Existing federal law, the Indian Gaming Regulatory Act of 1988, provides for the negotiation and execution of tribal-state gaming compacts for the purpose of authorizing certain types of gaming on Indian lands within a state. The California Constitution authorizes the Governor to negotiate and conclude compacts, subject to ratification by the Legislature. Existing law expressly ratifies a number of tribal-state gaming compacts, and amendments to tribal-state gaming compacts, between the State of California and specified Indian tribes.

The California Environmental Quality Act (CEQA) requires a lead agency to prepare, or cause to be prepared, and certify the completion of, an environmental impact report on a project, as defined, that it proposes to carry out or approve that may have a significant effect on the environment, as defined, or to adopt a negative declaration if it finds that the project will not have that effect.

This bill would ratify the tribal-state gaming compact entered into between the State of California and the Sycuan Band of the Kumeyaay Nation, executed on September 2, 2015. The bill would provide that, in deference to tribal sovereignty, certain actions are not projects for the purposes of CEQA.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing federal law, the Indian Gaming Regulatory Act of 1988, provides for the negotiation and execution of tribal-state gaming compacts for the purpose of authorizing certain types of gaming on Indian lands within a state. The California Constitution authorizes the Governor to negotiate and conclude compacts, subject to ratification by the Legislature. Existing law expressly ratifies a number of tribal-state gaming compacts, and amendments to tribal-state gaming compacts, between the State of California and specified Indian tribes.

The California Environmental Quality Act (CEQA) requires a lead agency to prepare, or cause to be prepared, and certify the completion of, an environmental impact report on a project, as defined, that it proposes to carry out or approve that may have a significant effect on the environment, as defined, or to adopt a negative declaration if it finds that the project will not have that effect.

This bill would ratify the tribal-state gaming compact entered into between the State of California and the Sycuan Band of the Kumeyaay Nation, executed on September 2, 2015. The bill would provide that, in deference to tribal sovereignty, certain actions are not projects for the purposes of CEQA.

This bill would declare that it is to take effect immediately as an urgency statute.

Existing law establishes within the Department of Industrial Relations to, among other things, enforce labor laws, including wage claims the Division of Labor Standards Enforcement, which is vested with the general duty of enforcing labor laws, including those relating to wage claims and employer retaliation. Existing law requires the Labor Commissioner, defined as the Chief of the Division of Labor Standards Enforcement, to establish and maintain a field enforcement unit in order to ensure that minimum labor standards are met. Existing law requires the commissioner to report annually to the Legislature, not later than March 1, concerning the effectiveness of the field enforcement unit, as specified.

This bill would require the department to report Labor Commissioner to include in its report to the Legislature, for each office, the amount of time it takes for all wage claims to receive a preliminary hearing date as described above, specified information on the status of wage claims and retaliation complaints, including the average amount of time it takes for a wage claim to receive a preliminary hearing and the current backlog of claims and complaints.

Existing employment regulation law, with certain exceptions, establishes an 8-hour workday and a 40-hour workweek, and requires payment of prescribed overtime compensation for additional hours worked.

This bill would make nonsubstantive changes to this provision.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 795

Author:(Atkins)

As Amended Ver:September 4, 2015

2/3 vote. Urgency

(vote not relevant)

Original Committee Reference: L. & E.

SUMMARY: Ratifies the tribal-state gaming compact (Compact) entered into between the State of California (State) and the Sycuan Band of the Kumeyaay Nation (Tribe) executed on September 2, 2015. Additionally, this bill provides that, in deference to tribal sovereignty, certain actions are not deemed projects for purposes of the California Environmental Quality Act (CEQA); and, stipulates, except as expressly provided, that none of the provisions shall be construed to exempt a city, county, or city and county, or the Department of Transportation from CEQA requirements.

The Senate amendments delete the Assembly version of this bill, and instead:

1. Ratify a tribal-state gaming compact entered into in accordance with the federal Indian Gaming Regulatory Act of 1988 (18 United States Code (U.S.C.) Sections 1166 to 1168, inclusive, and 25 U.S.C. Section 2701 et seq.) between the State and the Tribe, executed on September 2, 2015, is hereby ratified.

2. Authorize the Tribe to operate a maximum of 2,500 gaming devices at no more than two gaming facilities, and only on those Indian lands held in trust for the Tribe as of the execution date of this Compact, as described.

3. Supersede a 1999 compact between the Tribe and the State.

4. State once effective, this Compact shall be in full force and effect for State law purposes for 25 years following the effective date.

5. Provide that, in deference to tribal sovereignty, certain actions may not be deemed projects for purposes of the CEQA.

6. Contain an urgency clause, allowing the provisions of this bill to take effect immediately upon enactment.

AS PASSED BY THE ASSEMBLY, this bill required the Department of Industrial Relations (DIR) to submit a report to the Legislature the amount of time it takes for wage claims to receive a preliminary hearing date.

FISCAL EFFECT: Pursuant to the 1999 compact, the Tribe currently pays $2.4 million annually into the Special Distribution Fund (SDF) and $2.3 million annually into the Revenue Sharing Trust Fund (RSTF). Under this Compact, it is estimated that the Tribe will pay approximately $1 million annually (its pro rata share) into the SDF and approximately $10.1 million annually into the RSTF or the Tribal Nation Grant Fund (TNGF). Thus, the 60% credit referenced above will equate to approximately $6.3 million per year. Therefore, the net annual increase to the RSTF, assuming the Tribe maximizes its offsets, would be approximately $1.5 million annually.

COMMENTS: On September 9, 2015, the Assembly Governmental Organization Committee held an informational hearing on this tribal-state gaming compact between the State and the Tribe.

Purpose of this bill: This bill ratifies the Compact entered into between the State and the Tribe executed on September 2, 2015 and supersedes the 1999 compact between the Tribe and the State.

The Compact authorizes the Tribe to operate a maximum of 2,500 gaming devices (slot machines) at not more than two gaming facilities, and only on those Indian lands held in trust for the Tribe as of the execution date of this Compact, as described. If the Tribe chooses to operate more than one gaming facility, then one of the two gaming facilities shall have no more than 500 gaming devices and shall have a primary purpose other than gaming authorized under the Indian Gaming Regulatory Act (IGRA). Under the 1999 compact, the Tribe could not operate more than 2,000 gaming devices.

The Tribe has agreed to pay the State its pro rata share of the costs the State incurs for the performance of its duties under the Compact as well as 4.75% of its "Gross Gaming Revenue" from the operation of gaming devices in excess of 350, to be shared with non-gaming and limited gaming tribes so that the economic benefits of gaming reach tribal governments that have chosen to not operate a casino.

The Compact provides a framework for the sharing of gaming revenue with San Diego County, local jurisdictions, and other stated purposes. Specifically, the Tribe may take annual credits of up to 60% (of the 4.75% of its Gross Gaming Revenue) for infrastructure improvements, fire prevention, law enforcement, public transit, education, tourism and other services including investments in renewable energy or water conservation projects and non-gaming related economic development and health care facilities that provide a mutual benefit to the Tribe and the local community.

It should be noted that recent federal court decisions, such as the Rincon decision (see below), have severely limited the ability of the State to collect revenues for general purposes from gaming tribes. As a result, many of the gaming tribes that had executed compacts with Governor Schwarzenegger which provided direct contributions of gaming revenue to the State's General Fund, have sought to renegotiate or amend those deals in a way that is consistent with this federal court decision.

According to the Governor's office, the terms of the new Compact are consistent with provisions of more recent compacts related to licensing, compliance enforcement and mitigation of off-reservation gaming impacts but have been updated to reflect, among other things, the evolving nature of financial markets, as well as the professionalism of the Tribe's regulators and their constructive relationship with state gaming regulators.

The Governor's Office contends that the terms of the Compact reflect a continued commitment by the Tribe to revenue sharing with non-gaming and limited gaming tribes through the RSTF and TNGF, so that the economic benefits of gaming reach tribal governments that have not chosen to operate a tribal casino.

Once effective (legislative ratification and federal approval required), this Compact shall be in full force and effect until December 31, 2040.

Brief History and Background:

The Sycuan Band of the Kumeyaay Nation is a federally recognized tribe of Mission Indians from Southern California, near El Cajon in San Diego County. There are 220 members of the Tribe, approximately 160 of whom are voting members (over 18 years old). A democratically elected, seven-member tribal council governs the Tribe. Members of the Sycuan Tribal Council determine and administer laws, conditions and regulations for the benefit of the Tribe.

The Tribe opened its first gambling facility, the Sycuan Bingo Palace, on its reservation in 1983. In 1999, the Tribe and the State entered into a gaming compact, which enabled the Tribe, through revenues generated by its gaming operation, to improve the governance, environment, education, health, safety, and general welfare of its citizens; and to promote a strong tribal government, self-sufficiency, and to provide essential government services to its citizens.

The Tribe operates one of the more successful tribal casinos in California. Under the current 1999 compact, the Tribe operates 2,000 Class III gaming devices and 58 table games (Blackjack, Pai Gow, Sycuan-style craps, Poker). The Tribe also has off-track betting parlor for wagering on horse racing. The Sycuan Casino offers five different restaurants and a wide variety of top quality musical and theatrical entertainment. The Tribe's casino has become a premiere entertainment destination in San Diego County.

The Tribe has a diversified business portfolio, including the Sycuan Resort, which has a hotel, golf course and lighted tennis facility. The Tribe owns the downtown San Diego landmark US GRANT Hotel and the Marina Gateway Hotel and Conference Center in National City. The Tribe has an extensive marketing and advertising agreement with the San Diego Padres Major-League Baseball team at PETCO Park, the team's home field. The Tribe is also an investor in the Hotel Solamar near the ballpark. The Tribe owns the UP Smoke Shop that is located on its reservation.

The Tribe has two wastewater treatment plants and "a sequential batch reactor" used for their casino, administrative buildings, and maintenance buildings. They also own and operate a modular treatment plant and a water treatment facility that controls their nitrate levels. In addition, the Tribe operates a small medical clinic, dental office, a fire department and a tribal police force.

The Tribe employs 2,700 people at its casino, golf course, hotel, and other properties.

In 2006, the State and Tribe negotiated amendments to the Tribe's 1999 compact that provided for significant payments to the State's General Fund. Governor Schwarzenegger executed the compact amendments and the Legislature ratified them. However, the 2006 compact amendments contained a provision requiring ratification by the Tribe's General Council. Subsequently, the Council voted against ratifying the compact amendments therefore, the agreement was invalid. As a result, the Tribe's gaming operation continues to be governed by the provisions of the 1999 compact.

The Tribe states, "We are committed to improving the environment, education status, and the health, safety and general welfare of our members and the surrounding community." The Tribe further declares, "The future of our Tribe's social and economic advancement depends on promoting education of Sycuan’s future leaders. Education is important for the revitalization, retention, and maintenance of traditional knowledge that was passed on to our Tribe through ancestors."

Scope of Gaming Authorized and Financial Terms:

Scope of Class III Gaming Authorized: The Tribe is authorized to operate up to 2,500 gaming devices (slot machines), banking or percentage card games, and any devices or games that are authorized under state law to the California State Lottery. The Tribe may not operate roulette games (table or mechanical) or any game that incorporates the physical use of a die or dice. The Tribe shall not engage in Class III Gaming that is not expressly authorized in the Compact.

Authorized Gaming Facility: The Tribe may establish and operate not more than two gaming facilities, and only on those Indian lands located within the boundaries of the Tribe's reservation as those boundaries exist as of the execution date of this Compact, as legally described, and on which Class III Gaming may lawfully be conducted under IGRA. If the Tribe chooses to operate more than one gaming facility, then one of the two gaming facilities shall have no more than 500 gaming devices and shall have a primary purpose other than gaming authorized under IGRA.

Exclusivity: Provides that in the event the exclusive right of Indian tribes to operate Class III gaming in California pursuant to the California Constitution is lost and other non-Indian entities are able to engage in Class III gaming the Tribe shall have the right to terminate this Compact, in which case the Tribe will lose the right to operate Class III gaming authorized by this Compact; or continue under this Compact, as defined.

Special Distribution Fund: The Tribe shall pay to the State on a pro rata basis for costs the State incurs for the performance of all its duties under this Compact as determined by the monies appropriated in the annual Budget Act for the performance of their duties under Class III Gaming compacts each fiscal year for the California Gambling Control Commission (CGCC), the California Department of Justice, the Office of the Governor and the California Department of Alcohol and Drug Programs, Office of Problem Gambling, or any agency or agencies the State designates as a successor to them. The Tribe estimates it will pay approximately $1 million annually into the SDF under the defined formula.

Payments to the Revenue Sharing Trust Fund or Tribal Nation Grant Fund: If the Tribe operates more than 350 gaming devices at any time in a given calendar year, it shall thereafter, including that calendar year, pay to the CGCC, for deposit into the RSTF or the TNGF, 4.75% of its "Gross Gaming Revenue" from the operation of gaming devices in excess of 350. "Gross Gaming Revenue" is defined to mean means the win from gaming activities, which is the difference between gaming wins and losses before deducting costs and expenses or deducting incentives or adjusting for changes in progressive jackpot liability accruals. Generally, the difference between patron wagers and the payouts made on winning wagers. The Tribe estimates that the total RSTF/TNGF annual contribution will be approximately $10.1 million per year.

