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<ns0:Id>20250SB__071398AMD</ns0:Id>
<ns0:VersionNum>98</ns0:VersionNum>
<ns0:History>
<ns0:Action>
<ns0:ActionText>INTRODUCED</ns0:ActionText>
<ns0:ActionDate>2025-02-21</ns0:ActionDate>
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<ns0:Action>
<ns0:ActionText>AMENDED_SENATE</ns0:ActionText>
<ns0:ActionDate>2025-04-23</ns0:ActionDate>
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<ns0:SessionYear>2025</ns0:SessionYear>
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<ns0:AuthorText authorType="LEAD_AUTHOR">Introduced by Senator Valladares</ns0:AuthorText>
<ns0:Authors>
<ns0:Legislator>
<ns0:Contribution>LEAD_AUTHOR</ns0:Contribution>
<ns0:House>SENATE</ns0:House>
<ns0:Name>Valladares</ns0:Name>
</ns0:Legislator>
</ns0:Authors>
<ns0:Title> An act to amend Sections 12100.32 and 12100.33 of, and to add Sections 12100.34 and 14112 to, the Government Code, relating to economic development.</ns0:Title>
<ns0:RelatingClause>economic development</ns0:RelatingClause>
<ns0:GeneralSubject>
<ns0:Subject>Employee stock ownership plans: contractors: certification: bid preferences.</ns0:Subject>
</ns0:GeneralSubject>
<ns0:DigestText>
<html:p>
(1)
<html:span class="EnSpace"/>
Existing law creates within the Governor’s Office of Business and Economic Development the Office of Small Business Advocate in order to advocate the causes of small business and to provide small businesses with the information they need to survive in the marketplace to be led by the Small Business Advocate. The California Employee Ownership Act requires, upon appropriation by the Legislature, the
Office of Small Business Advocate to establish the California Employee Ownership Hub (hub) and to appoint an Employee Ownership Hub Manager (manager) to administer the hub. The act authorizes the manager to be responsible for certain duties, including working with all California state agencies whose regulations and programs affect employee-owned companies, and businesses with the potential to become employee-owned, to enhance opportunities and reduce barriers.
</html:p>
<html:p>This bill would require the Director of General Services (director) to issue an employee stock ownership plan (ESOP) contractor certificate to a qualified contractor, as defined,
that presents a valid and favorable ESOP determination letter from the Internal Revenue Service. The bill would require the director to determine the percentage of ESOP ownership for an applicant and indicate the percentage on the certificate, as specified. The bill would require the director to require that the certificate be renewed every 3 years. The bill would additionally authorize the manager to be responsible for compiling and maintaining a comprehensive bidders list of qualified contractors that have received the certificate from the Director of General Services.</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Existing law establishes within the Transportation Agency a Department of Transportation. Existing law requires the Department of Transportation to, among other things, plan, design, construct, operate, and maintain those transportation systems that the Legislature has made, or may make, the responsibility of the department, except as specified.
</html:p>
<html:p>This
bill would require, beginning January 1, 2027, the Department of Transportation to provide bid preferences to qualified contractors that have received the certificate based on the percentage of the qualified contractor owned by its ESOP, whenever the department prepares a solicitation for a state-funded construction contract, as specified.</html:p>
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<ns0:DigestKey>
<ns0:VoteRequired>MAJORITY</ns0:VoteRequired>
<ns0:Appropriation>NO</ns0:Appropriation>
<ns0:FiscalCommittee>YES</ns0:FiscalCommittee>
<ns0:LocalProgram>NO</ns0:LocalProgram>
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<ns0:ImmediateEffect>NO</ns0:ImmediateEffect>
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<ns0:TaxLevy>NO</ns0:TaxLevy>
<ns0:Election>NO</ns0:Election>
<ns0:UsualCurrentExpenses>NO</ns0:UsualCurrentExpenses>
<ns0:BudgetBill>NO</ns0:BudgetBill>
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<ns0:Bill id="bill">
<ns0:Preamble>The people of the State of California do enact as follows:</ns0:Preamble>
<ns0:BillSection id="id_B293302E-6F1B-4A8B-A784-39003EABDF83">
<ns0:Num>SECTION 1.</ns0:Num>
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Section 12100.32 of the
<ns0:DocName>Government Code</ns0:DocName>
is amended to read:
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<ns0:Num>12100.32.</ns0:Num>
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<ns0:Content>
<html:p>For purposes of this article, the following definitions apply:</html:p>
<html:p>
(a)
<html:span class="EnSpace"/>
“Advocate” means the Small Business Advocate.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
“Broad-based employee ownership vehicle” means any of the following:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
An employee-owned corporation, as that term is defined in subdivision (c) of Section 91502.1.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
An eligible worker-owned cooperative, as defined in subdivision (e).
