SB-30 and its Implications for Doing Public Work Construction for the State of California – Another Risk to Manage

by Snell & Wilmer

Snell & Wilmer

Summary of SB-30

Senate Bill 30 California-Mexico Border: Federally Funded Infrastructure (“SB-30”) was introduced on December 5, 2016 by Democrat Senator Ricardo Lara, who is its primary sponsor. SB-30 is an act to add a chapter to California’s Government Code and to amend a section of California’s Public Contract Code relating to infrastructure. SB-30 seeks to prevent the State of California from executing or renewing a contract with a company or individual that accepts a federal contract to either provide goods or services related to a wall project along California’s southern border. This act is a direct response from a number of California’s senators to President Trump’s plan to fund and build a wall along roughly half of the 2,000 miles of the United States and Mexico border in the states of California, Arizona, New Mexico and Texas. Such a wall was authorized back in 2006 by the Secure Fence Act of 2006, and some fencing was constructed pursuant to the Act. Opponents of such a wall or “barriers,” for example Senator Ricardo Lara, have opposed the wall on grounds that it will slow the movement of goods from California to Mexico, which is California’s largest export market, take away valuable jobs and threaten endangered species located in the area where the wall is proposed to be built.

The stated public policy serving as the basis of SB-30 is that such a wall or barrier would “do serious economic, social, and environmental harm to the state.” Specifically, SB-30 prohibits the State of California from not only contracting with these companies or individuals but also from renewing contracts with them once already existing contracts expire. SB-30 would add section 8900, in pertinent part, to Chapter 15 of the Government Code, as follows:

…commencing January 1, 2018, the state shall not award or renew any contract with any person that, at the time of bid or proposal for a new contract or renewal of an existing contract, is providing or has provided goods or services to the federal government for the construction of a federally funded wall, fence, or other barrier along California’s southern border. This section shall not exclude the state from awarding or renewing any contract with any person that has provided goods or services to the federal government for the construction of a federally funded wall, fence, or other barrier along California’s southern border on or before December 31, 2017.

SB-30 would amend Section 1102 of the Public Contract Code, in pertinent part, as follows:

For purposes of a contract with the state, the term “responsible bidder” does not include a bidder who, at the time of the bid or proposal for a new contract or renewal of an existing contract, is providing or has provided goods or services to the federal government for the construction of a federally funded wall, fence, or other barrier along California’s southern border. This subdivision shall not exclude a bidder who has provided goods or services to the federal government for the construction of a federally funded wall, fence, or other barrier along California’s southern border on or before December 31, 2017.

SB-30’s practical purpose is to preclude contractors from doing business with the State of California if such contractors do business with the federal government on a border wall across the 130 miles of the California and Mexico border, beginning January 1, 2018. Whether SB-30 is successful in discouraging those contracts, many fear the practical effect of the bill will be to inadvertently result in identification of contractors and create some sort of “blacklist” of individuals and contractors who provide goods or services for the construction of the wall. “Goods or services” is undefined in SB-30 and therefore could be broadly applied for enforcement purposes. SB-30 should not have an impact on individuals or companies who have provided such goods or services to the federal government for the construction of the wall on or before December 31, 2017.

SB-30 applies to any “wall, fence, or other barrier,” but does not include a port of entry. In today’s age of advanced technology, this raises the question of whether drone monitoring, heat sensors or other electronic surveillance could be considered a “barrier.” If it is, such contractors providing these services will be affected by SB-30 as well and be precluded from contracting with the State of California beginning January 1, 2018.

Current Status

On May 15, 2017, the California Senate placed SB-30 on the Standing Committee on Appropriations’ suspense file, which essentially means it was set aside along with other proposed bills having a fiscal impact by a majority of members present and voting. The Appropriations Committee’s focus is on what fiscal impact, if any, a proposed bill will have and makes their amendments and ultimate vote based on these fiscal considerations. On May 25, 2017, the Appropriations Committee voted to pass SB-30, with its earlier amendments, and it was ordered to a third reading. The third reading was completed on June 1, 2017, and passed by a majority vote of the Senate. It was ordered to the Assembly and has been read a first time.