Credits Applied to RSTF or the TNGF Payments: The State agrees to provide the Tribe with annual credits for up to 60% of the payments otherwise due to the RSTF or TNGF for the following: 1) The costs of services provided by the Tribe or payments made to the County, local jurisdictions, and non-profit and civic organizations operating facilities or providing services within the County for fire, emergency medical services, law enforcement, public transit, education, tourism, and other services and infrastructure improvements that in part serve off-reservation needs of County residents. Such payments shall be subject to approval by the State or State designated agency. At least 20% of the annual credits shall be utilized for this purpose; 2) Non-gaming economic development investments that benefit the State and the Tribe because of their cultural, social, or environmental value or diversify the sources of revenue for the Tribe's general fund; 3) Investments by the Tribe and any funds paid to the State for renewable energy projects, as defined; 4) Payments to support capital improvements and operating expenses for facilities within California that provide health care services to tribal members, Indians, and non-Indians; and, 5) Investments by the Tribe for water treatment and conservation projects.

It is estimated that the 60% credit will equate up to approximately $6.3 million per year. The current contribution by the Tribe to the RSTF under the 1999 compact is $2.3 million. It is estimated that, even considering the 60% credit the Tribe receives back for off-reservation infrastructure projects, the net amount it will pay under this Compact to the RSTF/TNGF is approximately $4.1 million per year, or nearly double what it is currently paying under the 1999 compact.

All excess authorized credits that cannot be applied in any one year because they would exceed the 60% may be applied as an annual credit in all following years that this Compact is in effect, in the same percentages, until completely exhausted.

Cost Reimbursement and Mitigation to Local Governments: Before the commencement of a project, and no later than the issuance of the Final Tribal Environmental Impact Report (TEIR) to the County, the Tribe shall offer to commence government-to-government negotiations with the County, and upon the County's acceptance of the Tribe's offer, shall negotiate with the County on a government-to-government basis and shall enter into enforceable written agreements with the County with respect to: 1) Timely mitigation of any significant effect on the off-reservation environment, as defined; 2) Compensation for law enforcement, fire protection, emergency medical services and any other public services to be provided by the County to the Tribe for the purposes of the Tribe’s gaming operation as a consequence of the project; 3) Reasonable compensation for programs designed to address gambling addiction; and 4) Mitigation of any effect on public safety attributable to the project, including any compensation to the County as a consequence thereof.

Quarterly Contribution Report: At the time each quarterly payment is due, the Tribe shall submit to the State a report, prepared and certified by an authorized representative of the gaming operation. The report must include: 1) calculation of the maximum number of gaming devices operated each day, 2) the Gross Gaming Revenue calculation reflecting the quarterly gross gaming revenue from the operation of all gaming devices in the facility, 3) the amount due the SDF, 4) calculation of the amount due to the RSTF/TNGF, and 5) the total amount of the quarterly payment.

Amendment by Agreement: The terms and conditions of this Compact may be amended at any time by the mutual and written agreement of both parties during the term of this Compact as defined, provided that each party voluntarily consents to such negotiations in writing. Any amendments to this Compact shall be deemed to supersede, supplant and extinguish all previous understandings and agreements on the subject.

Additional Compact Components:

1. Gaming Ordinance and Regulations – all gaming activities conducted under this Compact shall, at a minimum, comply a) with a gaming ordinance duly adopted by the Tribe and approved in accordance with IGRA, b) with all rules, regulations, procedures, specifications, and standards duly adopted by the National Indian Gaming Commission (NIGC), the Tribal Gaming Agency, and the CGCC, and c) with the provisions of this Compact.

2. Tribal Ownership, Management, and Control of Gaming Operation – the gaming operation authorized under this Compact shall be owned solely by the Tribe.

3. Licensing Requirements and Procedures – all persons in any way connected with the gaming operation or gaming facility who are required to be licensed or to submit to a background investigation under IGRA, and any others required to be licensed under this Compact, including, without limitation, all gaming employees, gaming resource suppliers, financial sources, and any other person having a significant influence over the gaming operation, must be licensed by the Tribal Gaming Agency and cannot have had any determination of suitability denied or revoked by CGCC. Every gaming employee shall obtain, and thereafter maintain current, a valid tribal gaming license, as provided. The parties intend that the licensing process provided for in this Compact shall involve cooperation between the Tribal Gaming Agency and CGCC, as described.

4. Environmental Protections – the Tribe is required to prepare a TEIR to measure off-reservation environmental impacts including an evaluation of energy consumption prior to initiating the development of a project for a facility. The Compact provides procedures regarding the following: a) Notice of Preparation of Draft TEIR; b) Notice of Completion of Draft TEIR; and c) Issuance of Final TEIR. A completed TEIR shall be filed with San Diego County, the Department of Justice, and the State Clearinghouse. Projects that have commenced prior to the effective date of this Compact, including the hotel expansion project, will be subject to the relevant terms and conditions of the Tribe's 1999 Compact then in effect. The Compact provides that existing mitigation agreements between the Tribe and San Diego County regarding development at the Tribe's other properties remain in effect and are not subject to the TEIR provisions of this Compact. If those agreements expire and are not renegotiated (or negotiations fail), then the TEIR provisions of the Compact become applicable to those properties, as well.

5. Employee Protections – the Tribe agrees that it will participate in the State's workers' compensation program with respect to employees employed at the gaming facility. Disputes arising from the workers' compensation laws shall be heard by the Workers’ Compensation Appeals Board pursuant to the California Labor Code and hereby consents to the jurisdiction of the State Workers' Compensation Appeals Board and the courts of the State of California for purposes of enforcement. Furthermore, the Tribe agrees that it will participate in the State's program for providing unemployment compensation benefits and unemployment compensation disability benefits with respect to employees employed at the casino, which participation shall include compliance with the provisions of the California Unemployment Insurance Code, and the Tribe consents to the jurisdiction of the State agencies charged with the enforcement of that Code and of the courts of the State of California for purposes of enforcement.

6. Participation in State Statutory Programs Related to Employment – as a matter of comity, with respect to persons, including nonresidents of California, employed at the gaming operation or gaming facility, the Tribe shall withhold all taxes due to the State as provided in the California Unemployment Insurance Code except for tribal members and shall forward such amounts to the State. The Tribe shall file with the Franchise Tax Board a copy of any information return filed with the Secretary of the Treasury, as provided in the California Revenue and Taxation Code and the regulations, except those pertaining to tribal members living on the Tribe’s reservation.

7. Cooperation with Tribal Gaming Agency – the CGCC shall meet periodically with the Tribal Gaming Agency and cooperate in all matters relating to the enforcement of the provisions of this Compact and its Appendices.

8. Audit and Compact Compliance Review – in addition to providing for an annual independent audit, the Compact allows the state to conduct its own annual audit and compact compliance review. The Tribe shall provide to the CGCC, within 20 days of their submission to the NIGC, copies of the audited financial statements of Class III Gaming and management letter(s), if any, provided to the NIGC.

9. Regulations for Operation, Management and Minimum Standards – the Tribe shall conduct its gaming activities pursuant to an internal control system that implements minimum internal control standards for Class III Gaming that are no less stringent than those contained in the MICS of the NIGC (25 Code of Federal Regulations Section 542), as specified. This requirement is met through compliance with the provisions, as defined, or in the alternative by compliance with the statewide uniform regulation CGCC-8, as it exists currently and as it may hereafter be amended.

10. Inspection and Testing of Slot Machines – slot machines shall be tested, approved and certified by an independent gaming test laboratory or state governmental gaming test laboratory to ensure that they are being operated according to specified technical standards. Also, requires the Tribal Gaming Agency to maintain adequate records that demonstrate compliance with software and hardware specifications. The CGCC shall be authorized to annually conduct up to four random inspections of slot machines in operation to confirm that the slot machines are operating in conformance with these standards. The Tribal Gaming Agency shall prepare and maintain records of its compliance while any gaming device is on the gaming floor and for a period of one year after the gaming device is removed from the gaming floor, and shall make those records available for inspection by CGCC upon request.

11. Patron Disputes – the Tribe must attempt to resolve patron disputes filed within three days of the play or operation of a Class III game, including refusal to pay any alleged winnings. If a patron is dissatisfied with the resolution, the Tribe shall inform the patron in writing with 15 days of the right to resolution of the dispute by the Tribal Gaming Agency. If dissatisfied with the resolution, the patron has the right to seek resolution either in the Sycuan Tribal Court or before a three-member tribal claims commission consisting of a representative of the tribal government and at least one non-tribal commissioner. The Tribal Gaming Agency shall conduct an appropriate investigation, provide to the patron a copy of its procedures concerning patron complaints, and render a decision in accordance with industry practice. The decision shall be issued within 60 days of the patron's request. Any party dissatisfied with the award of the Sycuan Tribal Court (STC) or the tribal claims commission may, at the party’s election, appeal the award to the Intertribal Court of Southern California Court of Appeals, provided that the party making the election must bear all costs and expenses associated with the appeal regardless of the outcome. The Tribe agrees to wave its sovereign immunity in connection with the jurisdiction of the STC, the tribal claims commission or Intertribal Court of Southern California and in any suit in state or federal court to enforce or execute a judgment based upon the award of the tribal court, claims commission, or appellate court.

12. Labor Provisions – provides that the gaming activities authorized by this Compact may only commence after the Tribe has adopted an ordinance identical to the Tribal Labor Relations Ordinance (TRLO), referenced as Appendix C of the Compact, and the gaming activities may only continue as long as the Tribe maintains the ordinance. If the Tribe employs 250 or more persons in a tribal casino facility, then the provisions of the TLRO become effective. The TLRO provides for a secret ballot election. The new TLRO proscribed by this Compact is modeled after the Tribe's 1999 TLRO with several modifications. The new TLRO provides for union neutrality. The Tribe will not oppose a union organization but can advocate the benefits of working for the Tribe. A labor union must issue a Notice of Intent or Organize (NOIO). For a period of 365 days following delivery of a NOIO, the union shall not engage in strikes, picketing, boycotts, attack websites, or other economic activity at or in relation to the tribal casino or related facility. During the 365 days after the Tribe received the NOIO, the union must collect dated and signed authorization cards and complete the secret ballot election. Failure to complete the secret ballot election within 365 days shall preclude the union from delivering another NOIO for a period of two years (730 days). After the certification that 30% of the employees have expressed an interest in the union, a notice of election shall be issued and the election shall be concluded within 30 calendar days thereafter. Secret ballot elections shall be held at the workplace and at least one neutral location. Employees may mail in ballots provided they are received by election day. Mediation for any collective bargaining agreement impasse shall be made in conjunction with the Federal Mediation and Conciliation Service. The mediation process is modeled on the Agricultural Labor Relations Act and authorizes the mediator to resolve the impasse. According to the Administration, the appeals procedures have been streamlined significantly in comparison to the Tribe's 1999 TLRO. Disputes are presented to an arbitrator with expertise in labor law and appropriate challenges to the arbitrator's decision may be presented to a state superior court.

13. Prohibitions Regarding Minors – the Tribe shall prohibit persons under the age of 18 years from being present in any room or area in which gaming activities are being conducted unless the person is en route to a non-gaming area of the gaming facility, or is employed at the gaming facility in a capacity other than as a gaming employee.

14. Program to Mitigate Problem Gambling - the gaming operation shall establish a program, approved by the Tribal Gaming Agency, to mitigate pathological and problem gambling.

15. Alcohol Provisions – makes it explicit that the purchase, sale, and service of alcoholic beverages shall be subject to state law – the Alcoholic Beverage Control Act.

16. Tobacco – the Tribe agrees to provide a non-smoking area in the gaming facility and to utilize a ventilation system throughout the gaming facility that exhausts tobacco smoke to the extent reasonably feasible under state-of-the-art technology existing as of the date of the construction or significant renovation of the gaming facility, and further agrees not to offer or sell tobacco to anyone under 18 years of age.

17. Possession of Firearms – the possession of firearms by any person in the gaming facility is prohibited at all times, except for federal, state, or local law enforcement personnel, or tribal law enforcement or security personnel authorized by tribal law and federal or state law to possess firearms at the gaming facility.

18. Health and Safety Standards – the Tribe has agreed to adopt and comply with State public health standards for food and beverage handling and federal water quality and safe drinking standards applicable to California.

19. Building Codes and Fire Safety – in order to assure the protection of the health and safety of all gaming facility patrons, guests, and employees, the Tribe shall adopt, or has already adopted, and shall maintain throughout the term of this Compact, an ordinance that requires any covered gaming facility construction to meet or exceed the applicable codes (California Building Code and the California Public Safety Code). The Tribe shall also take all necessary steps to reasonably ensure the ongoing availability of sufficient and qualified fire suppression services to the gaming facility, and to reasonably ensure that the gaming facility satisfies all requirements of titles 19 and 24 of the California Code of Regulations applicable to similar facilities in the County, as defined.

20. Emergency Services Accessibility – the Tribe shall make reasonable provisions for adequate emergency fire, medical, and related relief and disaster services for patrons and employees of the gaming facility.

21. Effective Date – the Compact shall not be effective unless and until all of the following have occurred: a) The Compact is ratified by statute in accordance with state law; and b) Notice of approval or constructive approval is published in the Federal Register.

