On October 7, 2015, Governor Jerry Brown signed Senate Bill 703 (SB 703), protecting transgender employees whose employers engage in business with state agencies. Specifically, the bill expands on the state’s pre-existing discrimination laws by prohibiting “a state agency from entering into contracts for the acquisition of goods or services of $100,000 or more with a contractor that discriminates between employees on the basis of gender identity in the provision of benefits.”

The new law will apply only to those portions of a contractor’s operations that occur

1. within the state of California,
2. on property outside California that is owned by the state or that the state has a right to occupy, and if the contractor’s presence at that location is connected to a contract with the state,
3. elsewhere in the United States where work related to a California contract is being performed.

The new law also requires that state agencies that enter into contracts subject to the new law include a statement in the contract by which the contractor certifies that it is in compliance with the law.

If an agency takes “all reasonable measures to find a contractor that complies” with this law, the agency may waive the requirements of the new law under the following limited circumstances:

1. There is only one contractor willing to enter into a given contract with the state agency.
2. The contract is necessary to respond to an emergency, as defined by the statute.
3. “The requirements of this section violate, or are inconsistent with, the terms or conditions of a grant, subvention, or agreement, if the agency has made a good faith attempt to change the terms or conditions of any grant, subvention, or agreement to authorize application of this section.”
4. The contractor provides water, power, or natural gas products or services “as required for ensuring reliable services in accordance with good utility practice,” which cannot “practically be accomplished through the standard competitive bidding procedures and the contractor is not providing direct retail services to end users.”

The bill, which Senator Mark Leno (D-San Francisco) authored and which the National Center for Lesbian Rights (NCLR), Equality California, and Transgender Law Center co-sponsored, will go into effect on January 1, 2016. In a statement, Senator Leno commented that, “California law already stipulates that employers cannot deny transgender people health care and other benefits, but a loophole in state law has allowed companies that contract with the state to refuse equal health coverage.” According to Senator Leno, “This bill closes that loophole.”

According to Keith A. Watts, Managing Shareholder of the Orange County office of Ogletree Deakins, “California demonstrates, once again, that it is on the cutting edge of laws protecting employees disadvantaged by their minority status—and in leveling the playing field for all, regardless of sex, race, race, creed, color, or gender. Closing the loophole (as Senator Leno mentioned) shows that the California Legislature—true to its agenda over the last decade—continues to not only “talk the talk,” but “walk the walk” in pursuing equality under the law for every one of its citizens, including transgender workers and preventing discrimination on the basis of protected characteristics.

Employers should know that equal treatment is important to the citizens of California and we should expect more legislation in the years to come.”