Existing law requires a local government agency to give a 10% preference to any bidder on a service contract to provide public transit services who agrees to retain employees of the prior contractor or subcontractor for a period of not less than 90 days, as specified.

This bill would expand these provisions to require a state agency to also give a 10% preference to any bidder under these provisions.

Existing law requires a local government agency to give a 10% preference to any bidder on a service contract to provide public transit services who agrees to retain employees of the prior contractor or subcontractor for a period of not less than 90 days, as specified.

This bill would expand these provisions to require a state agency to also give a 10% preference to any bidder under these provisions.

 VETO  

Bill No: SB 599

Author: Mendoza (D)

Introduced: 2/27/15

Vote: 21

SENATE LABOR & IND. REL. COMMITTEE: 4-1, 4/8/15

AYES: Mendoza, Jackson, Leno, Mitchell

NOES: Stone

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15

AYES: Lara, Beall, Hill, Leyva, Mendoza

NOES: Bates, Nielsen

SENATE FLOOR: 23-14, 6/1/15

AYES: Allen, Beall, Block, De León, Galgiani, Hall, Hancock, Hernandez, Hertzberg, Hill, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Monning, Pan, Pavley, Roth, Wieckowski, Wolk

NOES: Anderson, Bates, Berryhill, Cannella, Fuller, Gaines, Huff, Moorlach, Morrell, Nguyen, Nielsen, Runner, Stone, Vidak

NO VOTE RECORDED: Glazer, Hueso, Mitchell

ASSEMBLY FLOOR: 52-28, 9/1/15 - See last page for vote

SUBJECT: Employment: public transit service contracts

SOURCE: California Teamsters Public Affairs Council

International Longshore and Warehouse Union

DIGEST: This bill applies an existing 10 percent bid preference to transit contracts for the State of California when a contractor voluntarily decides to retain the employees of the previous contractor.

ANALYSIS:

Existing law, under Labor Code § 1072:

1. Requires that when a public entity puts out to bid a public service contract on public transit services, the bidder must state as part of the bid for a service contract whether or not he or she will retain the employees of the prior contractor or subcontractor for a period of not less than 90 days.
   
   

2. Also requires that an awarding authority letting a service contract out to bid for public transit services shall give a 10 percent preference to any bidder who agrees to retain the employees of the prior contractor or subcontractor.
   
   

3. Requires successor contractor or subcontractor for public transit services who agrees to retain employees must retain employees who have been employed by the prior contractor or subcontractors, except for reasonable and substantiated cause, which includes the particular employee's performance or conduct while working under the prior contract, as well as or the employee's failure of any controlled substances and alcohol test.
   
   

4. Requires successor contractor or subcontractor for public transit services shall make a written offer of employment to each employee to be rehired. That offer shall state the time within which the employee must accept that offer, which may not be less than 10 days, and does not need to be at the same level of wages or benefits as provided by the previous contractor or subcontractor.
   
   

5. Provides that if the successor contractor or subcontractor for public transit services determines that fewer employees are required than were required under the prior contract or subcontract, the successor contractor must retain qualified employees by seniority within the job classification. The successor contractor is permitted to consider licensing requirements when judging seniority.

Existing law, under Labor Code § 1073:

6. Provides that an employee who was not offered employment or who has been discharged in violation of this chapter, or his or her agent, may bring an action against the successor contractor or subcontractor in any superior court having jurisdiction over the successor contractor or subcontractor. Upon finding a violation of this, the court must order reinstatement to employment with the successor contractor or subcontractor and award backpay, including the value of benefits, for each day of violation, as well as reasonable attorney fees.

Existing law, under Labor Code § 1074:

7. Provides that, upon its own motion or upon the request of any member of the public, an awarding authority may terminate any service contract if both of the following occur:

1. The contractor or subcontractor has substantially breached the contract; and

2. The awarding authority holds a public hearing within 30 days of the receipt of the request or its announcement of its intention to terminate.

This bill makes the 10 percent bid preference for transit contracts also applicable when the State of California contracts out for transit services and when a contractor voluntarily decides to retain the employees of the previous contractor.

Comments

The author notes that the current 10% bid preference for transit contracts applies to all public entities, except to the State of California and believes that extending this bid preference will support the state’s continued economic recovery by rewarding contractors that retain the employees of the previous contractor. The author contends that this protects workers by giving them job stability while protecting good contractors from cross-cutting measures. The author specifically brings attention to an incident at Hearst Castle where the lowest bidder of the transit services terminated the employment of the existing drivers, leading to their unemployment and loss of benefits.