22. Term – once effective, this Compact shall be in full force and effect until December 31, 2040.

Additional Background Information:

Rincon Decision: In 2004, the Rincon Band of Mission Indians sued the State in federal court after negotiations for a new gambling agreement with then-Governor Schwarzenegger fell apart. The Tribe believed the Governor was violating federal law by insisting that tribes pay money into the state's General Fund in exchange for more slot machines.

In July 2011, the United States Supreme Court declined to review a Ninth Circuit Court's decision that ruled the state could not require the Rincon Band tribe to pay a percentage of slot machine revenue into California's General Fund for more gaming devices. The Ninth Circuit had affirmed a lower court decision that the new financial concessions were nothing more than a state tax on tribal casino revenues, which is prohibited by IGRA. The court concluded that a "non-negotiable, mandatory payment of 10% of net win into the State treasury for unrestricted use yields public revenue and is [therefore] a tax and that the court was therefore required to consider the State's demand as evidence of bad faith under IGRA's statutes."

The Rincon decision has changed the dynamics of tribal-state compact negotiations in California.

Pauma Band of Luiseno Mission Indians Lawsuit: In 2010, the Pauma Band of Luiseno Mission Indians ceased payments to the State and sued the State in federal court claiming that the State acted in bad faith by misrepresenting significant information relative to the number of gaming machines available for licensure. Prior to its 2004 amended compact, the Tribe was paying approximately $315,000 a year to the state (into the SDF and RSTF) under terms of its 1999 compact. The payment rose to $7.75 million a year (initially for securitizing the proposed transportation bond and subsequently deposited directly into the general fund) under the Tribe's 2004 amended compact. In 2013, the court sided with Pauma and, thus, the State no longer receives payments from the Pauma Tribe. The State has appealed that decision.

As noted above, the 2004 Pauma compact amendments were negotiated at the same time as the current Tribe compact, both of which were ratified by the same bill (AB 687 (Núñez), Chapter 91, Statutes of 2004). Both compacts provided for fixed payments to the state for securitizing transportation bonds. The Rincon decision as well as the Pauma case, have limited some of the state's options when negotiating and renegotiating compact agreements.

SDF: Existing law creates the SDF in the State Treasury for the receipt of revenue contributions made by tribal governments pursuant to the terms of the 1999 model Tribal-State Gaming Compacts and authorizes the Legislature to appropriate money from the SDF for the following purposes: 1) grants for programs designed to address gambling addiction; 2) grants for the support of state and local government agencies impacted by tribal government gaming; 3) compensation for regulatory costs incurred by CGCC and the DOJ in connection with the implementation and administration of compacts; 4) payment of shortfalls that may occur in the Indian Gaming RSTF; 5) disbursements for the purpose of implementing the terms of tribal labor relations ordinances promulgated in accordance with the terms of the 1999 compacts; and, 6) any other purpose specified by law. The distribution formula "sunsets" on January 1, 2021.

RSTF: Existing law also creates in the State Treasury the RSTF for the receipt and deposit of moneys derived from gaming device license fees that are paid into the RSTF pursuant to the terms of specified tribal-state gaming compacts for the purpose of making distributions to non-compacted tribes (e.g., federally-recognized non-gaming and tribes that operate casinos with fewer than 350 slot machines). Revenue in the RSTF is available to CGCC, upon appropriation by the Legislature, for making distributions of $1.1 million annually to non-compact tribes. The RSTF was created as part of the 1999 compacts, which, in conjunction with the passage of Proposition 1A (2000), created gaming compacts with approximately 60 California tribes. Non-compact tribes are considered third-party beneficiaries of the 1999 compacts.

TNGF: The TNGF was created in the Graton Rancheria compact [AB 517 (Hall), Chapter 12, Statutes of 2012], as a new destination for gaming revenue for distribution of funds to non-gaming and limited-gaming tribes, upon application of such tribes for purposes related to effective self-governance, self-determined community, and economic development. The fund is designed to be fluid and payments are intended to be made to non-gaming tribes on a "need" basis, upon application by non-gaming tribes. The TNGF currently does not receive funding.

Related legislation: AB 1540 (Gray) of the current legislative session. Ratifies the tribal-state gaming compact entered into between the State and the Santa Ynez Band of Mission Indians, executed on August 26, 2015.

AB 315 (Bigelow) of the current legislative session. Ratifies the amended and restated tribal-state gaming compact entered into between the State and the United Auburn Indian Community, executed on August 14, 2015.

Prior legislation: AB 475 (Bigelow), Chapter 8, Statutes of 2015. Ratified the tribal-state gaming compact entered into between the State and the Jackson Rancheria Band of Miwuk Indians, executed on February 1, 2015.

SB 1356 (De León), Chapter 314, Statutes of 2014. Ratified the amended and restated tribal-state gaming compact between the State and the Viejas Band of Kumeyaay Indians, executed on August 12, 2014.

SB 1224 (Correa), Chapter 300, Statutes of 2014. Ratified the tribal-state gaming compact entered into between the State and the Karuk Tribe, executed on December 4, 2013.

AB 277 (Hall), Chapter 51, Statutes of 2013. Ratified tribal-state gaming compacts entered into between the State and the North Fork Rancheria Band of Mono Indians of California, executed on August 31, 2012, and the State of California and the Wiyot Tribe, executed on March 20, 2013.

AB 1245 (V. Manuel Pérez), Chapter 462, Statutes of 2013. Ratified the tribal-state gaming compact entered into between the State and the Ramona Band of Cahuilla Indians, executed on June 10, 2013.

AB 1267 (Hall), Chapter 6, Statutes of 2013. Ratified the amended tribal-state gaming compact entered into between the State and the Shingle Springs Band of Miwok Indians, executed on November 15, 2012.

SB 668 (Fuller), Chapter 67, Statutes of 2013. Ratified the tribal-state gaming compact entered into between the State and the Fort Independence Indian Community of Paiute Indians, executed on February 28, 2013.

AB 517 (Hall), Chapter 12, Statutes of 2012. Ratified the tribal-state gaming compact entered into between the State and the Federated Indians of Graton Rancheria of Sonoma County, executed on March 27, 2012.

AB 787 (Chesbro), Chapter 340, Statutes of 2012. Ratified the amendment to the tribal-state gaming compact entered into between the State and the Coyote Valley Band of Pomo Indians, executed on July 25, 2012.

AB 1418 (Hall), Chapter 412, Statutes of 2011. Repealed those provisions ratifying the tribal-state gaming compact entered into between the State and Pinoleville Pomo Nation, executed on March 9, 2009 and instead ratified the tribal-state gaming compact entered into between the State and the Tribe, executed on August 8, 2011.

AB 1020 (Chesbro), Chapter 27, Statutes of 2011. Repealed the ratification of the tribal-state gaming compact entered into between the State and the Habematolel Pomo of Upper Lake, executed on September 2, 2009, and instead ratified a new tribal-state gaming compact entered into between the State and the Tribe, executed on March 17, 2011.

SB 89 (Budget and Fiscal Review Committee), Chapter 1, Statutes of 2010. Ratified the tribal-state gaming compact entered into between the State and the Habematolel Pomo of Upper Lake, executed on September 2, 2009.

AB 122 (Coto), Chapter 3, Statutes of 2009. Ratified the tribal-state gaming compact entered into between the State and the Pinoleville Pomo Nation, executed on March 10, 2009.

AB 3072 (Price), Chapter 334, Statutes of 2008. Ratified the first amendment to a tribal-state gaming compact entered into between the State and the Shingle Springs Band of Miwok Indians, executed on June 30, 2008.

SB 106 (Wiggins), Chapter 37, Statutes of 2007. Ratified a new compact between the State of California and the Yurok Tribe of the Yurok Reservation.

SB 174 (Ducheny), Chapter 39, Statutes of 2007. Ratified the first compact amendment to the compact between the State of California and Sycuan.

SB 175 (Ducheny), Chapter 38, Statutes of 2007. Ratified the first compact amendment to the compact between the State of California and Morongo.

SB 903 (Padilla), Chapter 40, Statutes of 2007. Ratified the first compact amendment to the compact between the State of California and Pechanga.

SB 941 (Padilla), Chapter 226, Statutes of 2007. Ratified the first compact amendment to the compact between the State of California and San Manuel.

SB 957 (Torlakson), Chapter 41, Statutes of 2007. Ratified the first compact amendment to the compact between the State of California and Agua Caliente.

SB 470 (Ducheny), Chapter 527, Statutes of 2006. Ratified the first amendment to the compact between the State and the Quechan Tribe of the Fort Yuma Reservation (Quechan).

SB 1117 (Burton), Chapter 856, Statutes of 2004. Ratified two new and two amended compacts entered into between the State and the following tribes: Coyote Valley Band of Pomo Indians (new compact); Fort Mojave Indian Tribe (new compact); Buena Vista Rancheria of Me-Wuk Indians (amended compact); and, Ewiiaapaayp Band of Kumeyaay Indians (amended compact).

AB 687 (Nuñez), Chapter 91, Statutes of 2004. Ratified amendments to five compacts entered into between the State and the following tribes: Pala Band of Mission Indians; Pauma Band of Luiseno Mission Indians of the Pauma and Yuima Reservation; Rumsey Band of Wintun Indians; United Auburn Indian Communities; and, Viejas Group of Kumeyaay Indians. 

SB 930 (Burton), Chapter 802, Statutes of 2003. Ratified a compact between the State of California and the Torres-Martinez Desert Cahuilla Indians.

SB 411 (Ducheny), Chapter 790, Statutes of 2003. Ratified compacts between the State of California and the La Posta Band of Diegueno Mission Indians and the Santa Ysabel Band of Diegueno Mission Indians in San Diego County.

AB 1385 (Battin), Chapter 874, Statutes of 1999. Designated the Governor as the state officer responsible for negotiating and executing compacts between the state and federally recognized Indian tribes located in the state.  Also, ratified 57 compacts and created two special funds in the State Treasury (SDF and RSTF), as specified.

SB 287 (Burton), Chapter 409, Statutes of 1998. Ratified 11 compacts negotiated between the State and Indian tribes that permitted Class III video gaming devices on tribal lands and established a process for ratifying other compacts.

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531 FN: 0002337

 THIRD READING  

Bill No: AB 795

Author: Atkins (D), et al.

Amended: 9/4/15 in Senate

Vote: 27 - Urgency

PRIOR VOTES NOT RELEVANT

NOTE: On September 9, 2015, the Senate Governmental Organization Committee held an informational hearing on the tribal-state gaming compact entered into betwee the State of California and the Sycuan Band of the Kumeyaay Nation.

SUBJECT: Tribal gaming: compact ratification

SOURCE: Author

DIGEST: This bill ratifies the tribal-state gaming compact (Compact) entered into between the State of California and the Sycuan Band of the Kumeyaay Nation (hereafter “Tribe”) executed on September 2, 2015. Additionally, this bill provides that, in deference to tribal sovereignty, certain actions are not deemed projects for purposes of the California Environmental Quality Act (CEQA); and, stipulates, except as expressly provided, that none of the provisions shall be construed to exempt a city, county, or city and county, or the Department of Transportation from CEQA requirements.

Senate Floor Amendments of 9/4/15 gut the contents of the existing bill; add a new lead author (Atkins); add an urgency clause; and, insert provisions pertaining to ratification of the tribal gaming compact recently executed by the Governor and the Sycuan Band of the Kumeyaay Nation.

ANALYSIS:

Existing law:

1. Provides, under the Indian Gaming Regulatory Act (IGRA), for the negotiation and conclusion of compacts between federally recognized Indian tribes and the State for the purpose of conducting Class III gaming activities on Indian lands within a State as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments.

2. Authorizes expressly a number of tribal-state gaming compacts between the State of California and specified Indian tribes.

3. Authorizes the conduct of Class III gaming activities to the extent such activities are permitted by state law, a gaming compact has been concluded by a federally recognized tribe and the State, and the compact has been approved by the Secretary of the Interior.

4. Limits the operation of Class III gaming activities to Indian lands acquired on or before October 17, 1988. Provides for certain exceptions to conduct gaming activities on Indian lands acquired after October 17, 1988.

5. Defines Indian lands to mean all lands within the limits of any Indian reservation, and any lands title to which is either held in trust by the United States for the benefit of any Indian tribe, or individual, or held by any Indian tribe or individual subject to restriction by the U.S. against alienation and over which an Indian tribe exercises governmental power.

6. Requires the State to negotiate to conclude a compact in good faith with an Indian tribe having jurisdiction over the Indian lands upon which the Class III gaming activity is to be conducted. Provides the U.S. district courts with jurisdiction over any cause of action initiated by a tribal government alleging that the State failed to negotiate in good faith to conclude a compact. Prescribes the remedy, mediation supervised by the courts, if it is found that the State failed to negotiate in good faith to conclude a compact.

7. Authorizes the Governor, under the California Constitution, to negotiate and conclude compacts, subject to ratification by the Legislature.

This bill ratifies the Compact entered into between the State of California and the Sycuan Band of the Kumeyaay Nation executed on September 2, 2015 and supersedes the 1999 compact between the Tribe and the State of California. The 1999 compact authorizes the Tribe to operate no more than 2,000 gaming devices (slot machines). Under this Compact, the Tribe may operate a maximum of 2,500 gaming devices at its current facility in San Diego County.

