SB 826 (transcript)

Today’s post is on Senate Bill 826 from the 2018 legislative session concerning California’s new mandate on women on publicly traded corporate boards.

Governor Brown signed SB 826 by State Senator Hannah Beth Jackson on September 30th. It was Chapter 954. It adds two new sections to California’s Corporations Code.

Essentially the new law requires every publicly held corporation whose principal executive offices are located in the state of California to have a specified minimum number of women on its board of directors.

It also requires the California Secretary of State to review and issue reports regarding corporate compliance with the bill’s provisions and authorizes the Secretary of State to impose fines for any violations of that bill.

The Legislature did make some modifications to the bill before they sent it down to the Governor for final action, including the addition of a fine for failure to timely file board member information with the Secretary of State. They modified the dollar amounts of the fines imposed for both the first and subsequent violations of the law.

What the bill essentially states is that no later than March 1, 2020 and annually thereafter, the Secretary of State will publish a report on its website that contains specified information. Again, it authorizes the Secretary of State to impose fines for violations of the bill.

These fines are quite substantial. For failure to timely file board member information the first violation is $100,000. For a second or subsequent violation, the amount goes up to $300,000 per violation.

Section One of the bill, which represents most of the bill’s contents, sets forth numerous legislative findings and decorations. In Section Two of the bill, it adds Section 301.3 to the Corporations Code, which we’ll cover in a moment.

Then it also adds Section 211.5.5 to the Corporations Code that essentially sets forth the requirements that will cover apply to a foreign corporation ‑‑ that is a publicly held corporation ‑‑ to the exclusion of the law, the jurisdiction in which that foreign corporation is incorporated.

What this new section of the Corporations Code says is that no later than the close of the 2019 calendar year, every domestic general corporation or foreign corporation that is publicly held, and whose principle executive office according to the corporation’s SEC 10K form is located in California, must have a minimum of one female on its board of directors.

Thereafter, the bill specifies that no later than the end of the 2021 calendar year, the required minimum number must be two female directors if the corporation has five directors or three female directors if the corporation has six or more directors.

This bill has gotten a lot of press attention and numerous legal scholars have questioned its constitutionality. We’ll have to wait and see once it’s implemented at the end of 2019 whether or not a publicly traded corporation undoubtedly incorporated out of state challenges this new statute.

Earlier this week, The National Law Review recently published the work of McGeorge Capital Lawyering adjunct professor Chris Micheli. You can find Micheli’s aritcle – A Review of 2018 Labor and Employment Legislation in California – here.

Micheli overviews the fourteen major labor and employment bills that were signed into law, as well as seven other significant pieces of legislation that made it through the Legislature but were ultimately vetoed by Governor Brown. Many of the bills that Micheli looks at are pieces of legislation inspired by the #MeToo movement that swept the nation as well as the We Said Enough movement that started here in California’s capital.

Chris Micheli – Attorney; Adjunct Professor, McGeorge School of Law; Principal, Aprea & Micheli

In August 2018, Sonoma City Councilmember Rachel Hundley was attacked by an anonymous group of internet trolls. Their tactic? Take pictures that Rachel had posted on her own Instagram account from Burning Man and combine those with some inflammatory accusations on a website. Their goal? Blackmail Rachel into not running for re-election by threatening to take that website public. In a bold move, Rachel countered their move by taking them on head on, calling them out for slut shaming her and trying to blackmail her into not running for re-election in the era of #MeToo. You can see that response here.

Today, we talk with Councilmember Hundley about that experience, and the additional challenges that she faces both running for and in office as a woman and as a millenial that her male and older counterparts do not have to face.

As always, if you enjoyed today’s episode, please take the time to leave us a five-star rating on iTunes, Apple Podcasts, or Stitcher Radio, and subscribe to our show wherever you listen to podcasts. All of that makes The CAP⋅impact Podcast easier to find and more accessible.

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The CAP⋅impact Podcast is made possible by the Capital Center for Law & Policy at McGeorge School of Law in Sacramento, California. You can learn more about the Capital Center here, and keep up with the Capital Center on Facebook and Twitter.

