The Morning Report
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California allows governments to sue people and businesses who engage in unfair and fraudulent practices.
But state law also requires that half of the penalties collected through civil enforcement must be shared with the county treasurer if the legal action is brought by a city prosecutor. In other words, the city might file a consumer protection case but only get 50 percent of the fines in the end.
“The distribution is not fair, and it doesn’t make sense,” San Diego City Attorney Mara Elliott told the Senate Judiciary Committee last week. “Recovering full penalties for the work we do is very important.”
Elliott is a sponsor of AB 3020, written by Assemblyman Todd Gloria. The bill would allow the city of San Diego to collect the full penalty stemming from any consumer cases they bring to the court.
It passed the Assembly earlier this year. It also passed the Senate Judiciary Committee on July 30 by 7-1, with Sen. Andreas Borgeas, a Republican from Fresno, not casting a vote. During the hearing, Borgeas expressed concern that other cities would see what San Diego was doing and want to alter their revenue-sharing responsibilities, too.
The state’s Unfair Practices Act, however, specifies that only cities with populations of more than 750,000 can bring these types of cases forward in the first place. Those are San Jose, San Diego and Los Angeles, according to a legislative analysis of Gloria’s bill. (San Francisco also has special prosecutorial powers as a consolidated city-county.)
Borgeas went on to ask why the bill was important enough to deserve a hearing at all. Legislative leaders have asked that non-coronavirus-related bills wait until 2021.
“Local governments are being squeezed in this pandemic and their revenues are plummeting, making them have to choose very difficult priorities of what they can pursue and what not pursue,” Gloria argued. Elliott, he said, is handling some cases related to COVID-19, “but has to judge on the fact that if she spends $100,000 in doing it, she only gets half of the revenue back.”
In an interview this week, Mark Ankcorn, chief deputy city attorney for the Affirmative Civil Enforcement Unit, said his staff has investigated hundreds of complaints during the pandemic. Some of those complaints were leveled at people selling goods on the internet, which means major platforms are in the middle, which complicates things.
“Having a robust enforcement division that is able to get back from these bad actors some of the costs of our investigations means we can do even more for consumers,” Ankcorn said.
Another problem, as Ankcorn sees it, is that the state consumer protection law anticipated a small volume of cases and split the penalties between cities and counties as a way to fund superior courts. But superior courts are largely funded these days through filing fees, Ankcorn said. “This is effectively windfall money for these counties and it’s long vexed the prosecutorial community.”
More on the history: Gloria introduced a similar bill in 2019, but it was broader in scope and would have applied to eligible city attorneys across the state. Gov. Gavin Newsom vetoed it, saying state law was “intended to ensure that both the city and county have resources to enforce consumer protection laws.”
The California State Association of Counties lobbied against it, but the group is staying out of Gloria’s San Diego-specific version of the same bill. AB 3020 has no registered opposition, and Ankcorn said Newsom has signaled early support for it.
A spokesman for the county didn’t return a message seeking comment on the bill.
– Jesse Marx
AB 5 Fixes Rolled Into Urgency Bill
The work of clarifying and changing last year’s landmark AB 5 began as a handful of separate bills, but now has been consolidated into a single measure that would take effect immediately if the Legislature and governor sign off.
AB 5 limited the circumstances in which employers could classify workers as independent contractors, and carved out exemptions for certain professions from the law.
Assemblywoman Lorena Gonzalez presented the new bill, AB 2257, to the Senate’s Labor, Public Employment and Retirement Committee this week.
The bill “provides crucial, yet structured, pathways for interpreters, translators, caddies and other professionals to create a small business and work with a third-party referral agency for referrals and payment processing,” according to the committee’s analysis.
With virtually all of the changes, Gonzalez described a difficult task of trying to thread a needle that would satisfy individual workers but prevent corporations from exploiting them. Gonzalez’s testimony on the bill was punctuated with phrases like “it’s been difficult,” “we still have a lot of work to do” when describing the effort to refine the original law.
