Existing law contains various provisions relating to franchise agreements between a local jurisdiction and a service provider for the provision of services such as utilities, waste hauling, and cable television.

This bill would prohibit any franchise contracts, licenses, or permits for solid waste handling services, as defined, entered into or substantially amended, as defined, by a local agency on or after January 1, 2024, from containing a force majeure provision that excuses the service provider from complying with the franchise contracts, licenses, or permits in the event of a work stoppage associated with a labor dispute, as defined. The bill would require specified provisions to be included in any exclusive franchise contract, license, or permit for solid waste handling services entered into or substantially amended by a local agency on or after January 1, 2024, and would require these provisions to apply in the event of service being disrupted by a work stoppage associated with a labor dispute.

By imposing new duties on local governments with respect to the franchise contracts, licenses, or permits for solid waste handling services, the bill would impose a state-mandated local program.

The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

Existing law contains various provisions relating to franchise agreements between a local jurisdiction and a service provider for the provision of services such as utilities, waste hauling, and cable television.

This bill would prohibit any franchise contracts, licenses, or permits for solid waste handling services, as defined, entered into or amended substantially amended, as defined, by a local agency on or after January 1, 2024, from excusing containing a force majeure provision that excuses the service provider from performance complying with the franchise contracts, licenses, or permits in the event of a work stoppage associated with a labor dispute, as defined. The bill would require specified provisions to be included in any exclusive franchise contract, license, or permit for solid waste handling services entered into or substantially amended by a local agency after January 1, 2024, and would require these provisions to apply in the event of service being disrupted by a work stoppage associated with a labor dispute, as defined. dispute.

By imposing new duties on local governments with respect to the franchise contracts, licenses, or permits for solid waste handling services, the 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, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

Existing law contains various provisions relating to franchise agreements between a local jurisdiction and a service provider for the provision of services such as utilities, waste hauling, and cable television.

This bill would prohibit any franchise contracts, licenses, or permits for solid waste handling services, as defined, entered into or amended by a local agency on or after January 1, 2024, from excusing the service provider from performance in the event of a labor dispute, as defined. The bill would require specified provisions to be included in any exclusive franchise contract, license, or permit for solid waste handling services entered into or amended by a local agency after January 1, 2024, and would require these provisions to apply in the event of service being disrupted by a work stoppage associated with a labor dispute, as defined.

Existing law contains various provisions relating to franchise agreements between a local jurisdiction and a service provider for the provision of services such as utilities, waste hauling, and cable television.

Existing law contains various provisions relating to franchise agreements between a local jurisdiction and a service provider for the provision of services such as utilities, waste hauling, and cable television.

This bill would prohibit a city, county, or city and county from entering an exclusive franchise agreement for services on or after January 1, 2024, or an agreement amended on or after that date, that contains a force majeure provision that can be triggered by a labor impasse.

 VETO  

Bill No: SB 751

Author: Padilla (D)

Amended: 9/1/23

Vote: 27

SENATE GOVERNANCE & FIN. COMMITTEE: 5-2, 5/3/23

AYES: Caballero, Durazo, Glazer, Skinner, Wiener

NOES: Seyarto, Dahle

NO VOTE RECORDED: Blakespear

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 30-9, 5/30/23

AYES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dodd, Durazo, Eggman, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener

NOES: Alvarado-Gil, Dahle, Glazer, Grove, Jones, Nguyen, Niello, Seyarto, Wilk

NO VOTE RECORDED: Ochoa Bogh

SENATE FLOOR: 28-10, 9/14/23

AYES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Durazo, Eggman, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener

NOES: Alvarado-Gil, Dahle, Glazer, Grove, Jones, Nguyen, Niello, Ochoa Bogh, Seyarto, Wilk

NO VOTE RECORDED: Dodd, Roth

ASSEMBLY FLOOR: 48-17, 9/13/23 - See last page for vote

SUBJECT: Franchise agreements: solid waste handling services: labor dispute

SOURCE: Author

DIGEST:

This bill prohibits franchise agreements entered into or substantially amended by a city or county on or after January 1, 2024, from containing a force majeure provision that excuses the service provider from complying with the agreement in the event of a work stoppage associated with a labor dispute, and requires agreements to include certain provisions in the event of a labor dispute.

ANALYSIS:

Existing law:

1. Allows a city or county to “make and enforce within its limits, all local, police, sanitary and other ordinances and regulations not in conflict with general laws,” known as the police power. Gives local governments their authority to regulate behaviors, business operations, and land uses. Local agencies also use this police power to abate nuisances and protect public health, safety, and welfare. Allows cities to exercise their police power within their jurisdictions, where not in conflict with state law, and allows counties to exercise this power in unincorporated areas.
2. Allows cities that adopt charters to control their own “municipal affairs.” Provides that, in all other matters, charter cities must follow the general, statewide laws.
3. Requires local agencies to provide solid waste handling services, or contract with another local agency or solid waste enterprise. Provides that certain decisions regarding solid waste handling to be local agencies’ responsibility.

This bill:

1. Provides that, to promote public health, safety, and well-being, no franchise contract, license, or permit for solid waste handling services that a local agency enters into or substantially amends on or after January 1, 2024, can contain a force majeure provision that excuses the service provider from complying with that contract, license or permit in the event of a work stoppage associated with a labor dispute.
2. Requires the following provisions be included in any franchise contract, license, or permit for solid waste handling services entered into or substantially amended by a local agency on or after January 1, 2024, and must apply in the event of service being disrupted by a work stoppage associated with a labor dispute:
   1. A process by which the franchisee shall provide advance or concurrent notice of service being disrupted.
   2. A process that allows a customer to file a service complaint with the franchisee and a timeframe within which the franchisee shall respond to complaints.
   3. A process for customers to request and receive refunds or credits for services not received.
   4. A remedy that allows the local agency to take administrative action to enforce the franchisee’s failure to comply with the franchise contract, license, or permit for solid waste handling services.
3. Defines “substantially amended” to mean a mutually agreed upon change to a majority of the material terms of a franchise agreement, license, or permit for solid waste handling services.
4. Includes findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

Background

Franchise agreements. Most jurisdictions in the state operate with some form of “franchise,” or contract, that limits solid waste hauling within the jurisdiction to one or more specified companies. Under these agreements, the local agency charges the franchisee for the benefit of operating within the public right-of-way. The franchisee then charges customers for providing waste hauling services. Jurisdictions have the authority to enter into franchises with waste haulers, with or without competitive bidding. Exclusive franchises authorize a single hauler to operate within a jurisdiction. Non-exclusive franchises allow for more than one hauler, but establish specific requirements for hauling within the jurisdiction. Some communities in California do not have franchise agreements, which allows solid waste businesses to compete within the jurisdiction for service contracts with individual waste generators.

Some franchise agreements include “force majeure” provisions, which free the parties to the agreement from performing their respective duties if extraordinary events directly prevent the parties from doing so. Such an extraordinary event is often referred to as an “act of god,” but can include both natural and human-made events, including fires, floods, storms, and labor disputes.

City of Chula Vista. Chula Vista is a charter city, and San Diego County’s second largest city, with just over 275,000 residents. In 2014, Chula Vista renewed their franchise agreement with Republic Services, one of the nation’s largest waste hauling companies with over 39,000 employees nationwide, to serve over 50,000 customers in the city. Their agreement included a force majeure provision that shielded both parties from fulfilling their obligations in certain extraordinary events, including natural events that cannot be anticipated, sabotage, war, riots, and strikes or work stoppages.

In December 2021, members of Teamsters Local 542 employed by Republic Services stopped working to protest stalled contract negotiations. During the month-long work stoppage, Republic Services halted some waste pick-up because the franchise agreement included a force majeure provision that shielded the company of liability for not picking up waste during uncontrollable events, including a work stoppage. While Republic Services picked up some waste and allowed customers to drop off waste at their landfill free of charge, the City also used its own staff and contracted with nonprofits to make up for lost or reduced services. In June 2022, the City settled with Republic Services. As part of the settlement, Republic Services reimbursed some City costs, provided the City with additional services, and provided a partial credit to customers.

