Existing law authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by the Department of General Services. Existing law sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits. Existing law provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void. Under existing law, a willful violation of those requirements and prohibitions is a misdemeanor.

This bill would also prohibit a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits, as specified. By expanding the scope of a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by the Department of General Services. Existing law sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits. Existing law provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void. Under existing law, a willful violation of those requirements and prohibitions is a misdemeanor.

This bill would also prohibit a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits, as specified. By expanding the scope of a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by the Department of General Services. Existing law sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits. Existing law provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void. Under existing law, a willful violation of those requirements and prohibitions is a misdemeanor.

This bill would also prohibit a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits, as specified. The bill would require the department to maintain an easily accessible list on its Internet Web site of contracts for the acquisition of goods or services of $100,000 or more entered into on or after January 1, 2016. By expanding the scope of a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by the Department of General Services. Existing law sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits. Existing law provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void. Under existing law, a willful violation of those requirements and prohibitions is a misdemeanor.

This bill would also prohibit a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits, as specified. The bill would require the department to maintain an easily accessible list on its Internet Web site of contracts for the acquisition of goods or services of $100,000 or more entered into on or after January 1, 2016. The bill would authorize a person to file a complaint with the department alleging that a contractor is in violation of, or a contract has been entered into in violation of, a state contracting requirement or prohibition and would require the department to investigate each complaint. By expanding the scope of a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by the Department of General Services. Existing law sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits. Existing law provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void. Under existing law, a willful violation of those requirements and prohibitions is a misdemeanor.

This bill would also prohibit a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits, as specified. The bill would require the department to maintain an easily accessible list on its Internet Web site of contracts for the acquisition of goods or services of $100,000 or more entered into on or after January 1, 2016. The bill would authorize a person to file a complaint with the department alleging that a contractor is in violation of, or a contract has been entered into in violation of, a state contracting requirement or prohibition and would require the department to investigate each complaint. By expanding the scope of a crime, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

SENATE THIRD READING

STR Bill Id:SB 703

Author:(Leno)

As Amended Ver:August 31, 2015

Majority vote

SENATE VOTE: 25-13

SUMMARY: Prohibits a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits. Specifically, this bill:

1. Prohibits a state agency from entering into a contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates between employees on the basis of an employee's or dependent’s actual or perceived gender identity, including, but not limited to, the employee's or dependent’s identification as transgender.

2. Provides that the term "contract" includes contracts with a cumulative amount of $100,000 or more per contractor in each fiscal year.

3. Provides that an employee health plan is discriminatory if the plan is not consistent with existing law governing health plan and health insurance non-discriminatory practices (Health and Safety Code Section 1365.5 and Insurance Code Section 10140).

4. Stipulates that the transgender nondiscrimination requirements referenced above shall apply only to those portions of a contractor's operations that occur under any of the following conditions:

   1. Within the State of California;

   2. On real property outside the state if the property is owned by the state or if the state has a right to occupy the property, and if the contractor’s presence at that location is connected to a contract with the state; or,

   3. Elsewhere in the United States where work related to a state contract is being performed.

5. Requires contractors to treat as confidential, to the maximum extent allowed by law or by the requirement of the contractor's insurance provider, any request by an employee or applicant for employment benefits or any documentation of eligibility for benefits submitted by an employee or applicant for employment.

6. Provides that the requirements of this bill may be waived under any of the following circumstances:

   1. There is only one prospective contractor willing to enter into a specific contract with the state agency;

   2. The contract is necessary to respond to an emergency that endangers public health, welfare, or safety, or the contract is necessary for the provision of essential services and no entity that complies with the requirements is capable of immediately responding to the emergency;

   3. The requirements violate, or are inconsistent with, the terms and conditions of a grant, subvention, or agreement and the agency has made a good faith effort to change those terms and conditions; or,

   4. The contractor is providing wholesale or bulk water, power, or natural gas, or ancillary services, as required for ensuring reliable services in accordance with good utility practice, if the purchase of the same cannot practicably be accomplished through standard competitive bidding procedures and the contractor is not providing direct retail services to end users.

7. Stipulates that a contractor shall not be deemed to discriminate in the provision of benefits if: a) the contractor, in providing the benefits, pays the actual costs incurred in obtaining the benefit or b) the contractor is unable to provide a certain benefit, despite taking reasonable measures to do so.

8. Requires every contract subject to this bill to contain a statement by which the contractor certifies that the contractor complies with this bill's provisions. If a contractor falsely certifies compliance, the contract with that contractor shall be subject to certain penalties and remedies unless, within a time period specified by the Department of General Services (DGS) or other contracting agency, the contractor provides proof that it has complied, or is in the process of complying.

9. Stipulates that this bill's provisions shall be construed so as not to conflict with applicable federal laws, rules, or regulations. Also, contains a severability provision, as specified.

10. Makes it explicit that this bill's provisions do not create any new enforcement responsibility for DGS or any other contracting agency.

FISCAL EFFECT: According to the Assembly Appropriations Committee, by adding contracting requirements on bidders, this bill would to some extent reduce the number of bidders on state contracts, thus reducing competition and possibly increasing costs. The cost of these impacts is unknown, but given that the state contracts for several billion dollars for goods and services exceeding $100,000 annually, costs could be in the hundreds of thousands to millions of dollars annually. [General Fund and numerous special funds] Over time, assuming more contractors come into compliance, the cost impact of this bill would diminish.

COMMENTS: According to the author's office, this bill is simply intended to prohibit state agencies from doing business with companies that discriminate between the benefits offered to transgender employees and other employees. The author's office notes that discrimination in the provision of employee benefits has a tremendous economic cost impact. For example, when workers are denied health coverage or excluded from medically necessary procedures, costs are pushed on to state funded programs and services. One mechanism that has been used to combat these costs and to reduce discrimination is the state’s market power through the contracting it does with the private sector.

The author's office contends that, despite these advances in prohibiting discrimination, companies that contract with the State of California that self-insure under federal law, or that are based out-of-state, may offer insurance plans that don’t comply with the same gender nondiscrimination requirements applied to other companies operating in California. Transgender employees at these companies are unfairly denied health coverage afforded to other employees.

Analysis Prepared by: William Herms / A. & A.R. / (916) 319-3600 FN: 0001706

 UNFINISHED BUSINESS  

Bill No: SB 703

Author: Leno (D)

Amended: 8/31/15

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 7-3, 4/14/15

AYES: Hall, Block, Galgiani, Hernandez, Hill, Lara, McGuire

NOES: Berryhill, Gaines, Vidak

NO VOTE RECORDED: Hueso

SENATE JUDICIARY COMMITTEE: 5-1, 4/21/15

AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski

NOES: Anderson

NO VOTE RECORDED: Moorlach

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

AYES: Lara, Beall, Hill, Leyva, Mendoza

NOES: Bates, Nielsen

SENATE FLOOR: 25-13, 6/3/15

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

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

NO VOTE RECORDED: Cannella, Hancock

ASSEMBLY FLOOR: 53-24, 9/2/15 - See last page for vote

SUBJECT: Public contracts: prohibitions: discrimination

SOURCE: Author

DIGEST: This bill adds a new section of law to the Public Contract Code that prohibits a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits.

Assembly Amendments delete the requirement imposed on the Department of General Services to include the listing of contracts on its website.

ANALYSIS:

Existing law:

1. Authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by the Department of General Services (DGS) and establishes rules governing the awarding of contracts by state agencies, including general requirements for competitive bidding on contracts for the acquisition of goods or services.

2. Sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits.
   
   

3. Provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void.
   
   

4. Makes a willful violation of the above requirements and prohibitions a misdemeanor.

This bill:

1. Prohibits a state agency from entering into a contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates between employees on the basis of an employee’s or dependent’s actual or perceived gender identity, including, but not limited to, the employee’s or dependent’s identification as transgender.
   
   

2. Provides that the term “contract” includes contracts with a cumulative amount of $100,000 or more per contractor in each fiscal year.
   
   

3. Provides that an employee health plan is discriminatory if the plan is not consistent with specified sections of law (Section 1365.5 of the Health and Safety Code and Section 10140 of the Insurance Code).
   
   

4. Stipulates that the transgender nondiscrimination requirements referenced above shall apply only to those portions of a contractor’s operations that occur under any of the following conditions:
   
   

   1. Within the State of California.
      
      

   2. On real property outside the state if the property is owned by the state or if the state has a right to occupy the property, and if the contractor’s presence at that location is connected to a contract with the state.
      
