HB32

Report Title:

Privatization Contracts; Public Services

Description:

Enacts the "Quality Public Services through Contractor Accountability Act". Specifies requirements for privatization contracts. Establishes a process by which contract costs are analyzed by public agencies. Provides for monitoring and enforcement. Protects employees of private contractors.

HOUSE OF REPRESENTATIVES	H.B. NO.	32
TWENTY-FIRST LEGISLATURE, 2001
STATE OF HAWAII

A BILL FOR AN ACT

relating to the improvement of public oversight and accountability of privatization contracts.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that using private contractors to provide public services formerly provided by public employees does not always promote the public interest. To ensure that citizens of this State receive high quality public services at low cost, with due regard for the taxpayers of this State, the service recipients, and the needs of public and private workers, the purpose of this Act is to:

(1) Regulate privatization contracts and protect those workers who report conditions and practices that impact on the efficiency and quality of public services provided by private contractors; and

(2) Ensure that access to public information guaranteed by the Uniform Information Practices Act (modified) is not in any way hindered by the fact that public services are provided by private contractors.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

privatization contracts

§ -1 Short title. This Act may be cited as the "Quality Public Services through Contractor Accountability Act".

§ -2 Definitions. As used in this chapter, unless the context clearly requires otherwise:

"Agency" includes an executive office, department, division, board, commission, or other office or officer in the executive branch of the government.

"Discrimination or retaliation" means a threat, intimidation, or any adverse change in an employee's wages, benefits, or terms or conditions of employment. In the case of a person who is not an employee of the private contractor, the term includes any adverse action taken against the person or the person's employer, including the cancellation of or refusal to renew a contract with the person or the person's employer.

"Employee of a private contractor" includes a worker directly employed by a private contractor, as well as an employee of a subcontractor or an independent contractor that provides supplies or services to a private contractor. The term includes former employees of a private contractor or subcontractor and former independent contractors.

"Person" includes an individual, institution; federal, state, or county governmental entity; or any other public or private entity.

"Private contractor" means any entity which enters into a privatization contract.

"Privatization contract" means an agreement, or combination or series of agreements, by which a non-governmental person or entity agrees with an agency to provide services, valued at $100,000 or more, which are substantially similar to and in lieu of, services heretofore provided, or that could have been provided, in whole or in part, by regular employees of an agency.

"Public employee" has the same meaning as an employee as defined in section 76-11.

"Public record" means a government record as defined in 92F-3, and also includes any document relating to the privatization contract or performance under the contract, prepared, received, or retained by a contractor or subcontractor, whether the document is handwritten, typed, tape-recorded, printed, photocopied, photographed, or recorded by any other method.

"Services" includes, with respect to a private contractor, all aspects of the provision of services provided by a private contractor pursuant to a privatization contract, or any services provided by a subcontractor of a private contractor.

"Subcontractor" means a subcontractor of a private contractor for work under a privatization contract or an amendment to a privatization contract.

§ -3 Privatization contracts; requirements. (a) No agency shall make any privatization contract and no such contract shall be valid unless the agency and the contractor comply with each of the requirements in this section and sections -4 through -7 and includes the specified provisions in the privatization contract.

(b) The agency shall prepare a specific written statement of the services proposed to be the subject of the privatization contract, including the specific quantity and standard of quality of the subject services. The agency shall solicit competitive sealed bids for the privatization contracts based upon this statement. The day designated by the agency upon which it will accept these sealed bids shall be the same for all parties. This statement shall be a public record, shall be filed in the agency, and shall be published in newspapers statewide not later than thirty business days prior to the date on which bids are due.

(1) The length of continuous employment of current employees with the contractor by job classification without identifying employee names. In addition, the contractor may submit information detailing the relevant prior experience of employees within each job classification. If the positions identified by the bidder shall be newly created, the bid shall identify the minimum requirements for prospective applicants for each such position;

(2) The annual rate of current staff turnover;

(3) The number of hours of training planned for each employee in subject matters directly related to providing services to state residents and clients;

(4) Any legal complaints issued by an enforcement agency for alleged violations of applicable federal, state, or county laws, ordinances, rules, or regulations, including laws governing employee safety and health, labor relations and other employment requirements, and any citations, court findings, or administrative findings for violations of federal, state, or county laws, ordinances, rules, or regulations. The information shall include the date, enforcement agency, the law, ordinance, rule, or regulation involved, and any additional information the contractor may wish to submit;

(5) Any collective bargaining agreements or personnel policies covering the employees to provide services to the State; and

(6) Political contributions made by the bidder or any employee in a management position with the bidding company, to any elected officer of the State or member of the state legislature, during the four years prior to the due date of the bid.