By: Trisha Mannie

After the launch of #MeToo and revelations of many allegations of sexual harassment and assault against Hollywood producer Harvey Weinstein became public, the media’s coverage of how common sexual harassment is in the workplace has become more prevalent.  Famous women are sharing their experiences and using their status to encourage other women to do the same, resulting in a drastic rise in awareness of the pervasiveness of sexual harassment. The #MeToo and We Said Enough movements are only a couple of examples of how society is taking a stand to deter sexual harassment in the workplace. Now, more than ever, there is mounting pressure to put a halt to the somewhat normalized behaviors of sexual harassment occurring in the workplace that have hindered the success of many women’s careers for years.

SB 224 represents California’s goal to end sexual harassment in the workplace.  SB 224 acts to emphasize that those in powerful positions are liable for their actions by adding investors, producers, directors, lobbyists, and elected officials into legislation as examples of professional relationships where sexual harassment should not occur. This recognition of a broader scope of potentially liable professionals extends to include professional relationships that do not yet exist, but are offered. Additionally, SB 224 removes the requirement that the victim must prove the relationship was not able to be easily terminated before the harasser can be held liable for his or her actions. Lastly, SB 224 revises two Governmental Codes allowing the Department of Fair Employment and Housing (DFEH) to investigate cases of sexual harassment.

Through these changes, there is indication of a greater awareness for sexual harassment and a clear declaration that victims of these situations are supported by the law.  It promotes the eradication of professional behaviors of sexual harassment dictated by money, status, and power that have manipulated the vulnerable as they fear for their jobs. It removes blame from the victim by acknowledging that it is not up to the victim to terminate the relationship, but that the sexually harassing behavior should not have occurred in the first place. SB 224 makes it clear that victims are not alone as the DFEH plays a role, alongside the individual, in seeking justice.  The enactment of SB 224 unambiguously promulgates that those within professional relationships are entitled to respect, while reinforcing that those who violate this right should be held liable.

With its progressive ideals and underlying aim of achieving equality, SB 224 has faced no opposition. It passed in both the Senate and the Assembly and on September 30th, SB 224 was approved by Governor Brown. SB 224 is one step towards achieving the bigger picture of ending sexual harassment across multiple industries.

To learn more about SB 224, listen to my interview on “In Session,” a podcast from the University of the Pacific Law Review.

Trisha Mannie is a staff writer for the University of the Pacific Law Review and law student student at McGeorge School of Law in Sacramento.

Here’s what the people at the Capital Center for Law & Policy have been reading and thinking about this week.

 

 

 

Molly Alcorn

New York Times

Asian-American Students Suing Harvard Over Affirmative Action Win Justice Dept. Support by Katie Benner

Students are suing Harvard over discrimination. This is not a new story- Universities across the country have been sued for racial discrimination against minorities. However, this story caught my interest due to the very stern statement of interest from the Justice Department. In this letter, the Justice Department states that Harvard failed to “adequately explain how race factors into its admissions decisions.” Of course, to keep things interesting, Harvard fired back by stating it was “deeply disappointed” but not surprised “given the highly irregular investigation the D.O.J. has engaged in thus far.”

 

 

 

Jon Wainwright

Santa Rosa Press Democrat

I’m trying out something new for CAP·impact. If you like – or don’t like – this kind of post let me know in the comments, or on Twitter or Facebook.

We’re going to let you all know what news has been capturing our attention over the past week. This week, we’ll start with the news I’ve been chewing on for the past week, and in the coming weeks, I’ll add some other familiar CAP·impact contributors. The news stories may or may not be political in nature. With no further ado, here are my top stories from the past week.

Former lawmaker under sexual misconduct investigation sues accuser for defamation

Earlier this week, Melanie Mason of the Los Angeles Times reported that former Assemblymember Matt Dababneh – who resigned eight months ago after allegations of serious sexual misconduct – filed a defamation lawsuit against his accuser, Pamela Lopez. Mason’s report came one day after Scott Lay discussed some positive things Dababneh could do with leftover campaign money that was transferred from Dababneh’s Assembly account to an account for a run at Lt. Governor in 2022 in his daily newsletter, The Nooner (start about halfway down the page, after the wildfire coverage for his thoughts on Dababneh). Lay discussed the defamation suit that Dababneh filed in Wednesday’s edition of The Nooner.

