The National Pork Case Suggests Peril for Federal Challenges to Bills Like SB 830 In 2018, California voters approved the ballot measure to ban the sale of meat and egg products from farms that did not raise their “veal calves, breeding pigs and egg-laying hens” in spaces that give them room enough to stand up and turn around. The proposition was supposed to go into effect in 2022, but two out-of-state organizations, the National Pork Producers Council and the American Farm Bureau Federation, sued to stop the measure.

The U.S. Supreme Court recently voted in a 5 to 4 ruling that didn’t follow the typical conservative-liberal split. In the majority opinion, Justice Neil Gorsuch wrote that rather than California regulating out-of-state businesses unconstitutionally, businesses are attempting to restrict a state’s ability to “regulate goods sold within their borders.” He was joined by Justices Amy Coney Barrett, Elena Kagan, Sonia Sotomayor, and Clarence Thomas.

• Gorsuch: “Consider an example. Today, many States prohibit the sale of horsemeat for human consumption…. Under the lead dissent’s test, all it would take is one complaint from an unhappy out-of-state producer and — presto — the Constitution would protect the sale of horsemeat.”

In their partial dissent, Chief Justice John Roberts and Justices Samuel Alito, Ketanji Brown Jackson, and Brett Kavanaugh said that the measure would place a “substantial burden against interstate commerce”:

• Roberts, in his opinion: “Petitioners identify broader, market-wide consequences of compliance — economic harms that our precedents have recognized can amount to a burden on interstate commerce…. California has enacted rules that carry implications for producers as far-flung as Indiana and North Carolina.” 

Because 99% of the pork Californians eat comes from out of state, opponents of the proposition argued that the measure gave California an outsized role in restricting interstate commerce, running afoul of the U.S. Constitution’s Commerce Clause. Producers estimated their costs would rise by 9% to comply with the rule, and the Biden administration stood with the pork producers, saying the measure would throw “a giant wrench into the workings of the interstate market in pork.”

So, why does this story about pork living conditions matter to contractors? Senate Bill 830 (Smallwood-Cuevas) is a long-expected bill sponsored by the Western States Council of Sheet Metal Workers that expands the definition of “public works” that makes custom fabrication of sheet metal ducts or similar sheet metal products for heating, ventilation, and air conditioning systems produced offsite and solely and specifically designed and engineered for installation in a particular public works project subject to the payment of prevailing wages. This bill would reverse a prevailing wage determination dating to 2008 and a 2014 California Appeals Court decision that upheld the determination.

One of the arguments against SB 830 is that “There is no practical way for public entities or prime contractors to enforce prevailing wage requirements for off-site fabrication. First, California cannot force SB 830 requirements for work performed outside of the state, nor is it clear that the state can mandate that someone in Boise or Tijuana receive California prevailing wages. Were California to create an artificial barrier to entry for products manufactured out-of-state, because workers in those states are not paid California prevailing wages, the law would likely run afoul of the Dormant Commerce Clause, which is intended to prevent the imposition of protectionist state policies that favor state business at the expense of out-of-state business.

Readers will note that the SCOTUS decision in the pork case upheld the state’s ability to “regulate goods sold within their borders.” Would the court make the same decision in the event SB 830 is before them?

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An Update on the 2024 Presidential Campaign As of May 11, 2023, there are three noteworthy Democratic presidential candidates, eight noteworthy Republican candidates, and one noteworthy Republican exploratory committee. Below is a summary of each candidate’s campaign activity from early May.

