BILL ANALYSIS �
Bill No: SB
1109
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Lou Correa, Chair
2013-2014 Regular Session
Staff Analysis
SB 1109 Author: Hueso
As Amended: March 27, 2014
Hearing Date: April 22, 2014
Consultant: Paul Donahue
SUBJECT
State contracts: Persons with disabilities
DESCRIPTION
Eliminates state sanctioned minimum wage exemptions for
disabled persons in specified state service contracts, and
establishes a participation goal in state contracts of not
less than 3% for disability business enterprises.
Specifically, this bill :
1)Prohibits a successful bidder on a services contract
awarded by the state from using the minimum wage
exemption for specified disabled persons for any employee
who is engaged in any way in providing services under the
contract. <1>
2)Directs each state agency to set a goal of awarding 3% of
its service contracts to a disability business
enterprise.<2>
3)Specifies that contracts performed by a disability
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<1> This provision would apply to state contracts entered
into or renewed on or after January 1, 2015.
<2> A disability business enterprise is defined as a public
or private nonprofit California corporation operating
community rehabilitation programs serving persons with
disabilities.
SB 1109 (Hueso) continued
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business enterprise shall be performed by a labor force
comprised primarily (75% or greater) of persons with
disabilities, as measured by the percentage of
person-hours of direct labor devoted to the contract
work.
4)Provides that, notwithstanding any other law, each
employee who performs work for a public or private
nonprofit California corporation, operating a community
rehabilitation program serving persons with disabilities,
shall be paid at the state minimum wage rate or a higher
rate when the entity is performing under contract with a
state agency for goods or services.
EXISTING LAW
1)Authorizes the Division of Labor Standards Enforcement of
the Department of Industrial Relations (DLSE) to fix a
special minimum wage, at less than the legal minimum
wage, and issue a related special license to a disabled
employee authorizing the employment of the licensee at
that lower wage for a period not to exceed one year from
date of issue.
2)Authorizes the DLSE to fix a special minimum wage and
issue a special license<3> to a nonprofit organization
such as a sheltered workshop or rehabilitation facility
to permit the employment of employees who have been
determined by the commission to be physically or mentally
disabled.
3)Identifies specific requirements applicable to contracts
entered into the acquisition of services by state
agencies.
4)Establishes participation goals for specified enterprises
to participate in contracts with state agencies for
construction, services, materials, supplies, equipment,
alterations, repairs, or improvements.
5)Authorizes a state agency, city or county, political
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<3> The special license of the nonprofit organization shall
be renewed on a yearly basis, or more frequently as
determined by the DLSE. (Labor Code � 1191.5)
SB 1109 (Hueso) continued
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subdivision, or district of this state to purchase
materials and supplies manufactured and services without
advertising or calling for bids, if the goods are
provided by interested public or private nonprofit
California corporations operating community
rehabilitation programs that serve persons with
disabilities.
BACKGROUND
1)Author's statement : "Many individuals with disabilities
are still legally paid less than minimum wage in the
United States. These exemptions for the minimum wage are
based on a 1938 loophole in the Fair Labor Standards Act
that grants employers a certificate that allows them to
pay people with disabilities less than minimum wage based
on productivity. In California about two thirds of these
workers are employed in "sheltered workshops," the vast
majority of whom never transition into gainful
employment. The other third typically work in segregated
group settings.
"The California Labor Code also provides for the same
exemption as the federal government. There are currently
more than 800 active licenses permitting the payment of
sub-minimum wages in California. Some of those licenses
are issued for individual employees who work in groups
and some are for facilities that employ anywhere from
about ten to well over a thousand workers at sub-minimum
wages.
"The process for determining the individual's pay is
outdated and humiliating for those with disabilities.
Employers "time" their workers' productivity and pay them
based on how fast they can move and meet certain
benchmarks. This provision allows employers across the
country to pay their workers with disabilities as little
as 22 cents an hour. More than half of these workers were
paid less than $2.50 an hour. Of the employers who held
these certificates, 41% claimed that their workers
performed at less than 25% of a non-disabled worker. This
allows them to pay their workforce one quarter of the
wages. By paying these individuals less than the minimum
wage, the state is condoning discrimination against those
with disabilities."