Comments

1. Purpose of this bill. According to the author, “In 2022, I had a front row seat to failure of business resulting in a public health emergency. Republic Services failed to reach a labor agreement with Teamsters Local 542 that triggered a strike. In the franchise agreement with the City of Chula Vista, Republic Services had placed a provision that shielded the company from liability in the face of a strike or work stoppage. As workers called for better wages and the strike continued, Republic Services halted trash pick-up leaving residents to deal with the consequences. The clause shielded the company from liability as the trash piled up throughout the city. The vendor stalled for time, prolonging the strike, and causing a public health crisis. What happened in Chula Vista is a perfect example of companies leveraging loopholes in their exclusive agreements with cities to take advantage of residents and workers alike. Sanitation vendors have turned an Act of God provision into a hammer against residents and workers. We shouldn’t allow vendors to use the public as pawns in their labor fights.”
2. What’s the problem? Chula Vista voluntarily entered into a franchise agreement with Republic Services that contained a commonly used provision to shield both parties from events not entirely in their control. Republic Services certainly has more control over work stoppages than “acts of god,” but this provision is by no means unique to Chula Vista, or even for waste hauling franchise agreements. The City could work with Republic Services to amend its existing contract to remove labor stoppages from the existing force majeure provision without legislation, or add additional protections for the city and customers. The City was also able to work with the company to provide the City and its customers with some financial relief from the work stoppage. Why is legislation needed to determine which provisions can be included in franchise agreements that both parties voluntarily enter into, and have the ability to amend? According to the author, many local agencies may not be aware that a company could use such a provision to shield them from liability in a labor dispute they were actively negotiating, and public outcry from waste piling up could influence negotiations against the workers and the City. On the other hand, waste hauling providers say that this bill creates an uneven playing field for them, does not provide enough flexibility, and could result in increased costs for local agencies as the balance in negotiation changes, all of which could lead to higher costs for customers. Does this bill help ensure that events like those in Chula Vista do not repeat in other parts of the state without unintended consequences?

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

According to Assembly Appropriations Committee:

• By imposing new duties on local governments with respect to franchise contracts, licenses, or permits for solid waste handling services, this bill imposes a state-mandated local program. While the cost to remove labor disputes from the “force majeure” sections of contracts – as required in 1, above – will likely be minor, the requirements under 2, above, could increase the staff time, workload, and costs associated with drafting and finalizing franchise contracts, licenses, or permits. With 540 cities and counties in the state, it seems likely that the total cost of implementing this provision will exceed $150,000.
• To the extent the Commission on State Mandates determines this bill establishes a reimbursable mandated local program, this bill would result in unknown General Fund costs, likely in excess of $150,000, for the state to provide such reimbursement.

SUPPORT: (Verified 10/17/23)

California Teamsters Public Affairs Council
City of Camarillo
City of Chula Vista
Imperial Valley Equity and Justice Coalition

OPPOSITION: (Verified 10/17/23)

Athens Services
California Waste & Recycling Association
California Waste Haulers Council
Resource Recovery Coalition of California
Waste Connections, Inc.
Waste Management & Affiliated Entities

GOVERNOR'S VETO MESSAGE:

This bill prohibits franchise agreements for solid waste handling services entered into or substantially amended by a city or county on or after January 1, 2024, from containing a "force majeure" provision that excuses the service provider from complying with the agreement in the event of a work stoppage associated with a labor dispute.

While I appreciate the author's intent to prevent disruptions in local waste hauling services, I do not believe a change to state law is necessary. Local jurisdictions voluntarily enter into franchise agreements and currently have the ability to negotiate amendments to such contracts without legislation.

ASSEMBLY FLOOR: 48-17, 9/13/23

AYES: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bennett, Berman, Bonta, Bryan, Calderon, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Gabriel, Garcia, Gipson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pellerin, Petrie-Norris, Ramos, Rendon, Reyes, Luz Rivas, Santiago, Schiavo, Ting, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NOES: Alanis, Megan Dahle, Davies, Dixon, Essayli, Flora, Vince Fong, Gallagher, Hoover, Lackey, Mathis, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

NO VOTE RECORDED: Bauer-Kahan, Boerner, Juan Carrillo, Chen, Friedman, Grayson, Stephanie Nguyen, Pacheco, Papan, Quirk-Silva, Rodriguez, Blanca Rubio, Soria, Valencia, Villapudua

Prepared by: Jonathan Peterson / GOV. & F. / (916) 651-4119

10/19/23 11:13:01

**** END ****

 UNFINISHED BUSINESS  

Bill No: SB 751

Author: Padilla (D)

Amended: 9/1/23

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 5-2, 5/3/23

AYES: Caballero, Durazo, Glazer, Skinner, Wiener

NOES: Seyarto, Dahle

NO VOTE RECORDED: Blakespear

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 30-9, 5/30/23

AYES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dodd, Durazo, Eggman, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener

NOES: Alvarado-Gil, Dahle, Glazer, Grove, Jones, Nguyen, Niello, Seyarto, Wilk

NO VOTE RECORDED: Ochoa Bogh

ASSEMBLY FLOOR: 48-17, 9/13/23 - See last page for vote

SUBJECT: Franchise agreements: solid waste handling services: labor dispute

SOURCE: Author

DIGEST:

This bill prohibits franchise agreements entered into or substantially amended by a city or county on or after January 1, 2024, from containing a force majeure provision that excuses the service provider from complying with the agreement in the event of a work stoppage associated with a labor dispute, and requires agreements to include certain provisions in the event of a labor dispute.

Assembly Amendments

restrict the bill’s provisions to new or substantially amended franchise agreements, apply the bill’s provisions to charter cities, and make technical and clarifying changes.

ANALYSIS:

Existing law:

1. Allows a city or county to “make and enforce within its limits, all local, police, sanitary and other ordinances and regulations not in conflict with general laws,” known as the police power. Gives local governments their authority to regulate behaviors, business operations, and land uses. Local agencies also use this police power to abate nuisances and protect public health, safety, and welfare. Allows cities to exercise their police power within their jurisdictions, where not in conflict with state law, and allows counties to exercise this power in unincorporated areas.
2. Allows cities that adopt charters to control their own “municipal affairs.” Provides that, in all other matters, charter cities must follow the general, statewide laws.
3. Requires local agencies to provide solid waste handling services, or contract with another local agency or solid waste enterprise. Provides that certain decisions regarding solid waste handling to be local agencies’ responsibility.

This bill:

1. Provides that, to promote public health, safety, and well-being, no franchise contract, license, or permit for solid waste handling services that a local agency enters into or substantially amends on or after January 1, 2024, can contain a force majeure provision that excuses the service provider from complying with that contract, license or permit in the event of a work stoppage associated with a labor dispute.
2. Requires the following provisions be included in any franchise contract, license, or permit for solid waste handling services entered into or substantially amended by a local agency on or after January 1, 2024, and must apply in the event of service being disrupted by a work stoppage associated with a labor dispute:
   1. A process by which the franchisee shall provide advance or concurrent notice of service being disrupted.
   2. A process that allows a customer to file a service complaint with the franchisee and a timeframe within which the franchisee shall respond to complaints.
   3. A process for customers to request and receive refunds or credits for services not received.
   4. A remedy that allows the local agency to take administrative action to enforce the franchisee’s failure to comply with the franchise contract, license, or permit for solid waste handling services.
3. Defines “substantially amended” to mean a mutually agreed upon change to a majority of the material terms of a franchise agreement, license, or permit for solid waste handling services.
4. Includes findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

Background

Franchise agreements. Most jurisdictions in the state operate with some form of “franchise,” or contract, that limits solid waste hauling within the jurisdiction to one or more specified companies. Under these agreements, the local agency charges the franchisee for the benefit of operating within the public right-of-way. The franchisee then charges customers for providing waste hauling services. Jurisdictions have the authority to enter into franchises with waste haulers, with or without competitive bidding. Exclusive franchises authorize a single hauler to operate within a jurisdiction. Non-exclusive franchises allow for more than one hauler, but establish specific requirements for hauling within the jurisdiction. Some communities in California do not have franchise agreements, which allows solid waste businesses to compete within the jurisdiction for service contracts with individual waste generators.

Some franchise agreements include “force majeure” provisions, which free the parties to the agreement from performing their respective duties if extraordinary events directly prevent the parties from doing so. Such an extraordinary event is often referred to as an “act of god,” but can include both natural and human-made events, including fires, floods, storms, and labor disputes.

City of Chula Vista. Chula Vista is a charter city, and San Diego County’s second largest city, with just over 275,000 residents. In 2014, Chula Vista renewed their franchise agreement with Republic Services, one of the nation’s largest waste hauling companies with over 39,000 employees nationwide, to serve over 50,000 customers in the city. Their agreement included a force majeure provision that shielded both parties from fulfilling their obligations in certain extraordinary events, including natural events that cannot be anticipated, sabotage, war, riots, and strikes or work stoppages.