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

According to the Senate Appropriations Committee, the fiscal impacts of SB 599 are unknown, but potentially significant to the extent that state contracts are awarded to other than the lowest bidder due to the preference. The State contracts out for relatively few transit services compared to local agencies. Based on currently-available information, the provisions of this bill appear only to affect the transit operation at Hearst San Simeon State Historical Monument (Hearst Castle). Hearst Castle’s current transit contract is valued at roughly $22 million over 10 years, and is up for renewal in eight years. Assuming the subsequent contract is for the same amount and duration, the 10 percent bid preferential could lead to an increased costs to the Department of Parks and Recreation of $2.2 million, or an average of $220,000 annually (special funds).

SUPPORT: (Verified 10/26/15)

California Teamsters Public Affairs Council (co-source)

International Longshore and Warehouse Union (co-source)

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists

California Labor Federation

Engineers and Scientists of California

Professional and Technical Engineers, Local 21

The Northern California District Council of the International Longshore and Warehouse Union

UNITE HERE!

Utility Workers Union of America, Local 132

OPPOSITION: (Verified 10/26/15)

None received

ARGUMENTS IN SUPPORT: Proponents argue that the existing bid preference, which impacts public agencies that contract out for transit services, has a nearly 10-year history of success on the local level. Proponents note that the law does not protect the wages or benefits of services, allowing those who seek the contract to bid the service at any price, but frequently all bidders decide to hire all of the incumbent employees in order to compete with the other bidders on a level playing field. Proponents believe that this bid preference should be extended to state transit contracts. Proponents bring attention to a case at Hearst Castle where a new contractor took over the transit services, resulting in the loss of employment and benefits for many drivers.

GOVERNOR'S VETO MESSAGE:

I am returning Senate Bill 599 without my signature.

This bill expands a local bid preference requirement to the state for public transit services.

By simply expanding this local requirement to the state, this bill would significantly limit the state's current contracting authority to determine who would be eligible for the bid preference and how to calculate it if applied. I do not believe such a broad change is needed at this time.

ASSEMBLY FLOOR: 52-28, 9/1/15

AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Atkins

NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk

Prepared by: Deanna Ping / L. & I.R. / (916) 651-1556

11/13/15 16:03:39

**** END ****

SENATE THIRD READING

STR Bill Id:SB 599

Author:(Mendoza)

As Introduced Ver:February 27, 2015

Majority vote

SENATE VOTE: 23-14

SUMMARY: Extends a 10% bid preference for bidders on public transit contracts who agree to retain the employees of the prior contractor of subcontractor to all public transit contracts awarded by the State of California.

EXISTING LAW:

1. Requires that when a public entity puts out to bid a public service contract on public transit services, the bidder must state as part of the bid for a service contract whether or not he or she will retain the employees of the prior contractor or subcontractor for a period of not less than 90 days.

2. Requires that an awarding authority letting a service contract out to bid for public transit services shall give a 10% preference to any bidder who agrees to retain the employees of the prior contractor or subcontractor.

3. Requires a successor contractor or subcontractor for public transit services who agrees to retain employees must retain employees who have been employed by the prior contractor or subcontractors, except for reasonable and substantiated cause, which includes the particular employee's performance or conduct while working under the prior contract, as well as or the employee's failure of any controlled substances and alcohol test.

4. Requires a successor contractor or subcontractor for public transit services to make a written offer of employment to each employee to be rehired. That offer shall state the time within which the employee must accept that offer, which may not be less than 10 days, and does not need to be at the same level of wages or benefits as provided by the previous contractor or subcontractor.

5. Provides that if the successor contractor or subcontractor for public transit services determines that fewer employees are required than were required under the prior contract or subcontract, the successor contractor must retain qualified employees by seniority within the job classification. The successor contractor is permitted to consider licensing requirements when judging seniority.

6. Provides that an employee who was not offered employment or who has been discharged in violation of this chapter, or his or her agent, may bring an action against the successor contractor or subcontractor in any superior court having jurisdiction over the successor contractor or subcontractor. Upon finding a violation of this, the court must order reinstatement to employment with the successor contractor or subcontractor and award back pay, including the value of benefits, for each day of violation, as well as reasonable attorney fees.