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2)Employment First policy : In August 2011, the State
Council on Developmental Disabilities released an
Employment First Report, outlining goals and objectives
to improve integrated competitive employment outcomes in
the developmentally disabled community. In 2013, this
policy was codified, as follows: "It is the policy of the
state that opportunities for integrated, competitive
employment shall be given the highest priority for
working age individuals with developmental disabilities,
regardless of the severity of their disabilities."<4>
State law now requires regional centers to provide
consumers with information, in an understandable form,
about the Employment First Policy, options for integrated
competitive employment,<5> and services and supports,
including postsecondary education, that are available to
enable the consumer to transition from school to work,
and to achieve the outcomes of obtaining and maintaining
integrated competitive employment.
The law also declares that integrated competitive
employment is intended to be the first option considered
by planning teams for working age individuals, but
individuals may choose goals other than integrated
competitive employment.<6>
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<4> See, Welfare & Inst. Code � 4869(a)(1), codified by AB
1041 (Chesbro), Chapter 677, Statutes of 2013.
<5> Integrated competitive employment occurs in work in
competitive labor market that is performed in a setting
where individuals interact with individuals without
disabilities to the same extent that individuals without
disabilities in comparable positions interact with other
persons. For this work, the individual is compensated at or
above the minimum wage, but not less than the customary
wage and level of benefits paid by the employer for the
same or similar work performed by individuals who are not
disabled. (See Welfare & Inst. Code �� 4868, 4851.)
<6> Welfare & Inst. Code � 4869, which also provides that
postsecondary education, technical or vocational training,
and internship programs may be considered as a means to
achieve integrated competitive employment or career
advancement.
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3)Philosophical differences : In a recent report concerning
the federal law that allows employers certified by the
U.S. Department of Labor to compensate persons with
disabilities for work at a rate less than the minimum
wage, <7> the National Council on Disability observed:
"Many disability advocates argue that [federal
law] should be abolished because it
discriminates against people with disabilities
and is thus inconsistent with our national
disability policy goals enshrined in the
Americans with Disabilities Act (ADA). Others
argue that the sub-minimum wage certification
program still has an important role among a
range of employment options because it provides
opportunities to people with disabilities who
are unable to obtain competitive employment
jobs. Debates among advocates and policy-makers
about [this issue] have often been divisive,
and consensus has been elusive."<8>
In a recent policy brief, the California Employment
Consortium for Youth (CECY) articulates its belief "that
all people have the right and must have the opportunity
for real work for real pay: people with disabilities
working in the community alongside non-disabled peers and
earning competitive wages."<9>
On the other hand, the California-based Alliance
Supporting People with Intellectual and Developmental
Disabilities argues that elimination of the
"productivity-based" wage may be well meaning, but would
be very harmful to employment opportunities for people
with the most significant disabilities. They contend that
some people with significant disabilities will always
require extensive services and supports, and suggest that
the state shouldn't assume the role of deciding what the
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<7> California law contains similar provisions. See Labor
Code �� 1191; 1191.5.
<8> Sub-minimum Wage and Supported Employment, National
Council on Disability, August 12, 2012
<9> Employment First Movement: The Train Has Left the
Station, California Employment Consortium for Youth, Policy
Brief #1, March 2014.
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potential of a person with disabilities will be.
4)State contracts and participation goals : Under SB 1109, a
successful bidder on a state contract for services is not
authorized to use the minimum wage exemptions provided
for state law. The author and the sponsor believe that
this is a modest, yet very important first step to
address the outdated and humiliating process for
determining the wages for an individual with
disabilities. They also note that the President recently
signed an Executive Order granting minimum wage
protections to individuals with disabilities working
under service or concessions contracts with the federal
government.