      

   3. Elsewhere in the United States where work related to a state contract is being performed.
      
      

5. Requires contractors to treat as confidential, to the maximum extent allowed by law or by the requirement of the contractor’s insurance provider, any request by an employee or applicant for employment benefits or any documentation of eligibility for benefits submitted by an employee or applicant for employment.
   
   

6. Provides that the requirements of this bill may be waived under any of the following circumstances:
   
   

   1. There is only one prospective contractor willing to enter into a specific contract with the state agency.
      
      

   2. The contract is necessary to respond to an emergency that endangers public health, welfare, or safety, or the contract is necessary for the provision of essential services and no entity that complies with the requirements is capable of immediately responding to the emergency.
      
      

   3. The requirements violate, or are inconsistent with, the terms and conditions of a grant, subvention, or agreement and the agency has made a good faith effort to change those terms and conditions.
      
      

   4. The contractor is providing wholesale or bulk water, power, or natural gas, or ancillary services, as required for ensuring reliable services in accordance with good utility practice, if the purchase of the same cannot practicably be accomplished through standard competitive bidding procedures and the contractor is not providing direct retail services to end users.
      
      

7. Stipulates that a contractor shall not be deemed to discriminate in the provision of benefits if: (a) the contractor, in providing the benefits, pays the actual costs incurred in obtaining the benefit or (b) the contractor is unable to provide a certain benefit, despite taking reasonable measures to do so.
   
   

8. Requires every contract subject to this bill to contain a statement by which the contractor certifies that the contractor is in compliance with the bill’s provisions. If a contractor falsely certifies compliance, the contract with that contractor shall be subject to certain penalties and remedies unless, within a time period specified by DGS or other contracting agency, the contractor provides proof that it has complied, or is in the process of complying.
   
   

9. Stipulates that the bill’s provisions shall be construed so as not to conflict with applicable federal laws, rules, or regulations. Also, contains a severability provision, as specified.
   
   

10. Makes it explicit that the bill’s provisions do not create any new enforcement responsibility for DGS or any other contracting agency.

Background

Purpose of SB 703. According to the author’s office, this bill is simply intended to prohibit state agencies from doing business with companies that discriminate between the benefits offered to transgender employees and other employees. The author’s office notes that discrimination in the provision of employee benefits has a tremendous economic cost impact. For example, when workers are denied health coverage or excluded from medically necessary procedures, costs are pushed on to state funded programs and services. One mechanism that has been used to combat these costs and to reduce discrimination is the state’s market power through the contracting it does with the private sector.

The author’s office points out that California has a long history of ensuring that state agencies do not discriminate in the provision of employee benefits, including health insurance through a series of bills and administrative actions. Specifically, the author’s office cites AB 17 (Kehoe, 2003) which prohibited state agencies from doing business with companies that discriminate in the benefits offered between employees with spouses and employees with registered domestic partners and also AB 2208 (Kehoe, 2004) which mandated that California health care service plans and health insurers provide equal benefits to domestic partners as to spouses. The author’s office also references AB 1586 (Koretz, 2006), known as the California Insurance Gender Nondiscrimination Act, which outlawed discriminatory exclusions by health care service plans and health insurers based on an individual’s gender identity. In 2012 the California Department of Insurance issued regulations to implement AB 1586 (Koretz). Also, in 2013, the Department of Managed Health Care similarly issued a letter to all plans under its jurisdiction, ordering them to remove blanket exclusions of coverage targeting health care needed by transgender people.

Furthermore, the author’s office notes that eight other states and the District of Columbia have banned transgender exclusions in health insurance and over 25% of Fortune 500 companies have also followed suit by offering equal health care benefits for transgender employees. Medi-Cal has also covered health care needed by transgender individuals since the 1970s and the federal Medicare system removed its discriminatory transgender exclusion in 2014.

The author’s office contends that despite these advances in prohibiting discrimination, companies that contract with the State of California that self-insure under federal law, or that are based out-of-state, may offer insurance plans that don’t comply with the same gender nondiscrimination requirements applied to other companies operating in California. Transgender employees at these companies are unfairly denied health coverage afforded to other employees.

Prior/Related Legislation

AB 1586 (Koretz, Chapter 421, Statutes of 2005) prohibited plans and insurers from denying an individual a plan contract or policy, or coverage for a benefit included in the contract policy, based on the person’s sex, as defined.

AB 2208 (Kehoe, Chapter 488, Statutes of 2004) required a health care service plan and a health insurer to provide coverage to the registered domestic partner of an employee, subscriber, insured, or policyholder that is equal to the coverage it provides to the spouse of those persons.

AB 17 (Kehoe, Chapter 752, Statutes of 2003) prohibited a state agency from entering into a contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor who, in the provision of benefits, discriminates between employees with spouses and employees with domestic partners, or discriminates between the domestic partners and spouses of those employees, except under specified circumstances.

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

According to the Assembly Appropriations Committee, by adding contracting requirements on bidders, this bill will to some extent reduce the number of bidders on state contracts, thus reducing competition and possibly increasing costs. The cost of these impacts is unknown, but given that the state contracts for several billion dollars for goods and services exceeding $100,000 annually, costs could be in the hundreds of thousands to millions of dollars annually. [General Fund and numerous special funds] Over time, assuming more contractors come into compliance, the cost impact of this bill would diminish.

SUPPORT: (Verified 9/2/15)

American Civil Liberties Union of California

American Federation of Labor and Congress of Industrial Organizations

American Federation of State, County and Municipal Employees

California Communities United Institute

Equality California

National Center for Lesbian Rights

Transgender Law Center

OPPOSITION: (Verified 9/2/15)

None received

ARGUMENTS IN SUPPORT: Proponents state that over the past decade, California has prohibited discrimination in the provision of employee benefits, including health insurance, through a series of bills and administrative actions.

This bill is intended to build on previous nondiscrimination law and ensure that California does business only with companies that provide equal benefits. Proponents emphasize that treating transgender employees differently is discrimination – this bill rewards companies that do not discriminate with the opportunity to do business with the state and prohibits a state agency from entering into a contract in the amount of $100,000 or more with a contractor who discriminates based on an employee’s transgender status.

Proponents claim that reducing discrimination is beneficial to both employers and employees, and by only contracting with entities that don’t discriminate, California will improve the quality of goods and services purchased with public dollars.

ASSEMBLY FLOOR: 53-24, 9/2/15

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, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Nazarian, O'Donnell, Olsen, 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, Gray, Grove, Hadley, Harper, Jones, Kim, Lackey, Mathis, Melendez, Obernolte, Patterson, Wagner, Waldron, Wilk

NO VOTE RECORDED: Linder, Mullin, Steinorth

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

9/2/15 17:49:21

**** END ****

Date of Hearing: July 15, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

SBPCA Bill Id:SB 703

Author:(Leno) – As Amended Ver:June 1, 2015

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

SUMMARY:

This bill prohibits state agencies from entering into certain contracts with a contractor that discriminates between their employees on the basis of gender identity. Specifically, this bill:

1. Prohibits state agencies from entering into contracts exceeding $100,000 for goods or services with a contractor that, in the provision of benefits, discriminates between employees on the basis of an employee's or dependent's actual or perceived gender identity, including identification as transgender.

2. Provides specific exceptions to the contracting requirement in (1), including when there is only one prospective contractor willing to enter into a contract with the state or as necessary to respond to an emergency situation.

3. Requires every contract subject to (1) to include a statement for the contractor to certify compliance with the requirement in (1). A contractor falsely certifying compliance shall be subject to certain penalties and remedies unless, within a time period specified by DGS or other state contracting agency, the contractor provides proof that it has complied or is in the process of complying.

4. Requires the Department of General Services (DGS) to maintain an easily accessible list on its website of contracts for the acquisition of goods or services in the amount $100,000 or more that are entered into on or after January 1, 2016.

FISCAL EFFECT:

1. By adding contracting requirements on bidders, the bill would to some extent reduce the number of bidders on state contracts, thus reducing competition and possibly increasing costs. The cost of these impacts is unknown, but given that the state contracts for several billion dollars for goods and services exceeding $100,000 annually, costs could be in the hundreds of thousands to millions of dollars annually. [General Fund and numerous special funds] Over time, assuming more contractors come into compliance, the cost impact of this bill would diminish.

2. DGS would incur minor one-time administrative costs to update standard contract terms, and minor absorbable costs to include the listing of contracts on its website.