7. Provides that, upon its own motion or upon the request of any member of the public, an awarding authority may terminate any service contract if both of the following occur:

   1. The contractor or subcontractor has substantially breached the contract; and

   2. The awarding authority holds a public hearing within 30 days of the receipt of the request or its announcement of its intention to terminate.

8. Provides that a contractor or subcontractor terminated as described above must be ineligible to bid on or be awarded a service contract or subcontract with that awarding authority for a period of not less than one year and not more than three years, to be determined by the awarding authority.

FISCAL EFFECT: According to the Assembly Appropriations Committee, costs from this measure are unknown, but potentially significant, to the extent state contracts are awarded to other than the lowest bidder due to the preference. The only transit contract currently awarded by the state appears to be the transit operation at Hearst San Simeon State Historical Monument (Hearst Castle). Hearst Castle's current transit contract is valued at roughly $22 million and is up for renewal in 2023. For illustration, assuming the subsequent contract is for the same amount and duration, the 10% bid preference could lead to increased costs to the Department of Parks and Recreation of $2.2 million, or an average of $220,000 annually (special funds).

COMMENTS: SB 158 (Alarcon), Chapter 103, Statutes of 2003, created the bid preference for contracted transit services for public agencies.

The author notes that the current 10% bid preference for transit contracts applies to all public entities, except to the State of California. The author believes that this oversight deserves to be revisited. The author notes that this oversight has already led to the lowest bidder of the transit services at Hearst Castle terminating the employment of the existing drivers, leading to their unemployment and loss of benefits.

This bill seeks to address this concern by making the 10% bid preference for transit contracts also applicable when the State of California contracts out for transit services.

Supporters argue that the existing bid preference, which impacts public agencies that contract out for transit services, has over ten year history of success on the local level. Supporters note that the law does not protect the wages or benefits of services, allowing those who seek the contract to bid the service at any price, but frequently all bidders decide to hire all of the incumbent employees in order to compete with the other bidders on a level playing field. Supporters believe that this bid preference should be extended to state transit contracts, and they cite the loss of employment and benefits by drivers formally employed at the Hearst Castle when the transit services were contracted out.

This bill is identical to SB 263 (Monning) of the 2013-14 Regular Session. SB 263 was held under submission in the Assembly Appropriations Committee. This bill is also identical to the introduced version of SB 232 (Monning) from 2013. However, SB 232 was subsequently substantially amended by the author and used for a different purpose.

Analysis Prepared by: Ben Ebbink / L. & E. / (916) 319-2091 FN: 0001633

Date of Hearing: July 8, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

SBPCA Bill Id:SB 599

Author:(Mendoza) – As Introduced Ver:February 27, 2015

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

SUMMARY:

This bill extends a ten percent bid preference for bidders on public transit contracts who agree to retain the employees of the prior contractor of subcontractor to all public transit contracts awarded by the State of California.

FISCAL EFFECT:

Costs from this measure are unknown, but potentially significant, to the extent state contracts are awarded to other than the lowest bidder due to the preference. The only transit contract currently awarded by the state appears to be the transit operation at Hearst San Simeon State Historical Monument (Hearst Castle). Hearst Castle’s current transit contract is valued at roughly $22 million and is up for renewal in 2023. For illustration, assuming the subsequent contract is for the same amount and duration, the 10% bid preference could lead to increased costs to the Department of Parks and Recreation of $2.2 million, or an average of $220,000 annually (special funds).

COMMENTS:

1. Purpose. Existing law requires a local government agency to give a 10% preference to any bidder on a service contract to provide public transit service if they agree to retain employees of the prior contractor or subcontractor for not less than 90 days. This law does not currently apply to state contracts. Supporters of the bill, including California Teamsters Public Affairs Council, believe this law should be extended to state transit contracts and cite an incident at Hearst Castle where the lowest bidder terminated the employment of existing drivers as an example of the need for this bid preference.

2. Prior legislation.

1. SB 263 (Monning) of 2014 is identical to this bill. SB 263 was held on the Suspense file in this committee.

2. SB 232 (Monning) of 2013, as introduced, is identical to this bill. SB 232 was subsequently amended to address issues related to the California Central Coast State Veterans Cemetery at Fort Ord Endowment Fund.