In December 2021, members of Teamsters Local 542 employed by Republic Services stopped working to protest stalled contract negotiations. During the month-long work stoppage, Republic Services halted some waste pick-up because the franchise agreement included a force majeure provision that shielded the company of liability for not picking up waste during uncontrollable events, including a work stoppage. While Republic Services picked up some waste and allowed customers to drop off waste at their landfill free of charge, the City also used its own staff and contracted with nonprofits to make up for lost or reduced services. In June 2022, the City settled with Republic Services. As part of the settlement, Republic Services reimbursed some City costs, provided the City with additional services, and provided a partial credit to customers.

Comments

1. Purpose of the bill. According to the author, “In 2022, I had a front row seat to failure of business resulting in a public health emergency. Republic Services failed to reach a labor agreement with Teamsters Local 542 that triggered a strike. In the franchise agreement with the City of Chula Vista, Republic Services had placed a provision that shielded the company from liability in the face of a strike or work stoppage. As workers called for better wages and the strike continued, Republic Services halted trash pick-up leaving residents to deal with the consequences. The clause shielded the company from liability as the trash piled up throughout the city. The vendor stalled for time, prolonging the strike, and causing a public health crisis. What happened in Chula Vista is a perfect example of companies leveraging loopholes in their exclusive agreements with cities to take advantage of residents and workers alike. Sanitation vendors have turned an Act of God provision into a hammer against residents and workers. We shouldn’t allow vendors to use the public as pawns in their labor fights.”
2. What’s the problem? Chula Vista voluntarily entered into a franchise agreement with Republic Services that contained a commonly used provision to shield both parties from events not entirely in their control. Republic Services certainly has more control over work stoppages than “acts of god,” but this provision is by no means unique to Chula Vista, or even for waste hauling franchise agreements. The City could work with Republic Services to amend its existing contract to remove labor stoppages from the existing force majeure provision without legislation, or add additional protections for the city and customers. The City was also able to work with the company to provide the City and its customers with some financial relief from the work stoppage. Why is legislation needed to determine which provisions can be included in franchise agreements that both parties voluntarily enter into, and have the ability to amend? According to the author, many local agencies may not be aware that a company could use such a provision to shield them from liability in a labor dispute they were actively negotiating, and public outcry from waste piling up could influence negotiations against the workers and the City. On the other hand, waste hauling providers say that this bill creates an uneven playing field for them, does not provide enough flexibility, and could result in increased costs for local agencies as the balance in negotiation changes, all of which could lead to higher costs for customers. Does this bill help ensure that events like those in Chula Vista do not repeat in other parts of the state without unintended consequences?

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

According to Assembly Appropriations Committee:

• By imposing new duties on local governments with respect to franchise contracts, licenses, or permits for solid waste handling services, this bill imposes a state-mandated local program. While the cost to remove labor disputes from the “force majeure” sections of contracts – as required in 1, above – will likely be minor, the requirements under 2, above, could increase the staff time, workload, and costs associated with drafting and finalizing franchise contracts, licenses, or permits. With 540 cities and counties in the state, it seems likely that the total cost of implementing this provision will exceed $150,000.
• To the extent the Commission on State Mandates determines this bill establishes a reimbursable mandated local program, this bill would result in unknown General Fund costs, likely in excess of $150,000, for the state to provide such reimbursement.

SUPPORT: (Verified 9/13/23)

California Teamsters Public Affairs Council
City of Camarillo
City of Chula Vista
Imperial Valley Equity and Justice Coalition

OPPOSITION: (Verified 9/13/23)

Athens Services
California Waste & Recycling Association
California Waste Haulers Council
Resource Recovery Coalition of California
Waste Connections, Inc.
Waste Management & Affiliated Entities

ASSEMBLY FLOOR: 48-17, 9/13/23

AYES: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bennett, Berman, Bonta, Bryan, Calderon, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Gabriel, Garcia, Gipson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Ortega, Pellerin, Petrie-Norris, Ramos, Rendon, Reyes, Luz Rivas, Santiago, Schiavo, Ting, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NOES: Alanis, Megan Dahle, Davies, Dixon, Essayli, Flora, Vince Fong, Gallagher, Hoover, Lackey, Mathis, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

NO VOTE RECORDED: Bauer-Kahan, Boerner, Juan Carrillo, Chen, Friedman, Grayson, Stephanie Nguyen, Pacheco, Papan, Quirk-Silva, Rodriguez, Blanca Rubio, Soria, Valencia, Villapudua

Prepared by: Jonathan Peterson / GOV. & F. / (916) 651-4119

9/14/23 11:38:37

**** END ****

 UNFINISHED BUSINESS  

Bill No: SB 751

Author: Padilla (D)

Amended: 9/1/23

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 5-2, 5/3/23

AYES: Caballero, Durazo, Glazer, Skinner, Wiener

NOES: Seyarto, Dahle

NO VOTE RECORDED: Blakespear

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 30-9, 5/30/23

AYES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dodd, Durazo, Eggman, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener

NOES: Alvarado-Gil, Dahle, Glazer, Grove, Jones, Nguyen, Niello, Seyarto, Wilk

NO VOTE RECORDED: Ochoa Bogh

ASSEMBLY FLOOR: Not available

SUBJECT: Franchise agreements: solid waste handling services: labor dispute

SOURCE: Author

DIGEST:

This bill prohibits franchise agreements entered into or substantially amended by a city or county on or after January 1, 2024, from containing a force majeure provision that excuses the service provider from complying with the agreement in the event of a work stoppage associated with a labor dispute, and requires agreements to include certain provisions in the event of a labor dispute.

Assembly Amendments

restrict the bill’s provisions to new or substantially amended franchise agreements, apply the bill’s provisions to charter cities, and make technical and clarifying changes.

ANALYSIS:

Existing law:

1. Allows a city or county to “make and enforce within its limits, all local, police, sanitary and other ordinances and regulations not in conflict with general laws,” known as the police power. Gives local governments their authority to regulate behaviors, business operations, and land uses. Local agencies also use this police power to abate nuisances and protect public health, safety, and welfare. Allows cities to exercise their police power within their jurisdictions, where not in conflict with state law, and allows counties to exercise this power in unincorporated areas.
2. Allows cities that adopt charters to control their own “municipal affairs.” Provides that, in all other matters, charter cities must follow the general, statewide laws.
3. Requires local agencies to provide solid waste handling services, or contract with another local agency or solid waste enterprise. Provides that certain decisions regarding solid waste handling to be local agencies’ responsibility.

This bill:

1. Provides that, to promote public health, safety, and well-being, no franchise contract, license, or permit for solid waste handling services that a local agency enters into or substantially amends on or after January 1, 2024, can contain a force majeure provision that excuses the service provider from complying with that contract, license or permit in the event of a work stoppage associated with a labor dispute.
2. Requires the following provisions be included in any franchise contract, license, or permit for solid waste handling services entered into or substantially amended by a local agency on or after January 1, 2024, and must apply in the event of service being disrupted by a work stoppage associated with a labor dispute:
   1. A process by which the franchisee shall provide advance or concurrent notice of service being disrupted.
   2. A process that allows a customer to file a service complaint with the franchisee and a timeframe within which the franchisee shall respond to complaints.
   3. A process for customers to request and receive refunds or credits for services not received.
   4. A remedy that allows the local agency to take administrative action to enforce the franchisee’s failure to comply with the franchise contract, license, or permit for solid waste handling services.
3. Defines “substantially amended” to mean a mutually agreed upon change to a majority of the material terms of a franchise agreement, license, or permit for solid waste handling services.
4. Includes findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

Background

Franchise agreements. Most jurisdictions in the state operate with some form of “franchise,” or contract, that limits solid waste hauling within the jurisdiction to one or more specified companies. Under these agreements, the local agency charges the franchisee for the benefit of operating within the public right-of-way. The franchisee then charges customers for providing waste hauling services. Jurisdictions have the authority to enter into franchises with waste haulers, with or without competitive bidding. Exclusive franchises authorize a single hauler to operate within a jurisdiction. Non-exclusive franchises allow for more than one hauler, but establish specific requirements for hauling within the jurisdiction. Some communities in California do not have franchise agreements, which allows solid waste businesses to compete within the jurisdiction for service contracts with individual waste generators.

Some franchise agreements include “force majeure” provisions, which free the parties to the agreement from performing their respective duties if extraordinary events directly prevent the parties from doing so. Such an extraordinary event is often referred to as an “act of god,” but can include both natural and human-made events, including fires, floods, storms, and labor disputes.