• Democratic candidates
• Joe Biden spoke in Hudson Valley, New York, on May 10. He supported raising the debt ceiling and criticized the Republican-backed Limit, Save, Grow Act. He also attended a fundraising event in New York City hosted by former Blackstone executive Tony James.
• Marianne Williamson held a town hall in East Palestine, Ohio, on May 9, and is set to speak at a bookstore in Washington, D.C., today.
• Republican candidates
• Nikki Haley held a rally in Greer, South Carolina, on May 4.
• Vivek Ramaswamy campaigned in New Hampshire on May 4, and in Michigan from May 6 to May 7. Ramaswamy began a campaign tour of Iowa on May 9, which is set to last through May 13.
• Corey Stapleton held a town hall in New Hampshire on May 4.
• Donald Trump issued a statement about Ramaswamy, and Rep. Andy Ogles (R-Tenn.) endorsed Trump on May 5. Trump participated in a CNN televised town hall on May 10.
• Tim Scott (R), announced his presidential candidacy on May 22, held a town hall in Iowa on May 6 and campaigned in New Hampshire from May 8 to May 9
• Florida Gov. Ron DeSantis announced his highly-anticipated presidential bid during a Twitter spaces session Wednesday and broke Twitter. The app repeatedly crashed Wednesday night as thousands of listeners attempted to tune in to hear the Florida governor announce he was entering the race for the GOP presidential nomination. Thirty minutes into the event, DeSantis was finally able to begin speaking.
• Other noteworthy candidates include Robert F. Kennedy Jr. (D), Larry Elder (R), and Asa Hutchinson (R).

[Ballotpedia]

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Former U.S. Rep. Will Hurd Discusses Tech Policy, Semiconductor Manufacturing, and More at Arizona Chamber Roundtable Republican Congressman Will Hurd – a former CIA operative turned politician – has long been dedicated to advancing policy to strengthen America’s economic and national security. And, as he made clear during a recent visit to the Arizona Chamber of Commerce & Industry, he’s not slowing down anytime soon. [Story]

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CHC BOLD PAC, The Campaign Arm of The Congressional Hispanic Caucus, Is Endorsing Two Democratic Candidates in Key California House Races. They are backing Tim Sanchez in California’s 12th District and Kim Nguyen in California’s 45th District. Sanchez, an Afghanistan veteran and entrepreneur, is aiming to succeed Rep. Barbara Lee (D-Calif.), who is running for Senate and leaving behind her Oakland-area seat. Nguyen is running to unseat Rep. Michelle Steel (R-Calif.). Despite representing a district President Joe Biden won in 2020, Steel has proven difficult to defeat in the past two cycles. Nguyen currently sits on the Garden Grove city council. [Politico]

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New York Building Trades Chief Sentenced in Bribe Scheme A federal judge sentenced the former president of New York State’s construction unions to more than four years in prison for taking bribes to help a non-union contractor win contracts and gain other benefits of organized labor association without employing union workers. Records show that James Cahill was the last of 11 defendants to be sentenced in connection to the bribery scheme and received the most severe sentence. U.S. District Court Judge Colleen McMahon in Manhattan sentenced him May 18 to 51 months in prison, to be served at a medium-security federal prison camp in Otisville, NY. McMahon also ordered Cahill to pay a $150,000 fine. Story

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Budget Woes The Legislative Analyst’s Office (LAO) predicts California revenues will fall $30 billion short of what’s needed to cover Gov. Gavin Newsom’s proposed spending for the 2024 fiscal year, adding to its doubts about the administration's budget plan. “Our analysis suggests that level of revenue is very unlikely — there is less than a one-in-six chance the state can afford the May Revision spending level across the five-year period,” Fiscal and Policy Analyst Ann Hollingshead wrote in an analysis Tuesday. The nonpartisan LAO last week forecasted that the governor’s May budget proposal would fail to close a $6 billion deficit in the coming fiscal year despite calling for several billions of dollars in cuts. The latest report argues the revenue forecasts underlying Newsom’s proposal are “optimistic, but plausible” through the 2023 fiscal year, but “they are improbable in the out-years.” The LAO called for $6 billion more in cuts to one-time spending cuts in the coming fiscal year and for one-time spending in future years to be eliminated entirely.

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CEQA Fix? On Tuesday, Mendocino County took a major step to remedy the backlog of cannabis license applications in one of the nation's oldest weed-growing regions. In a unanimous move, the Mendocino County Board of Supervisors voted to allow the state to take over the California Environmental Quality Act (CEQA) process in northern California. Through a $17 million grant, the Department of Cannabis Control (DCC) will also provide funding for the county to hire staff and purchase technology to reduce the backlog of provisional cannabis permit holders waiting for approval for permanent annual licenses. The county currently has 757 cannabis licensees, 696 of whom are still provisional, according to the DCC. "CEQA is unique to California, and it has been a pain point for a lot of licensees in the cannabis space," DCC Chief Deputy Director Rasha Salama told POLITICO in an interview last week. "This makes it easier to stay in the licensed market" in California, she added. According to the Mendocino Cannabis Alliance, the county has approved less than one percent of all provisional license holders for annual licenses — compared to 62 percent of licensees in Humboldt County and 23 percent in Trinity County, the other two counties making up the Emerald Triangle. [Politico]

