contract.
While CJAC agrees that the Ralph Civil Rights Act is as
deserving of vigorous enforcement as any other area of law
in California, we disagree that a consensual, voluntary,
pre-dispute agreement to resolve a future dispute through
arbitration is somehow unfair.
This prohibition on arbitration is not only contrary to the
provisions of the Federal Arbitration Act (FAA), but is
also contrary to well-established public policy encouraging
arbitration. Arbitration agreements are becoming
increasingly favored and have worked well in many areas.
The cost and time savings of arbitration offer considerable
benefits to both parties.
REGISTERED SUPPORT / OPPOSITION :
Support
Equality California (sponsor)
Amalgamated Transit Union, California Conference Board
American Civil Liberties Union
American Federation of State, County and Municipal Employees
Asian Americans for Civil Rights and Equality
California Conference of Machinists
California Teamsters
Consumer Attorneys of California
California Employment Lawyers Association
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Engineers and Scientists, Local 20
International Longshore and Warehouse Union
Professional and Technical Engineers Local 21
UNITE-HERE
United Food and Commercial Workers Union, Western States Council
Opposition
California Association of Joint Powers Authorities
California Business Properties Association
California Chamber of Commerce
California Farm Bureau Federation
California Hospital Association
California Retailers Association
Civil Justice Association of California
Cooperative of American Physicians, Inc.
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334