The Tribe has agreed to pay the State its pro rata share of the costs the State incurs for the performance of its duties under the Compact as well as four and three quarters percent (4.75%) of its “gross gaming revenue,” to be shared with tribes that are not gaming or that otherwise are not substantially benefiting from gaming. Additionally, the Compact provides a framework for the sharing of gaming revenue with the County of San Diego and other local jurisdictions. Specifically, from its payments to the Revenue Sharing Trust Fund (RSTF) or the Tribal Nation Grant Fund (TNGF), the Tribe may take annual credits of up to sixty percent (60%) for infrastructure improvements and fire, law enforcement, public transit, education, tourism and other services including investments in renewable energy or water conservation projects and non-gaming related economic development and health care facilities that provide a mutual benefit to the Tribe and the local community.

Pursuant to the 1999 compact, the Tribe currently pays approximately $2.4 million annually into the Special Distribution Fund (SDF) and $2.3 million annually into the RSTF. Under this Compact, it is estimated that the Tribe will pay approximately $1 million annually (its pro rata share) into the SDF and approximately $10.1 million annually into the RSTF or the TNGF. Thus, the RSTF will see an increase of revenue estimated to be roughly $7.8 million per year. However, this amount may be offset by up to $6.3 million per year that the Tribe is authorized to redirect to specified infrastructure projects and services that mutually benefit the local community, the Tribe and the state.

Brief History of the Sycuan Band of the Kumeyaay Nation

The Sycuan Band of the Kumeyaay Nation is a federally recognized tribe of Mission Indians from Southern California, near El Cajon. The Tribe consists of 220 members, approximately 160 of whom are voting members (over 18 years old). The Tribe opened its first gambling facility, the Sycuan Bingo Palace, on its reservation in 1983. In 1999, the Tribe entered into a tribal-state gaming compact with the State of California which has provided it with extensive economic opportunities, including a profitable casino. The Tribe has a diversified business portfolio which includes ownership interests in a variety of businesses both on and off of the Sycuan Reservation, including the historic U. S. Grant Hotel in downtown San Diego, the Marina Gateway Hotel and Conference Center in National City, an off-reservation golf course, and significant advertising agreements with the San Diego Padres Major-League Baseball team at PETCO Park. The Tribe is also an investor in the Hotel Solamar near the ballpark.

Furthermore, the Tribe funds the training and staffing of a fire station and police station in San Diego County. With respect to the fire station that it funds, 90% of the calls for service are off reservation, resulting in millions of dollars spent each year benefitting off-reservation communities. The majority of the police station’s calls are for off-reservation services, as well, although at a lower percentage.

Under the 1999 compact, the Tribe operates 2,000 Class III gaming devices and 58 table games and employs 2,700 people at its casino, golf course, hotel, and other properties. The Tribe also offers an off-track betting parlor for its customers. Pursuant to the 1999 compact, the Tribe currently pays $ 2.4 million into the SDF and $2.3 into the RSTF annually.

In 2006, the State and Tribe negotiated amendments to the 1999 Sycuan compact that provided for significant payments to the State's General Fund in exchange for more gaming devices. Governor Schwarzenegger executed the compact amendments, the Legislature ratified the amended compact, and the U.S. Department of the Interior published a notice in the Federal Register that the amended compact was “deemed-approved.” However, the 2006 amended compact contained a provision requiring ratification by the Tribe’s general membership. Subsequently, the Tribal membership voted NOT to ratify the compact amendments and therefore, they never went into effect. As a result, Sycuan's gaming operation continues to be governed by the provisions of the 1999 compact.

Key Components of this Compact

Scope of Class III Gaming Authorized and Financial Terms. Under this Compact, the Tribe may operate a maximum of 2,500 gaming devices, banking or percentage card games, and any devices or games that are authorized under state law to the California State Lottery, provided that the Tribe will not offer such games through use of the Internet unless others in the state not affiliated with or licensed by the California State Lottery are permitted to do so under state and federal law. The Tribe shall not engage in Class III Gaming that is not expressly authorized in the Compact.

Authorized Gaming Facility. The Tribe may establish and operate not more than two gaming facilities and engage in Class III Gaming only on eligible Indian lands held in trust for the Tribe, located within the boundaries of the Tribe’s reservation and trust lands as those boundaries exist as of the execution date of this Compact, as legally described in the Compact. If the Tribe chooses to operate more than one gaming facility, then one of the two gaming facilities shall have no more than five hundred (500) gaming devices and shall have a primary purpose other than gaming authorized under IGRA.

Exclusivity. Provides that in the event the exclusive right of Indian tribes to operate Class III gaming in California pursuant to the California Constitution is nullified by the enactment, amendment, or repeal of a state statute or constitutional provision or the conclusive and dispositive judicial construction of a statute or the state Constitution by a California appellate court after the effective date of this Compact, that gaming devices may lawfully be operated by non-Indian entities, the Tribe shall have the right to: (1) terminate this Compact, in which case the Tribe will lose the right to operate Class III gaming authorized by this Compact or (2) continue under this Compact with entitlement to a reduction of the rates specified below following conclusion of negotiations, to provide for (a) compensation to the State for the reasonable costs of regulation, as defined; (b) reasonable payments to local governments impacted by tribal government gaming; (c) grants for programs designed to address gambling addiction; and, (d) such assessments as may be permissible at such time under federal law. 

Payments to the SDF.  The Tribe shall pay to the State on a pro rata basis the costs the State incurs for the performance of all its duties under this Compact, as established by the monies appropriated in the annual Budget Act for the performance of their duties under the Class III Gaming Compacts each fiscal year for the California Gambling Control Commission (CGCC), the California Department of Justice, the Office of the Governor, the California Department of Public Health Programs, Office of Problem Gambling, the State Controller, the Department of Human Resources, and the Financial Information System for California, or any agency or agencies the State designates as a successor to them.  The Tribe’s pro rata share of the State’s costs in any given year this Compact is in effect shall be calculated using the following equation:

“The maximum number of gaming devices operated in the gaming facility for the previous fiscal year as determined by the State Gaming Agency, divided by the maximum number of gaming devices operated by all federally recognized tribes in California pursuant to tribal-state Class-III gaming compacts during the previous fiscal year, multiplied by costs, equals the Tribe’s pro rata share.”

Payments to the RSTF or TNGF. If the Tribe operates more than three hundred fifty (350) gaming devices at any time in a given calendar year, it shall thereafter, including in that calendar year, pay to CGCC, for deposit into the RSTF or the TNGF, four and three quarters percent (4.75%) of its “gross gaming revenue” from the operation of gaming devices in excess of three hundred fifty (350).

“Gross Gaming Revenue” is defined as the win from gaming activities, which is the difference between gaming wins and losses before deducting costs and expenses or deducting incentives or adjusting for changes in progressive jackpot liability accruals. Generally, the difference between patron wagers and the payouts made on winning wagers.

Credits Applied to RSTF or the TNGF. The State agrees to provide the Tribe with annual credits for up to sixty percent (60%) of the payments otherwise due to be paid into the RSTF or TNGF for the following:

1. Payments by the Tribe to San Diego County, local jurisdictions, and nonprofit and civic organizations operating facilities or providing services within the County for fire, law enforcement, emergency medical services, public transit, education, tourism, and other services and infrastructure improvements intended to serve off-reservation needs of County residents – such payments shall be subject to approval by the County or local jurisdiction in the County and at least twenty percent (20%) of the annual credits must be utilized for the above stated purposes;

2. Non-gaming related capital investments and economic development projects by the Tribe on or off tribal trust lands that the State or State designated agency agrees provides mutual benefits to the Tribe and the State because, for instance, they have particular cultural, social or environmental value, or diversify the sources of revenue for the Tribe’s general fund;

3. Investments in, and any funds paid to the State in connection with, renewable energy projects that, in part, serve the gaming facility, to include facilities that incorporate charging stations for electric or other zero-emission vehicles that are available to patrons and employees of the gaming facility;

4. Payments to support capital improvements and operating expenses for facilities within California that provide health care services to tribal members, Indians, and non-Indians; and,

5. Investments by the Tribe for water treatment and conservation projects.

All excess authorized credits that cannot be applied in any one year because they would exceed the sixty percent (60%) may be applied as an annual credit in all following years that this Compact is in effect, in the same percentages, until completely exhausted.

Quarterly Contribution Report. At the time each quarterly payment is due, the Tribe shall submit to the State a report, prepared and certified by an authorized representative of the gaming operation. The report must include: (a) calculation of the maximum number of gaming devices operated each day, (b) the gross gaming revenue calculation, (c) the amount due the SDF, (d) calculation of the amount due to the RSTF/TNGF, and (e) the total amount of the quarterly payment.

Additional Compact Elements

• Gaming Ordinance and Regulations. Provides that all gaming activities conducted under this Compact shall, at a minimum, comply with (1) a gaming ordinance duly adopted by the Tribe and approved in accordance with IGRA, (2) all rules, regulations, procedures, specifications, and standards duly adopted by the National Indian Gaming Commission (NIGC), the Tribal Gaming Agency, and the State Gaming Agency, and (3) the provisions of this Compact, as specified.

• Licensing Requirements and Procedures. Provides that all persons in any way connected with the gaming operation or gaming facility who are required to be licensed or to submit to a background investigation under IGRA, and any others required to be licensed under this Compact, including, without limitation, all gaming employees, gaming resource suppliers, financial sources, and any other person having a significant influence over the gaming operation, must be licensed by the Tribal Gaming Agency and cannot have had any determination of suitability denied or revoked by the CGCC. Also, every gaming employee must obtain, and thereafter maintain current, a valid tribal gaming license, as specified.

• Minimum Internal Control Standards (MICS). Requires the Tribe to adopt and comply with standards that meet or exceed the federal NIGC standards. The MICS are incorporated in this Compact as an appendix (Appendix D), which shall be updated periodically by the State Gaming Agency and Tribal Gaming Agency, to ensure the MICS keep up with changing technology and industry standards.

• Patron Disputes. Provides that the Tribe (through its tribal gaming agency) must attempt to resolve patron disputes within three days of the play or operation of any game, including refusal to pay to a patron any alleged winnings from any gaming activities. If a patron is dissatisfied with the resolution, the Tribe shall inform the patron in writing with 15 days of the right to resolution of the dispute by the Tribal Gaming Agency. If dissatisfied with the resolution, the patron has the right to seek resolution in either the Sycuan Tribal Court system or before a three-member tribal claims commission consisting of a representative of the tribal government and at least one non-tribal commissioner. The Tribal Gaming Agency shall conduct an appropriate investigation, provide to the patron a copy of its procedures concerning patron complaints, and render a decision in accordance with industry practice. The decision shall be issued within 60 days of the patron's request. Any party dissatisfied with the award of the Sycuan Tribal Court or tribal claims commission may, at the party’s election, appeal to the Intertribal Court of Southern California Court of Appeals, provided that the party making the election must bear all costs and expenses associated with the appeal regardless of the outcome. The Tribe agrees to wave its sovereign immunity in connection with the jurisdiction of the Sycuan Tribal Court, the tribal claims commission or Intertribal Court of Southern California and in any suit in state or federal court to enforce or execute a judgment based upon the award of the tribal court, claims commission or appellate court.

• Public and Workplace Liability. Requires the Tribe to obtain and maintain a commercial general liability insurance policy which provides coverage of no less than $10 million. Also, requires the Tribe to adopt a Tort Liability Ordinance stipulating that California tort law governs claims. In addition, the Compact provides that California tort law shall apply to specified claims if the Tribe fails to adopt a Tort Liability Ordinance.

• Environmental Protections. Requires the Tribe to prepare a Tribal Environmental Impact Report (TEIR) and negotiate mitigation of any off-reservation impacts prior to initiating the development of a project for a facility. The Compact provides procedures regarding the (1) Notice of Preparation of Draft TEIR, (2) Notice of Completion of Draft TEIR, and (3) Issuance of Final TEIR. The Tribe’s failure to prepare an adequate TEIR when required shall be deemed a breach of this Compact and furthermore shall be grounds for issuance of an injunction or other appropriate equitable relief. A completed TEIR must be filed with San Diego County, the Department of Justice, the State Clearinghouse and the State Gaming Agency. Also, projects that have been initiated under the terms of the 1999 compact shall be subject to the relevant terms and conditions of the 1999 compact. Additionally, projects commenced prior to the existing mitigation agreements (January of 2012) between the Tribe and San Diego County regarding development of the Tribe’s other properties remain in effect and are not subject to the TEIR provisions of this Compact. If those agreements expire and are not renegotiated (or negotiations fail), then the TEIR provisions of the Compact become applicable to those properties, as well.