The California Disability Services Association (CDSA) is
opposed to this provision. CDSA believes that if SB 1109
continues to require minimum wage for any workers in
state contracts without also including policies to assure
that the state will in fact contract without the
employment service programs by way of a strong set aside
or contracting goal such as what exists in the Disabled
Veteran Business program, the bill will simply result in
a loss of jobs for its clients.
The author counters by pointing to the fact that, in
response to this concern, SB 1109 was recently amended to
add a provision directing each state agency to set a goal
of awarding 3% of its service contracts to a disability
business enterprise, as defined. The author believes that
this provision would not only discourage state agencies
from failing to renew existing contracts with disability
enterprises, but would also encourage additional state
contracting.
The CDSA would like additional assurances, however, and
has suggested an amendment that would prohibit a state
agency from cancelling, terminating or not renewing a
contract with a disability services program provider
solely on the basis of increased costs associated with
this change in policy. The author believes this
additional change is unnecessary.
5)Support : The sponsor of SB 1109 believes that the current
practice of paying persons with disabilities less than
minimum wage violates their basic civil rights and
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perpetuates discrimination on the basis of disability.
Supporters argue that the bill will serve as a model in
increasing competitive, integrated employment for people
with disabilities. Other supporters believe that allowing
sub-minimum wage constitutes an unfair business practice
which does not support equality. Finally, supporters say
that experience shows that employees with disabilities,
when provided the proper training, tools and reasonable
accommodations, can be as productive as people without
disabilities.
6)Opposition : The opponents state that the bill does
nothing to encourage the state to contract with the
developmentally disabled population, and they believe
that they will also lose the few contracts they have when
state agencies accept the lowest bid for their contracts.
PRIOR/RELATED LEGISLATION
SB 1160 (Beall), 2013-2014 Session. Requires a state agency
awarding contracts to give a 5% preference in the scoring
of a bid by a business that proposes to provide the goods
or services to the state when at least 10% of the personnel
of the business involved in doing so are California
residents with developmental disabilities receiving support
services under the Lanterman Developmental Disabilities
Services Act. (Pending in Senate Human Services Committee)
AB 1041 (Chesbro), Chapter 677, Statutes of 2013. Creates a
statewide Employment First Policy, which establishes that
opportunities for integrated, competitive employment shall
be given the highest priority for working age individuals
with development disabilities, regardless of the severity
of their disabilities.
SB 755 (Negrete-McLeod), 2009-2010 Session. Would have
established a new participation goal program for persons
with developmental disabilities business enterprises, to
assist and encourage participation of developmentally
disabled in state contracting opportunities. (Held in
Senate Appropriations)
AB 287 (Beall), Chapter 231, Statutes of 2009. Established
the Employment First Committee as a standing committee of
the State Council on Developmental Disabilities. The
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Committee was to recommended an employment first policy,
identify strategies and best practices, report on the
state's progress, and make recommendations for policy
change for significantly increasing the numbers of people
with developmental disabilities in integrated competitive
employment.
SB 1687 (Negrete McLeod), 2007-08 Session. Would have
required that state agencies take all practical actions to
encourage the awarding of contracts for goods and services
to persons with developmental disabilities business
enterprises. (Held in Assembly Appropriations Committee)
AB 2424 (Beall), 2007-2008 Session. Would have established
an employment first policy and imposed responsibilities on
regional centers and the DDS related to the development of
materials and the conduct of Individual Program Plan
meetings. (Held in Senate Appropriations)
SB 1270 (Chesbro), Chapter 397, Statutes of 2006.
Established a stakeholder and public input process to
recommend ways to expand opportunities for people with
developmental disabilities in the areas of employment and
community participation.
SUPPORT:
Association of California State Employees with Disabilities
Disability Rights California (sponsor)
National Association of Social Workers
State Independent Living Council
Several individuals
OPPOSE:
California Disability Services Association
California Elwyn
The Alliance Supporting People with Intellectual and
Developmental Disabilities
FISCAL COMMITTEE : Senate Appropriations Committee
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