City of Chula Vista. Chula Vista is a charter city, and San Diego County’s second largest city, with just over 275,000 residents. In 2014, Chula Vista renewed their franchise agreement with Republic Services, one of the nation’s largest waste hauling companies with over 39,000 employees nationwide, to serve over 50,000 customers in the city. Their agreement included a force majeure provision that shielded both parties from fulfilling their obligations in certain extraordinary events, including natural events that cannot be anticipated, sabotage, war, riots, and strikes or work stoppages.

In December 2021, members of Teamsters Local 542 employed by Republic Services stopped working to protest stalled contract negotiations. During the month-long work stoppage, Republic Services halted some waste pick-up because the franchise agreement included a force majeure provision that shielded the company of liability for not picking up waste during uncontrollable events, including a work stoppage. While Republic Services picked up some waste and allowed customers to drop off waste at their landfill free of charge, the City also used its own staff and contracted with nonprofits to make up for lost or reduced services. In June 2022, the City settled with Republic Services. As part of the settlement, Republic Services reimbursed some City costs, provided the City with additional services, and provided a partial credit to customers.

Comments

1. Purpose of the bill. According to the author, “In 2022, I had a front row seat to failure of business resulting in a public health emergency. Republic Services failed to reach a labor agreement with Teamsters Local 542 that triggered a strike. In the franchise agreement with the City of Chula Vista, Republic Services had placed a provision that shielded the company from liability in the face of a strike or work stoppage. As workers called for better wages and the strike continued, Republic Services halted trash pick-up leaving residents to deal with the consequences. The clause shielded the company from liability as the trash piled up throughout the city. The vendor stalled for time, prolonging the strike, and causing a public health crisis. What happened in Chula Vista is a perfect example of companies leveraging loopholes in their exclusive agreements with cities to take advantage of residents and workers alike. Sanitation vendors have turned an Act of God provision into a hammer against residents and workers. We shouldn’t allow vendors to use the public as pawns in their labor fights.”
2. What’s the problem? Chula Vista voluntarily entered into a franchise agreement with Republic Services that contained a commonly used provision to shield both parties from events not entirely in their control. Republic Services certainly has more control over work stoppages than “acts of god,” but this provision is by no means unique to Chula Vista, or even for waste hauling franchise agreements. The City could work with Republic Services to amend its existing contract to remove labor stoppages from the existing force majeure provision without legislation, or add additional protections for the city and customers. The City was also able to work with the company to provide the City and its customers with some financial relief from the work stoppage. Why is legislation needed to determine which provisions can be included in franchise agreements that both parties voluntarily enter into, and have the ability to amend? According to the author, many local agencies may not be aware that a company could use such a provision to shield them from liability in a labor dispute they were actively negotiating, and public outcry from waste piling up could influence negotiations against the workers and the City. On the other hand, waste hauling providers say that this bill creates an uneven playing field for them, does not provide enough flexibility, and could result in increased costs for local agencies as the balance in negotiation changes, all of which could lead to higher costs for customers. Does this bill help ensure that events like those in Chula Vista do not repeat in other parts of the state without unintended consequences?

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

According to Assembly Appropriations Committee:

• By imposing new duties on local governments with respect to franchise contracts, licenses, or permits for solid waste handling services, this bill imposes a state-mandated local program. While the cost to remove labor disputes from the “force majeure” sections of contracts – as required in 1, above – will likely be minor, the requirements under 2, above, could increase the staff time, workload, and costs associated with drafting and finalizing franchise contracts, licenses, or permits. With 540 cities and counties in the state, it seems likely that the total cost of implementing this provision will exceed $150,000.
• To the extent the Commission on State Mandates determines this bill establishes a reimbursable mandated local program, this bill would result in unknown General Fund costs, likely in excess of $150,000, for the state to provide such reimbursement.

SUPPORT: (Verified 9/13/23)

California Teamsters Public Affairs Council
City of Camarillo
City of Chula Vista
Imperial Valley Equity and Justice Coalition

OPPOSITION: (Verified 9/13/23)

Athens Services
California Waste & Recycling Association
California Waste Haulers Council
Resource Recovery Coalition of California
Waste Connections, Inc.
Waste Management & Affiliated Entities

Prepared by: Jonathan Peterson / GOV. & F. / (916) 651-4119

9/13/23 21:07:16

**** END ****

SENATE THIRD READING

STR Bill Id:SB 751

Author:(Padilla)

As Amended Ver:September 1, 2023

Majority vote

SUMMARY

This bill prohibits a city or county from entering into or amending a solid waste hauling agreement if it excuses the service provider from performing its duties in the event of a labor dispute, and requires agreements to include certain provisions in the event of a labor dispute.

Major Provisions

1. Prohibits a franchise contract, license, or permit for solid waste handling services entered into or amended by a local agency on or after January 1, 2024, shall not contain a force majeure provision that excuses the service provider from complying with the franchise, contract, license, or permit for solid waste handling services in the event of a work stoppage due to a labor dispute.
2. Requires the following provisions be included in any franchise contract, license, or permit for solid waste handling services entered into or amended by a local agency on or after January 1, 2024, and apply in the event of service being interrupted by a work stoppage associated with a labor dispute:
   1. A process by which the franchisee shall provide advance notice of service being disrupted;
   2. A process that allows a customer to file a service complaint with the franchisee and a timeframe within which the franchisee shall respond to complaints;
   3. A process for customers to request and receive refunds or credits for services not received; and,
   4. A remedy that allows the local agency to take administrative action to enforce the franchisee's failure to comply with the franchise, contract, license, or permit for solid waste handling services.

COMMENTS

Most jurisdictions in the state operate with some form of "franchise," or contract that limits solid waste hauling within a jurisdiction to one or more specified companies. Under such an agreement, the local agency charges the franchisee for the benefit of operating within the public right-of-way. The franchisee then charges customers for providing waste hauling services. Jurisdictions have the authority to enter into franchises with waste haulers, with or without competitive bidding. An exclusive franchise authorizes a single hauler to operate within a jurisdiction. A non-exclusive franchise allows for more than one hauler, but establishes specific requirements for hauling within the jurisdiction. Some communities in California do not have franchise agreements, which allows solid waste businesses to compete within a jurisdiction for service contracts with individual waste generators.

Some franchise agreements include "force majeure" provisions, which free the parties to such an agreement from performing their respective duties if extraordinary events directly prevent the parties from doing so. Such an extraordinary event is often referred to as an "act of god," but can include both natural and human-made events, including fires, floods, storms, and labor disputes.

Chula Vista is San Diego County's second largest city, with just over 275,000 residents. In 2014, Chula Vista renewed its franchise agreement with Republic Services, one of the nation's largest waste hauling companies, to serve more than 50,000 customers in the city. In December 2021, members of Teamsters Local 542 employed by Republic Services stopped working to protest stalled contract negotiations. During the month-long work stoppage, Republic Services halted some waste pick-up because the franchise agreement included a force majeure provision that shielded the company from liability for not picking up waste during uncontrollable events, including a work stoppage. While Republic Services picked up some waste and allowed customers to drop off waste at their landfill free of charge, the city also used its own staff and contracted with nonprofits to make up for lost or reduced services. In June 2022, Chula Vista settled with Republic Services. As part of the settlement, Republic Services reimbursed some city costs, provided the city with additional services, and provided a partial credit to customers.

This bill is intended to prevent future work stoppages that disrupt solid waste collection services due to labor disputes by prohibiting the inclusion of clauses in local government contracts that excuse service providers from performing their duties during labor disputes.

According to the Author

In 2022, I had a front row seat to a business taking advantage of a loophole, which resulted in a public health emergency. Republic Services failed to reach a labor agreement that triggered a strike. In the franchise agreement with the City of Chula Vista, Republic Services had placed a provision that shielded the company from liability in the face of a strike or work stoppage. As workers called for better wages and the strike continued, Republic Services halted trash pick-up leaving residents to deal with the consequences. The clause shielded the company from liability for the trash piling up throughout the city. The vendor stalled for time while trash piled up, causing a public health crisis.

What happened in Chula Vista in a perfect example of companies leveraging loopholes in their exclusive agreements with cities to take advantage of residents and workers alike. Sanitation vendors have turned an Act of God provision into a hammer against residents and workers. We shouldn't allow vendors to use the public as pawns in their labor fights.

