Senate Bill 1364, which would limit UC vendors, is misguided

Senate Bill 1364, a bill the Legislature just sent to the governor for his signature, would create substantial new obstacles for small businesses that provide services to the University of California, one of the state’s largest institutions and employers. Eliminating these potential vendors would hurt the UC system, and its services to students and patients of its medical centers.

SB 1364 seeks to limit contract labor by imposing onerous restrictions on any company that contracts for $1,000 or more to provide services to UC. These restrictions on vendors are unnecessary: UC Regents Policy 5402 already limits the use of contracts for covered services.

Existing UC Regents policy also requires UC to be a model employer and to only use contractors as an option of last resort to address temporary or exigent circumstances. In addition, the policy requires UC vendors to pay wages and provide benefits consistent with the wages and benefits the system offers its own employees for providing the same or similar services.

The restrictions SB 1364 would impose are ostensibly to enforce UC’s wage-and-benefit parity policy. But UC is already enforcing this policy: It audits suppliers of covered services for compliance, and failure to comply with wage-and-benefit parity is grounds for contract termination. These are adequate safeguards for ensuring contract employees have the same wages and benefits.

In addition, SB 1364 would require vendors who have a contract of $1,000 or more to report their payroll information every six months to UC and any organization that is the exclusive representative of UC employees who perform similar services. This information would include each contracted employee’s name, address, phone number, hours worked at UC and non-UC locations and their pay.

Any UC employee or any contracted employee would also be able to sue vendors for alleged violations. The bill mandates that courts impose penalties (from $100 up to $14,000 per employee) on California businesses, and it requires a five-year blacklisting of vendors from holding contracts with UC even if their violation is minor or technical in nature.

These record-keeping requirements and the risk of costly litigation would disincentivize and discourage small businesses from contracting with UC. This could cost the state jobs, especially in smaller communities where UC campuses are major employers, and negatively affect small businesses and their owners across California.

UC has been a significant source of revenue for these businesses, spending more than $1 billion on goods and services from minority-owned, women-owned and disabled veteran-owned businesses in fiscal year 2021.

In addition, SB 1364 would apply to any work done by any bargaining unit — not just units affiliated with the American Federation of State, County & Municipal Employees (AFSCME), the labor union sponsoring the bill. This misguided measure also would apply to vendors providing professional services, nursing, health care services and potentially even the research enterprise.

If SB 1364 becomes law, it will affect UC classes, facilities and health care delivery. For example, some medical centers occasionally need to contract for specialty medical translation services in languages UC doesn’t often encounter. If translation vendors won’t work with UC, those patients may need to go elsewhere.

This legislation harms California’s small businesses, essential drivers of the state’s economic growth. Small businesses (those with 500 or fewer employees) create two-thirds of new jobs in the state and employ nearly half of all private sector employees. In California, small businesses represent 99.8% of all businesses and employ more than 7 million workers.

We can’t afford to lose these vital services, and we shouldn’t place such burdensome requirements and litigation risks on small businesses that are the backbone of our state’s economy.

We call on the governor to reject SB 1364 so that small businesses can afford to continue to provide contract services to UC when necessary.

Dick Ackerman co-chairs the California Coalition for Public Higher Education. Ackerman, a Republican, is a former state senator. Mel Levine co-chairs the California Coalition for Public Higher Education. Levine, a Los Angeles Democrat, is a former congressional representative. They wrote this commentary for CalMatters.