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PAGA Standing at Issue in California Supreme Court Oral Argument On May 9, 2023, the California Supreme Court heard oral arguments in Adolph v. Uber to decide “[W]hether an aggrieved employee who has been compelled to arbitrate [their individual] claims under the [California Labor Code] Private Attorneys General Act (PAGA) . . . maintains statutory standing to pursue PAGA claims arising out of events involving other employees . . . in court or in any other forum the parties agree is suitable.” The Court’s answer to the question is of critical importance to employers who utilize (or are considering utilizing) arbitration agreements. Last year, the U.S. Supreme Court held in Viking River Cruises v. Moriana that an employee who has been compelled to arbitrate their individual PAGA claim(s) lacks standing to pursue PAGA claims involving other employees in court. The decision made employment arbitration agreements increasingly attractive to employers because it potentially allowed arbitration agreements to dispose of most, if not all, of a PAGA action. But the U.S. Supreme Court’s decision also left open the possibility that the California Supreme Court might disagree with its conclusion and, because the issue is a matter of pure state law, the California Supreme Court’s decision would control at the end of the day. [CalMatters]

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New Arizona Candidate Marlene Galán-Woods, former TV journalist, has launched a campaign for Rep. David Schweikert's seat. Galán-Woods, widow of former Arizona Attorney General Grant Woods, joins four other candidates in the Democratic primary race. They hope to be the party's nominee to take on Schweikert, (R-Ariz.), in the 2024 general election. Story

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Newsom Unveils New Proposals to Build California’s Clean Future, Faster Newsom’s proposals would “Streamline projects to unleash construction across the state – accelerating the building of clean infrastructure so California can reach its world-leading climate goals while creating hundreds of thousands of jobs.” The legislative package and executive order will:

• Speed Up Construction: Current construction procurement processes drive delays and increase project costs. The Governor’s proposals include methods to offer a streamlined process for project delivery to reduce project timeframes and costs.
• Expedite Court Review: Legal challenges often tie up projects even after they’ve successfully gone through environmental review. These proposals would authorize expedited judicial review to avoid long delays on the back end and advance projects without reducing the environmental and government transparency benefits of CEQA.
• Streamline Permitting: Makes various changes to California law to accelerate permitting for certain projects, reducing delays and project costs.
• Address cumbersome CEQA processes across the board: Streamlines procedures around document retention and review.
• Maximize Federal Dollars: Establish a Green Bank Financing Program within the Climate Catalyst Fund so that the state can leverage federal dollars for climate projects that cut pollution, with an emphasis on projects that benefit low-income and disadvantaged communities.

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Lead Cal/OSHA proposes reducing the Permissible Exposure Limit (PEL) from 50 micrograms to 10 micrograms per cubic meter of air and the Action Level (AL) from 30 micrograms to 2 micrograms per cubic meter of air. These proposed levels would impose significant burdens on the entire construction industry in California, most notably mid and small contracting businesses.

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Workplace Violence Reduction Act Cal/OSHA has a workplace violence regulation for healthcare and is presently developing a workplace violence regulation for all industries – with multiple published draft texts and years of work already completed. The United Food and Commercial Workers (UFCW) is not satisfied and persuaded Senator Cortese to introduce SB 553 to impose rules stronger than those that apply to hospitals to all businesses with more than one employee.

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Workforce Housing The State Building and Construction Trades Council has sponsored SB 584, which requires a PLA to build “Laborforce housing," defined as public housing with a mixture of household income ranges at or below moderate income. It would be paid for by a new 15% fee collected from transient occupancy residential property owners - like Airbnb owners. The housing would be built by public agencies.