• Labor Provisions. Provides that the gaming activities authorized by this Compact may only commence after the Tribe has adopted an ordinance identical to the Tribal Labor Relations Ordinance (TRLO), referenced as Appendix C of the Compact, and the gaming activities may only continue as long as the Tribe maintains the ordinance. If the Tribe employs 250 or more persons in a tribal casino facility, then the provisions of the TLRO become effective. The TLRO provides for a secret ballot election. The new TLRO proscribed by this Compact is modeled after the Tribe’s 1999 TLRO with several modifications. The new TLRO provides for union neutrality. The Tribe will not oppose a union organization but can advocate the benefits of working for the Tribe. A labor union must issue a Notice of Intent or Organize (NOIO). For a period of 365 days following delivery of a NOIO, the union shall not engage in strikes, picketing, boycotts, attack websites, or other economic activity at or in relation to the tribal casino or related facility. During the 365 days after the Tribe received the NOIO, the union must collect dated and signed authorization cards and complete the secret ballot election. Failure to complete the secret ballot election within 365 days shall preclude the union from delivering another NOIO for a period of two years (730 days). After the certification that 30% of the employees have expressed an interest in the union, a notice of election shall be issued and the election shall be concluded within 30 calendar days thereafter. Secret ballot elections shall be held at the workplace and at least one neutral location. Employees may mail in ballots provided they are received by election day. Mediation for any collective bargaining agreement impasse shall be made in conjunction with the Federal Mediation and Conciliation Service (FMCS). The mediation process is modeled on the Agricultural Labor Relations Act and authorizes the mediator to resolve the impasse. According to the Administration, the appeals procedures have been streamlined significantly in comparison to the Tribe’s 1999 TLRO. Disputes are presented to an arbitrator with expertise in labor law and appropriate challenges to the arbitrator’s decision may be presented to a state superior court.

• Enhanced Audit and Compliance Review Procedures. In addition to providing for an annual independent audit, the Compact allows the state to conduct its own annual audit and compact compliance review.

• Inspection and Testing of Slot Machines. Provides that slot machines will have to be tested, approved and certified by an independent gaming test laboratory or state governmental gaming test laboratory to ensure they are being operated according to specified technical standards. Also, requires the Tribal Gaming Agency to maintain adequate records that demonstrate compliance with software and hardware specifications. The State Gaming Agency would be authorized to annually conduct up to four random inspections of slot machines in operation to confirm that the slot machines are operating in conformance with these standards.

• Prohibitions Regarding Minors. Provides that the Tribe shall prohibit persons under the age of eighteen (18) years from being present in any room or area in which gaming activities are being conducted unless the person is en route to a non-gaming area of the gaming facility, or is employed at the Gaming Facility in a capacity other than as a gaming employee.

• Health and Safety Standards. Provides that the Tribe has agreed to adopt and comply with tribal health standards for food and beverage handling that are no less stringent than State public health standards. Also, the Tribe has agreed to comply with federal water quality and safe drinking water standards applicable in California.

• Problem Gambling. Requires the gaming operation to establish a program, approved by the Tribal Gaming Agency, to mitigate pathological and problem gaming by implementing specified measures.

• Alcohol Provisions. Makes it explicit that the purchase, sale, and service of alcoholic beverages shall be subject to state law (the Alcoholic Beverage Control Act).

• Tobacco Provisions. Provides that the Tribe agrees to provide a non-smoking area in the gaming facility and to utilize a ventilation system throughout the gaming facility that exhausts tobacco smoke to the extent reasonably feasible under state-of-the-art technology existing as of the date of the construction or significant renovation of the gaming facility, and further agrees not to offer or sell tobacco to anyone under 18 years of age.

• Emergency Services Accessibility and Possession of Firearms. Provides that the Tribe must make reasonable provisions for adequate emergency fire, medical, and related relief and disaster services for patrons and employees. Also, prohibits the possession of firearms by any person in the gaming facility at all times except for federal, state, or local law enforcement personnel, or tribal law enforcement or security personnel, as authorized.

• Workers’ Compensation. Provides that the Tribe agrees to participate in the state’s workers’ compensation program with respect to employees at the casino. All disputes arising from the workers’ compensation laws shall be heard by the State Workers’ Compensation Appeals Board pursuant to the California Labor Code. The Tribe acknowledges the jurisdiction of the Board in such manners. Furthermore, the Tribe agrees that it will participate in the state’s unemployment compensation program for providing benefits and unemployment compensation disability benefits to employees at the casino. The Tribe shall withhold all taxes due to the state, except for Tribal members living on the Tribe’s reservation, and forward such amounts to the state.

• Effective Date. Provides that this Compact shall not be effective unless and until all of the following have occurred: (a) the Compact is ratified by statute in accordance with state law and (b) notice of approval or constructive approval is published in the Federal Register. Once effective, this Compact shall be in full force and effect until December 31, 2040.

• Amendment by Agreement. Provides that the terms and conditions of this Compact may be amended at any time by the mutual and written agreement of both parties during the term of this Compact, provided that each party voluntarily consents to such negotiations in writing. Any amendments to this Compact shall be deemed to supersede, supplant and extinguish all previous understandings and agreements on the subject.

Additional Relevant Background Information

Indian Gaming Regulatory Act (IGRA)

In 1988, Congress enacted the Indian Gaming Regulatory Act (IGRA) to provide a statutory basis for the operation and regulation of gaming on Indian lands. IGRA provides that an Indian tribe may conduct gaming activity on Indian lands if the activity “is not specifically prohibited by federal law and is conducted within a State which does not prohibit such gaming activity.”

IGRA distinguishes between three classes of gaming (Class I, Class II, and Class III) and provides for different forms of regulation for each class. Class I gaming includes “social games” for minor prizes or “traditional forms of Indian gaming.” Class II gaming is defined to include bingo and card games that are explicitly authorized by the laws of the state, or that are not explicitly prohibited by the laws of the state and are played at any location in the State, so long as the card games are played in conformity with those laws and regulations. Class III gaming includes such things as slot machines, casino games and banked card games such as black jack and baccarat. Class III gaming may only be conducted under terms of a compact negotiated between an Indian tribe and a State.

IGRA was enacted against a legal background in which Indian tribes and individuals generally are exempt from state taxation within their own territory. IGRA provides that with the exception of assessments permitted under the statute, to defray the State’s costs of regulating gaming activity, IGRA shall not be interpreted as conferring upon a State authority to impose any tax, fee, charge, or other assessment upon an Indian tribe to engage in Class III activity. Nor may a State refuse to enter into negotiations based on the lack of authority to impose such a tax, fee, charge, or other assessment.

When a tribe requests negotiations for a Class III compact, IGRA requires the State to negotiate with the Indian tribe in good faith. IGRA provides a comprehensive process to prevent an impasse in compact negotiations, which is triggered when a tribe files suit alleging that the State has refused to negotiate or has failed to negotiate in good faith.

Before 2000, The California Constitution prohibited Class III gaming. In 2000, California voters approved Proposition 1A which had been proposed by the Governor and passed by the Legislature. Proposition 1A amended the California Constitution to permit the State to negotiate compacts with federally recognized Indian tribes for certain Class III gaming activities. Because non-Indian parties were still forbidden from operating gaming facilities, Proposition 1A granted Indian tribes a “constitutionally protected monopoly on most types of Class III games in California.”

Rincon Decision

The U.S. Supreme Court in July 2011 refused to consider the decision of the Ninth Circuit Court rejecting a Class III Tribal-State Gaming Compact negotiated by Governor Schwarzenegger with the Rincon Band of Luiseno Mission Indians. The issue of this case's impact on Indian gaming throughout the country has been a topic of great debate.

As noted, IGRA authorizes states to receive compensation for costs related to tribal gaming such as regulation and gaming addiction, and to offset the effects of casinos on surrounding communities. However, states are prohibited from assessing taxes on tribal casino revenues, so unjustified payments to a state's General Fund are no longer permissible unless the tribes are getting something in return for the required payments, such as those authorized by IGRA.

Another vehicle for state receipt of casino payments above those payments must be in exchange for some benefit deemed "exclusive" to the tribe. To this end, it is fact that a number of other state (Governors) have attempted to create "exclusive grants" in favor of compact signatory tribes in return for payments to the state treasuries.

Rincon challenged the legality of California's "second generation" compacts pursuant to which the signatory tribes would be entitled to increase their slot machine count in return for paying percentages of the new slot machine revenue to the state's General Fund. The Ninth Circuit had affirmed a lower court decision that the new financial concessions were nothing more than a state tax on tribal casino revenues which is prohibited by IGRA.

Rincon had refused to sign the amended compact which already had been executed by several other tribes choosing instead to demand that it be given the expanded gaming opportunity without making the new financial concessions. The Ninth Circuit Court concluded that a “non-negotiable, mandatory payment of 10% of net win into the State treasury for unrestricted use yields public revenue, and is [therefore] a tax, and that the court was therefore required to consider the State’s demand as evidence of bad faith under IGRA’s statutes.”

The court noted that “the State could rebut the presumption of bad faith by demonstrating that the revenue demanded was to be used for the public interest, public safety, criminality, financial integrity, and adverse economic impacts on existing activities, but the State’s need for general tax revenue was insufficient to demonstrate good faith.”

Prior/Related Legislation

AB 1540 (Gray, 2015) ratifies the tribal-state gaming compact entered into between the State of California and the Santa Ynez Band of Chumash Indians, executed on August 26, 2015. (Enrolled and presented to the Governor on 9/3/2015)

AB 315 (Bigelow, 2015) ratifies the amended and restated tribal-state gaming compact entered into between the State of California and the United Auburn Indian Community, executed on August 14, 2015. (Enrolled and presented to the Governor on 9/3/2015)

AB 475 (Bigelow, Chapter 8, Statutes of 2015) ratified the tribal-state gaming compact entered into between the State of California and Jackson Rancheria Band of Miwuk Indians, executed on February 1, 2015.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 9/8/15)

Agua Caliente Band of Chauilla Indians

Asian Business Association of San Diego

Downtown San Diego Partnership

La Mesa Chamber of Commerce

Mental Health America of San Diego County

Ronald McDonald House Charities of San Diego

San Diego City Councilman Scott Sherman

San Diego County Building and Construction Trades Council, AFL-CIO

San Diego Regional Chamber of Commerce

San Diego Rescue Mission

San Diego Tourism Authority

San Ysidro Chamber of Commerce

Santa Ynez Band of Chumash Indians

State Building and Construction Trades Council, AFL-CIO

Sycuan Band of the Kumeyaay Nation

Urban Corps of San Diego County

OPPOSITION: (Verified 9/8/15)

None received

Prepared by: Arthur Terzakis / G.O. / (916) 651-1530

9/8/15 15:43:55

**** END ****

 THIRD READING  

Bill No: AB 795

Author: Atkins (D), et al.

Amended: 9/4/15 in Senate

Vote: 27 - Urgency

PRIOR VOTES NOT RELEVANT

NOTE: On September 9, 2015, the Senate Governmental Organization Committee held an informational hearing on the tribal-state gaming compact entered into betwee the State of California and the Sycuan Band of the Kumeyaay Nation.

SUBJECT: Tribal gaming: compact ratification

SOURCE: Author

DIGEST: This bill ratifies the tribal-state gaming compact (Compact) entered into between the State of California and the Sycuan Band of the Kumeyaay Nation (hereafter “Tribe”) executed on September 2, 2015. Additionally, this bill provides that, in deference to tribal sovereignty, certain actions are not deemed projects for purposes of the California Environmental Quality Act (CEQA); and, stipulates, except as expressly provided, that none of the provisions shall be construed to exempt a city, county, or city and county, or the Department of Transportation from CEQA requirements.

Senate Floor Amendments of 9/4/15 gut the contents of the existing bill; add a new lead author (Atkins); add an urgency clause; and, insert provisions pertaining to ratification of the tribal gaming compact recently executed by the Governor and the Sycuan Band of the Kumeyaay Nation.

ANALYSIS:

Existing law:

1. Provides, under the Indian Gaming Regulatory Act (IGRA), for the negotiation and conclusion of compacts between federally recognized Indian tribes and the State for the purpose of conducting Class III gaming activities on Indian lands within a State as a means of promoting tribal economic development, self-sufficiency, and strong tribal governments.

2. Authorizes expressly a number of tribal-state gaming compacts between the State of California and specified Indian tribes.

3. Authorizes the conduct of Class III gaming activities to the extent such activities are permitted by state law, a gaming compact has been concluded by a federally recognized tribe and the State, and the compact has been approved by the Secretary of the Interior.

4. Limits the operation of Class III gaming activities to Indian lands acquired on or before October 17, 1988. Provides for certain exceptions to conduct gaming activities on Indian lands acquired after October 17, 1988.

5. Defines Indian lands to mean all lands within the limits of any Indian reservation, and any lands title to which is either held in trust by the United States for the benefit of any Indian tribe, or individual, or held by any Indian tribe or individual subject to restriction by the U.S. against alienation and over which an Indian tribe exercises governmental power.

6. Requires the State to negotiate to conclude a compact in good faith with an Indian tribe having jurisdiction over the Indian lands upon which the Class III gaming activity is to be conducted. Provides the U.S. district courts with jurisdiction over any cause of action initiated by a tribal government alleging that the State failed to negotiate in good faith to conclude a compact. Prescribes the remedy, mediation supervised by the courts, if it is found that the State failed to negotiate in good faith to conclude a compact.

7. Authorizes the Governor, under the California Constitution, to negotiate and conclude compacts, subject to ratification by the Legislature.

This bill ratifies the Compact entered into between the State of California and the Sycuan Band of the Kumeyaay Nation executed on September 2, 2015 and supersedes the 1999 compact between the Tribe and the State of California. The 1999 compact authorizes the Tribe to operate no more than 2,000 gaming devices (slot machines). Under this Compact, the Tribe may operate a maximum of 2,500 gaming devices at its current facility in San Diego County.

