BILL ANALYSIS �
Bill No: SB
117
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
SB 117 Author: Kehoe
As Introduced: January 20, 2011
Hearing Date: March 22, 2011
Consultant: Paul Donahue
SUBJECT
Public Contracts: Prohibitions
DESCRIPTION
Existing law prohibits a state agency from entering into
any contract for goods or services in the amount of
$100,000 or more with a contractor that does not provide
the same benefits to an employee with a registered domestic
partner that it provides to an employee with a spouse.
This bill would additionally prohibit a state agency from
entering into a contract in the amount of $100,000 or more
with a contractor who discriminates based on the gender or
sexual orientation of the spouses or domestic partners of
employees.
EXISTING LAW
Under current law , a state agency may not enter into a
contract for the acquisition of goods or services in the
amount of $100,000 or more with a business entity which, in
providing benefits to its employees, (1) discriminates
between employees with spouses and employees with domestic
partners, or (2) discriminates between the domestic
partners and spouses of those employees. In addition,
existing law :
1) Permits a state agency, provided it has taken all
reasonable measures to find a compliant contractor, to
SB 117 (Kehoe) continued
PageB
waive the requirement that a contractor provide the same
benefits to a registered domestic partner employee as it
does to a married employee, under specified circumstances.
2) Provides that the contractor is not deemed to
discriminate if the contractor, in providing the benefits,
pays the actual costs incurred in obtaining the benefit.
3) Specifies that, in the event a contractor is unable to
provide a certain benefit, despite taking reasonable
measures to do so, the contractor may not be deemed to have
discriminated in the provision of benefits if it provides
the employee with a cash payment equal to the amount that
the contractor or vendor pays to provide that benefit to
the spouse of an employee.
4) Provides, to the extent allowed by law, for
confidentiality of information disclosed or provided by an
employee or applicant for employment to verify his or her
domestic partnership registration or marriage for purposes
of qualifying for benefits.
5) Requires each state contract to contain a certification
by the contractor that it is in compliance with the
requirements of the law.
6) Specifies that, if a contractor falsely certifies that
it is in compliance with the law, the contractor is subject
to specific penalties unless within a time period specified
by the contracting agency, the contractor provides proof
that it has complied, or is in the process of complying
with the law.
BACKGROUND
Purpose : The sponsor of this bill, Equality California,
states that this bill will protect the 18,000 same-sex
couples who were married in California during 2008 by
expanding the law to include gender and sexual orientation
of spouses. Equality California states:
"The playing field for contractors needs to be
leveled by ensuring that entities that
discriminate are not given a competitive
advantage over those who treat their employees
equally. Providing the same benefits to an
SB 117 (Kehoe) continued
PageC
employee with a domestic partner, or same-sex or
opposite-sex spouse ensures that workers receive
equal pay for equal work. To do otherwise is
essentially to discriminate against gay, lesbian,
bisexual and transgender employees."
"Providing equal benefits also show respect for
the diversity of employees and their individual
circumstances. Additionally, treating employees
fairly is a sound business practice. A
non-discriminatory benefits program enables
employers to attract and retain the best and most
talented employees, lowers turnover and
recruitment costs, and helps improve job
satisfaction and performance."
Equal Benefits Ordinances : Equal benefits ordinances
require contractors and vendors who enter into contracts
with a public entity to offer equal benefits to their
employees. To comply with such a law, a government
contractor or vendor that offers health insurance and other
benefits to employees' spouses must offer equivalent
coverage to employees' domestic partners. Several cities
and counties in the United States currently have adopted
equal benefits laws.<1> These laws are generally
consistent with existing California law, which this bill
expands to additionally prohibit the state from contracting
with a business that discriminates based on the gender or
sexual orientation of the spouses or domestic partners of
its employees.