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
A business wherein the majority of stock is owned by an employee stock ownership plan, as defined in
subdivision (f), or by another trust on behalf of the company’s employees.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
A business wherein the majority of which is owned by a trust that has the purposes of creating employee ownership and of promoting the financial and nonfinancial interests of all employees.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
A “worker cooperative” or “employment cooperative,” as defined in subdivision (l).
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
A member-owned organization that includes workers as members and where the voting interest or stock is held by members, and the majority of the governing body is elected by the members on the basis of one vote per member.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
“California capital programs” means state programs offering capital assistance to
businesses, including, but not limited to, the Small Business Loan Guarantee Program, the State Small Business Credit Initiative, the California Rebuilding Fund, and the California Capital Access Program.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
“CalOSBA” or “office” means the Office of Small Business Advocate within the Governor’s Office of Business and Economic Development.
</html:p>
<html:p>
(e)
<html:span class="EnSpace"/>
“Eligible worker-owned cooperative” has the same definition as that term is defined in paragraph (2) of subsection (c) of Section 1042 of the Internal Revenue Code, as that provision read on January 1, 2022.
</html:p>
<html:p>
(f)
<html:span class="EnSpace"/>
“Employee stock ownership plan” or “ESOP” has the same definition as that term is defined in paragraph (7) of subsection (e) of Section 4975 of the Internal Revenue
Code, as that provision read on January 1, 2022.
</html:p>
<html:p>
(g)
<html:span class="EnSpace"/>
“Employee ownership transition” means the process of a business entering a broad-based employee ownership vehicle.
</html:p>
<html:p>
(h)
<html:span class="EnSpace"/>
“Feasibility assessment” means a financial assessment of a company’s debt capacity and other factors that will determine viable employee ownership transition scenarios.
</html:p>
<html:p>
(i)
<html:span class="EnSpace"/>
“Independent ESOP trustee” means an ESOP trustee that is unrelated to the company, its officers, and its shareholders, and is in the business of serving as an ESOP fiduciary.
</html:p>
<html:p>
(j)
<html:span class="EnSpace"/>
“Manager” means the Employee Ownership Hub Manager.
</html:p>
<html:p>
(k)
<html:span class="EnSpace"/>
“Qualified contractor” means a
business that is currently registered with the Department of Industrial Relations as a public works contractor.
</html:p>
<html:p>
(l)
<html:span class="EnSpace"/>
“Worker cooperative” or “employment cooperative” has the same definition as those terms are defined in Section 12253.5 of the Corporations Code.
</html:p>
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<ns0:BillSection id="id_4E893539-27F3-45C5-9608-5F15B9138BEC">
<ns0:Num>SEC. 2.</ns0:Num>
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Section 12100.33 of the
<ns0:DocName>Government Code</ns0:DocName>
is amended to read:
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<ns0:Num>12100.33.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
Upon appropriation by the Legislature, CalOSBA shall establish the California Employee Ownership Hub, administered by an Employee Ownership Hub Manager, appointed by the advocate.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
The manager shall administer the Employee Ownership Hub, and may be responsible for the following duties:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
Work with all California state agencies whose regulations and programs affect employee-owned companies, and businesses with the potential to become employee-owned, to enhance opportunities and reduce barriers.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Partner with relevant private, nonprofit, and
public organizations including, but not limited to, professional and trade
associations, financial institutions, labor unions, worker centers, Small Business Development Centers, economic and workforce development organizations, and nonprofit entities to educate business owners and employees about the benefits of employee ownership and employee ownership transition succession models.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
Share materials regarding employee ownership benefits and employee ownership transition succession models.
</html:p>
<html:p>
(4)
<html:span class="EnSpace"/>
Provide a referral service to help business owners, labor unions, workers, and worker centers find appropriate legal, financial, and technical employee ownership resources and services to assist in employee ownership transitions and the growth of employee-owned businesses.
</html:p>
<html:p>
(5)
<html:span class="EnSpace"/>
Work with the
California Infrastructure and Economic Development Bank, the California Pollution Control Financing
Authority, and related entities to develop recommendations and enhance the ability of broad-based employee ownership vehicles to access California capital programs. Those recommendations shall only apply to ESOPs to the extent that the ESOPs satisfy one of the following conditions:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The ESOP has appointed an independent ESOP trustee.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
The ESOP has, as a trustee, a person or entity that has completed education on ESOP trustee best practices.
</html:p>
<html:p>
(6)
<html:span class="EnSpace"/>
Report to the Legislature, in accordance with Section 9795, on activities undertaken by the hub during the prior fiscal year, including recommendations for improvement.