(d) For each position in which a contractor will employ any person pursuant to the privatization contract, the minimum compensation to be paid for the position shall be the greater of the wage rate paid at step one of the grade or classification under which an agency employee whose duties are most similar is paid, plus the cash value of health and other benefits provided to those state employees, or the average private sector compensation rate, including the value of health and other benefits, for the position as determined by the department of human resources development.

(e) The term of any privatization contract shall not exceed two years. No amendment to a privatization contract shall be valid if it has the purpose or effect of avoiding any requirement of any section of this chapter.

(f) Every privatization contract shall contain provisions requiring the contractor to offer available employee positions pursuant to the contract to qualified regular employees of the agency whose state employment is terminated because of the privatization contract. Every such contract shall also contain provisions requiring the contractor to comply with a policy of nondiscrimination and equal opportunity for all persons, and to take affirmative steps to provide such equal opportunity for all such persons.

(g) State funds shall not be used:

(1) To support or oppose unionization, including preparation and distribution of materials which advocate for or against unionization;

(2) For hiring or consulting legal counsel or other consultants to advise the contractor about how to assist;

(3) For promoting or deterring union organizing or how to impede a union which represents the contractor's employees from fulfilling its representational responsibilities;

(4) For holding meetings to influence employees about unionization;

(5) For planning or conducting activities by supervisors to assist, promote, or deter union activities; or

(6) For defending against unfair labor practice charges brought by federal or state enforcement agencies.

§ -4 Review of contract costs. (a) Any agency considering whether to enter into a privatization contract shall prepare a comprehensive written estimate of the costs of regular agency employees providing the subject services in the most cost-efficient manner. The estimate shall include all direct and indirect costs of regular agency employees providing the subject services, including pension, insurance, and other employee benefit costs. For the purpose of this estimate, any employee organization, at any time before the final day for the agency to receive sealed bids pursuant to section -3(b), may propose amendments to any relevant collective bargaining agreement to which it is a party. Any such amendments shall take effect only if necessary to reduce the cost estimate pursuant to this subsection below the contract cost. This estimate shall remain confidential until after the final day for the agency to receive sealed bids for the privatization contract, at which time the estimate shall become a public record, shall be filed in the agency, and shall be published in newspapers statewide.

(b) After soliciting and receiving bids, the agency shall publicly designate the bidder to which it proposes to award the privatization contract. In selecting a contractor, the agency shall consider the contractor's past performance and its record of compliance with federal, state, and county laws, including the disclosures as required in section -3(c). The agency shall prepare a comprehensive written analysis of the contract cost based upon the designated bid, specifically including the costs of transition from public to private operation, of additional unemployment and retirement benefits, if any, and of monitoring and otherwise administering contract performance. If the designated bidder proposes to perform any or all of the contract outside the boundaries of the State, the contract cost shall be increased by the amount of income tax revenue, if any, which will be lost to the State by the corresponding elimination of agency employees, as determined by the department of taxation to the extent that it is able to do so.

(1) The agency head has complied with all of the provisions of this section and of all other applicable laws;

(2) The quality of the services to be provided by the designated bidder is likely to satisfy the quality requirements of the statement prepared pursuant to section -3(b), and to equal or exceed the quality of services which could be provided by regular agency employees;

(3) The contract cost will be at least ten per cent less than the estimated cost pursuant to subsection (a), taking into account all comparable types of costs and all the additional costs of the contract as specified in subsection (b);

(4) The proposed privatization contract is in the public interest, in that it meets the applicable quality and fiscal standards set forth in this chapter.

(d) Any privatization contract entered into by a state agency and the agency certification described in this section shall be public records subject to disclosure pursuant to chapter 92F.

§ -5 Monitoring and enforcement of privatization contracts. (a) No contractor shall award a subcontract for work under a contract or for work under an amendment to a contract without the approval of the agency head or a designee of:

(1) The selection of the subcontractor; and

(2) The provisions of the subcontract.

Each such contractor shall file a copy of each executed subcontract or amendment to the subcontract with the agency, which shall maintain the subcontract or amendment as a public record.

(b) Any private contractor awarded a privatization contract, and any subcontractor to a private contractor subject to these provisions, shall file with the agency head copies of financial audits of the private contractor prepared at least annually during the course of the contract term.