Arguments in Support

The League of California Cities states:

In some cases where there is an exclusive solid waste franchise agreement in place and in which labor disputes amongst solid waste companies and their workforce result in work stoppages, local governments may not be able to hold parties liable or take actions to ensure waste collection continues for residents. SB 751 aids cities in protecting their authority to ensure, at minimum, public health and safety is maintained during labor disputes.

Arguments in Opposition

A coalition of waste management companies state:

It is important to note that the bill is not necessary to address force majeure provisions in existing local contracts. Local jurisdictions, working with their local partners, can address this issue without a state mandate. Indeed, many local jurisdictions already have and those who have not are free to do so as part of their ongoing future contracting processes… SB 751 as currently drafted would create an unlevel playing field, resulting in significant cost burdens for local municipalities as the current balance in negotiation leverages would potentially change. The residents of the State of California have had to bear the brunt of overall increasing prices in many services and cannot continue to absorb artificially created cost increases.

FISCAL COMMENTS

According to the Assembly Appropriations Committee, by imposing new duties on local governments with respect to franchise contracts, licenses, or permits for solid waste handling services, this bill imposes a state-mandated local program. While the cost to remove labor disputes from the "force majeure" sections of contracts – as required in 1, above – will likely be minor, the requirements under 2, above, could increase the staff time, workload, and costs associated with drafting and finalizing franchise contracts, licenses, or permits. With 540 cities and counties in the state, it seems likely that the total cost of implementing this provision will exceed $150,000.

To the extent the Commission on State Mandates determines this bill establishes a reimbursable mandated local program, this bill would result in unknown General Fund costs, likely in excess of $150,000, for the state to provide such reimbursement.

VOTES

SENATE FLOOR: 30-9-1

YES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dodd, Durazo, Eggman, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener

NO: Alvarado-Gil, Dahle, Glazer, Grove, Jones, Nguyen, Niello, Seyarto, Wilk

ABS, ABST OR NV: Ochoa Bogh

ASM NATURAL RESOURCES: 8-3-0

YES: Luz Rivas, Addis, Friedman, Muratsuchi, Pellerin, Ward, Wood, Zbur

NO: Flora, Hoover, Mathis

ASM APPROPRIATIONS: 11-4-1

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Wilson

NO: Megan Dahle, Dixon, Mathis, Sanchez

ABS, ABST OR NV: Soria

UPDATED

VERSION: September 1, 2023

CONSULTANT: Elizabeth MacMillan / NAT. RES. / (916) 319-2092 FN: 0001737

Date of Hearing: August 16, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

SBPCA Bill Id:SB 751

Author:(Padilla) – As Amended Ver:May 4, 2023

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

SUMMARY:

This bill prohibits a city or county from entering into or amending a solid waste hauling agreement if it excuses the service provider from performing its duties in the event of a labor dispute, and requires agreements to include certain provisions in the event of a labor dispute.

Specifically, this bill:

1. Prohibits a franchise contract, license, or permit for solid waste handling services entered into or amended by a local agency on or after January 1, 2024, from excusing the service provider from performance in the event of a labor dispute, as defined.
2. Requires the following provisions be included in any franchise contract, license, or permit for solid waste handling services entered into or amended by a local agency on or after January 1, 2024, and apply in the event of service being interrupted by a work stoppage associated with a labor dispute:
   1. A timeframe within which the franchisee shall provide advance notice of service being disrupted.
   2. A process that allows a customer to file a service complaint with the franchisee and a timeframe within which the franchisee shall respond to complaints.
   3. A process for customers to request and receive refunds or credits for services not received.
   4. A remedy that allows the local agency to take administrative action to enforce the franchisee’s failure to perform.

FISCAL EFFECT:

By imposing new duties on local governments with respect to franchise contracts, licenses, or permits for solid waste handling services, this bill imposes a state-mandated local program. While the cost to remove labor disputes from the “force majeure” sections of contracts – as required in 1, above – will likely be minor, the requirements under 2, above, could increase the staff time, workload, and costs associated with drafting and finalizing franchise contracts, licenses, or permits. With 540 cities and counties in the state, it seems likely that the total cost of implementing this provision will exceed $150,000.

To the extent the Commission on State Mandates determines this bill establishes a reimbursable mandated local program, this bill would result in unknown General Fund costs, likely in excess of $150,000, for the state to provide such reimbursement.

COMMENTS:

1) Purpose. According to the author:

In 2022…Republic Services failed to reach a labor agreement that triggered a strike. In the franchise agreement with the City of Chula Vista, Republic Services had placed a provision that shielded the company from liability in the face of a strike or work stoppage. As workers called for better wages and the strike continued, Republic Services halted trash pick-up leaving residents to deal with the consequences. The clause shielded the company from liability for the trash piling up throughout the city. The vendor stalled for time while trash piled up, causing a public health crisis…Sanitation vendors have turned an Act of God provision into a hammer against residents and workers. We shouldn’t allow vendors to use the public as pawns in their labor fights.

2) Background.

Franchise Agreements. According to the Assembly Natural Resources Committee analysis of this bill, most jurisdictions in the state operate with some form of “franchise,” or contract that limits solid waste hauling within a jurisdiction to one or more specified companies. Under such an agreement, the local agency charges the franchisee for the benefit of operating within the public right-of-way. The franchisee then charges customers for providing waste hauling services. Jurisdictions have the authority to enter into franchises with waste haulers, with or without competitive bidding. An exclusive franchise authorizes a single hauler to operate within a jurisdiction. A non-exclusive franchise allows for more than one hauler, but establishes specific requirements for hauling within the jurisdiction. Some communities in California do not have franchise agreements, which allows solid waste businesses to compete within a jurisdiction for service contracts with individual waste generators.

Some franchise agreements include “force majeure” provisions, which free the parties to such an agreement from performing their respective duties if extraordinary events directly prevent the parties from doing so. Such an extraordinary event is often referred to as an “act of god,” but can include both natural and human-made events, including fires, floods, storms, and labor disputes.

City of Chula Vista. Chula Vista is San Diego County’s second largest city, with just over 275,000 residents. In 2014, Chula Vista renewed its franchise agreement with Republic Services, one of the nation’s largest waste hauling companies, to serve more than 50,000 customers in the city. In December 2021, members of Teamsters Local 542 employed by Republic Services stopped working to protest stalled contract negotiations. During the month-long work stoppage, Republic Services halted some waste pick-up because the franchise agreement included a force majeure provision that shielded the company from liability for not picking up waste during uncontrollable events, including a work stoppage. While Republic Services picked up some waste and allowed customers to drop off waste at their landfill free of charge, the city also used its own staff and contracted with nonprofits to make up for lost or reduced services. In June 2022, Chula Vista settled with Republic Services. As part of the settlement, Republic Services reimbursed some city costs, provided the city with additional services, and provided a partial credit to customers.

This bill is intended to prevent future work stoppages that disrupt solid waste collection services due to labor disputes by prohibiting the inclusion of clauses in local government contracts that excuse service providers from performing their duties during labor disputes.

1. Support and Opposition. Among others in support, the League of California Cities writes:

In some cases where there is an exclusive solid waste franchise agreement in place and in which labor disputes amongst solid waste companies and their workforce result in work stoppages, local governments may not be able to hold parties liable or take actions to ensure waste collection continues for residents. SB 751 aids cities in protecting their authority to ensure, at minimum, public health and safety is maintained during labor disputes.

A coalition of waste management organizations writes in opposition:

The undersigned organizations oppose SB 751 unless it is amended with clear language that allows for the establishment of mechanisms that provide a roadmap to address a work stoppage associated with a labor dispute…SB 751 as currently drafted would create an unlevel playing field, resulting in significant cost burdens for local municipalities as the current balance in negotiation leverages would potentially change. The residents of the State of California have had to bear the brunt of overall increasing prices in many services and cannot continue to absorb artificially created cost accelerations.

Analysis Prepared by: Nikita Koraddi / APPR. / (916) 319-2081

Date of Hearing: July 10, 2023

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Luz Rivas, Chair

SBPCA Bill Id:SB 751

Author:(Padilla) – As Amended Ver:May 4, 2023

SENATE VOTE: 30-9

SUBJECT: Franchise agreements: labor dispute

SUMMARY: Prohibits a city or county from entering into or amending a solid waste hauling agreement if it excuses the service provider from performing its duties in the event of a labor dispute, and requires agreements to include certain provisions in the event of a labor dispute.