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
The first report shall be due
on January 15, following the first fiscal year in which funding is provided to implement any portion of this article.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
This reporting requirement may be met separately or the information may be included in the annual report required by subdivision (b) of Section 12098.4.
</html:p>
<html:p>
(C)
<html:span class="EnSpace"/>
CalOSBA shall also post the report to its internet website.
</html:p>
<html:p>
(7)
<html:span class="EnSpace"/>
Report employee ownership transition related concerns and recommendations to the advocate.
</html:p>
<html:p>
(8)
<html:span class="EnSpace"/>
Compiling and maintaining a comprehensive bidders list of qualified contractors that have received a certificate from the Director of General Services pursuant to Section 12100.34.
</html:p>
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<ns0:Num>SEC. 3.</ns0:Num>
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Section 12100.34 is added to the
<ns0:DocName>Government Code</ns0:DocName>
, to read:
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<ns0:LawSection id="id_05372272-09EC-4251-B653-758E9BB54A25">
<ns0:Num>12100.34.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
The Director of General Services shall issue an ESOP contractor certificate to a qualified contractor that presents a valid and favorable ESOP determination letter from the Internal Revenue Service.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
The Director of General Services shall determine the percentage of ESOP ownership for an applicant based on its current and valid IRS Form 5500 and shall indicate the percentage on the certificate.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The applicant may request a revision to the percentage indicated on the certificate no more than once per year.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
The Director of General Services may establish a fee for an applicant that collectively covers the costs to administer the certification program authorized by this section.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
Notwithstanding paragraph (2) of subdivision (b), the Director of General Services shall
require the certificate to be renewed every three years.
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<ns0:Num>SEC. 4.</ns0:Num>
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Section 14112 is added to the
<ns0:DocName>Government Code</ns0:DocName>
, to read:
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<ns0:Num>14112.</ns0:Num>
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<html:p>
(a)
<html:span class="EnSpace"/>
Whenever the department prepares a solicitation for a state-funded construction contract, including the alteration, demolition, repair, or improvement of state facilities, the department shall provide a bid preference to a qualified contractor that has received an ESOP contractor certificate pursuant to Section 12100.34 as follows:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
If 30 to 74 percent, inclusive, of the qualified contractor is owned by its ESOP, one of the following may
apply:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
In solicitations where an award is to be made to the lowest responsible bidder meeting specifications, the preference to the qualified contractor shall be 2 percent of the lowest responsible bidder meeting specifications.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
In solicitations where an award is to be made to the highest scored bidder based on evaluation factors in addition to price, the preference to the qualified contractor shall be 2 percent of the highest responsible bidder’s total score.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
If 75 to 99 percent, inclusive, of the qualified contractor is owned by its ESOP, one of the following may apply:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
In solicitations where an award is to be made to the lowest responsible bidder meeting specifications, the preference to the qualified contractor shall be 3 percent of the lowest responsible bidder meeting specifications.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
In solicitations where an award is to be made to the highest scored bidder based on evaluation factors in addition to price, the preference to the qualified contractor shall be 3 percent of the highest responsible bidder’s total score.
</html:p>
<html:p>
(3)
<html:span class="EnSpace"/>
If 100 percent of the qualified contractor is owned by its ESOP, one of the following may apply:
</html:p>
<html:p>
(A)
<html:span class="EnSpace"/>
In solicitations where an award is to be made to the lowest responsible bidder meeting specifications, the preference to the qualified contractor shall be 4 percent of the lowest responsible bidder meeting specifications.
</html:p>
<html:p>
(B)
<html:span class="EnSpace"/>
In solicitations where an award is to be made to the highest scored bidder based on evaluation factors in addition to price, the preference to the qualified contractor shall be 4 percent of the highest responsible bidder’s total score.
</html:p>
<html:p>
(b)
<html:span class="EnSpace"/>
(1)
<html:span class="EnSpace"/>
An additional 1 percent to the bid preferences under subdivision (a) shall be provided to a qualified contractor that include employees covered by a collective bargaining agreement or master labor agreement.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
The bid preferences under subdivision (a) shall not be awarded to a noncompliant bidder and shall not be used to achieve any applicable minimum requirements.
</html:p>
<html:p>
(c)
<html:span class="EnSpace"/>
For the purposes of this section, both of the following definitions apply:
</html:p>
<html:p>
(1)
<html:span class="EnSpace"/>
“Employee stock ownership plan” or “ESOP” means as defined in subdivision (f) of Section 12100.32.
</html:p>
<html:p>
(2)
<html:span class="EnSpace"/>
“Qualified contractor” means as defined in subdivision (k) of Section 12100.32.
</html:p>
<html:p>
(d)
<html:span class="EnSpace"/>
This section shall become operative on January 1, 2027.
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