COMMENTS:

1. Purpose. According to the author’s office, this bill is simply intended to prohibit state agencies from doing business with companies that discriminate between the benefits offered to transgender employees and other employees. The author’s office notes that discrimination in the provision of employee benefits has a tremendous economic cost impact. For example, when workers are denied health coverage or are excluded from medically necessary procedures, costs are pushed on to state funded programs and services. One mechanism that has been used to combat these costs, and to reduce discrimination, is the state’s market power through the contracting it does with the private sector.

2. Prior Legislation. This bill is modeled after AB 17 (Kehoe), Chapter 752, Statutes of 2003, which prohibited state contracts with firms that discriminate, in the provision of benefits, between employees with spouses and employees with registered domestic partners.

3. Comment. Since the state's FI$Cal public transparency website will list all contracts for goods and services and will enable users to run search queries, including queries for contracts over $100,000, it seems unnecessary to require DGS to post, and continually update, information that members of the public could obtain on their own through FI$CAL.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: July 1, 2015

ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW

Rudy Salas, Chair

SBPCA Bill Id:SB 703

Author:(Leno) – As Amended Ver:June 1, 2015

SENATE VOTE: 25-13

SUBJECT: Public contracts: prohibitions: discrimination.

SUMMARY: Prohibits a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits. Specifically, this bill:

1. Prohibits a state agency from entering into a contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates between employees on the basis of an employee’s or dependent’s actual or perceived gender identity, including, but not limited to, the employee’s or dependent’s identification as transgender.
   
   

2. Requires the Department of General Services (DGS) to maintain an easily accessible list on its Internet Web site of contracts for the acquisition of goods or services in the amount $100,000 or more that are entered into on or after January 1, 2016.
   
   

3. Provides that the term “contract” includes contracts with a cumulative amount of $100,000 or more per contractor in each fiscal year.
   
   

4. Provides that an employee health plan is discriminatory if the plan is not consistent with existing law governing health plan and health insurance non-discriminatory practices (Section 1365.5 of the Health and Safety Code and Section 10140 of the Insurance Code).
   
   

5. Stipulates that the transgender nondiscrimination requirements referenced above shall apply only to those portions of a contractor’s operations that occur under any of the following conditions:
   
   

   1. Within the State of California;
      
      

   2. On real property outside the state if the property is owned by the state or if the state has a right to occupy the property, and if the contractor’s presence at that location is connected to a contract with the state; or,
      
      

   3. Elsewhere in the United States where work related to a state contract is being performed.
      
      

6. Requires contractors to treat as confidential, to the maximum extent allowed by law or by the requirement of the contractor’s insurance provider, any request by an employee or applicant for employment benefits or any documentation of eligibility for benefits submitted by an employee or applicant for employment.
   
   

7. Provides that the requirements of this bill may be waived under any of the following circumstances:
   
   

   1. There is only one prospective contractor willing to enter into a specific contract with the state agency;
      
      

   2. The contract is necessary to respond to an emergency that endangers public health, welfare, or safety, or the contract is necessary for the provision of essential services and no entity that complies with the requirements is capable of immediately responding to the emergency;
      
      

   3. The requirements violate, or are inconsistent with, the terms and conditions of a grant, subvention, or agreement and the agency has made a good faith effort to change those terms and conditions; or,
      
      

   4. The contractor is providing wholesale or bulk water, power, or natural gas, or ancillary services, as required for ensuring reliable services in accordance with good utility practice, if the purchase of the same cannot practicably be accomplished through standard competitive bidding procedures and the contractor is not providing direct retail services to end users.
      
      

8. Stipulates that a contractor shall not be deemed to discriminate in the provision of benefits if: (a), the contractor, in providing the benefits, pays the actual costs incurred in obtaining the benefit or (b), the contractor is unable to provide a certain benefit, despite taking reasonable measures to do so.
   
   

9. Requires every contract subject to this bill to contain a statement by which the contractor certifies that the contractor complies with this bill’s provisions. If a contractor falsely certifies compliance, the contract with that contractor shall be subject to certain penalties and remedies unless, within a time period specified by DGS or other contracting agency, the contractor provides proof that it has complied, or is in the process of complying.
   
   

10. Stipulates that this bill’s provisions shall be construed so as not to conflict with applicable federal laws, rules, or regulations. Also, contains a severability provision, as specified.
    
    

11. Makes it explicit that the bill’s provisions do not create any new enforcement responsibility for DGS or any other contracting agency.
    
    

EXISTING LAW:

1. Authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by DGS and establishes rules governing the awarding of contracts by state agencies, including general requirements for competitive bidding on contracts for the acquisition of goods or services.

2. Sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits.
   
   

3. Provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void.
   
   

4. Makes a willful violation of the above requirements and prohibitions a misdemeanor.
   
   

FISCAL EFFECT: According to the Senate Appropriations Committee, minor costs to DGS to compile, update, and post a list of contracts for goods and services valued at $100,000 or more. This information is readily available on the Financial Information System for California Web site (General Fund). Additionally, minor one-time administrative costs to DGS to update the State Contracting Manual and update standard bid and contract language to incorporate a certification of compliance (General Fund).

COMMENTS: According to the author’s office, this bill is simply intended to prohibit state agencies from doing business with companies that discriminate between the benefits offered to transgender employees and other employees. The author’s office notes that discrimination in the provision of employee benefits has a tremendous economic cost impact. For example, when workers are denied health coverage or excluded from medically necessary procedures, costs are pushed on to state funded programs and services. One mechanism that has been used to combat these costs and to reduce discrimination is the state’s market power through the contracting it does with the private sector.

The author’s office points out that California has a long history of ensuring that state agencies do not discriminate in the provision of employee benefits, including health insurance, through a series of bills and administrative actions. Specifically, the author’s office cites AB 17 (Kehoe), Chapter 752, Statutes of 2003, which prohibits state agencies from doing business with companies that discriminate in the benefits offered between employees with spouses and employees with registered domestic partners and also AB 2208 (Kehoe), Chapter 488, Statutes of 2004, which mandates that California health care service plans and health insurers provide equal benefits to domestic partners as to spouses. The author’s office also references AB 1586 (Koretz), Chapter 421, Statutes of 2005, known as the California Insurance Gender Nondiscrimination Act, which bans discriminatory exclusions by health care service plans and health insurers based on an individual’s gender identity. In 2012, the California Department of Insurance issued regulations to implement AB 1586 and, in 2013, the Department of Managed Health Care similarly issued a letter to all plans under its jurisdiction, ordering them to remove blanket exclusions of coverage targeting health care needed by transgender people.

According to the author's office, eight other states and the District of Columbia have prohibited transgender exclusions in health insurance and over 25% of Fortune 500 companies have also followed suit by offering equal health care benefits for transgender employees. California's health care program for the poor, Medi-Cal, has also covered health care needed by transgender individuals since the 1970s and the federal Medicare system removed its discriminatory transgender exclusion in 2014.

The author’s office contends that, despite these advances in prohibiting discrimination, companies that contract with the State of California that self-insure under federal law, or that are based out-of-state, may offer insurance plans that don’t comply with the same gender nondiscrimination requirements applied to other companies operating in California. Transgender employees at these companies are unfairly denied health coverage afforded to other employees.

REGISTERED SUPPORT / OPPOSITION:

Support

National Center for Lesbian Rights (sponsor)

Transgender Law Center (sponsor)

American Civil Liberties Union of California

American Federation of Labor and Congress of Industrial Organizations

American Federation of State, County and Municipal Employees

California Communities United Institute

Equality California

Opposition

None on file

Analysis Prepared by: William Herms / A. & A.R. / (916) 319-3600

 THIRD READING  

Bill No: SB 703

Author: Leno (D)

Introduced: 6/1/15

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 7-3, 4/14/15

AYES: Hall, Block, Galgiani, Hernandez, Hill, Lara, McGuire

NOES: Berryhill, Gaines, Vidak

NO VOTE RECORDED: Hueso

SENATE JUDICIARY COMMITTEE: 5-1, 4/21/15

AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski

NOES: Anderson

NO VOTE RECORDED: Moorlach

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

AYES: Lara, Beall, Hill, Leyva, Mendoza

NOES: Bates, Nielsen

SUBJECT: Public contracts: prohibitions: discrimination

SOURCE: Author

DIGEST: This bill adds a new section of law to the Public Contract Code that prohibits a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits. This bill also requires the Department of General Services (DGS) to maintain an easily accessible list on its Internet Web site of contracts for the acquisition of goods and services in the amount of $100,000 or more that are entered into on or after January 1, 2016.