I remember a certain somebody else threatening to sue women who accused him of sexual assault, but never making good on that threat. Personally, I don’t like the look or smell of all of this lawsuit one bit, and I completely agree with Scott Lay’s assessment that we are “going to be deep in the gutter here.”

Capitol Weekly’s 10th Top 100 List features three McGeorge alumni

Earlier this week, Capitol Weekly announced their annual Top 100 list. It’s their “annual look at people who aren’t elected to office but who wield decisive influence on California politics or policy – or both.” This year was the 10th anniversary of the Top 100 and we were happy to be at the party announcing the honorees.

We were also very happy to see three McGeorge alumni make the list this year. Coming in at number 8 this year was Alan Zaremberg, President and CEO of the California Chamber of Commerce. At 38th is Rex Frazier, President of PIFC – short for Personal Insurance Federation of California. And coming in at 57th is Mike Belote, who is President of the contract lobbying firm California Advocates and a noted philanthropist.

Congratulations to the McGeorge alumni on the list, as well as all the honorees on this year’s Top 100 list!

Early returns are in from yesterday’s primary election here in California. Below is a recap of some key statewide races and some of the key Legislative and Congressional races with my thoughts on what last night’s results mean for the election in November. Unless otherwise noted, all the numbers referenced are courtesy of the hard work of the team at the Los Angeles Times (as of 10:00am) which has a running tracker of election results in California.

Governor

Lt. Governor Gavin Newsom (D) and businessman John Cox (R) advance to the General Election. While Cox has the support of President Trump and can self-fund his campaign. Newsom, who has been running for the job since 2015, has a sizeable war chest and California’s demographics on his side.  Democrats outnumber Republicans in California by nearly 2 to 1 (closer to 1.77 to 1), and as of May 21, there are more No Party Preference voters in California than Republicans. Newsom is currently ahead of Cox by a little under 300,000 votes, despite sharing the ballot with three other major Democratic candidates. Despite what President Trump thinks, I’d expect Newsom to strike Lieutenant from his job title and become California’s next Governor in November.

U.S. Senate

2018’s U.S. Senate race will be a repeat of 2016 as two Democrats will face off in November. Incumbent U.S. Senator Dianne Feinstein has a sizeable advantage in terms of campaign cash and name ID over former State Senate Pro Tem Kevin De Leon, as evidenced by Senator Feinstein garnering 3.89 times as many votes as De Leon. This looks to be a replay of the Hillary/Bernie fight in 2016. I’d expect Senator Feinstein to keep her job.

Insurance Commissioner

Steve Poizner looks to be the first major No Party Preference candidate to make it to the General Election under California’s Top Two rules. Granted Poizner has previously held the Insurance Commissioner post and was formerly a Republican. Should Poizner be successful in his bid for Insurance Commissioner, he may be paving the way forward for more moderate Republicans looking to make an impact at the statewide level. He’ll face off against Democratic State Senator Ricardo Lara in November. Less than 25,000 votes currently separate the two, but Lara did have competition from fellow Democrat Asif Mahmood. This will be an interesting race to watch come November.

Gas Tax Proxy Fight

State Senator Josh Newman faced a recall election for voting in favor of the gas tax increase last year, and it appears that his yes vote will cost him his job. Voters favored the recall to the tune of 59% and will send former Assembly Member (and opponent of Josh Newman in the 2016 State Senate race) Ling Ling Chang to the State Senate to replace him.

The recall was viewed by many as a proxy fight for the upcoming repeal of the gas tax that will be on the ballot in November. Results here indicate that the new taxes and fees that are guaranteed to go to fixing California’s roads and bridges are in jeopardy with momentum currently favoring the repeal effort.

#MeToo at the Ballot Box

SD 32 Special Election – In the Special Election to fill out the rest of former State Senator Tony Mendoza’s term (he resigned earlier this year just before his colleagues were going to vote to expel him) came in third. In the primary election to determine who will take the seat for the new term, Mendoza is in fourth and more than 6,400 votes behind second-place finisher Bob Archuleta.