Litigation Concerning Federal ERISA Law Preemption : A
possibility exists that the provisions of this bill, and
the statute that it amends, could eventually be invalidated
-------------------------
<1> There are at least 13 cities and counties that have
enacted equal benefits ordinances, including Berkeley, CA;
King County, WA; Long Beach, CA; Los Angeles, CA; Miami
Beach, FL; Minneapolis, MN; Oakland, CA; Olympia, WA;
Sacramento, CA; San Diego, CA; San Francisco, CA; San Mateo
County, CA; Seattle, WA; Tumwater, WA. The city of
Atlanta, GA gives businesses competing for city contracts a
bidding preference if they offer domestic partner benefits
to employees.
SB 117 (Kehoe) continued
PageD
on ERISA<2> preemption grounds. Although this issue is far
from settled, a series of court decisions have in essence
held that government entities may not contradict federal
ERISA law with equal benefits laws or ordinances. In 1998,
a federal district court concluded that San Francisco's
equal benefits ordinance could not require airline carriers
to provide equal benefits to domestic partners through
ERISA-regulated benefit plans.<3>
In 2004, a federal court in Maine held that a Portland
ordinance that conditioned receipt of certain city funds on
providing domestic partner coverage was preempted because
it required employers' ERISA-covered plans to provide
certain benefits.<4>
Most recently, in 2006, the New York State Court of Appeals
refused to compel New York City mayor Bloomberg to enforce
the equal benefits law requiring certain city contractors
to provide domestic partner benefits to employees.
Specifically, the New York state high court ruled that the
ordinance was invalid on the grounds that it was preempted
by ERISA.
With certain limited exceptions, the New York City
ordinance would have required covered employers that enter
into or renew contracts with the City of New York for work,
labor, services, supplies, equipment, or materials valued
at over $100,000 to provide employees with domestic
partners the same benefits as they provide to employees
with spouses.
-------------------------
<2> Employee Retirement Income Security Act of 1974, 29
U.S.C. � 1001 et seq.
<3> Air Transport Assn. of America v. City & County of San
Francisco (N.D. Cal 1998) 992 F. Supp. 1149
<4> Catholic Charities of Maine., Inc. v. City of Portland
(D. Me. 2004) 204 WL 231778
SB 117 (Kehoe) continued
PageE
The NY City Council argued in this case that ERISA
preemption should not apply due to a "market participant"
exception to ERISA preemption since the City was merely
acting as a consumer in the marketplace, and not as a
regulator, but the court ruled that the ordinance attempted
to prescribe the terms of ERISA benefit plans, which the
U.S. Supreme Court has held to be prohibited under
ERISA.<5> On the "market participant" exception argument,
the court held that the law did not meet the requirements
for the exception.<6> The court noted that a state or
municipality would be deemed a regulator, which rendered
the exception inapplicable because the city used "its
bargaining leverage as a means of attaining policy ends."
In order for the "market participant" exception to apply,
"the state must have no interest in setting policy." The
court then concluded that the ordinance in question was
"designed to induce contractors to treat domestic partners
and spouses equally," and, accordingly, found the ERISA
exception did not apply.
However, ERISA does not regulate "soft benefits," such as
family medical leave and bereavement leave, and it appears
clear that government entities can require companies to
offer such benefits to the domestic partners of their
employees.<7>
-------------------------
<5> See Shaw v. Delta Airlines, Inc. (1983) 463 U.S. 83,
96-97
<6> The court decided this issue by relying on 2 decisions
of the US Supreme Court: Building & Constr. Trades Council
v. Associated Bldrs. and Contrs. of Massachusetts/Rhode
Island, Inc. (1993) 507 U.S. 218 and Wisconsin Department
of Industry, Labor and Human Relations v. Gould Inc. (1986)
475 U.S. 282
<7> See S.D. Myers, Inc. v. City and County of San
Francisco (9th Cir. 2001) 253 F.3d 461, holding that San
Francisco's requirement that city contractors provide
"soft" domestic partner benefits to out-of-state employees
working on San Francisco contracts does not violate the
"dormant" Commerce Clause. �The court also held that S.D.
Myers lacked standing to challenge the application of ERISA
law.]