ANALYSIS:

Existing law:

1. Authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by DGS and establishes rules governing the awarding of contracts by state agencies, including general requirements for competitive bidding on contracts for the acquisition of goods or services.

2. Sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits.
   
   

3. Provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void.
   
   

4. Makes a willful violation of the above requirements and prohibitions a misdemeanor.

This bill:

1. Prohibits a state agency from entering into a contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates between employees on the basis of an employee’s or dependent’s actual or perceived gender identity, including, but not limited to, the employee’s or dependent’s identification as transgender.
   
   

2. Requires DGS to maintain an easily accessible list on its Internet Web site of contracts for the acquisition of goods or services in the amount $100,000 or more that are entered into on or after January 1, 2016.
   
   

3. Provides that the term “contract” includes contracts with a cumulative amount of $100,000 or more per contractor in each fiscal year.
   
   

4. Provides that an employee health plan is discriminatory if the plan is not consistent with specified sections of law (Section 1365.5 of the Health and Safety Code and Section 10140 of the Insurance Code).
   
   

5. Stipulates that the transgender nondiscrimination requirements referenced above shall apply only to those portions of a contractor’s operations that occur under any of the following conditions:
   
   

   1. Within the State of California.
      
      

   2. On real property outside the state if the property is owned by the state or if the state has a right to occupy the property, and if the contractor’s presence at that location is connected to a contract with the state.
      
      

   3. Elsewhere in the United States where work related to a state contract is being performed.
      
      

6. Requires contractors to treat as confidential, to the maximum extent allowed by law or by the requirement of the contractor’s insurance provider, any request by an employee or applicant for employment benefits or any documentation of eligibility for benefits submitted by an employee or applicant for employment.
   
   

7. Provides that the requirements of this bill may be waived under any of the following circumstances:
   
   

   1. There is only one prospective contractor willing to enter into a specific contract with the state agency.
      
      

   2. The contract is necessary to respond to an emergency that endangers public health, welfare, or safety, or the contract is necessary for the provision of essential services and no entity that complies with the requirements is capable of immediately responding to the emergency.
      
      

   3. The requirements violate, or are inconsistent with, the terms and conditions of a grant, subvention, or agreement and the agency has made a good faith effort to change those terms and conditions.
      
      

   4. The contractor is providing wholesale or bulk water, power, or natural gas, or ancillary services, as required for ensuring reliable services in accordance with good utility practice, if the purchase of the same cannot practicably be accomplished through standard competitive bidding procedures and the contractor is not providing direct retail services to end users.
      
      

8. Stipulates that a contractor shall not be deemed to discriminate in the provision of benefits if: (a) the contractor, in providing the benefits, pays the actual costs incurred in obtaining the benefit or (b) the contractor is unable to provide a certain benefit, despite taking reasonable measures to do so.
   
   

9. Requires every contract subject to this bill to contain a statement by which the contractor certifies that the contractor is in compliance with the bill’s provisions. If a contractor falsely certifies compliance, the contract with that contractor shall be subject to certain penalties and remedies unless, within a time period specified by DGS or other contracting agency, the contractor provides proof that it has complied, or is in the process of complying.
   
   

10. Stipulates that the bill’s provisions shall be construed so as not to conflict with applicable federal laws, rules, or regulations. Also, contains a severability provision, as specified.
    
    

11. Makes it explicit that the bill’s provisions do not create any new enforcement responsibility for DGS or any other contracting agency.

Background

Purpose of SB 703. According to the author’s office, this bill is simply intended to prohibit state agencies from doing business with companies that discriminate between the benefits offered to transgender employees and other employees. The author’s office notes that discrimination in the provision of employee benefits has a tremendous economic cost impact. For example, when workers are denied health coverage or excluded from medically necessary procedures, costs are pushed on to state funded programs and services. One mechanism that has been used to combat these costs and to reduce discrimination is the state’s market power through the contracting it does with the private sector.

The author’s office points out that California has a long history of ensuring that state agencies do not discriminate in the provision of employee benefits, including health insurance through a series of bills and administrative actions. Specifically, the author’s office cites AB 17 (Kehoe, 2003) which prohibited state agencies from doing business with companies that discriminate in the benefits offered between employees with spouses and employees with registered domestic partners and also AB 2208 (Kehoe, 2004) which mandated that California health care service plans and health insurers provide equal benefits to domestic partners as to spouses. The author’s office also references AB 1586 (Koretz, 2006), known as the California Insurance Gender Nondiscrimination Act, which outlawed discriminatory exclusions by health care service plans and health insurers based on an individual’s gender identity. In 2012 the California Department of Insurance issued regulations to implement AB 1586 (Koretz). Also, in 2013, the Department of Managed Health Care similarly issued a letter to all plans under its jurisdiction, ordering them to remove blanket exclusions of coverage targeting health care needed by transgender people.

Furthermore, the author’s office notes that eight other states and the District of Columbia have banned transgender exclusions in health insurance and over 25% of Fortune 500 companies have also followed suit by offering equal health care benefits for transgender employees. Medi-Cal has also covered health care needed by transgender individuals since the 1970s and the federal Medicare system removed its discriminatory transgender exclusion in 2014.

The author’s office contends that despite these advances in prohibiting discrimination, companies that contract with the State of California that self-insure under federal law, or that are based out-of-state, may offer insurance plans that don’t comply with the same gender nondiscrimination requirements applied to other companies operating in California. Transgender employees at these companies are unfairly denied health coverage afforded to other employees.

Prior/Related Legislation

AB 1586 (Koretz, Chapter 421, Statutes of 2005) prohibited plans and insurers from denying an individual a plan contract or policy, or coverage for a benefit included in the contract policy, based on the person’s sex, as defined.

AB 2208 (Kehoe, Chapter 488, Statutes of 2004) required a health care service plan and a health insurer to provide coverage to the registered domestic partner of an employee, subscriber, insured, or policyholder that is equal to the coverage it provides to the spouse of those persons.

AB 17 (Kehoe, Chapter 752, Statutes of 2003) prohibited a state agency from entering into a contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor who, in the provision of benefits, discriminates between employees with spouses and employees with domestic partners, or discriminates between the domestic partners and spouses of those employees, except under specified circumstances.

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

According to the Senate Appropriations Committee, minor costs to DGS to compile, update, and post a list of contracts for goods and services valued at $100,000 or more. This information is readily available on the Financial Information System for California Web site (General Fund). Additionally, minor one-time administrative costs to DGS to update the State Contracting Manual and update standard bid and contract language to incorporate a certification of compliance (General Fund).

SUPPORT:

(Verified 5/29/15)

American Civil Liberties Union of California

American Federation of Labor and Congress of Industrial Organizations

American Federation of State, County and Municipal Employees

California Communities United Institute

Equality California

National Center for Lesbian Rights

Transgender Law Center

OPPOSITION: (Verified 5/29/15)

None received

ARGUMENTS IN SUPPORT: Proponents state that over the past decade, California has prohibited discrimination in the provision of employee benefits, including health insurance, through a series of bills and administrative actions.

This bill is intended to build on previous nondiscrimination law and ensure that California does business only with companies that provide equal benefits. Proponents emphasize that treating transgender employees differently is discrimination – this bill rewards companies that do not discriminate with the opportunity to do business with the state and prohibits a state agency from entering into a contract in the amount of $100,000 or more with a contractor who discriminates based on an employee’s transgender status. Additionally, proponents note that this bill expands existing enforcement provisions in state contracting by adding requirements that DGS provide an Internet Web based database listing all contracts subject to the above provision.

Proponents claim that reducing discrimination is beneficial to both employers and employees, and by only contracting with entities that don’t discriminate, California will improve the quality of goods and services purchased with public dollars.

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

6/1/15 15:42:47

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 703 (Leno) - Public contracts: prohibitions: discrimination

SUSPENSE FILE. AS AMENDED.

Bill Summary:

SB 703 would prohibit state agencies from entering into a contract for goods or services in the amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates on the basis of actual or perceived gender identity, with specified exceptions. The bill would also require the Department of General Services (DGS) to maintain a list of contracts for goods and services in the amount of $100,000 or more on its website.

Fiscal Impact (as approved on May 28, 2015):

• Minor costs to DGS to compile, update, and post a list of contracts for goods and services valued at $100,000 or more. This information is readily available on the FISCal website (General Fund).
  
  

• Minor one-time administrative costs to DGS to update the State Contracting Manual and update standard bid and contract language to incorporate a certification of compliance (General Fund).