The Tribe has agreed to pay the State its pro rata share of the costs the State incurs for the performance of its duties under the Compact as well as four and three quarters percent (4.75%) of its “gross gaming revenue,” to be shared with tribes that are not gaming or that otherwise are not substantially benefiting from gaming. Additionally, the Compact provides a framework for the sharing of gaming revenue with the County of San Diego and other local jurisdictions. Specifically, from its payments to the Revenue Sharing Trust Fund (RSTF) or the Tribal Nation Grant Fund (TNGF), the Tribe may take annual credits of up to sixty percent (60%) for infrastructure improvements and fire, law enforcement, public transit, education, tourism and other services including investments in renewable energy or water conservation projects and non-gaming related economic development and health care facilities that provide a mutual benefit to the Tribe and the local community.

Pursuant to the 1999 compact, the Tribe currently pays approximately $2.4 million annually into the Special Distribution Fund (SDF) and $2.3 million annually into the RSTF. Under this Compact, it is estimated that the Tribe will pay approximately $1 million annually (its pro rata share) into the SDF and approximately $10.1 million annually into the RSTF or the TNGF. Thus, the RSTF will see an increase of revenue estimated to be roughly $7.8 million per year. However, this amount may be offset by up to $6.3 million per year that the Tribe is authorized to redirect to specified infrastructure projects and services that mutually benefit the local community, the Tribe and the state.

Brief History of the Sycuan Band of the Kumeyaay Nation

The Sycuan Band of the Kumeyaay Nation is a federally recognized tribe of Mission Indians from Southern California, near El Cajon. The Tribe consists of 220 members, approximately 160 of whom are voting members (over 18 years old). The Tribe opened its first gambling facility, the Sycuan Bingo Palace, on its reservation in 1983. In 1999, the Tribe entered into a tribal-state gaming compact with the State of California which has provided it with extensive economic opportunities, including a profitable casino. The Tribe has a diversified business portfolio which includes ownership interests in a variety of businesses both on and off of the Sycuan Reservation, including the historic U. S. Grant Hotel in downtown San Diego, the Marina Gateway Hotel and Conference Center in National City, an off-reservation golf course, and significant advertising agreements with the San Diego Padres Major-League Baseball team at PETCO Park. The Tribe is also an investor in the Hotel Solamar near the ballpark.

Furthermore, the Tribe funds the training and staffing of a fire station and police station in San Diego County. With respect to the fire station that it funds, 90% of the calls for service are off reservation, resulting in millions of dollars spent each year benefitting off-reservation communities. The majority of the police station’s calls are for off-reservation services, as well, although at a lower percentage.

Under the 1999 compact, the Tribe operates 2,000 Class III gaming devices and 58 table games and employs 2,700 people at its casino, golf course, hotel, and other properties. The Tribe also offers an off-track betting parlor for its customers. Pursuant to the 1999 compact, the Tribe currently pays $ 2.4 million into the SDF and $2.3 into the RSTF annually.

In 2006, the State and Tribe negotiated amendments to the 1999 Sycuan compact that provided for significant payments to the State's General Fund in exchange for more gaming devices. Governor Schwarzenegger executed the compact amendments, the Legislature ratified the amended compact, and the U.S. Department of the Interior published a notice in the Federal Register that the amended compact was “deemed-approved.” However, the 2006 amended compact contained a provision requiring ratification by the Tribe’s general membership. Subsequently, the Tribal membership voted NOT to ratify the compact amendments and therefore, they never went into effect. As a result, Sycuan's gaming operation continues to be governed by the provisions of the 1999 compact.

Key Components of this Compact

Scope of Class III Gaming Authorized and Financial Terms. Under this Compact, the Tribe may operate a maximum of 2,500 gaming devices, banking or percentage card games, and any devices or games that are authorized under state law to the California State Lottery, provided that the Tribe will not offer such games through use of the Internet unless others in the state not affiliated with or licensed by the California State Lottery are permitted to do so under state and federal law. The Tribe shall not engage in Class III Gaming that is not expressly authorized in the Compact.

Authorized Gaming Facility. The Tribe may establish and operate not more than two gaming facilities and engage in Class III Gaming only on eligible Indian lands held in trust for the Tribe, located within the boundaries of the Tribe’s reservation and trust lands as those boundaries exist as of the execution date of this Compact, as legally described in the Compact. If the Tribe chooses to operate more than one gaming facility, then one of the two gaming facilities shall have no more than five hundred (500) gaming devices and shall have a primary purpose other than gaming authorized under IGRA.

Exclusivity. Provides that in the event the exclusive right of Indian tribes to operate Class III gaming in California pursuant to the California Constitution is nullified by the enactment, amendment, or repeal of a state statute or constitutional provision or the conclusive and dispositive judicial construction of a statute or the state Constitution by a California appellate court after the effective date of this Compact, that gaming devices may lawfully be operated by non-Indian entities, the Tribe shall have the right to: (1) terminate this Compact, in which case the Tribe will lose the right to operate Class III gaming authorized by this Compact or (2) continue under this Compact with entitlement to a reduction of the rates specified below following conclusion of negotiations, to provide for (a) compensation to the State for the reasonable costs of regulation, as defined; (b) reasonable payments to local governments impacted by tribal government gaming; (c) grants for programs designed to address gambling addiction; and, (d) such assessments as may be permissible at such time under federal law. 

Payments to the SDF.  The Tribe shall pay to the State on a pro rata basis the costs the State incurs for the performance of all its duties under this Compact, as established by the monies appropriated in the annual Budget Act for the performance of their duties under the Class III Gaming Compacts each fiscal year for the California Gambling Control Commission (CGCC), the California Department of Justice, the Office of the Governor, the California Department of Public Health Programs, Office of Problem Gambling, the State Controller, the Department of Human Resources, and the Financial Information System for California, or any agency or agencies the State designates as a successor to them.  The Tribe’s pro rata share of the State’s costs in any given year this Compact is in effect shall be calculated using the following equation:

“The maximum number of gaming devices operated in the gaming facility for the previous fiscal year as determined by the State Gaming Agency, divided by the maximum number of gaming devices operated by all federally recognized tribes in California pursuant to tribal-state Class-III gaming compacts during the previous fiscal year, multiplied by costs, equals the Tribe’s pro rata share.”

Payments to the RSTF or TNGF. If the Tribe operates more than three hundred fifty (350) gaming devices at any time in a given calendar year, it shall thereafter, including in that calendar year, pay to CGCC, for deposit into the RSTF or the TNGF, four and three quarters percent (4.75%) of its “gross gaming revenue” from the operation of gaming devices in excess of three hundred fifty (350).

“Gross Gaming Revenue” is defined as the win from gaming activities, which is the difference between gaming wins and losses before deducting costs and expenses or deducting incentives or adjusting for changes in progressive jackpot liability accruals. Generally, the difference between patron wagers and the payouts made on winning wagers.

Credits Applied to RSTF or the TNGF. The State agrees to provide the Tribe with annual credits for up to sixty percent (60%) of the payments otherwise due to be paid into the RSTF or TNGF for the following:

1. Payments by the Tribe to San Diego County, local jurisdictions, and nonprofit and civic organizations operating facilities or providing services within the County for fire, law enforcement, emergency medical services, public transit, education, tourism, and other services and infrastructure improvements intended to serve off-reservation needs of County residents – such payments shall be subject to approval by the County or local jurisdiction in the County and at least twenty percent (20%) of the annual credits must be utilized for the above stated purposes;

2. Non-gaming related capital investments and economic development projects by the Tribe on or off tribal trust lands that the State or State designated agency agrees provides mutual benefits to the Tribe and the State because, for instance, they have particular cultural, social or environmental value, or diversify the sources of revenue for the Tribe’s general fund;

3. Investments in, and any funds paid to the State in connection with, renewable energy projects that, in part, serve the gaming facility, to include facilities that incorporate charging stations for electric or other zero-emission vehicles that are available to patrons and employees of the gaming facility;

4. Payments to support capital improvements and operating expenses for facilities within California that provide health care services to tribal members, Indians, and non-Indians; and,

5. Investments by the Tribe for water treatment and conservation projects.

All excess authorized credits that cannot be applied in any one year because they would exceed the sixty percent (60%) may be applied as an annual credit in all following years that this Compact is in effect, in the same percentages, until completely exhausted.

Quarterly Contribution Report. At the time each quarterly payment is due, the Tribe shall submit to the State a report, prepared and certified by an authorized representative of the gaming operation. The report must include: (a) calculation of the maximum number of gaming devices operated each day, (b) the gross gaming revenue calculation, (c) the amount due the SDF, (d) calculation of the amount due to the RSTF/TNGF, and (e) the total amount of the quarterly payment.

Additional Compact Elements

• Gaming Ordinance and Regulations. Provides that all gaming activities conducted under this Compact shall, at a minimum, comply with (1) a gaming ordinance duly adopted by the Tribe and approved in accordance with IGRA, (2) all rules, regulations, procedures, specifications, and standards duly adopted by the National Indian Gaming Commission (NIGC), the Tribal Gaming Agency, and the State Gaming Agency, and (3) the provisions of this Compact, as specified.

• Licensing Requirements and Procedures. Provides that all persons in any way connected with the gaming operation or gaming facility who are required to be licensed or to submit to a background investigation under IGRA, and any others required to be licensed under this Compact, including, without limitation, all gaming employees, gaming resource suppliers, financial sources, and any other person having a significant influence over the gaming operation, must be licensed by the Tribal Gaming Agency and cannot have had any determination of suitability denied or revoked by the CGCC. Also, every gaming employee must obtain, and thereafter maintain current, a valid tribal gaming license, as specified.

• Minimum Internal Control Standards (MICS). Requires the Tribe to adopt and comply with standards that meet or exceed the federal NIGC standards. The MICS are incorporated in this Compact as an appendix (Appendix D), which shall be updated periodically by the State Gaming Agency and Tribal Gaming Agency, to ensure the MICS keep up with changing technology and industry standards.

• Patron Disputes. Provides that the Tribe (through its tribal gaming agency) must attempt to resolve patron disputes within three days of the play or operation of any game, including refusal to pay to a patron any alleged winnings from any gaming activities. If a patron is dissatisfied with the resolution, the Tribe shall inform the patron in writing with 15 days of the right to resolution of the dispute by the Tribal Gaming Agency. If dissatisfied with the resolution, the patron has the right to seek resolution in either the Sycuan Tribal Court system or before a three-member tribal claims commission consisting of a representative of the tribal government and at least one non-tribal commissioner. The Tribal Gaming Agency shall conduct an appropriate investigation, provide to the patron a copy of its procedures concerning patron complaints, and render a decision in accordance with industry practice. The decision shall be issued within 60 days of the patron's request. Any party dissatisfied with the award of the Sycuan Tribal Court or tribal claims commission may, at the party’s election, appeal to the Intertribal Court of Southern California Court of Appeals, provided that the party making the election must bear all costs and expenses associated with the appeal regardless of the outcome. The Tribe agrees to wave its sovereign immunity in connection with the jurisdiction of the Sycuan Tribal Court, the tribal claims commission or Intertribal Court of Southern California and in any suit in state or federal court to enforce or execute a judgment based upon the award of the tribal court, claims commission or appellate court.

• Public and Workplace Liability. Requires the Tribe to obtain and maintain a commercial general liability insurance policy which provides coverage of no less than $10 million. Also, requires the Tribe to adopt a Tort Liability Ordinance stipulating that California tort law governs claims. In addition, the Compact provides that California tort law shall apply to specified claims if the Tribe fails to adopt a Tort Liability Ordinance.

• Environmental Protections. Requires the Tribe to prepare a Tribal Environmental Impact Report (TEIR) and negotiate mitigation of any off-reservation impacts prior to initiating the development of a project for a facility. The Compact provides procedures regarding the (1) Notice of Preparation of Draft TEIR, (2) Notice of Completion of Draft TEIR, and (3) Issuance of Final TEIR. The Tribe’s failure to prepare an adequate TEIR when required shall be deemed a breach of this Compact and furthermore shall be grounds for issuance of an injunction or other appropriate equitable relief. A completed TEIR must be filed with San Diego County, the Department of Justice, the State Clearinghouse and the State Gaming Agency. Also, projects that have been initiated under the terms of the 1999 compact shall be subject to the relevant terms and conditions of the 1999 compact. Additionally, projects commenced prior to the existing mitigation agreements (January of 2012) between the Tribe and San Diego County regarding development of the Tribe’s other properties remain in effect and are not subject to the TEIR provisions of this Compact. If those agreements expire and are not renegotiated (or negotiations fail), then the TEIR provisions of the Compact become applicable to those properties, as well.