EXISTING LAW:

1. Authorizes cities and counties to “make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws.” (California Constitution, Article XI, Section 7)
2. Requires local agencies to make adequate provision for solid waste handling within their jurisdictions and in response to regional needs, consistent with state policies, standards, and requirements. (Public Resources Code (PRC) 40002)
3. Expressly authorizes local agencies to determine:
   1. Aspects of solid waste handling which are of local concern, including frequency of collection, means of collection and transportation, level of services, charges and fees, and nature, location, and extend of providing services; and,
   2. Whether services are provided by nonexclusive, partially exclusive, or wholly exclusive franchise, contract, license, permit, or otherwise, either with or without competitive bidding. (PRC 40059)
4. Defines “solid waste handling services” as the collection, transportation, storage, transfer, or processing of solid waste. (PRC 40195)
5. Defines “labor dispute” as any controversy concerning terms or conditions of employment, or concerning the association or representation of persons in negotiating, fixing, maintaining, changing, or seeking to arrange terms or conditions of employment regardless of whether or not the disputants stand in the proximate relation of employer and employee. (Code of Civil Procedure 527.3)

THIS BILL:

1. Prohibits a franchise contract, license, or permit for solid waste handling services entered into or amended by a local agency on or after January 1, 2024, from excusing the service provider from performance in the event of a labor dispute, as defined.
2. Prohibits the following provisions from being included in any franchise contract, license, or permit for solid waste handling services entered into or amended by a local agency on or after January 1, 2024, and apply in the event of service being interrupted by a work stoppage associated with a labor dispute:
   1. A timeframe in which the franchisee shall provide advance notice of service being disrupted;
   2. A process that allows a customer to file a service complaint with the franchisee and a timeframe within which the franchisee shall respond to complaints;
   3. A process for customers to request and receive refunds or credits for services not received; and,
   4. A remedy that allows the local agency to take administrative action to enforce the franchisee’s failure to perform.
3. Specifies that if the Commission on State Mandates determines that this bill contains costs mandated by the state, reimbursement for local agencies and school districts shall be made, as specified.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, this bill has negligible state costs.

COMMENTS:

1. Author’s statement:

In 2022, I had a front row seat to a business taking advantage of a loophole, which resulted in a public health emergency. Republic Services failed to reach a labor agreement that triggered a strike. In the franchise agreement with the City of Chula Vista, Republic Services had placed a provision that shielded the company from liability in the face of a strike or work stoppage. As workers called for better wages and the strike continued, Republic Services halted trash pick-up leaving residents to deal with the consequences. The clause shielded the company from liability for the trash piling up throughout the city. The vendor stalled for time while trash piled up, causing a public health crisis.

What happened in Chula Vista in a perfect example of companies leveraging loopholes in their exclusive agreements with cities to take advantage of residents and workers alike. Sanitation vendors have turned an Act of God provision into a hammer against residents and workers. We shouldn’t allow vendors to use the public as pawns in their labor fights.

1. Franchise agreements. Most jurisdictions in the state operate with some form of “franchise,” or contract, that limits solid waste hauling within the jurisdiction to one or more specified companies. Under these agreements, the local agency charges the franchisee for the benefit of operating within the public right-of-way. The franchisee then charges customers for providing waste hauling services. Jurisdictions have the authority to enter into franchises with waste haulers, with or without competitive bidding. Exclusive franchises authorize a single hauler to operate within a jurisdiction. Non-exclusive franchises allow for more than one hauler, but establish specific requirements for hauling within the jurisdiction. Some communities in California do not have franchise agreements, which allows solid waste businesses to compete within the jurisdiction for service contracts with individual waste generators.

Some franchise agreements include “force majeure” provisions, which free the parties to the agreement from performing their respective duties if extraordinary events directly prevent the parties from doing so. Such an extraordinary event is often referred to as an “act of god,” but can include both natural and human-made events, including fires, floods, storms, and labor disputes.

1. City of Chula Vista. Chula Vista is San Diego County’s second largest city, with just over 275,000 residents. In 2014, Chula Vista renewed its franchise agreement with Republic Services, one of the nation’s largest waste hauling companies with more than 39,000 employees nationwide, to serve more than 50,000 customers in the city. Their agreement included a force majeure provision that shielded both parties from fulfilling their obligations in certain extraordinary events, including natural events that cannot be anticipated, sabotage, war, riots, and strikes or work stoppages.

In December 2021, members of Teamsters Local 542 employed by Republic Services stopped working to protest stalled contract negotiations. During the month-long work stoppage, Republic Services halted some waste pick-up because the franchise agreement included a force majeure provision that shielded the company from liability for not picking up waste during uncontrollable events, including a work stoppage. While Republic Services picked up some waste and allowed customers to drop off waste at their landfill free of charge, the City also used its own staff and contracted with nonprofits to make up for lost or reduced services. In June 2022, the City settled with Republic Services. As part of the settlement, Republic Services reimbursed some City costs, provided the City with additional services, and provided a partial credit to customers.

1. This bill. This bill is intended to prevent future work stoppages that disrupt solid waste collection services due to labor disputes by prohibiting the inclusion of clauses that excuse services providers from their duties during labor disputes in local government contracts.

REGISTERED SUPPORT / OPPOSITION:

Support

City of Chula Vista

Opposition

Waste Management & Affiliated Entities

Analysis Prepared by: Elizabeth MacMillan / NAT. RES. /

 THIRD READING  

Bill No: SB 751

Author: Padilla (D)

Amended: 5/4/23

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 5-2, 5/3/23

AYES: Caballero, Durazo, Glazer, Skinner, Wiener

NOES: Seyarto, Dahle

NO VOTE RECORDED: Blakespear

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Franchise agreements: labor dispute

SOURCE: Author

DIGEST:

This bill prohibits a city or county from entering into or amending a solid waste hauling agreement if it excuses the service provider from performing its duties in the event of a labor dispute, and requires agreements to include certain provisions in the event of a labor dispute.

ANALYSIS:

Existing law:

1. Allows a city or county to “make and enforce within its limits, all local, police, sanitary and other ordinances and regulations not in conflict with general laws,” known as the police power. It is from this fundamental power that local governments derive their authority to regulate behaviors, business operations, and land uses. Local agencies also use this police power to abate nuisances and protect public health, safety, and welfare. Cities exercise their police power within their jurisdictions, where not in conflict with state law, and counties exercise this power in unincorporated areas.
2. Allows cities that adopt charters to control their own “municipal affairs.” In all other matters, charter cities must follow the general, statewide laws.
3. Requires local agencies to provide solid waste handling services, or contract with another local agency or solid waste enterprise. These provisions declare certain decisions regarding solid waste handling to be local agencies’ responsibility.

This bill:

1. Provides that, to promote public health, safety, and well-being, no franchise contract, license, or permit for solid waste handling services that a local agency enters into or amends on or after January 1, 2024, can excuse the service provider from performing their duties in the event of a labor dispute.
2. Requires the following provisions be included in any franchise contract, license, or permit for solid waste handling services entered into or amended by a local agency on or after January 1, 2024, and must apply in the event of service being disrupted by a work stoppage associated with a labor dispute:
   1. A timeframe within which the franchisee shall provide advance notice of service being disrupted.
   2. A process that allows a customer to file a service complaint with the franchisee and a timeframe within which the franchisee shall respond to complaints.
   3. A process for customers to request and receive refunds or credits for services not received.
   4. A remedy that allows the local agency to take administrative action to enforce the franchisee’s failure to perform.

Background

Franchise agreements. Most jurisdictions in the state operate with some form of “franchise,” or contract, that limits solid waste hauling within the jurisdiction to one or more specified companies. Under these agreements, the local agency charges the franchisee for the benefit of operating within the public right-of-way. The franchisee then charges customers for providing waste hauling services. Jurisdictions have the authority to enter into franchises with waste haulers, with or without competitive bidding. Exclusive franchises authorize a single hauler to operate within a jurisdiction. Non-exclusive franchises allow for more than one hauler, but establish specific requirements for hauling within the jurisdiction. Some communities in California do not have franchise agreements, which allows solid waste businesses to compete within the jurisdiction for service contracts with individual waste generators.

Some franchise agreements include “force majeure” provisions, which free the parties to the agreement from performing their respective duties if extraordinary events directly prevent the parties from doing so. Such an extraordinary event is often referred to as an “act of god,” but can include both natural and human-made events, including fires, floods, storms, and labor disputes.

City of Chula Vista. Chula Vista is a charter city, and San Diego County’s second largest city, with just over 275,000 residents. In 2014, Chula Vista renewed their franchise agreement with Republic Services, one of the nation’s largest waste hauling companies with over 39,000 employees nationwide, to serve over 50,000 customers in the city. Their agreement included a force majeure provision that shielded both parties from fulfilling their obligations in certain extraordinary events, including natural events that cannot be anticipated, sabotage, war, riots, and strikes or work stoppages.