Background:

Existing law, the Unruh Civil Rights Act, generally prohibits discrimination on the basis of sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation, and provides civil remedies for violations of its provisions. Existing law also prohibits discrimination in the provision of health care and insurance benefits on the basis of numerous factors, including sex, domestic partner status, or gender, gender identity, and gender expression.

Existing law authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by DGS, and establishes rules governing the awarding of contracts by state agencies, including general requirements for competitive bidding. Existing law prescribes various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits. A contract that is in violation of those requirements and prohibitions is void. Existing law authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void. A willful violation of these requirements and prohibitions is a misdemeanor.

Proposed Law:

SB 703 would prohibit state agencies from contracting for goods and services with entities that discriminate on the basis of gender identity in the provision of benefits. Specifically, this bill would, among other things, do the following:

• Prohibit state agencies from entering into contracts for the acquisition of goods and services in an amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates on the basis of an employee’s or dependent’s actual or perceived gender identity, including identification as transgender, as specified.

• Authorize a state agency, after taking all reasonable measures to find a compliant contractor, to waive these requirements under the following circumstances: (1) there is only one available contractor; (2) the contract is necessary to respond to an emergency and compliant contractors are unavailable; (3) the requirements would violate conditions of a grant, subvention, or agreement; and (4) the contract is for wholesale or bulk water, power, or natural gas, as specified.

• Requires every contract to contain a statement by which the contractor self-certifies compliance with these requirements.

• Require DGS or other contracting agency to enforce these provisions pursuant to its existing enforcement powers.

• Authorize any person to file a complaint with DGS alleging contractor violations, or alleging that a contract or transaction has been entered into in violation of these provisions.

• Require DGS to investigate any complaints it receives regarding these provisions.

• Require DGS to maintain an easily accessible list on its website of contracts for the acquisition of goods and services in the amount of $100,000 or more that are entered into on or after January 1, 2016.

Staff Comments:

Although California prohibits discrimination on the basis of gender or gender identity in the provision of employee benefits, there could be circumstances in which an out-of-state entity or an entity that self-insures under federal law is contracting with the state for goods and services. SB 703 would ensure that contracting entities do not discriminate against employees or their dependents on the basis of gender identity.

The prohibitions in this bill are similar to provisions in existing law that prohibit contracting with entities that discriminate in the provision of benefits to domestic partners.

DGS indicates that it would incur minor costs to update the State Contracting Manual and to update standard bid and contract language to incorporate a statement by which a contractor certifies compliance.

SB 703 includes a provision to require DGS to maintain an accessible list of goods and services contracts with a value of $100,000 or more on its website. Staff notes that the FISCal Project will have functionality on its website that allows users to generate sortable lists of state contracts for goods and services. As such, DGS indicates that any costs to pull the data from FISCaL and post it on the DGS website would be minor.

The bill also authorizes any person to file complaints with DGS alleging violations of these provisions, and requires DGS to investigate any complaints it receives. These requirements would result in unknown, but likely significant costs to DGS. The department has not yet determined the full scope of duties that would be necessary to investigate complaints, and DGS does not currently have expertise in health insurance regulation and has only limited experience with investigating employment issues with contractors. Most of DGS’ current investigative roles pertain to procurement and construction contract performance issues. In addition, it is likely that a larger proportion of complaints would involve out-of-state employers that are not subject to California law, which would likely drive additional costs and complications for travel and interpretation of out-of-state insurance and benefit plans. Costs related to complaint-driven investigations are unquantifiable, but likely significant, and would depend upon the number and complexity of complaints received.

Author amendments (as adopted on May 28, 2015): Author’s amendments would delete provisions authorizing any person to file a complaint under the bill, and requiring DGS to investigate any complaints it receives. The amendments would also clarify that the bill does not create any new enforcement responsibility for DGS or any other contracting agency.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 703 (Leno) - Public contracts: prohibitions: discrimination

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

Bill Summary:

SB 703 would prohibit state agencies from entering into a contract for goods or services in the amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates on the basis of actual or perceived gender identity, with specified exceptions. The bill would also require the Department of General Services (DGS) to maintain a list of contracts for goods and services in the amount of $100,000 or more on its website.

Fiscal Impact:

• Unknown, likely significant DGS administrative costs to investigate complaints and conduct enforcement activities (General Fund). DGS does not currently possess expertise in health insurance regulation and has limited resources for investigating employment issues at private contractors. Costs would depend upon the number and complexity of complaints received.
  
  

• Minor costs to DGS to compile, update, and post a list of contracts for goods and services valued at $100,000 or more. This information is readily available on the FISCal website (General Fund).
  
  

• Minor one-time administrative costs to DGS to update the State Contracting Manual and update standard bid and contract language to incorporate a certification of compliance (General Fund).

Background:

Existing law, the Unruh Civil Rights Act, generally prohibits discrimination on the basis of sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation, and provides civil remedies for violations of its provisions. Existing law also prohibits discrimination in the provision of health care and insurance benefits on the basis of numerous factors, including sex, domestic partner status, or gender, gender identity, and gender expression.

Existing law authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by DGS, and establishes rules governing the awarding of contracts by state agencies, including general requirements for competitive bidding. Existing law prescribes various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits. A contract that is in violation of those requirements and prohibitions is void. Existing law authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void. A willful violation of these requirements and prohibitions is a misdemeanor.

Proposed Law:

SB 703 would prohibit state agencies from contracting for goods and services with entities that discriminate on the basis of gender identity in the provision of benefits. Specifically, this bill would, among other things, do the following:

• Prohibit state agencies from entering into contracts for the acquisition of goods and services in an amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates on the basis of an employee’s or dependent’s actual or perceived gender identity, including identification as transgender, as specified.

• Authorize a state agency, after taking all reasonable measures to find a compliant contractor, to waive these requirements under the following circumstances: (1) there is only one available contractor; (2) the contract is necessary to respond to an emergency and compliant contractors are unavailable; (3) the requirements would violate conditions of a grant, subvention, or agreement; and (4) the contract is for wholesale or bulk water, power, or natural gas, as specified.

• Requires every contract to contain a statement by which the contractor self-certifies compliance with these requirements.

• Require DGS or other contracting agency to enforce these provisions pursuant to its existing enforcement powers.

• Authorize any person to file a complaint with DGS alleging contractor violations, or alleging that a contract or transaction has been entered into in violation of these provisions.

• Require DGS to investigate any complaints it receives regarding these provisions.

• Require DGS to maintain an easily accessible list on its website of contracts for the acquisition of goods and services in the amount of $100,000 or more that are entered into on or after January 1, 2016.

Staff Comments:

Although California prohibits discrimination on the basis of gender or gender identity in the provision of employee benefits, there could be circumstances in which an out-of-state entity or an entity that self-insures under federal law is contracting with the state for goods and services. SB 703 would ensure that contracting entities do not discriminate against employees or their dependents on the basis of gender identity.

The prohibitions in this bill are similar to provisions in existing law that prohibit contracting with entities that discriminate in the provision of benefits to domestic partners.

DGS indicates that it would incur minor costs to update the State Contracting Manual and to update standard bid and contract language to incorporate a statement by which a contractor certifies compliance.

SB 703 includes a provision to require DGS to maintain an accessible list of goods and services contracts with a value of $100,000 or more on its website. Staff notes that the FISCal Project will have functionality on its website that allows users to generate sortable lists of state contracts for goods and services. As such, DGS indicates that any costs to pull the data from FISCaL and post it on the DGS website would be minor.

The bill also authorizes any person to file complaints with DGS alleging violations of these provisions, and requires DGS to investigate any complaints it receives. These requirements would result in unknown, but likely significant costs to DGS. The department has not yet determined the full scope of duties that would be necessary to investigate complaints, and DGS does not currently have expertise in health insurance regulation and has only limited experience with investigating employment issues with contractors. Most of DGS’ current investigative roles pertain to procurement and construction contract performance issues. In addition, it is likely that a larger proportion of complaints would involve out-of-state employers that are not subject to California law, which would likely drive additional costs and complications for travel and interpretation of out-of-state insurance and benefit plans. Costs related to complaint-driven investigations are unquantifiable, but likely significant, and would depend upon the number and complexity of complaints received.

