BILL ANALYSIS �
AB 2570
Page 1
ASSEMBLY THIRD READING
AB 2570 (Hill)
As Introduced February 24, 2012
Majority vote
BUSINESS & PROFESSIONS 6-3 APPROPRIATIONS 11-5
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|Ayes:|Hayashi, Allen, Butler, |Ayes:|Fuentes, Blumenfield, |
| |Eng, Hill, Ma | |Bradford, Campos, Davis, |
| | | |Gatto, Hall, Hill, Lara, |
| | | |Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Bill Berryhill, Hagman, |Nays:|Harkey, Donnelly, |
| |Smyth | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Prohibits licensees of any board, bureau or program
under the Department of Consumer Affairs (DCA) from including
any "regulatory gag clause" in civil settlement agreements.
Specifically, this bill :
1)Provides that no licensee who is regulated by a board, bureau,
or program within DCA, nor an entity or person acting as an
authorized agent of a licensee, shall include or permit to be
included a provision in an agreement to settle a civil
dispute, whether the agreement is made before or after the
commencement of a civil action, that prohibits the other party
in that dispute from contacting, filing a complaint with, or
cooperating with the DCA, board, bureau, or program or that
requires the other party to withdraw a complaint from the DCA,
board, bureau, or program.
2)Provides that a provision of the nature as described above is
void as against public policy, and any licensee who includes
or permits to be included a provision of that nature in a
settlement agreement is subject to disciplinary action by the
board, bureau, or program.
3)Provides that any board, bureau, or program within the DCA
that takes disciplinary action against a licensee or licensees
based on a complaint or report that has also been the subject
AB 2570
Page 2
of a civil action and that has been settled for monetary
damages providing for full and final satisfaction of the
parties may not require its licensee or licensees to pay any
additional sums to the benefit of any plaintiff in the civil
action.
4)Specifies that the term "board" means the board in which the
administration of the above provisions are vested, and unless
otherwise expressly provided, shall include bureau,
commission, committee, department, division, examining
committee, program, and agency, and specifies that "license"
means license, certificate, registration, or other means to
engage in a business or profession.
FISCAL EFFECT : According to Assembly Appropriations Committee,
minor and absorbable enforcement costs for the various DCA
boards and bureaus to enforce the provisions of this
legislation.
COMMENTS : According to the author, "Regulatory gag clauses
inhibit the ability of regulatory agencies to comprehensively
and conscientiously perform their oversight function. The
regulatory boards of the DCA cannot adequately 'protect
consumers from unscrupulous and unqualified individuals' (quote
from the DCA website) if they are unable to communicate with
individuals filing complaints or who have been victimized.
Furthermore, pressuring aggrieved consumers and injured parties
into agreeing to such clauses enables potentially dangerous
licensees to continue operating.
"Settlement agreements are an important and valuable mechanism
for parties to willingly resolve differences. However, the
inclusion of gag clauses into settlement agreements allows a
perilous veil of secrecy to envelop licensees. Denying
regulators the ability to exercise their disciplinary discretion
not only allows the conduct to continue, but potentially
endangers future consumers."
A regulatory gag clause requires a plaintiff to agree, as a
condition of a malpractice or misconduct settlement with the
licensee, to the inclusion of a provision prohibiting the
plaintiff from contacting or cooperating with the defendant's
regulator (or requiring the plaintiff to withdraw a pending
complaint before that regulator).
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A regulatory gag clause is not to be confused with secret
settlements, which are agreements that make certain types of
information in a settlement agreement confidential and preclude
that information from being introduced as evidence in a court
action. Prohibiting regulatory gag clauses does not prohibit,
or affect, the ability of parties to a civil action to agree to
a secret settlement, regardless of whether or not either party
is required to hold a professional license issued by DCA.
Prohibiting regulatory gag clauses merely prohibits
professionals licensed by DCA from hiding activities related to
their license from DCA.
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301
FN: 0003670