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Workers Compensation AB 336, an Iron Workers-sponsored bill, will require a contractor who has on file with the CSLB a current and valid Certificate of Workers’ Compensation Insurance or Certification of Self-Insurance or is required to provide those certificates to certify on the license renewal form the workers’ compensation classification codes endorsed on the licensee’s policy. The author, sponsor, and supporters of this bill contend that unscrupulous contractors do not purchase the appropriate workers' compensation policies for their work. Although workers’ compensation insurance is a condition for licensure for those contractors who have employees —and soon to be all contractors regardless of the number of employees — CSLB is not responsible for enforcing the state’s labor laws and therefore does not verify that contractors have an appropriate workers’ compensation insurance policy for the work that their employees do. Consequently, this bill is unlikely to affect enforcement. Any reduction in insurance fraud will likely be contingent upon any deterrent effect created by this bill. Although this bill would make licensees’ workers’ compensation insurance classification codes available to consumers by posting them online, this additional information is not likely to be helpful to the average consumer with limited knowledge of the construction industry, workers’ compensation insurance, or industry-specific classification codes.

Legislative Calendar:

·        May 12 – Last day for policy committees to meet before June 5

·        May 19 – Last day for fiscal committees to hear and report to the floor bills introduced in their house

·        June 2 – Last day for each house to pass bills introduced in that house

·        June 15 – Budget must be passed by midnight

·        July 14 – August 14 – Summer recess

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San Diego Decides to Elect a Fletcher Replacement Last week, the San Diego County Board of Supervisors decided to replace possibly soon-to-be-ex-Supervisor Nathan Fletcher by a special election, which will take place on Aug. 15. If no one captures more than 50 percent of the vote, then the contest will go to a runoff election on Nov. 7. However, Voice of San Diego points out “Fletcher’s position is not yet vacant, and we’ve heard no word from him since he resigned as Metropolitan Transit System chair following allegations of sexual harassment and assault and announced he would resign from the Board in May. His office says he’s been at a treatment center without outside contact. So, if Fletcher’s resignation comes to pass, this special election will be triggered. San Diego City Councilwoman Monica Montgomery Steppe and Janessa Goldbeck, a Marine veteran and LGBTQ+ advocate, have announced their candidacy.” The Democratic majority on the board is over, and the board is split on party lines. With Fletcher gone, there are two Democrats and two Republicans, and much work is needed, such as passing the county budget. It must be a bipartisan deal, with Fletcher’s seat presumably vacant for several months. The Politics Report confirmed that one name would not be on the ballot. San Diego Councilman Stephen Whitburn is not going anywhere. He plans to stay on the city council. For weeks, insiders saw Whitburn as the likeliest contender to fill Fletcher’s seat. He seemed to have a chance if there was an appointment or a special election. But he’s not going anywhere. “That work to significantly decrease street homelessness is at a critical juncture right now, and I intend to see it through,” he said.

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Laborforce Housing Senator Anna Caballero has co-authored SB 584 (Limón - D), which would create the Laborforce Housing Financing Act of 2023. The bill would impose the first statewide Transient Occupancy Tax (TOT) of 15 percent on short-term rentals like Homeaway, VRBO, and Airbnb. What is unique about SB 584 is that it is sponsored by the State Building and Construction Trades Council, and because of that, the bill requires a PLA for all construction. The fact that the bill’s sponsorers would obtain the sole-source, no-bid contract for all construction labor did not trouble the author and the Democrat Senators on the committee, who all voted AYE. General trade and public sector unions have contributed over $700,000 to Limón – the top two donor categories.

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On a related topic…Can California incentivize developers to build at a rate that would help solve our housing shortage and also require them to ensure jobs for unionized construction workers? As CalMatters housing reporter Ben Christopher explains, “That’s the question at the center of a nondescript housing project in Saratoga. Known as Quito Village, the project kicked off in 2020 when its original developer agreed to follow a strict labor standard that favors hiring “skilled and trained” union workers. The standard was included in a 2017 law and aimed to speed up construction of dense housing. Construction began in 2022 after an Atlanta-based real estate company, PulteGroup, took over the project. To date, it’s the only known project in California that has broken ground under the law’s union-hiring rule.