On strengthening a business-to-business exemption, for example, she said she worried Uber would attempt to seize on any language to attempt to paint each driver as his or her own business. On crafting rules for labor brokers and referral agencies, she said she wanted to help individual interpreters and others who utilize such services while preventing those services from exploiting users by taking large cuts of their money.
“This is important because what we care most about is that the employee is protected,” Gonzalez said at the hearing.
Among the many other changes contained in the bill, AB 2257:
- Adds further exemptions to AB 5 for many music industry professionals, competition judges, appraisers, certain insurance professionals and others
- Lifts the rule that prevented freelance journalists from contributing no more than 35 pieces to a single publication
- Clarifies that youth sports coaches can be exempted under the referral agency rule
- Contains an urgency clause that would allow it to go into effect as soon as the bill is signed
The committee passed the bill 5-0; it now moves to the Senate’s Appropriations Committee.
- Meanwhile, the state’s labor commissioner filed two new lawsuits against Uber and Lyft, arguing they’re violating AB 5 and owe drivers benefits and wages. (Sacramento Bee)
– Sara Libby
Hotels-as-Housing Plan Moves Forward
The San Diego Housing Commission is officially pursuing state grant funds to try to buy hotels to house hundreds of homeless San Diegans.
Commissioners voted 4-0 Tuesday to allow staffers to apply for state Project Homekey funds to help the city buy at least two unspecified hotels.
The vote this week comes less than a month after Gov. Gavin Newsom said that the state would begin accepting grant applications to use $550 million in federal Coronavirus Aid Relief Funds allocated to the state and another $50 million from the state’s general fund.
The Project Homekey initiative is the second phase of Newsom’s Project Roomkey initiative, which aimed to temporarily shelter thousands of vulnerable homeless Californians during the coronavirus pandemic.
Before the Project Homekey funds were finalized in the state budget, Mayor Kevin Faulconer in June joined other California mayors to rally behind Newsom’s $600 million hotel acquisition plan. Almost two months earlier, Faulconer revealed he was working with the Housing Commission on a plan to acquire “hundreds and hundreds” of hotel rooms and had spoken with Sen. Kamala Harris and others about additional funding for this purpose.
The City Council later signed off on a Housing Commission budget that includes $29 million in the its budget for the hotel purchases.
Now the Housing Commission is hurrying to submit multiple applications for additional funds it would need to spend by the end of the year.
The county is eyeing its options too.
County spokeswoman Sarah Sweeney said the county is also considering whether to apply for funds but does not expect to submit any applications before state’s initial deadline next week.
– Lisa Halverstadt
Golden State News
- The Los Angeles Times delved into the chaos at California’s unemployment agency and laid out why it’s taking weeks or months for some people to get benefits. Those problems are why a host of lawmakers, including San Diego Assemblymen Todd Gloria, Brian Maienschein and Randy Voepel and Sen. Pat Bates signed onto a letter this week urging Gov. Gavin Newsom to implement widespread reforms within the department.
- This is the second time in two weeks a California police agency has been accused of harboring a secret clique that celebrates fatal shootings. Meanwhile, attorneys say the Fresno County sheriff is violating a key piece of the so-called sanctuary state law. (ABC 7, Fresno Bee)
- Southern California Gas is suing California, arguing the state isn’t doing enough to consider using natural gas. (Los Angeles Times)
- Senate President Pro Tem Toni Atkins asked lawmakers to significantly scale back their bill packages amid the COVID-19 crisis, but which bills still deserve a hearing on a massively abbreviated schedule is the source of much tension in the Capitol. (Sacramento Bee)
- A data glitch is hampering officials’ ability to understand what progress – if any – California is having in getting coronavirus cases under control. (Politico)
- The U.S. Supreme Court blocked a lower court order requiring Orange County to take certain measures to protect prisoners from the spread of the coronavirus. (Orange County Register)