-- END --

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015 - 2016 Regular Session

Bill No: SB 703 (Author:Leno)

Amended: Version: February 27, 2015

Hearing Date: April 21, 2015

Fiscal: Yes

Urgency: No

Consultant: TMW

SUBJECT

Public contracts: prohibitions: discrimination

DESCRIPTION

This bill would prohibit a state agency from entering into any contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates between employees on the basis of the employee’s or dependent’s actual or perceived gender identity, including, but not limited to, the employee’s or dependent’s identification as transgender. This bill would provide specified waivers, and authorize a person alleging a violation by a contractor to file a complaint with the Department of General Services.

BACKGROUND

California was the first state to pass legislation creating an equal benefits statute. Citing the importance of having the state take the lead and not “subsidize this discrimination with taxpayer-funded contracts,” AB 17 (Kehoe, Chapter 752, Statutes of 2003), among other things, made it unlawful for a state agency to enter into a public contract with a vendor or contractor for goods or services if that vendor or contractor did not provide the same benefits to an employee and his or her registered domestic partner as those provided to an employee and his or her spouse. Proponents argued that the state should not, in the bidding process, disadvantage a company that recognizes the need for equity in the workplace. AB 17 included certain exceptions as well as circumstances when this requirement could be waived. For example, the requirement can be waived by showing that “all reasonable measures” were taken to find a compliant contractor.

To further equal benefits, the California Insurance Equality Act (AB 2208 (Kehoe, Chapter 488, Statutes of 2004)) prohibited discrimination in the provision of health care and insurance benefits on the basis of domestic partner status. Similarly, AB 1586 (Koretz, Chapter 421, Statutes of 2005) prohibited discrimination on the basis of sex in the provision of life, disability, and health care insurance service plans, and provided protection regarding a person’s gender identity and gender related appearance and behavior, whether or not stereotypically associated with the person’s assigned sex at birth. Subsequently, AB 887 (Atkins, Chapter 719, Statutes of 2011) clarified these protections for gender, gender identity, and gender expression.

This bill seeks to prohibit the implicit endorsement of discrimination by prohibiting the state from entering into a contract over $100,000 with a contractor who, in the provision of benefits, discriminates on the basis of gender identity.

This bill was heard by the Senate Governmental Organization Committee on April 14, 2015, and passed out on a vote of 7-3.

CHANGES TO EXISTING LAW

Existing law, the Unruh Civil Rights Act, generally prohibits business establishments from discriminating on the basis of sex, race, color, religion, ancestry, national origin, disability, or medical condition, marital status, or sexual orientation and provides civil remedies for violations of its provisions. (Civ. Code Sec. 51 et seq.) That Act defines “sex” to include gender, gender identity and gender expression, which is a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth. (Civ. Code Sec. 51(e)(5).)

Existing law, the Fair Employment and Housing Act (FEHA), prohibits discrimination or harassment in employment or housing on the basis of, among other things, a person’s gender, gender identity, and gender expression. (Gov. Code Sec. 12940(j)(1).)

Existing law prohibits a health care service plan or specialized health care service plan from refusing to enter into any contract or shall cancel or decline to renew or reinstate any contract because of the race, color, national origin, ancestry, religion, sex, which includes gender, marital status, sexual orientation, or age of any contracting party, prospective contracting party, or person reasonably expected to benefit from that contract as a subscriber, enrollee, member, or otherwise. (Health & Saf. Code Sec. 1365.5.) Existing law defines “gender” to mean sex, and includes a person’s gender identity and gender expression. “Gender expression” means a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth. (Pen. Code Sec. 422.56(c).)

Existing law prohibits an admitted insurer, licensed to issue life or disability insurance, from failing or refusing to accept an application for that insurance, issuing that insurance to an applicant therefor, or issuing or canceling that insurance, under conditions less favorable to the insured than in other comparable cases, except for reasons applicable alike to persons of every race, color, religion, sex, gender, gender identity, gender expression, national origin, ancestry, or sexual orientation. (Ins. Code Sec. 10140(a).) Existing law defines “sex” to mean gender and includes a person’s gender identity and gender expression, which is a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth. (Ins. Code Sec. 10140(h).)

Existing law prohibits a state agency from entering into a contract of $100,000 or more for goods or services with a vendor or contractor that does not provide the same benefits to an employee with a registered domestic partner that it provides to an employee with a spouse. (Pub. Contract Code Sec. 10295.3.)

Existing law provides that a contractor is not in violation of that provision if the contractor does any of the following:

• offers the same benefits to employees with domestic partners and employees with spouses and offers the same benefits to domestic partners and spouses of employees;

• provides the same benefits to individuals that are provided to employees’ spouses and employees’ domestic partners;

• provides benefits on a basis unrelated to an employee’s marital status or domestic partnership status, including, but not limited to, allowing each employee to designate a legally domiciled member of the employee’s household as being eligible for benefits; or

• does not provide benefits to employees based on their marital status or domestic partnership status, or does not provide benefits to employees’ spouses and to employees’ domestic partners. (Pub. Contract Code Sec. 10295.3.)

Existing law provides that these requirements may be waived in specified circumstances, including when there is only one contractor willing to contract with the state or when the contract is necessary to respond to an emergency and no entities that are capable of responding and that comply with this section are available. (Pub. Contract Code Sec. 10295.3.)

This bill would prohibit a state agency from entering into a contract of $100,000 or more for goods or services with a contract that, in the provision of benefits, discriminates between employees on the basis of an employee’s or dependent’s actual or perceived gender identity, including, but not limited to, the employee’s or dependent’s identification as transgender.

This bill would provide that an employee health plan is discriminatory if it is not consistent with corresponding statutes under the Health and Safety Code and the Insurance Code.

This bill would apply only to those portions of a contractor’s operations that occur under any of the following conditions:

• within the state;

• on real property outside the state if the property is owned by the state or if the state has a right to occupy the property, and if the contractor’s presence at that location is connected to a contract with the state; or

• elsewhere in the United States where work related to a state contract is being performed.

This bill would require contractors to treat as confidential, to the maximum extent allowed by law or by the requirement of the contractor’s insurance provider, any request by an employee or applicant for employment benefits or any documentation of eligibility for benefits submitted by an employee or applicant for employment.

This bill would specify that after taking all reasonable measures to find a contractor that complies with this section, as determined by the state agency, the requirements of this bill may be waived under any of the following circumstances:

• there is only one prospective contractor willing to enter into a specific contract with the state agency;

• the contract is necessary to respond to an emergency, as determined by the state agency, that endangers the public health, welfare, or safety, or the contract is necessary for the provision of essential services, and no entity that complies with the requirements of this section capable of responding to the emergency is immediately available;

• the requirements of this section violate, or are inconsistent with, the terms or conditions of a grant, subvention, or agreement, if the agency has made a good faith attempt to change the terms or conditions of any grant, subvention, or agreement to authorize application of this section; or

• the contractor is providing wholesale or bulk water, power, or natural gas, the conveyance or transmission of the same, or ancillary services, as required for assuring reliable services in accordance with good utility practice, if the purchase of the same cannot practically be accomplished through the standard competitive bidding procedures and the contractor is not providing direct retail services to end users.

This bill would provide that a contractor would not be deemed to discriminate in the provision of benefits if the contractor, in providing the benefits, pays the actual costs incurred in obtaining the benefit.

This bill would allow a contractor, who is unable to provide a certain benefit, despite taking reasonable measures to do so, to not be deemed to discriminate in the provision of benefits.

This bill would require every contract subject to this bill to contain a statement by which the contractor certifies that the contractor is in compliance.

This bill would require the Department of General Services (DGS) or other contracting agency to enforce this bill pursuant to its existing enforcement powers.

This bill would provide that if a contractor falsely certifies that it is in compliance with, the contract with that contractor shall be subject to specified remedies and penalties, including voidance of the contract, unless, within a time period specified by DGS or other contracting agency, the contractor provides to DGS or agency proof that it has complied, or is in the process of complying.

This bill would provide that the application of specified remedies or penalties to a contract would not preclude the application of any existing remedies otherwise available to DGS or other contracting agency under its existing enforcement powers.

This bill would not apply to the contracting practices of any local jurisdiction.

This bill would limit its construction so as not to conflict with applicable federal laws, rules, or regulations. In the event that a court or agency of competent jurisdiction holds that federal law, rule, or regulation invalidates any clause, sentence, paragraph, or section of the Public Contracts Code or the application thereof to any person or circumstances, the court or agency could sever that clause, sentence, paragraph, or section so that the remainder of the bill would remain in effect.

This bill would authorize any person to file a complaint with DGS alleging that a contractor is in violation of, or a contract or other transaction has been entered into in violation of this bill, and would require DGS to investigate any complaints it receives.