• Labor Provisions. Provides that the gaming activities authorized by this Compact may only commence after the Tribe has adopted an ordinance identical to the Tribal Labor Relations Ordinance (TRLO), referenced as Appendix C of the Compact, and the gaming activities may only continue as long as the Tribe maintains the ordinance. If the Tribe employs 250 or more persons in a tribal casino facility, then the provisions of the TLRO become effective. The TLRO provides for a secret ballot election. The new TLRO proscribed by this Compact is modeled after the Tribe’s 1999 TLRO with several modifications. The new TLRO provides for union neutrality. The Tribe will not oppose a union organization but can advocate the benefits of working for the Tribe. A labor union must issue a Notice of Intent or Organize (NOIO). For a period of 365 days following delivery of a NOIO, the union shall not engage in strikes, picketing, boycotts, attack websites, or other economic activity at or in relation to the tribal casino or related facility. During the 365 days after the Tribe received the NOIO, the union must collect dated and signed authorization cards and complete the secret ballot election. Failure to complete the secret ballot election within 365 days shall preclude the union from delivering another NOIO for a period of two years (730 days). After the certification that 30% of the employees have expressed an interest in the union, a notice of election shall be issued and the election shall be concluded within 30 calendar days thereafter. Secret ballot elections shall be held at the workplace and at least one neutral location. Employees may mail in ballots provided they are received by election day. Mediation for any collective bargaining agreement impasse shall be made in conjunction with the Federal Mediation and Conciliation Service (FMCS). The mediation process is modeled on the Agricultural Labor Relations Act and authorizes the mediator to resolve the impasse. According to the Administration, the appeals procedures have been streamlined significantly in comparison to the Tribe’s 1999 TLRO. Disputes are presented to an arbitrator with expertise in labor law and appropriate challenges to the arbitrator’s decision may be presented to a state superior court.

• Enhanced Audit and Compliance Review Procedures. In addition to providing for an annual independent audit, the Compact allows the state to conduct its own annual audit and compact compliance review.

• Inspection and Testing of Slot Machines. Provides that slot machines will have to be tested, approved and certified by an independent gaming test laboratory or state governmental gaming test laboratory to ensure they are being operated according to specified technical standards. Also, requires the Tribal Gaming Agency to maintain adequate records that demonstrate compliance with software and hardware specifications. The State Gaming Agency would be authorized to annually conduct up to four random inspections of slot machines in operation to confirm that the slot machines are operating in conformance with these standards.

• Prohibitions Regarding Minors. Provides that the Tribe shall prohibit persons under the age of eighteen (18) years from being present in any room or area in which gaming activities are being conducted unless the person is en route to a non-gaming area of the gaming facility, or is employed at the Gaming Facility in a capacity other than as a gaming employee.

• Health and Safety Standards. Provides that the Tribe has agreed to adopt and comply with tribal health standards for food and beverage handling that are no less stringent than State public health standards. Also, the Tribe has agreed to comply with federal water quality and safe drinking water standards applicable in California.

• Problem Gambling. Requires the gaming operation to establish a program, approved by the Tribal Gaming Agency, to mitigate pathological and problem gaming by implementing specified measures.

• Alcohol Provisions. Makes it explicit that the purchase, sale, and service of alcoholic beverages shall be subject to state law (the Alcoholic Beverage Control Act).

• Tobacco Provisions. Provides that the Tribe agrees to provide a non-smoking area in the gaming facility and to utilize a ventilation system throughout the gaming facility that exhausts tobacco smoke to the extent reasonably feasible under state-of-the-art technology existing as of the date of the construction or significant renovation of the gaming facility, and further agrees not to offer or sell tobacco to anyone under 18 years of age.

• Emergency Services Accessibility and Possession of Firearms. Provides that the Tribe must make reasonable provisions for adequate emergency fire, medical, and related relief and disaster services for patrons and employees. Also, prohibits the possession of firearms by any person in the gaming facility at all times except for federal, state, or local law enforcement personnel, or tribal law enforcement or security personnel, as authorized.

• Workers’ Compensation. Provides that the Tribe agrees to participate in the state’s workers’ compensation program with respect to employees at the casino. All disputes arising from the workers’ compensation laws shall be heard by the State Workers’ Compensation Appeals Board pursuant to the California Labor Code. The Tribe acknowledges the jurisdiction of the Board in such manners. Furthermore, the Tribe agrees that it will participate in the state’s unemployment compensation program for providing benefits and unemployment compensation disability benefits to employees at the casino. The Tribe shall withhold all taxes due to the state, except for Tribal members living on the Tribe’s reservation, and forward such amounts to the state.

• Effective Date. Provides that this Compact shall not be effective unless and until all of the following have occurred: (a) the Compact is ratified by statute in accordance with state law and (b) notice of approval or constructive approval is published in the Federal Register. Once effective, this Compact shall be in full force and effect until December 31, 2040.

• Amendment by Agreement. Provides that the terms and conditions of this Compact may be amended at any time by the mutual and written agreement of both parties during the term of this Compact, provided that each party voluntarily consents to such negotiations in writing. Any amendments to this Compact shall be deemed to supersede, supplant and extinguish all previous understandings and agreements on the subject.

Additional Relevant Background Information

Indian Gaming Regulatory Act (IGRA)

In 1988, Congress enacted the Indian Gaming Regulatory Act (IGRA) to provide a statutory basis for the operation and regulation of gaming on Indian lands. IGRA provides that an Indian tribe may conduct gaming activity on Indian lands if the activity “is not specifically prohibited by federal law and is conducted within a State which does not prohibit such gaming activity.”

IGRA distinguishes between three classes of gaming (Class I, Class II, and Class III) and provides for different forms of regulation for each class. Class I gaming includes “social games” for minor prizes or “traditional forms of Indian gaming.” Class II gaming is defined to include bingo and card games that are explicitly authorized by the laws of the state, or that are not explicitly prohibited by the laws of the state and are played at any location in the State, so long as the card games are played in conformity with those laws and regulations. Class III gaming includes such things as slot machines, casino games and banked card games such as black jack and baccarat. Class III gaming may only be conducted under terms of a compact negotiated between an Indian tribe and a State.

IGRA was enacted against a legal background in which Indian tribes and individuals generally are exempt from state taxation within their own territory. IGRA provides that with the exception of assessments permitted under the statute, to defray the State’s costs of regulating gaming activity, IGRA shall not be interpreted as conferring upon a State authority to impose any tax, fee, charge, or other assessment upon an Indian tribe to engage in Class III activity. Nor may a State refuse to enter into negotiations based on the lack of authority to impose such a tax, fee, charge, or other assessment.

When a tribe requests negotiations for a Class III compact, IGRA requires the State to negotiate with the Indian tribe in good faith. IGRA provides a comprehensive process to prevent an impasse in compact negotiations, which is triggered when a tribe files suit alleging that the State has refused to negotiate or has failed to negotiate in good faith.

Before 2000, The California Constitution prohibited Class III gaming. In 2000, California voters approved Proposition 1A which had been proposed by the Governor and passed by the Legislature. Proposition 1A amended the California Constitution to permit the State to negotiate compacts with federally recognized Indian tribes for certain Class III gaming activities. Because non-Indian parties were still forbidden from operating gaming facilities, Proposition 1A granted Indian tribes a “constitutionally protected monopoly on most types of Class III games in California.”

Rincon Decision

The U.S. Supreme Court in July 2011 refused to consider the decision of the Ninth Circuit Court rejecting a Class III Tribal-State Gaming Compact negotiated by Governor Schwarzenegger with the Rincon Band of Luiseno Mission Indians. The issue of this case's impact on Indian gaming throughout the country has been a topic of great debate.

As noted, IGRA authorizes states to receive compensation for costs related to tribal gaming such as regulation and gaming addiction, and to offset the effects of casinos on surrounding communities. However, states are prohibited from assessing taxes on tribal casino revenues, so unjustified payments to a state's General Fund are no longer permissible unless the tribes are getting something in return for the required payments, such as those authorized by IGRA.

Another vehicle for state receipt of casino payments above those payments must be in exchange for some benefit deemed "exclusive" to the tribe. To this end, it is fact that a number of other state (Governors) have attempted to create "exclusive grants" in favor of compact signatory tribes in return for payments to the state treasuries.

Rincon challenged the legality of California's "second generation" compacts pursuant to which the signatory tribes would be entitled to increase their slot machine count in return for paying percentages of the new slot machine revenue to the state's General Fund. The Ninth Circuit had affirmed a lower court decision that the new financial concessions were nothing more than a state tax on tribal casino revenues which is prohibited by IGRA.

Rincon had refused to sign the amended compact which already had been executed by several other tribes choosing instead to demand that it be given the expanded gaming opportunity without making the new financial concessions. The Ninth Circuit Court concluded that a “non-negotiable, mandatory payment of 10% of net win into the State treasury for unrestricted use yields public revenue, and is [therefore] a tax, and that the court was therefore required to consider the State’s demand as evidence of bad faith under IGRA’s statutes.”

The court noted that “the State could rebut the presumption of bad faith by demonstrating that the revenue demanded was to be used for the public interest, public safety, criminality, financial integrity, and adverse economic impacts on existing activities, but the State’s need for general tax revenue was insufficient to demonstrate good faith.”

Prior/Related Legislation

AB 1540 (Gray, 2015) ratifies the tribal-state gaming compact entered into between the State of California and the Santa Ynez Band of Chumash Indians, executed on August 26, 2015. (Enrolled and presented to the Governor on 9/3/2015)

AB 315 (Bigelow, 2015) ratifies the amended and restated tribal-state gaming compact entered into between the State of California and the United Auburn Indian Community, executed on August 14, 2015. (Enrolled and presented to the Governor on 9/3/2015)

AB 475 (Bigelow, Chapter 8, Statutes of 2015) ratified the tribal-state gaming compact entered into between the State of California and Jackson Rancheria Band of Miwuk Indians, executed on February 1, 2015.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 9/8/15)

Agua Caliente Band of Chauilla Indians

Asian Business Association of San Diego

Barona Band of Mission Indians

Barrio Station

Congressman Juan Vargas

Downtown San Diego Partnership

La Mesa Chamber of Commerce

Mental Health America of San Diego County

Ronald McDonald House Charities of San Diego

San Diego City Councilman Scott Sherman

San Diego County Building and Construction Trades Council, AFL-CIO

San Diego Police Officers Association

San Diego Regional Chamber of Commerce

San Diego Rescue Mission

San Diego Tourism Authority

San Ysidro Chamber of Commerce

Santa Ynez Band of Chumash Indians

State Building and Construction Trades Council, AFL-CIO

Sycuan Band of the Kumeyaay Nation

Urban Corps of San Diego County

OPPOSITION: (Verified 9/8/15)

None received

Prepared by: Arthur Terzakis / G.O. / (916) 651-1530

9/8/15 16:58:25

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 THIRD READING  

Bill No: AB 795

Author: Low (D)

Amended: 6/15/15 in Senate

Vote: 21

SENATE LABOR & IND. REL. COMMITTEE: 5-0, 7/8/15

AYES: Mendoza, Stone, Jackson, Leno, Mitchell

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 79-1, 6/1/15 - See last page for vote

SUBJECT: Employment: Department of Industrial Relations: wage claims and retaliation complaints

SOURCE: Author

DIGEST: This bill requires the Division of Labor Standards Enforcement (DLSE) to include a section on the status of wage and retaliation claims in their annual report.

ANALYSIS:

Existing law:

1. Establishes the Division of Labor Standards Enforcement (DLSE), headed by the Labor Commissioner, which is empowered to enforce California’s labor laws, including the minimum wage and workers’ compensation. (Labor Code §§ 79, 90.3, & 90.5)

2. Authorizes the Labor Commissioner to investigate employee complaints and provide for a hearing in any action to recover wages, penalties, and other demands for compensation, including liquidated damages if the complaint alleges payment of a wage less than the minimum wage fixed by an order of the Industrial Welfare Commission or by statute, properly before the division or the Labor Commissioner, including orders of the Industrial Welfare Commission, and is required to determine all matters arising under his or her jurisdiction. (Labor Code § 98)

3. Requires that the Labor Commissioner reports to the Legislature, not later than March 1, concerning the effectiveness of the field enforcement unit. The report must include, but is not be limited to, all of the following:

1. The enforcement plan adopted by the Labor Commissioner, and the rationale for the priorities identified in the plan;

2. The number of establishments investigated by the unit, and the number of types of violations found;

3. The amount of wages found to be unlawfully withheld from workers, and the amount of unpaid wages recovered for workers; and

4. The amount of penalties and unpaid wages transferred to the General Fund as a result of the efforts of the unit.

This bill adds a second section to the annual legislative report by the Labor Commissioner on the status of wage and retaliation claims. This report includes:

1. The average amount of time it takes for a wage claim to receive a preliminary hearing;

2. The number of determinations issued, the number of investigative hearings held, the number of complaints dismissed, and the number of complaints found valid, grouped by the year in which the complaints were filed; and

3. An update on the division’s current backlog of wage claims and retaliation complaints.

Comments

1. Wage Claims Adjudication:

In 2013, the Division of Labor Standards Enforcement issued a general update on the progress of the Division since 2010. In the Report, the DLSE reported that, despite some of the lowest staffing levels in recent years, DLSE was able to cut the length of time a wage dispute reached a hearing from 7 months to slightly less than 6 months. However, as of 2010, the adjudication process for garment manufacturing workers (known as the AB 633 process) remains significantly longer than that. While the number of AB 633 hearings tripled between 2011 and 2012, DLSE notes in their report that there is a continued need to shorten hearing waiting times.

AB 795 requires that the DLSE report to the Legislature on wage claim adjudication hearing wait times, backlog, and decisions issued.

Related Legislation

SB 588 (DeLeon), which was heard by the Senate Committee on Labor and Industrial Relations in April, allows the Labor Commissioner to file a lien or levy on an employer’s property in order to assist the employee in collecting unpaid wages when there is a judgment against the employer. SB 588 is currently before the Assembly Appropriations Committee.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 8/17/15)

None received

OPPOSITION: (Verified 8/17/15)

None received

ARGUMENTS IN SUPPORT: The author argues that DLSE has faced a significant backlog in processing wage claims, which creates delays in workers receiving the wages they are due. The author notes that such delays adversely impact the most vulnerable Californians who are desperately in need of their wages to meet the basic needs of themselves and their families. The author believes that AB 795 will help address this by providing the Legislature with timely data on the status of wage claim adjudication hearing wait times, backlog, and decisions issued.