The law will expire in 2026 and is up for renewal. But Democrat lawmakers are debating whether to nix the “skilled and trained” requirement, arguing that it’s too heavy a burden for developers — and point to Quito Village as evidence. Assemblymember Buffy Wicks, Oakland Democrat and chairperson of the housing committee, says “So that’s one in five years. That to me kind of says it all.” To complicate matters, it’s not entirely clear that PulteGroup is even satisfying the union-hiring requirement. When it took over Quito Village, its legal team attested that law does not mandate the company to abide by the hiring standard imposed on mixed-income projects. The city of Saratoga disagrees and noted that PulteGroup has not been submitting monthly reports that would prove it’s complying with the rule.

So, the true number of projects that have resulted under the law might not be one, but zero.

One possible explanation for this: syntax. The text of the law gives certain exemptions for projects “Located within a jurisdiction located in a coastal or bay county with a population of 225,000 or more.” Saratoga is located in Santa Clara County, which has a population of nearly 2 million and is considered a bay county. Saratoga itself, on the other hand, has only 30,000 residents. Does the 225,000 threshold apply to the county or the city? If the threshold applies to Saratoga, PulteGroup would be exempt from the “skilled and trained” obligation. It would also mean that under this standard, only 12 cities out of California’s 482 would meet the law’s requirement.

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NLRB Ruling Sets Higher Bar for Discipline A new ruling from the National Labor Relations Board raises the standards for termination of an employee engaging in workplace organization, reports Andy Medici of The Business Journals. The ruling reverses a previous decision in a case involving General Motors LLC that the agency says made it easier for employers to sanction misconduct that occurs as part of a protected activity. In the decision, the NLRB said that conduct occurring during the course of a protected activity must be evaluated as part of that protected activity — and that workers have a right under the law to organize and advocate for better working conditions. The latest decision comes not long after another NLRB ruling that gutted nondisclosure agreements and nondisparagement agreements.

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Reps. Barbara Lee, Katie Porter, and Adam Schiff joined the California Labor Federation in Sacramento on Sunday night for their first-ever appearance together since each launched their campaigns to succeed Sen. Dianne Feinstein. It was a chance not only for the three to give voters a side-by-side-by-side comparison in real time, but also an opportunity to curry favor with one of the most critical sectors of the electorate — organized labor. Unions are frequently among the top donors to campaigns and top spenders when it comes to lobbying and can deploy an army of precinct marchers and door-knockers for whoever should be so lucky to win their favor. Notably, it was labor that rallied tens of thousands to help beat back the recall of Gov. Gavin Newsom. And for what has historically been a formidable force, the labor movement in California has grown steadily louder since the pandemic, manifesting in high-profile actions in Sacramento and across the state — pushing hard on housing bills, retention rights, and a bill to unionize Legislative staff in addition to high-profile strikes by Los Angeles teachers and Hollywood writers.

The three senatorial hopefuls worked to capitalize on that momentum Sunday night, speaking forcefully about workers’ rights and doing their best to rile up the room with their pro-union talking points.

Schiff led the audience in chants to pass the labor-backed PRO Act. Lee got cheers for being arrested while marching with a union in Berkeley. And Porter got one of the biggest pops of the night when she called union-busting in the name of industry transformation “some real bullshit.”

A Senate race between three popular Democrats with powerful fundraising machines will be competitive, and labor’s blessing could be the difference between victory and failure. The California Labor Federation won’t make its endorsement until December. But as the audience swarmed the candidates afterwards to shake hands and take selfies, one worker --- Claudia Fletcher of the flight attendants union — said a decision will be tough. "There's too much good talent,” she said. “I think it's a good problem, quite frankly.” [CalMatters]

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California Employers May Request a Deferral to File Labor Contractor Employee Report On May 10, 2023, private employers with 100 or more employees, with at least one employee based in California, must file their annual pay data reports with the California Civil Rights Department (CRD).  

Annual pay data reports consist of (1) a Payroll Employee Report, and/or (2) a Labor Contractor Employee Report.