3. SB 158 (Alarcon), Chapter 103, Statutes of 2003 created the 10% bid preference for contracted transit services for local government agencies.

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

Date of Hearing: June 24, 2015

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Roger Hernández, Chair

SBPCA Bill Id:SB 599

Author:(Mendoza) – As Introduced Ver:February 27, 2015

SENATE VOTE: 23-14

SUBJECT: Employment: public transit service contracts.

SUMMARY: Extends a ten percent bid preference for bidders on public transit contracts who agree to retain the employees of the prior contractor of subcontractor to all public transit contracts awarded by the State of California.

EXISTING LAW:

1. Requires that when a public entity puts out to bid a public service contract on public transit services, the bidder must state as part of the bid for a service contract whether or not he or she will retain the employees of the prior contractor or subcontractor for a period of not less than 90 days.
   
   

2. Requires that an awarding authority letting a service contract out to bid for public transit services shall give a ten percent preference to any bidder who agrees to retain the employees of the prior contractor or subcontractor.
   
   

3. Requires a successor contractor or subcontractor for public transit services who agrees to retain employees must retain employees who have been employed by the prior contractor or subcontractors, except for reasonable and substantiated cause, which includes the particular employee's performance or conduct while working under the prior contract, as well as or the employee's failure of any controlled substances and alcohol test.
   
   

4. Requires a successor contractor or subcontractor for public transit services to make a written offer of employment to each employee to be rehired. That offer shall state the time within which the employee must accept that offer, which may not be less than ten days, and does not need to be at the same level of wages or benefits as provided by the previous contractor or subcontractor.
   
   

5. Provides that if the successor contractor or subcontractor for public transit services determines that fewer employees are required than were required under the prior contract or subcontract, the successor contractor must retain qualified employees by seniority within the job classification. The successor contractor is permitted to consider licensing requirements when judging seniority.
   
   

6. Provides that an employee who was not offered employment or who has been discharged in violation of this chapter, or his or her agent, may bring an action against the successor contractor or subcontractor in any superior court having jurisdiction over the successor contractor or subcontractor. Upon finding a violation of this, the court must order

reinstatement to employment with the successor contractor or subcontractor and award back pay, including the value of benefits, for each day of violation, as well as reasonable attorney fees.

7. Provides that, upon its own motion or upon the request of any member of the public, an awarding authority may terminate any service contract if both of the following occur:
   
   

   1. The contractor or subcontractor has substantially breached the contract; and
      
      

   2. The awarding authority holds a public hearing within 30 days of the receipt of the request or its announcement of its intention to terminate.
      
      

8. Provides that a contractor or subcontractor terminated as described above must be ineligible to bid on or be awarded a service contract or subcontract with that awarding authority for a period of not less than one year and not more than three years, to be determined by the awarding authority.

FISCAL EFFECT: According to the Senate Appropriations Committee the fiscal impacts of this bill are unknown, but potentially significant to the extent that state contracts are awarded to other than the lowest bidder due to the preference. The State contracts out for relatively few transit services compared to local agencies. Based on currently-available information, the provisions of this bill appear only to affect the transit operation at Hearst San Simeon State Historical Monument (Hearst Castle). Hearst Castle’s current transit contract is valued at roughly $22 million over 10 years, and is up for renewal in eight years. Assuming the subsequent contract is for the same amount and duration, the 10 percent bid preferential could lead to an increased costs to the Department of Parks and Recreation of $2.2 million, or an average of $220,000 annually (special funds).

COMMENTS: SB 158 (Alarcon), Chapter 103, Statutes of 2003 created the bid preference for contracted transit services for public agencies.

The author notes that the current ten percent bid preference for transit contracts applies to all public entities, except to the State of California. The author believes that this oversight deserves to be revisited. The author notes that this oversight has already led to the lowest bidder of the transit services at Hearst Castle terminating the employment of the existing drivers, leading to their unemployment and loss of benefits.

This bill seeks to address this concern by making the ten percent bid preference for transit contracts also applicable when the State of California contracts out for transit services.

Supporters argue that the existing bid preference, which impacts public agencies that contract out for transit services, has over ten year history of success on the local level. Supporters note that the law does not protect the wages or benefits of services, allowing those who seek the contract to bid the service at any price, but frequently all bidders decide to hire all of the incumbent employees in order to compete with the other bidders on a level playing field. Supporters believe that this bid preference should be extended to state transit contracts, and they cite the loss of employment and benefits by drivers formally employed at the Hearst Castle when the transit services were contracted out.