(c) All privatization contracts shall include a contract provision specifying that in order to determine compliance with these principles as well as the contract, the private contractor shall be required to provide the State or its agents, except where prohibited by federal or state laws, regulations, or rules, reasonable access, through representatives of the private contractor, to facilities, records, and employees that are used in conjunction with the provision of contract services.

(d) The private contractor shall submit a report, not less than annually during the term of the privatization contract, detailing the extent to which the contractor has achieved the specific quantity and standard of quality of the subject services as specified by the agency pursuant to section -3(b) and its compliance with all federal, state, and county laws, including any complaints, citations, or findings issued by administrative agencies or courts.

(e) The state agency may seek contractual remedies for any violation of a privatization contract. In addition, if a contractor fails to comply with section -3(d), (f), or (g), any person or entity aggrieved by the violation may bring a claim for equitable and other relief including back pay. In such a suit, an aggrieved person or entity shall be entitled to costs and attorney fees.

§ -6 Compliance with chapter 92F; privacy provisions. (a) Ownership of public records.

(1) No contractor or subcontractor, or employee or agent of a contractor or subcontractor, shall have any ownership rights or interest in any public records which the contractor, subcontractor, employee, or agent possesses, modifies, or creates pursuant to a contract, subcontract, or amendment to a contract or subcontract;

(2) No contractor or subcontractor, or employee or agent of a contractor or subcontractor, shall impair the integrity of any public records which the contractor, subcontractor, employee, or agent possesses or creates; and

(3) Public records which a contractor or subcontractor, or employee or agent of a contractor or subcontractor, possesses, modifies or creates pursuant to a contract or subcontract shall at all times and for all purposes remain the property of the State.

(b) Public access to information.

(1) Any public record which a state agency provides to a contractor or subcontractor or which a contractor or subcontractor creates shall be and remain a public record for the purposes of chapter 92F, and the enforcement provisions of that chapter shall apply to any failure to disclose records under this section;

(2) With regard to any public record, the state agency and the contractor or subcontractor shall have a joint and several obligation to comply with the obligations of the state agency under chapter 92F; provided that the determination of whether or not to disclose a particular record or type of record shall be made solely by the state agency;

(3) No contractor or subcontractor, or employee or agent of a contractor or subcontractor, shall disclose to the public any public records:

(A) Which it possesses, modifies, or creates pursuant to a contract, subcontract, or amendment to a contract or subcontract; and

(B) Which the state agency:

(i) Is prohibited from disclosing pursuant to state or federal law in all cases;

(ii) May disclose pursuant to state or federal law only to certain entities or individuals or under certain conditions; or

(iii) May withhold from disclosure pursuant to state or federal law. No provision of this subsection shall be construed to prohibit any such contractor from disclosing these public records to any of its subcontractors to carry out the purposes of its subcontract;

(4) No contractor or subcontractor, or employee or agent of a contractor or subcontractor, shall sell, market, or otherwise profit from the disclosure or use of any public records which are in its possession pursuant to a contract, subcontract, or amendment to a contract or subcontract, except as authorized in the contract, subcontract, or amendment; and

(5) Any contractor or subcontractor, or employee or agent of a contractor or subcontractor, which learns of any violation of this section, no later than seven calendar days after learning of the violation, shall notify the agency head and the attorney general of the violation.

(1) If any person violates subsection (a) or (b), the attorney general may bring an action against that person seeking:

(A) Damages on behalf of the State for the violation;

(B) Restitution for damages suffered by any person as a result of the violation; or

(2) In addition to the remedies under paragraph (1), any person aggrieved by a violation of subsection (a) or (b) may bring an action in any state court to recover any damages suffered as a result of the violation;

(3) In any action brought under paragraph (1) or (2), the court may:

(A) Order disgorgement of any profits or other benefits derived as a result of a violation of subsection (a) or (b);

(B) Award punitive damages, costs, and reasonable attorney's fees; and

(C) Order injunctive or other equitable relief. Proof of public interest or public injury shall not be required in any action brought under paragraph (1) or (2). No action may be brought under paragraph (1) or (2) more than three years after the occurrence of the violation; and

(4) Any person who knowingly or wilfully violates subsection (a) or (b), for each such violation, shall be guilty of a class C felony; provided that the person shall not be imprisoned for less than one year.

§ -7 Prohibition against discrimination or retaliation for disclosure of information. (a) No person shall retaliate or discriminate in any manner against any public employee or employee of a private contractor because that employee, or any person acting on behalf of the employee, in good faith:

(1) Engaged in any disclosure of information relating to the services provided by a private contractor pursuant to a privatization contract;

(2) Advocated on behalf of service recipients with respect to the care or services provided by the private contractor; or

(3) Initiated, cooperated, or otherwise participated in any investigation or proceeding of any governmental entity relating to the services provided pursuant to a privatization contract.