This bill would require DGS to maintain an easily accessible list on its Internet Web site of contracts for the acquisition of goods or services in the amount of $100,000 or more that are entered into on or after January 1, 2016.

COMMENT

1. Stated need for the bill

The author writes:

In most circumstances, California already requires gender nondiscrimination in regard to employee benefits. This bill builds on previous nondiscrimination law and will ensure that California does business only with companies that provide equal benefits.

When individuals have health insurance that covers their care, they are less likely to use state funded services, saving taxpayers money. Moreover, studies show that having health insurance that covers essential healthcare for oneself and one’s family reduces stress and improves effectiveness on the job.

Treating all workers with respect improves employee morale and retention. Reducing discrimination is beneficial to both employers and employees, and by only contracting with entities that don’t discriminate, the State of California will improve the quality of goods and services purchased with public dollars.

SB 703 will level the playing field in state contracting between in-state and out-of-state companies while also ensuring that state tax dollars are used in a cost effective manner.

2. Extending discrimination protection

This bill would prohibit a state agency from entering into a contract in the amount of $100,000 or more with any contractor that discriminates based on gender identity by failing to offer equal benefits to all employees and their dependents, regardless of their gender identity, or perceived gender identity, including, but not limited to, the employee’s or dependent’s identification as transgender. Existing law provides a similar prohibition on state contracts with vendors or contractors who discriminate in benefits to domestic partners.

The National Center for Lesbian Rights, co-sponsor, argues that although the California Insurance Gender Nondiscrimination Act of 2006 outlawed discriminatory exclusions in health plans, some insurance companies persisted in limiting care based on an individual’s transgender status. Further, co-sponsor Equality California notes that Oregon, Colorado, and the District of Columbia and San Francisco and Berkeley have bans on transgender exclusions in health insurance. They also note that over 25 percent of Fortune 500 companies have followed suit by offering health care equality for transgender employees. The Transgender Law Center (TLC), co-sponsor, contends that denying transgender people equal access to health care puts them at serious risk for negative health outcomes and financial hardship. Further, TLC argues that providing equal benefits will help protect transgender workers and our families. TLC also states that this bill makes economic sense for the state and employers, which will benefit from increased employee morale, productivity, and retention.

Notably, California has already established a public policy against discriminating in benefits on the premise of gender identity. In addition to general protections for transgender individuals provided under the Unruh Civil Rights Act and the Fair Employment and Housing Act, discriminating against an individual on the basis of gender identity with respect to life and disability insurance and health care service plans. The author argues that, although California has established these protections, out-of-state companies or self-insured in-state companies contracting with California public agencies are not complying with these prohibitions on gender identity discrimination. This bill arguably builds on those protections by prohibiting a state agency from contracting for services in the amount of $100,000 or more with companies that are not complying with California law.

It is important to note that under this bill, a contractor, who does not provide benefits as required, could avoid being deemed to discriminate in the provision of benefits provided to transgender employees or dependents if the contractor pays the actual costs incurred in obtaining the benefit. Additionally, if a contractor is unable to provide a certain benefit, despite taking reasonable measures to do so, the contractor would not be deemed to discriminate in the provision of benefits. These provisions contemplate scenarios when the contractor is willing to provide the benefit, but is unable to do so. In this way, the bill would provide benefit equality while acknowledging circumstances beyond the contractor’s control.

Further, this bill would only apply to a contractor’s operations occurring within the state, on real property outside the state if the property is owned by the state or if the state has a right to occupy the property and the contractor’s presence at that location is connected to a contract with the state, or elsewhere in the United States where work related to a state contract is being performed.

Supporters argue that “[t]his legislation closes an outdated gap in state law that has allowed some private companies to treat transgender people unfairly. No employee should be denied equal medical coverage or other benefits simply because of who they are.” Supporters also argue that reducing discrimination is beneficial to both employers and employees, and will improve the quality of goods and services purchased with public dollars.

3. Exceptions to gender identity discrimination protections

The Public Contract Code provides an elaborate scheme for state procurement of materials, supplies, equipment and services, including a competitive bidding process, procedures and standards for professional consulting services and other services contracts, a process for purchasing federal surplus property, conflict of interest rules, and exemptions from these rules. (Pub. Contract Code Sec. 10290 et seq.) Included in that scheme are various exemptions for the following contracts for materials, supplies, equipment, and services:

• entered into by the Regents of the University of California and the Trustees of the California State University;

• involving information technology;

• where the vendor/contractor is an exempted entity;

• involving services provided by architects, engineers, land surveyors, and construction project management firms;

• where members of boards or commissions receive no compensation except for payment for each meeting of the board or commission, for preparatory time and for per diem; and

• where the vendor/contractor employs spouses of state officers and employees and the vendor does not benefit from decisions made by the state officer or employee. (Pub. Contract Code Sec. 10430.)

This bill would apply to all contractors for goods and services that seek state contracts, subject to the exemptions enumerated above.

The bill would also provide that, as long as the state agency has taken “all reasonable measures” to find a contractor that complies with benefit equality for transgender individuals, the requirement may be waived, and a contract entered into, where the contract is a single-source contract, a contract for emergency services, a sole contract for essential services where there are no qualified bidders, or a contract for a public utility service that is not a retail service to consumers. These exceptions are intended to provide a state agency with the flexibility to enter into contracts where the prohibition would result in a detriment to the public’s welfare.

4. Other provisions

1. Contract to contain certification of compliance

This bill would require every contract to contain a certification by the contractor that it is in compliance with the requirements of this bill. This would relieve the state contracting agency from the duty to inquire and to evaluate whether or not the contractor is in compliance. The bill simply leaves it to the Department of General Services (DGS) or the state contracting agency to use its existing enforcement powers to enforce the provisions of this bill.

It is not clear what the agency’s enforcement powers are when it comes to public contracts. Usually, an agency’s enforcement powers have to do with the function of the agency, whether to deliver services, regulate an area, implement programs or a host of other functions. However, the bill also provides for DGS enforcement should the contracting state agency’s enforcement power be limited.

With regards to a contract for goods or services, however, the enforcement mechanism, regardless of the goods or services to be delivered, is the rescission, cancellation or early termination, reformation, or modification of the contract. In addition to any enforcement powers of the DGS or the state agency, this bill would also provide for remedies and penalties applicable to all other state contracts. Further, this bill would provide that a contractor who falsely certifies its compliance is subject to those remedies and penalties unless the contractor took steps within a specified period of time to correct the condition regarding the employee benefits that this bill intends to address.

2. Employee enforcement

This bill would authorize any person, which would include the employee or employee’s dependent, to file a complaint with DGS alleging that a contractor is in violation of, or a contract or other transaction has been entered into in violation of the protections in this bill.

The author states that “there presently is not an easy way for individuals to determine what entities have contracts with the state and are covered by California’s equal benefits law nor a way for individuals to alert the state if a contractor is not fulfilling its obligations under the contract they entered into pursuant to existing law.” This bill would require DGS to investigate any complaints it receives. In this way, the bill would provide individuals, who may be the target of the discrimination prohibited in the state agency contracts, the ability to report the contractor to DGS. This provision would act as a deterrent to a contractor who attempts to violate this bill, but also make certain that the protections of the bill continue to be carried out after the state agency has entered into the contract.

3. Remaining provisions

The California Constitution and the California Public Records Act provides the public with the right to access public agency information. This bill would require DGS to disclose and maintain on its Internet Web site an easily accessible list of contracts for goods and services in the amount of $100,000 or more entered into on or after January 1, 2016. This provision would provide transparency of the contracts entered into by the state agency so that the public is aware of how public funds are being used.

This bill would also provide a severability clause so that if any provision in the bill conflicts with applicable federal laws, rules or regulations or if a court or agency of competent jurisdiction finds that the federal law invalidates any part of the bill, that part would be severed so that the remainder of the bill may be given effect. This bill would also require contractors to treat as confidential any request made by an employee or employment applicant for employment benefits or any documentation of eligibility for benefits submitted by an employee or applicant.

Support: American Civil Liberties Union of California; American Federation of State, County and Municipal Employees, AFL-CIO; California Communities United Institute

Opposition: None Known

HISTORY

Source: Equality California; National Center for Lesbian Rights; Transgender Law Center

Related Pending Legislation: None Known

Prior Legislation:

AB 887 (Atkins, Ch. 719, Stats. 2011) See Background.

AB 1586 (Koretz, Ch. 421, Stats. 2005) See Background.

AB 2208 (Kehoe, Ch. 488, Stats. 2004) See Background.