PRIOR IDENTICAL LEGISLATION:

This bill is identical to SB 263 (Monning) from 2014. SB 263 was held under submission in the Assembly Appropriations Committee.

This bill is also identical to the introduced version of SB 232 (Monning) from 2013, which passed this Committee. However, SB 232 was subsequently gut and amended by the author and used for a different purpose.

REGISTERED SUPPORT / OPPOSITION:

Support

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists

California Labor Federation, AFL-CIO

California Teamsters Public Affairs Council (co-sponsor)

Engineers and Scientists of California

International Longshore and Warehouse Union (co-sponsor)

Northern CA District Council of the International Longshore and Warehouse Union (co-sponsor)

Professional and Technical Engineers, Local 21

UNITE HERE!

Utility Workers Union of America, Local 132

Opposition

None on file.

Analysis Prepared by: Ben Ebbink / L. & E. / (916) 319-2091

 THIRD READING  

Bill No: SB 599

Author: Mendoza (D)

Introduced: 2/27/15

Vote: 21

SENATE LABOR & IND. REL. COMMITTEE: 4-1, 4/8/15

AYES: Mendoza, Jackson, Leno, Mitchell

NOES: Stone

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/28/15

AYES: Lara, Beall, Hill, Leyva, Mendoza

NOES: Bates, Nielsen

SUBJECT: Employment: public transit service contracts

SOURCE: California Teamsters Public Affairs Council

International Longshore and Warehouse Union

DIGEST: This bill applies an existing 10 percent bid preference to transit contracts for the State of California when a contractor voluntarily decides to retain the employees of the previous contractor.

ANALYSIS:

Existing law, under Labor Code § 1072:

1. Requires that when a public entity puts out to bid a public service contract on public transit services, the bidder must state as part of the bid for a service contract whether or not he or she will retain the employees of the prior contractor or subcontractor for a period of not less than 90 days.
   
   

2. Also requires that an awarding authority letting a service contract out to bid for public transit services shall give a 10 percent preference to any bidder who agrees to retain the employees of the prior contractor or subcontractor.
   
   

3. Requires successor contractor or subcontractor for public transit services who agrees to retain employees must retain employees who have been employed by the prior contractor or subcontractors, except for reasonable and substantiated cause, which includes the particular employee's performance or conduct while working under the prior contract, as well as or the employee's failure of any controlled substances and alcohol test.
   
   

4. Requires successor contractor or subcontractor for public transit services shall make a written offer of employment to each employee to be rehired. That offer shall state the time within which the employee must accept that offer, which may not be less than 10 days, and does not need to be at the same level of wages or benefits as provided by the previous contractor or subcontractor.
   
   

5. Provides that if the successor contractor or subcontractor for public transit services determines that fewer employees are required than were required under the prior contract or subcontract, the successor contractor must retain qualified employees by seniority within the job classification. The successor contractor is permitted to consider licensing requirements when judging seniority.

Existing law, under Labor Code § 1073:

6. Provides that an employee who was not offered employment or who has been discharged in violation of this chapter, or his or her agent, may bring an action against the successor contractor or subcontractor in any superior court having jurisdiction over the successor contractor or subcontractor. Upon finding a violation of this, the court must order reinstatement to employment with the successor contractor or subcontractor and award backpay, including the value of benefits, for each day of violation, as well as reasonable attorney fees.

Existing law, under Labor Code § 1074:

7. Provides that, upon its own motion or upon the request of any member of the public, an awarding authority may terminate any service contract if both of the following occur:

1. The contractor or subcontractor has substantially breached the contract; and

2. The awarding authority holds a public hearing within 30 days of the receipt of the request or its announcement of its intention to terminate.

This bill makes the 10 percent bid preference for transit contracts also applicable when the State of California contracts out for transit services and when a contractor voluntarily decides to retain the employees of the previous contractor.

Comments

The author notes that the current 10% bid preference for transit contracts applies to all public entities, except to the State of California and believes that extending this bid preference will support the state’s continued economic recovery by rewarding contractors that retain the employees of the previous contractor. The author contends that this protects workers by giving them job stability while protecting good contractors from cross-cutting measures. The author specifically brings attention to an incident at Hearst Castle where the lowest bidder of the transit services terminated the employment of the existing drivers, leading to their unemployment and loss of benefits.