In December 2021, members of Teamsters Local 542 employed by Republic Services stopped working to protest stalled contract negotiations. During the month-long work stoppage, Republic Services halted some waste pick-up because the franchise agreement included a force majeure provision that shielded the company of liability for not picking up waste during uncontrollable events, including a work stoppage. While Republic Services picked up some waste and allowed customers to drop off waste at their landfill free of charge, the City also used its own staff and contracted with nonprofits to make up for lost or reduced services. In June 2022, the City settled with Republic Services. As part of the settlement, Republic Services reimbursed some City costs, provided the City with additional services, and provided a partial credit to customers.

Comments

1. Purpose of the bill. According to the author, “In 2022, I had a front row seat to failure of business resulting in a public health emergency. Republic Services failed to reach a labor agreement with Teamsters Local 542 that triggered a strike. In the franchise agreement with the City of Chula Vista, Republic Services had placed a provision that shielded the company from liability in the face of a strike or work stoppage. As workers called for better wages and the strike continued, Republic Services halted trash pick-up leaving residents to deal with the consequences. The clause shielded the company from liability as the trash piled up throughout the city. The vendor stalled for time, prolonging the strike, and causing a public health crisis. What happened in Chula Vista is a perfect example of companies leveraging loopholes in their exclusive agreements with cities to take advantage of residents and workers alike. Sanitation vendors have turned an Act of God provision into a hammer against residents and workers. We shouldn’t allow vendors to use the public as pawns in their labor fights.”
2. What’s the problem? Chula Vista voluntarily entered into a franchise agreement with Republic Services that contained a commonly used provision to shield both parties from events not entirely in their control. Republic Services certainly has more control over work stoppages than “acts of god,” but this provision is by no means unique to Chula Vista, or even for waste hauling franchise agreements. The City could work with Republic Services to amend its existing contract to remove labor stoppages from the existing force majeure provision without legislation, or add additional protections for the city and customers. The City was also able to work with the company to provide the City and its customers with some financial relief from the work stoppage. Why is legislation needed to determine which provisions can be included in franchise agreements that both parties voluntarily enter into, and have the ability to amend? According to the author, many local agencies may not be aware that a company could use such a provision to shield them from liability in a labor dispute they were actively negotiating, and public outcry from waste piling up could influence negotiations against the workers and the City. On the other hand, waste hauling providers say that SB 751 creates an uneven playing field for them, does not provide enough flexibility, and could result in increased costs for local agencies as the balance in negotiation changes, all of which could lead to higher costs for customers. Does SB 751 help ensure that events like those in Chula Vista do not repeat in other parts of the state without unintended consequences?
   
3. Sure, but will it work? The California Constitution allows cities that adopt charters to control their own “municipal affairs,” and Chula Vista is a charter city. While the Constitution does not define “municipal affairs,” the courts have typically considered contracting to be a municipal affair. Can SB 751 actually force charter cities like Chula Vista to comply with its provisions?

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

SUPPORT: (Verified 5/16/23)

California Teamsters Public Affairs Council
Imperial Valley Equity and Justice Coalition
League of California Cities

OPPOSITION: (Verified 5/16/23)

California Waste & Recycling Association
California Waste Haulers Council
Resource Recovery Coalition of California
Waste Connections, Inc.
Waste Management & Affiliated Entities

Prepared by: Jonathan Peterson / GOV. & F. / (916) 651-4119

5/17/23 15:09:43

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SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Anna M. Caballero, Chair

2023 - 2024 Regular

Franchise agreements: labor impasse

Prohibits a city or county from entering into or amending a solid waste hauling agreement if it excuses the service provider from performing its duties in the event of a labor dispute.

Background

Police Power. The California Constitution allows a city or county to “make and enforce within its limits, all local, police, sanitary and other ordinances and regulations not in conflict with general laws,” known as the police power. It is from this fundamental power that local governments derive their authority to regulate behaviors, business operations, and land uses. Local agencies also use this police power to abate nuisances and protect public health, safety, and welfare. Cities exercise their police power within their jurisdictions, where not in conflict with state law, and counties exercise this power in unincorporated areas.

The California Constitution allows cities that adopt charters to control their own “municipal affairs.” In all other matters, charter cities must follow the general, statewide laws. Because the Constitution does not define "municipal affairs," the courts determine whether a topic is a municipal affair or an issue of statewide concern.

Waste handling franchise agreements. State law requires local agencies to provide solid waste handling services, or contract with another local agency or solid waste enterprise. These provisions declare certain decisions regarding solid waste handling to be local agencies’ responsibility, including:

• Frequency of collection;
• Means of collection;
• Level of service;
• Charges and fees;
• Nature, location, and extent of providing the services; and
• Whether to provide services through franchise agreements (either nonexclusive or exclusive), contracts, licenses, permits, other approvals, or a combination.

Most jurisdictions in the state operate with some form of “franchise,” or contract, that limits solid waste hauling within the jurisdiction to one or more specified companies. Under these agreements, the local agency charges the franchisee for the benefit of operating within the public right-of-way. The franchisee then charges customers for providing waste hauling services. Jurisdictions have the authority to enter into franchises with waste haulers, with or without competitive bidding. Exclusive franchises authorize a single hauler to operate within a jurisdiction. Non-exclusive franchises allow for more than one hauler, but establish specific requirements for hauling within the jurisdiction. Some communities in California do not have franchise agreements, which allows solid waste businesses to compete within the jurisdiction for service contracts with individual waste generators.

Force majeure. Some franchise agreements include “force majeure” provisions, which free the parties to the agreement from performing their respective duties if extraordinary events directly prevent the parties from doing so. Such an extraordinary event is often referred to as an “act of god,” but can include both natural and human-made events, including fires, floods, storms, and labor disputes.

City of Chula Vista. Chula Vista is a charter city, and San Diego County’s second largest city, with just over 275,000 residents. In 2014, Chula Vista renewed their franchise agreement with Republic Services, one of the nation’s largest waste hauling companies with over 39,000 employees nationwide, to serve over 50,000 customers in the city. Their agreement included a force majeure provision that shielded both parties from fulfilling their obligations in certain extraordinary events, including natural events that cannot be anticipated, sabotage, war, riots, and strikes or work stoppages.

In December 2021, members of Teamsters Local 542 employed by Republic Services stopped working to protest stalled contract negotiations. During the month-long work stoppage, Republic Services halted some waste pick-up because the franchise agreement included a force majeure provision that shielded the company of liability for not picking up waste during uncontrollable events, including a work stoppage. While Republic Services picked up some waste and allowed customers to drop off waste at their landfill free of charge, the City also used its own staff and contracted with nonprofits to make up for lost or reduced services. In June 2022, the City settled with Republic Services. As part of the settlement, Republic Services reimbursed some City costs, provided the City with additional services, and provided a partial credit to customers.

The author wants to prevent cities and counties from entering into agreements that excuse waste hauling providers from performing their duties during a labor dispute, and ensure that agreements contain protections for consumers and the local agency.

Proposed Law

Senate Bill 751 provides that, to promote public health, safety, and well-being, no franchise contract, license, or permit for solid waste handling services that a local agency enters into or amends on or after January 1, 2024, can excuse the service provider from performing their duties in the event of a labor dispute. SB 751 also defines its terms.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “In 2022, I had a front row seat to failure of business resulting in a public health emergency. Republic Services failed to reach a labor agreement with Teamsters Local 542 that triggered a strike. In the franchise agreement with the City of Chula Vista, Republic Services had placed a provision that shielded the company from liability in the face of a strike or work stoppage. As workers called for better wages and the strike continued, Republic Services halted trash pick-up leaving residents to deal with the consequences. The clause shielded the company from liability as the trash piled up throughout the city. The vendor stalled for time, prolonging the strike, and causing a public health crisis.

What happened in Chula Vista is a perfect example of companies leveraging loopholes in their exclusive agreements with cities to take advantage of residents and workers alike. Sanitation vendors have turned an Act of God provision into a hammer against residents and workers. We shouldn’t allow vendors to use the public as pawns in their labor fights.”