(b) No person shall retaliate or discriminate in any manner against any public employee or employee of a private contractor because the employee has attempted or has an intention to engage in an action described in subsection (a).

(c) No person shall by contract, policy, or procedure prohibit or restrict any employee of a private contractor from engaging in any action for which a protection against discrimination or retaliation is provided under subsection (a).

(d) This section does not protect disclosures that would violate federal or state law or diminish or impair the rights of any person to the continued protection of confidentiality of communications provided by state or federal law.

(e) With respect to the conduct described in subsection (a)(l), an employee of a private contractor shall be considered to be acting in good faith if the employee reasonably believes that:

(1) The information is true; and

(2) The information disclosed by the employee:

(A) Evidences a violation of any law, rule, or regulation, or of a generally recognized professional or clinical standard; or

(B) Relates to the care, services, or conditions which potentially endanger one or more recipients of service or employees employed pursuant to a privatization contract.

(f) The identity of an employee of a private contractor who complains in good faith to a government agency or department or any member or employee of the state legislature about the quality of services provided by a private contractor shall remain confidential and shall not be disclosed by any person except upon the knowing written consent of the employee of the private contractor and except in the case in which there is imminent danger to health or public safety or an imminent violation of criminal law.

(g) Enforcement.

(1) Private cause of action.

(A) Any current or former public employee or employee of a private contractor who believes that the person has been retaliated or discriminated against in violation of subsection (a), (b), or (c) may file a civil action in any state court of competent jurisdiction against the person believed to have violated subsection (a), (b), or (c);

(B) If the court determines that a violation of subsection (a), (b), or (c) has occurred, the court shall award such damages which result from the unlawful act or acts, including compensatory damages, reinstatement, reimbursement of any wages, salary, employment benefits, or other compensation denied or lost to such employee by reason of the violation, as well as punitive damages, attorney's fees, and costs, including expert witness fees. The court shall award interest on the amount of damages awarded at the prevailing rate;

(C) The court may issue temporary, preliminary, and permanent injunctive relief restraining violations of this chapter, including the restraint of any withholding of the payment of wages, salary, employment benefits, or other compensation, plus interest, found by the court to be due and the restraint of any other change in the terms and conditions of employment, and may award such other equitable relief as may be appropriate, including employment, reinstatement, and promotion; and

(D) An action may be brought under this subsection not later than two years after the date of the last event constituting the alleged violation for which the action is brought; and

(2) Any person who violates subsection (a), (b), or (c) shall be subject to a civil penalty not exceeding $10,000 for each violation. In determining the amount of any penalty under this subsection, the appropriateness of the penalty to the size of the business of the person charged and the gravity of the violation shall be considered. The amount of any penalty under this subsection, when finally determined, may be:

(A) Deducted from any sums owing by the State to the person charged; or

(B) Ordered by the court, in an action brought for a violation of subsection (a), (b), or (c) brought by the employee or employees who suffered retaliation or discrimination.

(h) Burden of proof.

(1) On complainant. In any civil action brought under this chapter, the complainant shall have the initial burden of making a prima facie showing that any behavior described in subsections (a) through (c) was a contributing factor in the adverse action or inaction alleged in the complaint. A prima facie case shall be established if the complainant can show that:

(A) The respondent knew of the complainant's protected activities at the time that the alleged unfavorable action or inaction was taken; and

(B) The discriminatory action occurred within a period of time such that a reasonable person could conclude that an activity protected by subsection (a) or (b) was a contributing factor in the discriminatory treatment; and

(2) On respondent. Once the complainant establishes a prima facie case, the burden shifts to the respondent to demonstrate, by clear and convincing evidence, that it would have taken the same adverse action or inaction in the absence of that behavior.

(i) Notice.

(1) Each private contractor shall post and keep posted, in conspicuous places on its premises where notices to employees and applicants for employment are customarily posted, a notice, to be prepared or approved by the department of human resources development, setting forth excerpts from, or summaries of, the pertinent provisions of this chapter and information pertaining to the filing of a charge under this section; and

(2) Any employer that wilfully violates this section may be assessed a civil penalty not to exceed $100 for each separate offense.

§ -8 Nonpreemption. Nothing in this chapter preempts any other law, and nothing in this chapter shall be construed or interpreted to impair or diminish in any way the authority of any county to enact and enforce any law that provides equivalent or greater protections for its employees."

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________