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

According to the Senate Appropriations Committee the fiscal impacts of SB 599 are unknown, but potentially significant to the extent that state contracts are awarded to other than the lowest bidder due to the preference. The State contracts out for relatively few transit services compared to local agencies. Based on currently-available information, the provisions of this bill appear only to affect the transit operation at Hearst San Simeon State Historical Monument (Hearst Castle). Hearst Castle’s current transit contract is valued at roughly $22 million over 10 years, and is up for renewal in eight years. Assuming the subsequent contract is for the same amount and duration, the 10 percent bid preferential could lead to an increased costs to the Department of Parks and Recreation of $2.2 million, or an average of $220,000 annually (special funds).

SUPPORT: (Verified 5/29/15)

California Teamsters Public Affairs Council (co-source)

International Longshore and Warehouse Union (co-source)

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists

California Labor Federation

Engineers and Scientists of California

Professional and Technical Engineers, Local 21

The Northern California District Council of the International Longshore and Warehouse Union

UNITE HERE!

Utility Workers Union of America, Local 132

OPPOSITION: (Verified 5/29/15)

None received

ARGUMENTS IN SUPPORT: Proponents argue that the existing bid preference, which impacts public agencies that contract out for transit services, has a nearly 10-year history of success on the local level. Proponents note that the law does not protect the wages or benefits of services, allowing those who seek the contract to bid the service at any price, but frequently all bidders decide to hire all of the incumbent employees in order to compete with the other bidders on a level playing field. Proponents believe that this bid preference should be extended to state transit contracts. Proponents bring attention to a case at Hearst Castle where a new contractor took over the transit services, resulting in the loss of employment and benefits for many drivers.

Prepared by: Deanna Ping / L. & I.R. / (916) 651-1556

5/30/15 17:43:13

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 599 (Mendoza) - Employment: public transit service contracts

This bill meets the criteria for referral to the Suspense File.

Bill Summary: SB 599 would extend to state agencies the current-law 10 percent bid preference for local agency transit contracts.

Fiscal Impact: Costs from this measure are unknown, but potentially significant, to the extent that state contracts are awarded to other than the lowest bidder due to the preference. The State contracts out for relatively few transit services compared to local agencies. Based on currently-available information, the provisions of this bill appear only to affect the transit operation at Hearst San Simeon State Historical Monument (Hearst Castle). Hearst Castle’s current transit contract is valued at roughly $22 million over 10 years, and is up for renewal in eight years. Assuming the subsequent contract is for the same amount and duration, the 10 percent bid preferential could lead to an increased costs to the Department of Parks and Recreation of $2.2 million, or an average of $220,000 annually (special funds).

Background: When public transit service contracts are up for renewal, the current contractor can be underbid by a competitor. The underbidding contractor can often do so based on lower wage rates and other forms of compensation. Consequently, the new low-bidding contractor can be awarded the contract and the employees of the former contractor can be terminated. At the same time, bid preferences can increase the costs of contracts over what would have happened on the natural.

Proposed Law: This bill would extend the provisions of Chapter 4.6 of the Labor Code to state agencies, which include the following:

• When a public entity puts out to bid a public service contract on public transit services, the bidding entity must state as part of the bid for a service contract whether or not it will retain the employees of the prior contractor or subcontractor for a period of not less than 90 days.

• An awarding authority, as defined, letting a service contract out to bid for public transit services, as defined, shall give a 10 percent preference to any bidder who agrees to retain the employees of the prior contractor or subcontractor.

Related Legislation: AB 158 (Alarcon), Statutes of 2003 Chapter 103, created the 10 percent bid preference for contracted transit services for local public agencies.

SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS

Senator Tony Mendoza, Chair

2015 - 2016 Regular

Bill No: SB 599 Hearing Date: April 8, 2015

Subject: Employment: public transit service contracts

KEY ISSUE

Should the Legislature require a ten percent bid preference for bidders who agree to retain the employees of the prior contractor of subcontractor on all on public transit contracts awarded by the State of California?