• A Payroll Employee Report covers pay and demographic data for employees on an employer’s payroll in the prior calendar year.
• A Labor Contractor Employee Report separately covers pay and demographic data for labor contractor employees hired through labor contractors in the prior calendar year (for example, temporary employees).
• The Labor Contractor Employee Report is new for 2023.
• A labor contractor is an “individual or entity that supplies ... a client employer with workers to perform labor within the client employer’s usual course of business.”
• A labor contractor employee is an “individual on a labor contractor’s payroll, including a part-time individual, and for whom the labor contractor is required to withhold federal social security taxes from that individual’s wages, and who performs labor for a client employer within the client employer’s usual course of business.”
• A Labor Contractor Report is required only if a private employer has 100 or more labor contractor employees working for it.
• To gather data for the Labor Contractor Report, employers must request the data from their labor contractors, who in turn are obligated by law to provide specified data to their customers.

Since April 18, 2023, CRD has been accepting “enforcement deferral requests” to allow employers more time to file the Labor Contractor Employee Reports. To make such a request, an employer must first register itself in the CRD’s pay data reporting portal and then submit the request through the portal. If the request is granted, it is not considered an extension. The CRD will simply defer – through July 10, 2023 – seeking an order of compliance for the employer to file its Labor Contractor Employee Report. More

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Su nomination on hold as Feinstein questions linger; Julie Su’s nomination to be the next Labor secretary remains stalled. The HELP Committee cleared Su on April 26. However, with unified GOP opposition and several Democratic moderates still refusing to say how they’ll vote, this nomination isn’t going anywhere. The continued absence of Sen. Dianne Feinstein (D-Calif.) also plays into the Su fight. With Feinstein out, there’s almost no chance Su can get confirmed (she may not be anyway, to be honest). There’s been enormous speculation about Feinstein’s potential return, but we have no indication right now that Feinstein will return this week. Senate Majority Whip Dick Durbin, who also chairs the Judiciary Committee, was pressed by CNN’s Jake Tapper on Sunday. Durbin, who can’t move several controversial nominees in his panel nor issue a subpoena over the Supreme Court ethics scandal, urged Feinstein to announce her plans as soon as possible. “I hope she does what is best for her and her family and the state of California and makes a decision soon as to whether she is coming back,” Durbin said of the 89-year-old Feinstein. Note the inclusion of “soon” there. In a statement from her office last week, Feinstein pointed out that the Judiciary Committee has continued to move judicial nominees despite her absence. [Punchbowl]

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April PIT Revenue $3.8 Billion Below Budget Projection The state collected $7.49 billion in personal income tax (PIT) revenue during the month of April – approximately $3.8 billion less than anticipated in Governor Gavin Newsom’s January budget proposal – according to the PIT revenue tracker maintained by the State Controller’s Office. The revenue figures are not good news for a state facing an operating deficit estimated to be at least $22.5 billion – a January projection that is expected to grow significantly when Newsom unveils his updated budget plan and fiscal projections this week. From the beginning of the 2022-23 fiscal year through the end of April, the state collected $79.68 billion in PIT revenue, or roughly $45 billion less than during the same period last year.

However, the figures are not an apples-to-apples comparison, as the filing deadline was extended this year (from April 18 to October 16 for most California taxpayers), making it likely that much of the state’s PIT revenue will arrive far later in the year than usual. Newsom’s 2023-24 budget proposal, released in January, estimated that April PIT collections would total $11.29 billion, representing 5.44 percent of total general fund revenue of $207.34 billion projected for the 2022-23 fiscal year, which ends June 30. The January projection was based on the filing deadline being extended to May 15, as the estimate was made before the second extension of the deadline. Newsom's deadline is May 14 – Mother’s Day this year – to release a revised budget proposal with new revenue and spending projections.

The Legislature’s deadline for sending a budget bill to the governor is June 15. The courts have ruled that this bill does not have to comprise a complete budget, so budget “trailer bills” often are approved after the deadline. Given the uncertainty of the PIT collections, which typically account for roughly half of the state’s total revenue, observers expect the Legislature to delay many budget decisions until late in the year, after an expected rush of payments near the October deadline. [CalTAX]

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Tickets Going Fast Seats at WECA’s 2023 Lincoln-Reagan dinner table are almost gone. If you’d like to join WECA members on June 3 from 5:00 PM – 8:00 PM at the Marriott Marquis, Downtown San Diego, email WECA at communications@goweca.com and request a seat or two.