ASSEMBLY FLOOR: 79-1, 6/1/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NOES: Harper

Prepared by: Gideon L. Baum / L. & I.R. / (916) 651-1556

8/20/15 15:35:40

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SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS

Senator Tony Mendoza, Chair

2015 - 2016 Regular

Bill No: AB 795 Hearing Date: July 8, 2015

Subject: Employment: Department of Industrial Relations: wage claims and retaliation complaints.

KEY ISSUE

Should the Legislature require the Division of Labor Standards Enforcement (DLSE) to include a section on the status of wage and retaliation claims in their annual report?

ANALYSIS

Existing law establishes the Division of Labor Standards Enforcement (DLSE), headed by the Labor Commissioner, which is empowered to enforce California’s labor laws, including the minimum wage and workers’ compensation. (Labor Code §§ 79, 90.3, & 90.5)

Existing law authorizes the Labor Commissioner to investigate employee complaints and provide for a hearing in any action to recover wages, penalties, and other demands for compensation, including liquidated damages if the complaint alleges payment of a wage less than the minimum wage fixed by an order of the Industrial Welfare Commission or by statute, properly before the division or the Labor Commissioner, including orders of the Industrial Welfare Commission, and is required to determine all matters arising under his or her jurisdiction. (Labor Code § 98)

Existing law requires that the Labor Commissioner reports to the Legislature, not later than March 1, concerning the effectiveness of the field enforcement unit. The report must include, but is not be limited to, all of the following:

1. The enforcement plan adopted by the Labor Commissioner, and the rationale for the priorities identified in the plan;

2. The number of establishments investigated by the unit, and the number of types of violations found;

3. The amount of wages found to be unlawfully withheld from workers, and the amount of unpaid wages recovered for workers; and

4. The amount of penalties and unpaid wages transferred to the General Fund as a result of the efforts of the unit.

This bill would add a second section to the annual legislative report by the Labor Commissioner on the status of wage and retaliation claims. This report would include:

1. The average amount of time it takes for a wage claim to receive a preliminary hearing;

2. The number of determinations issued, the number of investigative hearings held, the number of complaints dismissed, and the number of complaints found valid, grouped by the year in which the complaints were filed; and

3. An update on the division’s current backlog of wage claims and retaliation complaints.

COMMENTS

1. Wage Claims Adjudication:

In 2013, the Division of Labor Standards Enforcement issued a general update on the progress of the Division since 2010. In the Report, the DLSE reported that, despite some of the lowest staffing levels in recent years, DLSE was able to cut the length of time a wage dispute reached a hearing from 7 months to slightly less than 6 months. However, as of 2010, the adjudication process for garment manufacturing workers (known as the AB 633 process) remains significantly longer than that. While the number of AB 633 hearings tripled between 2011 and 2012, DLSE notes in their report that there is a continued need to shorten hearing waiting times.

AB 795 would require that the DLSE report to the Legislature on wage claim adjudication hearing wait times, backlog, and decisions issued.

2. Proponent Arguments:

The author argues that DLSE has faced a significant backlog in processing wage claims, which creates delays in workers receiving the wages they are due. The author notes that such delays adversely impact the most vulnerable Californians who are desperately in need of their wages to meet the basic needs of themselves and their families. The author believes that AB 795 will help address this by providing the Legislature with timely data on the status of wage claim adjudication hearing wait times, backlog, decisions issued.

3. Opponent Arguments:

None on file.

4. Current Legislation:

SB 588 (DeLeon), which was heard by this Committee in April, allows the Labor Commissioner to file a lien or levy on an employer’s property in order to assist the employee in collecting unpaid wages when there is a judgment against the employer. SB 588 is currently before the Assembly Committee on Labor and Employment.

SUPPORT

None received.

OPPOSITION

None received.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 795

Author:(Low)

As Amended Ver:March 26, 2015

Majority vote

SUMMARY: Requires the Department of Industrial Relations (DIR) to submit a report to the Legislature the amount of time it takes for wage claims to receive a preliminary hearing date.

EXISTING LAW authorizes the Labor Commissioner from DIR to investigate and enforce labor laws and orders of the Industrial Welfare Commission (IWC) that, among other things, include wage claims. Also, provides for criminal and civil penalties for violations of statutes and orders of the IWC regarding payment of wages.

FISCAL EFFECT: According to Assembly Appropriations Committee, minor absorbable costs to the DIR to produce and submit the report.

COMMENTS: According to a 2013 report "Winning Wage Justice" by the National Employment Law Project (NELP) shortchanging workers of the wages they are owed – wage theft – is becoming a defining trend of the 21st century labor market. It takes many forms for workers, including being paid less than the minimum wage or other agreed upon wage, working "off-the-clock" without pay, getting less than time-and-a half for overtime hours, having tips stolen, being misclassified as an "independent contractor" instead of an employee and underpaid, having illegal deductions taken out of paychecks, or simply not being paid at all. It spans a number of industries as well.

The wage theft crisis in this state is well-documented. A recent University of California, Los Angeles (UCLA) study¹ reported that an estimated $26 million in wages per week are stolen from low-wage workers in Los Angeles County alone. Adding to the crisis are the backlogs clogging the timely processing of wage claim hearings for impacted workers.

Wage Claims Adjudication

As the largest unit within the Division of Labor Standards Enforcement (DLSE), Wage Claims Adjudication (WCA) handles over 30,000 new wage claims a year in 16 offices across the state. Under California Labor Code Section 98, workers may file a claim before the DLSE for unpaid wages (including minimum wage and overtime), other compensation, and penalties through an administrative claims process. Commonly known as the "Berman" process, this process has been heralded by the Legislature and the courts as an indispensable alternative to costly litigation for both workers and employers. When a Berman claim is filed, WCA staff typically hold a settlement conference and hearing on the claim. In addition, WCA staff administer wage claims brought by garment workers under a separate statutorily-mandated process (known as "AB 633" [(Steinberg), Chapter 554, Statutes of 1999]) for investigating and adjudicating garment claims.

From 2009 to 2011 it was taking an average of seven months for a wage claim to be heard. The backlog for AB 633 claims was even worse with more than half of those open cases filed two to three years prior. Prior to 2008, DLSE did not officially track the time it took for a wage claim to be heard. As a result of the Labor Commissioner working to raise the bar on enforcement efforts there has been a small reduction in the length of time for wage claim to be heard. The length of time has been reduced to between five and six months for Berman claims to be heard.²

Although the DLSE has made progress to reduce the delays for wage claim hearings and AB 633 cases in the last two years, more work needs to be done to further expedite the wage claims hearing process.

The author argues that wage theft exacts a heavy socio-economic toll on workers, particularly low-wage workers and their communities. The proliferation of wage theft, particularly in the underground economy, underscores the fact that effective, strong enforcement of labor laws is needed now more than ever before, to give working people a chance in our economy. Abiding businesses who play by the rules suffer the economic consequences when government enforcement of labor laws is lackluster or nonexistent; unscrupulous employers operating illegally are able to gain an unfair competitive advantage and ignite a race to the bottom that lowers even the most basic labor standards.

Additionally the author points out, when California workers are not paid their earned wages, they have less money to spend for basic necessities, which means less consumer spending to help spur economic growth. This adversely impacts not only local communities and economies, but also the entire state. The DLSE's enforcement activities not only put hard-earned wages in the pockets of workers, but also help generate tax revenue and substantial monetary penalties for the state.

This bill requires DIR to submit a report to the Legislature detailing the length of time it takes for wage claims to receive a hearing date.

Analysis Prepared by: Lorie Alvarez / L. & E. / (916) 319-2091 FN: 0000572

Date of Hearing: April 29, 2014

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 795

Author:(Low) – As Amended Ver:March 26, 2015

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the Department of Industrial Relations (DIR) to submit a report to the Legislature regarding the amount of time it takes for wage claims to receive a preliminary hearing date.

FISCAL EFFECT:

Minor/absorbable costs to the DIR to produce and submit the report.

COMMENTS:

1. Purpose. This bill requires DIR to submit a report to the Legislature detailing the length of time it takes for wage claims to receive a hearing date.

2. Background. The Division of Labor Standards Enforcement (DLSE) Wage Claims Adjudication (WCA) unit under DIR handles over 30,000 new wage claims a year in 16 offices across the state. Under current law, workers may file a claim before the DLSE for unpaid wages (including minimum wage and overtime), other compensation, and penalties through an administrative claims process ("Berman" process). When a Berman claim is filed, WCA staff typically hold a settlement conference and hearing on the claim. In addition, WCA staff administer wage claims brought by garment workers under a separate statutorily-mandated process (known as “AB 633”) for investigating and adjudicating garment claims.

From 2009 to 2011 it took an average of seven months for a wage claim to be heard. With regard to AB 633 claims, more than half of the open cases filed two to three years prior were still open during this timeframe.

As of May 2013, the length of time has been reduced to between five and six months for Berman claims to be heard.

Although the DLSE has made progress to reduce the delays for wage claim hearings and AB 633 cases in the last two years, the author contends more work needs to be done to further expedite the wage claims hearing process.

Analysis Prepared by: Misty Feusahrens / APPR. / (916) 319-2081

Date of Hearing: April 22, 2015

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Roger Hernández, Chair

ABPCA Bill Id:AB 795

Author:(Low) – As Amended Ver:March 26, 2015

SUBJECT: Employment: Department of Industrial Relations: wage claims

SUMMARY: Requires the Department of Industrial Relations (DIR) to submit a report to the Legislature the amount of time it takes for wage claims to receive a preliminary hearing date.

EXISTING LAW: Authorizes the Labor Commissioner from DIR to investigate and enforce labor laws and orders of the Industrial Welfare Commission (IWC) that, among other things, include wage claims. Also, provides for criminal and civil penalties for violations of statutes and orders of the IWC regarding payment of wages.

FISCAL EFFECT: Unknown

COMMENTS: According to a 2013 report "Winning Wage Justice" by the National Employment Law Project (NELP) shortchanging workers of the wages they are owed - wage theft – is becoming a defining trend of the 21st century labor market. It takes many forms for workers, including being paid less than the minimum wage or other agreed upon wage, working “off-the-clock” without pay, getting less than time-and-a half for overtime hours, having tips stolen, being misclassified as an “independent contractor” instead of an employee and underpaid, having illegal deductions taken out of paychecks, or simply not being paid at all. It spans a number of industries as well.

The wage theft crisis in this state is well-documented. A recent UCLA study¹ reported that an estimated $26 million in wages per week are stolen from low-wage workers in Los Angeles County alone. Adding to the crisis are the backlogs clogging the timely processing of wage claim hearings for impacted workers.

Wage Claims Adjudication

As the largest unit within the Division of Labor Standards Enforcement (DLSE), Wage Claims Adjudication (WCA) handles over 30,000 new wage claims a year in 16 offices across the state. Under Section 98 of the California Labor Code, workers may file a claim before the DLSE for unpaid wages (including minimum wage and overtime), other compensation, and penalties

through an administrative claims process. Commonly known as the “Berman” process, this process has been heralded by the Legislature and the courts as an indispensable alternative to costly litigation for both workers and employers. When a Berman claim is filed, WCA staff typically hold a settlement conference and hearing on the claim. In addition, WCA staff administer wage claims brought by garment workers under a separate statutorily-mandated process (known as “AB 633”) for investigating and adjudicating garment claims.

From 2009 to 2011 it was taking an average of seven months for a wage claim to be heard. The backlog for AB 633 claims was even worse with more than half of those open cases filed two to three years prior. Prior to 2008, DLSE did not officially track the time it took for a wage claim to be heard. As a result of the LC working to raise the bar on enforcement efforts there has been a small reduction in the length of time for wage claim to be heard. The length of time has been reduced to between five and six months for Berman claims to be heard.²

Although the DLSE has made progress to reduce the delays for wage claim hearings and AB 633 cases in the last two years, more work needs to be done to further expedite the wage claims hearing process.

The author argues that wage theft exacts a heavy socio-economic toll on workers, particularly low-wage workers and their communities. The proliferation of wage theft, particularly in the underground economy, underscores the fact that effective, strong enforcement of labor laws is needed now more than ever before, to give working people a chance in our economy. Abiding businesses who play by the rules suffer the economic consequences when government enforcement of labor laws is lackluster or nonexistent; unscrupulous employers operating illegally are able to gain an unfair competitive advantage and ignite a race to the bottom that lowers even the most basic labor standards.

Additionally the author points out, when California workers are not paid their earned wages, they have less money to spend for basic necessities, which means less consumer spending to help spur economic growth. This adversely impacts not only local communities and economies, but also the entire state. The DLSE’s enforcement activities not only put hard-earned wages in the pockets of workers, but also help generate tax revenue and substantial monetary penalties for the state.

This bill requires DIR to submit a report to the Legislature detailing the length of time it takes for wage claims to receive a hearing date.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file.

Opposition

None on file.

Analysis Prepared by: Lorie Alvarez / L. & E. / (916) 319-2091