ANALYSIS

Existing law requires that when a public entity puts out to bid a public service contract on public transit services, the bidder must state as part of the bid for a service contract whether or not he or she will retain the employees of the prior contractor or subcontractor for a period of not less than 90 days. (Labor Code § 1072)

Existing law also requires that an awarding authority letting a service contract out to bid for public transit services shall give a 10 percent preference to any bidder who agrees to retain the employees of the prior contractor or subcontractor. (Labor Code § 1072)

Existing law requires successor contractor or subcontractor for public transit services who agrees to retain employees must retain employees who have been employed by the prior contractor or subcontractors, except for reasonable and substantiated cause, which includes the particular employee's performance or conduct while working under the prior contract, as well as or the employee's failure of any controlled substances and alcohol test. (Labor Code § 1072)

Existing law requires successor contractor or subcontractor for public transit services shall make a written offer of employment to each employee to be rehired. That offer shall state the time within which the employee must accept that offer, which may not be less than 10 days, and does not need to be at the same level of wages or benefits as provided by the previous contractor or subcontractor. (Labor Code § 1072)

Existing law provides that if the successor contractor or subcontractor for public transit services determines that fewer employees are required than were required under the prior contract or subcontract, the successor contractor must retain qualified employees by seniority within the job classification. The successor contractor is permitted to consider licensing requirements when judging seniority. (Labor Code § 1072)

Existing law also provides that an employee who was not offered employment or who has been discharged in violation of this chapter, or his or her agent, may bring an action against the successor contractor or subcontractor in any superior court having jurisdiction over the successor contractor or subcontractor. Upon finding a violation of this, the court must order reinstatement to employment with the successor contractor or subcontractor and award backpay, including the value of benefits, for each day of violation, as well as reasonable attorney fees.

(Labor Code § 1073)

Existing law also provides that, upon its own motion or upon the request of any member of the public, an awarding authority may terminate any service contract if both of the following occur:

1. The contractor or subcontractor has substantially breached the contract; and

2. The awarding authority holds a public hearing within 30 days of the receipt of the

request or its announcement of its intention to terminate.

A contractor or subcontractor terminated as described above must be ineligible to bid on or be awarded a service contract or subcontract with that awarding authority for a period of not less than one year and not more than three years, to be determined by the awarding authority.

(Labor Code § 1074)

This Bill would apply the above-discussed bid preference to state agencies.

COMMENTS

1. Need for this bill?

The author notes that the current 10% bid preference for transit contracts applies to all public entities, except to the State of California and believes that extending this bid preference will support the state’s continued economic recovery by rewarding contractors that retain the employees of the previous contractor. The author contends that this protects workers by giving them job stability while protecting good contractors from cross-cutting measures. The author specifically brings attention to an incident at Hearst Castle where the lowest bidder of the transit services terminated the employment of the existing drivers, leading to their unemployment and loss of benefits.

SB 599 seeks to address this concern by making the 10% bid preference for transit contracts also applicable when the State of California contracts out for transit services and when a contractor voluntarily decides to retain the employees of the previous contractor.

2. Proponent Arguments:

Proponents argue that the existing bid preference, which impacts public agencies that contract out for transit services, has a nearly ten year history of success on the local level. Proponents note that the law does not protect the wages or benefits of services, allowing those who seek the contract to bid the service at any price, but frequently all bidders decide to hire all of the incumbent employees in order to compete with the other bidders on a level playing field. Proponents believe that this bid preference should be extended to state transit contracts, and they cite the loss of employment and benefits by drivers formally employed at the Hearst Castle when the transit services were contracted out.

4. Prior Legislation:

SB 263 (Monning) of 2014 was identical to this bill, but held in Assembly Appropriations Committee.

SB 232 (Monning) of 2013 was identical to this bill. It passed the Senate and the first policy committee in the Assembly but was then amended to Military and Veterans code, relating to the California Central Coast State Veterans Cemetery at Fort Ord Endowment Fund.

SB 158 (Alarcon), Statutes of 2003, Chapter 103, created the bid preference for contracted transit services for public agencies.

SUPPORT

California Teamsters Public Affairs Council (Co-Sponsor)

International Longshore & Warehouse Union (Co-Sponsor)

California Conference Board of the Amalgamated Transit Union

California Conference of Machinists

California Labor Federation, AFL-CIO

Engineers and Scientists of California

Professional and Technical Engineers, Local 21

The Northern California District Council of the International Longshore and Warehouse Union

UNITE HERE!

Utility Workers Union of America, Local 132

OPPOSITION

None on File.

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