Discrimination on “Political Beliefs?”

An initial question that comes to mind when considering SB-30 is whether it constitutes discrimination based on “political beliefs” as its formation was a direct and vocal response to President Trump’s proposal and plan to build the border wall. Prohibitions against discrimination related to political beliefs have been addressed in other contexts by statutes, such as employment and independent contracts. Because of these existing laws, in the labor and employment context, it is a simpler task to determine whether there is discrimination based on political affiliation. California has numerous laws prohibiting discrimination based on an employee’s political beliefs, as does the United States. Below is a list of examples, non-exhaustive, of laws prohibiting political affiliation discrimination:

  • California Labor Code § 1101 prohibits employers from making, adopting or enforcing any rule, regulation or policy (a) forbidding or preventing employees from engaging or participating in politics or from becoming candidates for public office and (b) controlling or directing, or tending to control or direct the political activities or affiliations of employees.
  • California Labor Code § 1102 prohibits employers from coercing or influencing, or attempting to coerce or influence, his or her employees from political action or activity by threats of discharge or loss of employment.
  • Civil Rights Act of 1871, codified at 42 U.S.C. § 1983, applies to public employers (i.e., state and local governments, publicly funded colleges, the police, etc.) and prohibits the deprivation of “any rights, privileges, or immunities secured by the constitution and laws.” Such prohibition applies to political affiliation discrimination. See, e.g. Wagner v. Jones, 664 F.3d 259 (8th Cir. 2011) (§ 1983 action based on political discrimination by republican applicant for an instructor position at publicly funded college).
  • Civil Service Reform Act of 1978, codified at 5 U.S.C. § 1101, et seq., protects federal government applicants and employees from discrimination in personnel actions based on a variety of categories, including political affiliation. See 5 U.S.C. § 2301(b)(2).

In the context of legislation, the inquiry about whether a piece of legislation constitutes political discrimination is more difficult and, even then, involves an inquiry about whether the alleged discrimination is against the law. The First Amendment of the United States Constitution and section 3 of the California Constitution provides for the freedom to associate with others and to join organizations, such as political parties, as a fundamental right. See U.S.C. Const. Amend. 1; Cal. Const. art. I, § 3. Laws that discriminate against members of certain political parties may constitute constitutional violations.

Courts have held that independent contractors have standing under the First Amendment for claims of political discrimination against public entities in various situations. See e.g. Garcia-Gonzalez v. Puig-Morales, 761 F.3d 81 (1st Cir. 2014). For example, in Garcia-Gonzalez, a licensed insurance broker, who was an independent contractor, held annual contracts with the Department of the Treasury for the acquisition of insurance policies for various government agencies. Id. at 84. Before the contract was set to expire, an incumbent governor lost a general election to the candidate for the opposing party. Id. The insurance broker was a member of the defeated governor’s party and three months after the election, received a letter terminating his contract with the Department of the Treasury and his preliminary approval on a bid for a new contract. Id. The insurance broker, as an independent contractor or regular provider of service to a city, was protected by the First Amendment against termination for refusing to support a political party or its candidate, unless that political affiliation was a reasonably appropriate requirement for effective performance of the contract. Id. [citing O'Hare Truck Service, Inc. v. City of Northlake (1996) 518 U.S. 712, 116 S. Ct. 2353, 135 L. Ed. 2d 874].

To some, SB-30 can be categorized as a law that discriminates against supporters of President Trump and his plan to build the border wall. Evidence for this argument can be found in the various public comments by Senator Lara surrounding SB-30 and which are specifically directed at companies and individuals who provide any sort of goods or services to support the federal government’s construction of the border wall. In a press release posted on Senator’s Lara’s official website on June 1, 2017, he is quoted as saying:

[SB-30] sends a clear message that we want our businesses to stand with us and support our core values. There is plenty of work to do in the state of California that is going to move us forward. It is not enough to simply oppose the wall in theory. Rhetoric can only go so far. It is time for us to act and be courageous.