AB 17 (Kehoe, Ch. 752, Stats. 2003) See Background.

Prior Vote: Senate Governmental Organization Committee (Ayes 7, Noes 3)

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SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Isadore Hall, III

Chair

2015 - 2016 Regular

Bill No: SB 703 Hearing Date: 4/14/2015

SUBJECT: Public contracts: prohibitions: discrimination

DIGEST: This bill adds a new section of law to the Public Contract Code that prohibits a state agency from entering into contracts for the acquisition of goods or services of one hundred thousand dollars ($100,000) or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits. This bill also requires the Department of General Services (DGS) to maintain an easily accessible list on its Internet Web site of contracts for the acquisition of goods and services in the amount of one hundred thousand dollars ($100,000) or more that are entered into on or after January 1, 2016.

ANALYSIS:

Existing law:

1. Authorizes state agencies to enter into contracts for the acquisition of goods or services upon approval by DGS and establishes rules governing the awarding of contracts by state agencies, including general requirements for competitive bidding on contracts for the acquisition of goods or services.

2. Sets forth various requirements and prohibitions for those contracts, including, but not limited to, a prohibition on entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between spouses and domestic partners or same-sex and different-sex couples in the provision of benefits.
   
   

3. Provides that a contract entered into in violation of those requirements and prohibitions is void and authorizes the state or any person acting on behalf of the state to bring a civil action seeking a determination that a contract is in violation and therefore void.
   
   

4. Makes a willful violation of the above requirements and prohibitions a misdemeanor.

This bill:

1. Prohibits a state agency from entering into a contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor that, in the provision of benefits, discriminates between employees on the basis of an employee’s or dependent’s actual or perceived gender identity, including, but not limited to, the employee’s or dependent’s identification as transgender.
   
   

2. Requires DGS to maintain an easily accessible list on its Internet Web site of contracts for the acquisition of goods or services in the amount $100,000 or more that are entered into on or after January 1, 2016.
   
   

3. Provides that the term “contract” includes contracts with a cumulative amount of $100,000 or more per contractor in each fiscal year.
   
   

4. Provides that an employee health plan is discriminatory if the plan is not consistent with specified sections of law (Section 1365.5 of the Health and Safety Code and Section 10140 of the Insurance Code).
   
   

5. Stipulates that the transgender nondiscrimination requirements referenced above shall apply only to those portions of a contractor’s operations that occur under any of the following conditions:
   
   

   1. Within the state of California.
      
      

   2. On real property outside the state if the property is owned by the state or if the state has a right to occupy the property, and if the contractor’s presence at that location is connected to a contract with the state.
      
      

   3. Elsewhere in the U.S. where work related to a state contract is being performed.
      
      

6. Requires contractors to treat as confidential, to the maximum extent allowed by law or by the requirement of the contractor’s insurance provider, any request by an employee or applicant for employment benefits or any documentation of eligibility for benefits submitted by an employee or applicant for employment.
   
   

7. Provides that the requirements of this bill may be waived under any of the following circumstances:
   
   

   1. There is only one prospective contractor willing to enter into a specific contract with the state agency.
      
      

   2. The contract is necessary to respond to an emergency that endangers public health, welfare, or safety, or the contract is necessary for the provision of essential services and no entity that complies with the requirements is capable of immediately responding to the emergency.
      
      

   3. The requirements violate, or are inconsistent with, the terms and conditions of a grant, subvention, or agreement and the agency has made a good faith effort to change those terms and conditions.
      
      

   4. The contractor is providing wholesale or bulk water, power, or natural gas, or ancillary services, as required for assuring reliable services in accordance with good utility practice, if the purchase of the same cannot practicably be accomplished through standard competitive bidding procedures and the contractor is not providing direct retail services to end users.
      
      

8. Stipulates that a contractor shall not be deemed to discriminate in the provision of benefits if: (a) the contractor, in providing the benefits, pays the actual costs incurred in obtaining the benefit or (b) the contractor is unable to provide a certain benefit, despite taking reasonable measures to do so.
   
   

9. Requires every contract subject to this bill to contain a statement by which the contractor certifies that the contractor is in compliance with the bill’s provisions. If a contractor falsely certifies compliance, the contract with that contractor shall be subject to certain penalties and remedies unless, within a time period specified by DGS or other contracting agency, the contractor provides proof that it has complied, or is in the process of complying.
   
   

10. Stipulates that the bill’s provisions shall be construed so as not to conflict with applicable federal laws, rules, or regulations. Also, contains a severability provision, as specified.
    
    

Background

Purpose of SB 703: According to the author’s office, this measure is simply intended to prohibit state agencies from doing business with companies that discriminate between the benefits offered to transgender employees and other employees. The author’s office notes that discrimination in the provision of employee benefits has a tremendous economic cost impact. For example, when workers are denied health coverage or excluded from medically necessary procedures, costs are pushed on to state funded programs and services. One mechanism that has been used to combat these costs and to reduce discrimination is the state’s market power through the contracting it does with the private sector.

The author’s office points out that California has a long history of ensuring that state agencies do not discriminate in the provision of employee benefits, including health insurance through a series of bills and administrative actions. Specifically, the author’s office cites AB 17 (Kehoe) of 2003 which prohibits state agencies from doing business with companies that discriminate in the benefits offered between employees with spouses and employees with registered domestic partners and also AB 2208 (Kehoe) of 2004 which mandates that California health care service plans and health insurers provide equal benefits to domestic partners as to spouses. The author’s office also references AB 1586 (Koretz) of 2006, known as the California Insurance Gender Nondiscrimination Act, which outlawed discriminatory exclusions by health care service plans and health insurers based on an individual’s gender identity. In 2012 the California Department of Insurance issued regulations to implement AB 1586 (Koretz). Also, in 2013, the Department of Managed Health Care similarly issued a letter to all plans under its jurisdiction, ordering them to remove blanket exclusions of coverage targeting health care needed by transgender people.

Furthermore, the author’s office notes that eight other states and the District of Columbia have banned transgender exclusions in health insurance and over 25% of Fortune 500 companies have also followed suit by offering equal health care benefits for transgender employees. Medi-Cal has also covered health care needed by transgender individuals since the 1970s and the federal Medicare system removed its discriminatory transgender exclusion in 2014.

The author’s office contends that despite these advances in prohibiting discrimination, companies that contract with the State of California that self-insure under federal law, or that are based out-of-state, may offer insurance plans that don’t comply with the same gender nondiscrimination requirements applied to other companies operating in California. Transgender employees at these companies are unfairly denied health coverage afforded to other employees.

Prior/Related Legislation

AB 1586 (Koretz), Chapter 421, Statutes of 2005. Prohibited plans and insurers from denying an individual a plan contract or policy, or coverage for a benefit included in the contract policy, based on the person’s sex, as defined.

AB 2208 (Kehoe), Chapter 488, Statutes of 2004. Required a health care service plan and a health insurer to provide coverage to the registered domestic partner of an employee, subscriber, insured, or policyholder that is equal to the coverage it provides to the spouse of those persons.

AB 17 (Kehoe), Chapter 752, Statutes of 2003. Among other things, prohibited a state agency from entering into a contract for the acquisition of goods or services in the amount of $100,000 or more with a contractor who, in the provision of benefits, discriminates between employees with spouses and employees with domestic partners, or discriminates between the domestic partners and spouses of those employees, except under specified circumstances.

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

SUPPORT:

American Civil Liberties Union of California

American Federation of State, County and Municipal Employees

California Communities United Institute

Equality California

National Center for Lesbian Rights

Transgender Law Center

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: Proponents state that over the past decade, California has prohibited discrimination in the provision of employee benefits, including health insurance, through a series of bills and administrative actions. This measure is intended to build on previous nondiscrimination law and ensure that California does business only with companies that provide equal benefits. Proponents emphasize that treating transgender employees differently is discrimination – this measure would reward companies that do not discriminate with the opportunity to do business with the state and prohibit a state agency from entering into a contract in the amount of $100,000 or more with a contractor who discriminates based on an employee’s transgender status. Additionally, proponents note that this measure would expand existing enforcement provisions in State contracting by adding requirements that the Department of General Services provide an Internet Web based database listing all contracts subject to the above provision and also would establish a method for receiving, investigating, and resolving complaints of non-compliance.

Proponents claim that reducing discrimination is beneficial to both employers and employees, and by only contracting with entities that don’t discriminate, California will improve the quality of goods and services purchased with public dollars.

DUAL REFERRAL: Senate Judiciary Committee