2. What’s the problem? Chula Vista voluntarily entered into a franchise agreement with Republic Services that contained a commonly used provision to shield both parties from events not entirely in their control. Republic Services certainly has more control over work stoppages than “acts of god,” but this provision is by no means unique to Chula Vista, or even for waste hauling franchise agreements. The City could work with Republic Services to amend its existing contract to remove labor stoppages from the existing force majeure provision without legislation, or add additional protections for the city and customers. The City was also able to work with the company to provide the City and its customers with some financial relief from the work stoppage. Why is legislation needed to determine which provisions can be included in franchise agreements that both parties voluntarily enter into, and have the ability to amend? According to the author, many local agencies may not be aware that a company could use such a provision to shield them from liability in a labor dispute they were actively negotiating, and public outcry from waste piling up could influence negotiations against the workers and the City. On the other hand, waste hauling providers say that SB 751 creates an uneven playing field for them, does not provide enough flexibility, and could result in increased costs for local agencies as the balance in negotiation changes, all of which could lead to higher costs for customers. Does SB 751 help ensure that events like those in Chula Vista do not repeat in other parts of the state without unintended consequences?

3. Belts and suspenders. SB 751 provides that franchise agreements cannot excuse a waste hauling provider from performing their duties in the event of a labor dispute, but does make any changes to the requirements of these agreements to ensure that the issues that arose in Chula Vista do not happen elsewhere. For example, should these agreements include provisions regarding notice of service disruptions, or provide a process for customers to file service complaints? The Committee may wish to consider amending the bill to include:

• A timeframe for the provider to provide advance notice of service disruptions;
• A process that allows a customer to file a service complaint and a timeframe for the provider to respond to complaints;
• A process for customers to request and receive refunds or credits for services not received; and
• A remedy that allows the local agency to take administrative action to enforce the provider’s failure to perform.

4. Sure, but will it work? The California Constitution allows cities that adopt charters to control their own “municipal affairs,” and Chula Vista is a charter city. While the Constitution does not define “municipal affairs,” the courts have typically considered contracting to be a municipal affair. Can SB 751 actually force charter cities like Chula Vista to comply with its provisions?

Support and Opposition

(4/28/23)

Support:
California Teamsters Public Affairs Council
Imperial Valley Equity and Justice Coalition

Opposition:
California Waste & Recycling Association
California Waste Haulers Council
Resource Recovery Coalition of California
Waste Connections, INC.
Waste Management & Affiliated Entities

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SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Anna M. Caballero, Chair

2023 - 2024 Regular

Franchise agreements: labor impasse

Prohibits a city or county from entering into, or amending, an exclusive franchise agreement for services on or after January 1, 2024, that contains a force majeure provision that can be triggered by a labor impasse.

Background

Police Power. The California Constitution allows a city or county to “make and enforce within its limits, all local, police, sanitary and other ordinances and regulations not in conflict with general laws,” known as the police power. It is from this fundamental power that local governments derive their authority to regulate behaviors, business operations, and land uses. Local agencies also use this police power to abate nuisances and protect public health, safety, and welfare. Cities exercise their police power within their jurisdictions, where not in conflict with state law, and counties exercise this power in unincorporated areas.

The California Constitution allows cities that adopt charters to control their own “municipal affairs.” In all other matters, charter cities must follow the general, statewide laws. Because the Constitution doesn't define "municipal affairs," the courts determine whether a topic is a municipal affair or an issue of statewide concern.

Waste handling franchise agreements. State law requires local agencies to provide solid waste handling services, or contract with another local agency or solid waste enterprise. These provisions declare certain decisions regarding solid waste handling to be local agencies’ responsibility, including:

• Frequency of collection;
• Means of collection;
• Level of service;
• Charges and fees;
• Nature, location, and extent of providing the services; and
• Whether to provide services through franchise agreements (either nonexclusive or exclusive), contracts, licenses, permits, other approvals, or a combination.

Most jurisdictions in the state operate with some form of “franchise,” or contract, that limits solid waste hauling within the jurisdiction to one or more specified companies. Under these agreements, the local agency charges the franchisee for the benefit of operating within the public right-of-way. The franchisee then charges customers for providing waste hauling services. Jurisdictions have the authority to enter into franchises with waste haulers, with or without competitive bidding. Exclusive franchises authorize a single hauler to operate within a jurisdiction. Non-exclusive franchises allow for more than one hauler, but establish specific requirements for hauling within the jurisdiction. Some communities in California do not have franchise agreements, which allows solid waste businesses to compete within the jurisdiction for service contracts with individual waste generators.

Force majeure. Some franchise agreements include “force majeure” provisions, which free the parties to the agreement from performing their respective duties if extraordinary events directly prevent the parties from doing so. Such an extraordinary event is often referred to as an “act of god,” but can include both natural and human-made events, including fires, floods, storms, and labor disputes.

City of Chula Vista. Chula Vista is a charter city, and San Diego County’s second largest city, with just over 275,000 residents. In 2014, Chula Vista renewed their franchise agreement with Republic Services, one of the nation’s largest waste hauling companies with over 39,000 employees nationwide, to serve over 50,000 customers in the city. Their agreement included a force majeure provision that shielded both parties from fulfilling their obligations in certain extraordinary events, including natural events that cannot be anticipated, sabotage, war, riots, and strikes or work stoppages.

In December 2021, members of Teamsters Local 542 employed by Republic Services stopped working to protest stalled contract negotiations. During the month-long work stoppage, Republic Services halted some waste pick-up because the franchise agreement included a force majeure provision that shielded the company of liability for not picking up waste during uncontrollable events, including a work stoppage. While Republic Services picked up some waste and allowed customers to drop off waste at their landfill free of charge, the City also used its own staff and contracted with nonprofits to make up for lost or reduced services. In June 2022, the City settled with Republic Services. As part of the settlement, Republic Services reimbursed some City costs, provided the City with additional services, and provided a partial credit to customers.

To prevent local agencies from agreeing to provisions that shield companies from liability during work stoppages, the author wants to prevent cities and counties from entering into franchise agreements with force majeure provisions that can be triggered by work stoppages.

Proposed Law

Senate Bill 751 prohibits a city or county from entering into, or amending, an exclusive franchise agreement for services on or after January 1, 2024, that contains a force majeure provision that can be triggered by a labor impasse.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “In 2022, I had a front row seat to failure of business resulting in a public health emergency. Republic Services failed to reach a labor agreement with Teamsters Local 542 that triggered a strike. In the franchise agreement with the City of Chula Vista, Republic Services had placed a provision that shielded the company from liability in the face of a strike or work stoppage. As workers called for better wages and the strike continued, Republic Services halted trash pick-up leaving residents to deal with the consequences. The clause shielded the company from liability as the trash piled up throughout the city. The vendor stalled for time, prolonging the strike, and causing a public health crisis.

What happened in Chula Vista is a perfect example of companies leveraging loopholes in their exclusive agreements with cities to take advantage of residents and workers alike. Sanitation vendors have turned an Act of God provision into a hammer against residents and workers. We shouldn’t allow vendors to use the public as pawns in their labor fights.”

2. What’s the problem? Chula Vista voluntarily entered into a franchise agreement with Republic Services that contained a commonly used provision to shield both parties from events not entirely in their control. Republic Services certainly has more control over work stoppages than “acts of god,” but this provision is by no means unique to Chula Vista, or even for waste hauling franchise agreements. Additionally, the City could work with Republic Services to amend its existing contract to remove labor stoppages from the existing force majeure provision without legislation. The City was also able to work with the company to provide the City and its customers with some financial relief from the work stoppage. Requiring these provisions’ removal could affect franchise agreements that are currently under negotiation. Additionally, SB 751 applies not just to waste hauling, but all franchise agreements. Why is legislation needed to prevent franchise agreements from including something that both parties voluntarily entered into and have the ability to amend? According to the author, many local agencies may not be aware that a company could use such a provision to shield them from liability in a labor dispute they were actively negotiating, and public outcry from waste piling up could influence negotiations against the workers and the City. To better tailor its provisions to circumstances like Chula Vista’s, the Committee may wish to consider amending the bill to:

• Apply solely to franchise agreements, contracts, licenses, or permits for waste handling services that excuse the service provider from performance in the event of a labor dispute;
• Clarify that the measure is necessary to promote public health, safety, and wellbeing; and
• Define “labor dispute.”

3. Sure, but will it work? The California Constitution allows cities that adopt charters to control their own “municipal affairs,” and Chula Vista is a charter city. While the Constitution does not define “municipal affairs,” the courts have typically considered contracting to be a municipal affair. Can SB 751 actually force charter cities like Chula Vista to comply with its provisions?

Support and Opposition

(4/7/23)

Support:
California Teamsters Public Affairs Council
Imperial Valley Equity and Justice Coalition

Opposition: None submitted.

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