President Trump’s wall will be a multi-billion-dollar boondoggle dragging down California’s economy, hurting our environment and separating our communities – without making us any safer.

Senator Lara’s press release did not include citations to facts in support of his comments.

Such discrimination to those providing goods or services to support the federal government’s construction of the border wall may be unconstitutional and in violation of anti-discrimination laws in California. Like the independent contractor in Garcia-Gonzalez, supra, contractors and independent contractors could argue that SB-30 amounts to political discrimination against those that support President Trump and construction of the federal wall, and that they have standing to sue the State of California on these grounds using Senator Lara’s comments as evidence of their claim. California’s defense to such claims would likely be based on the stated reasons for SB-30: the wall’s negative impact on the transfer of goods from California to Mexico, jobs and the environment.

Bill of Attainder?

Another question that SB-30 raises is whether it amounts to a bill of attainder. The Constitutions of both the United States and California prohibit bills of attainder. U.S.C.A. Const. Art 1. § 9; Article 1, Cal. Const. art. I, § 9. A bill of attainder is a legislative act, irrespective of form, that applies either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a judicial trial and is prohibited by the state constitution. Law School Admission Council, Inc. v. State (2014) 222 Cal.App.4th 1265, 1298-99. California’s test for determining whether a legislative act is a bill of attainder is: “(1) whether the challenged statute falls within the historical meaning of legislative punishment; (2) whether the statute, ‘viewed in terms of the type and severity of burdens imposed, reasonably can be said to further nonpunitive legislative purposes’; and (3) whether the legislative record ‘evinces a congressional intent to punish.’” Id. at 1299. In Law School Admission Council, Inc., applying California’s test, the court held that a statute prohibiting a law school standardized test sponsor from “flagging” test scores reported to law schools as having been achieved with extra testing time as an accommodation under the Americans with Disabilities Act did not constitute an unconstitutional bill of attainder against the test sponsor since the statute would also apply to any companies that become test sponsors in the future, and since the requirements imposed by the statute do not constitute punishment. Id. This asserted “bill of attainder” was the test sponsor being required to comply with new requirements for testing conditions, scoring disputes and conveying testing scores to law schools. Id.

Here, opponents of SB-30 are likely to argue that SB-30 is a bill of attainder because it inflicts punishment upon any company or individual who has provided goods or services to the federal government for the construction of the wall between California and Mexico, which are legitimate and legally provided services, without a judicial trial. The punishment is that they would be foreclosed from contracting with the State of California at any point in the future (unless SB-30 is repealed). The “easily ascertainable members of a group” are those individuals and companies who have provided goods or services to the Federal government for construction of the wall or other “barrier,” which is undefined and could potentially result in broad application, as discussed above.

Passage of SB-30 presents ample opportunity for its opponents to file suit for a judicial declaration that it is a bill of attainder, prohibited by California’s Constitution. In fact, if SB-30 passes and becomes law, there is a good chance that a class of independent contractors would have standing to bring a class action challenging SB-30 on these grounds.

Implications for Doing Business in California

The passage of SB-30 will send a message to all businesses and individuals both inside and outside of California that participating in a controversial construction project could have a preclusive effect in the future, preventing them from the ability to contract with the State of California. This is true even though the construction of a wall, fence or barrier between California and Mexico is a legitimate Federal construction project. A further concern is that SB-30 will establish precedent. The passage of this law would establish that when a state disagrees with a federal construction project, it can simply enact laws precluding a particular industry from working on state projects if a class of contractors provides services to the disfavored federal project. This could, and in all likelihood would, eventually go beyond the construction and design industry. While the controversial project today is the proposed federal border wall project to be constructed on the border of California and Mexico, in the future it could be some other project that the elected officials in California oppose.

The passage of SB-30 would almost certainly create an atmosphere of uncertainty for contractors doing business in California, which may cause them to look elsewhere for work. This would likely cause an increase in construction costs as the number of contractors willing to do business in California would decrease due to the risk, and therefore the cost to attract contractors willing to do the work would increase in light of the uncertainty about what major construction projects in California happen to be unpopular at a given time.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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