SB 117 (Kehoe) continued
PageF
Los Angeles Equal Benefits Ordinance : The City of Los
Angeles has adopted an equal benefits ordinance prohibiting
companies that contract with the city from discriminating
in the provision of "soft" or "Non-ERISA Benefits" between
employees with domestic partners and employees with
spouses, and/or between the domestic partners and spouses
of such employees. The ordinance defines "Non-ERISA
Benefits" to mean any and all benefits payable through
benefit arrangements generally available to the
contractor's employees which are neither "employee welfare
benefit plans" nor "employee pension benefit plans," as
those terms are defined in ERISA.
In light of the foregoing, the author and the Committee may
wish to discuss these ERISA-related issues in the context
of Section 10295.3 of the Public Contract Code and the
extensions to that law contained in this bill.
Support : the California Commission on the Status of Women
notes that it supported AB 17 (Kehoe), which prohibited
state agencies from entering into specified contracts with
businesses that discriminate between employers with spouses
and those with domestic partners. Employee benefits
account for 25% to 40% of an employee's compensation.
Providing the same benefits to an employee with a domestic
partnership, or same-sex or opposite-sex spouse ensures
that workers receive equal pay for equal work.
The California Employment Lawyers Association believes that
all employees should be treated equally, and are entitled
to work with dignity under the protection of the laws of
this state. Employers who discriminate should not be given
an unfair competitive advantage over employers who play
fair and follow our laws. The Gray Panthers and the
Professional Engineers in State Government agree that
employers who discriminate should not be given unfair
competitive advantages.
PRIOR LEGISLATION
AB 17 (Kehoe) Chap. 752, Stats. 2003. Prohibits state
agencies from entering into any contract for goods or
services in the amount of $100,000 or more with a
contractor that does not provide the same benefits to an
employee with a registered domestic partner that it
SB 117 (Kehoe) continued
PageG
provides to an employee with a spouse.<8>
AB 25 (Migden) Chap. 893, Stats. 2001. Expanded California
domestic partnership law by conferring on registered
domestic partners various rights, privileges and standing
granted by the state to married couples. Domestic partners
now enjoy (1) the right to bring an action for wrongful
death, (2) the right to receive continued health care
coverage as a surviving beneficiary of the decedent, (3)
the right to make health care decisions for an
incapacitated partner, (4) the right to adopt a partner's
child as a stepparent, (5) the right to file a claim for
disability benefits a partner in the same manner as a
spouse may file such a claim, and (6) the right to be
nominated and appointed as conservator of an incapacitated
partner. AB 25 also required benefits policy carriers of
public agency employers to provide the same benefits to
employees whether they are married or have domestic
partners, and the same benefits to the employees' spouses
or domestic partners.<9>
AB 26 (Migden) Chap. 588, Stats. 1999. Recognized domestic
partnerships in California, and specified the manner by
which such partnerships may be formed, registered, and
terminated. It provided certain rights to domestic
partners, such as hospital visitation rights and health
benefits to domestic partners of public employees.
SUPPORT:
California Commission on the Status of Women
California Employment Lawyers Association
-------------------------
<8> AB 1080 (Kehoe) �2002] was a substantially identical
bill that died in the Assembly pending concurrence in
Senate amendments.
<9> In 2002, the following bills were enacted: AB 2216
(Keeley), granting a domestic partner inheritance rights if
his or her partner dies without a will; AB 2777 (Nation)
added Los Angeles, Santa Barbara and Marin Counties to
those permitted to offer death benefits to surviving
domestic partners of county employees; SB 1575 (Sher) added
domestic partners to those exempted from the prohibition on
receiving from a will or trust that one helped to draft;
and SB 1661 (Kuehl) granted six weeks of paid family leave
to employees to care for a sick spouse or domestic partner.
SB 117 (Kehoe) continued
PageH
California National Organization for Women
Gray Panthers Association of California Networks
Professional Engineers in California Government
OPPOSE: None on File
DUAL REFERRAL: Senate Judiciary Committee
FISCAL COMMITTEE: No
**********