Special Elections in AD 39 and AD 45 – Democrat Luz Rivas came out ahead in the special election to replace Raul Bocanegra, who resigned last year. Rivas also came in first in the primary election for the next term.  Similarly, Jesse Gabriel (D) came in first in the special election and primary election to take over for Matt Dababneh, who also resigned.

AD 58 – Asm. Cristina Garcia (D) came in first in her primary, with Republican Mike Simpfenderfer close behind her in second. Garcia just returned to the job after taking an unpaid leave of absence from her position while allegations of sexual harassment against her were investigated. The investigation determined those allegations to be unfounded, although that result is being appealed.

The Fight to Flip the House

CD 10 – Democrats have been eyeing Rep. Jeff Denham’s seat as one to flip for as long as he’s held it, and an overabundance of Democratic candidates in the district could lead to them being shut out of the general election. Democrat Josh Harder currently sits in second, but leads Republican Ted Howze by 850 votes. The combined vote total for Democratic candidates was 31,308 – 6,600 more than Denham received. Had Democrats coalesced around just Harder instead of fielding six candidates, Denham would be biting his nails instead of Harder.

CD 22 and 25 – Incumbent Reps. Devin Nunes (R – CA 22) Steve Knight (R – CA 25) look to be safe. Both pulled in over 50% of the votes last night. Although Katie Hill, currently in second against Rep. Steve Knight, can coalesce the party support and get a boost from voters looking to put more women into office, she could give the incumbent a run for his money.

CD 39, 45, 48, 49, and 50 – These races in Orange and San Diego counties were where Democrats faced the serious possibility of having no candidates in the General Election, despite these districts going for Hillary Clinton over Donald Trump in 2016. That’s because a glut of Democratic candidates nearly created a circular firing squad situation. Instead, it appears Democrats will have candidates on the ballot in November in each of these races. CD 39 and 49 are open seats and will be very competitive. The races in CD 48 and 50 feature embattled incumbents and should also be competitive. Of these five races, Rep. Mimi Walters (R) in CS 45 seems the safest, but all of these will be closely contested races and could be key in determining control of the U.S. House of Representatives.

 

 

 

 

The big news from late last week, and last weekend, was State Senator Tony Mendoza’s (D- Artesia) resignation from the California Legislature moments before the State Senate was going to vote on whether or not to expel him. His fiery resignation letter hinted that he was not ruling out running for re-election to the position he was resigning from. Over the weekend at the California Democratic Party’s convention, Mendoza made it clear that he is running for re-election.

There is nothing in the Joint Rules of the Senate and the Assembly, Senate Rules, or the California Constitution that prevents Mendoza from doing so after resigning. Actually, had Senator Mendoza been expelled, there is still nothing that prevents him from running for re-election. And should he win re-election, there is nothing in the California Constitution, Senate Rules, or Joint Rules that allows the California Senate to not seat him. Considering Mendoza’s current lawsuit against the Senate, it would not be surprising if he were to sue again should the Senate take actions to remove him from that body.

Something clearly needs to be done. As part of the California Legislature’s overall effort to clean house and make the building a safer work environment for staffers there should be something in place – rule, law, or otherwise – that prevents those who resign, or at the very least are expelled, due to sexual harassment from returning to the Legislature. This current gap in rules and law that allows lawmakers who have resigned or been expelled over sexual harassment to return to office is a glaring hole in the protections for staffers.

The bill introduction deadline for 2018 was 1½ weeks ago, but there are a few options legislative options the Legislature could pursue – gutting and amending a bill, or introducing a committee bill among –  for there to be a legislative fix this year. Even then, the new legislation would need to have an urgency clause added to it – making the bill effective immediately upon the Governor’s signature, but requiring a 2/3 vote in each house to pass – for it to prevent Mendoza from taking a seat in the State Senate. Without the urgency clause, the new law would go into effect in January of 2019; after Mendoza would have taken his seat in the Senate should he win re-election. But in the likely case that the sexual harassment allegations against Mendoza become a campaign issue, and he still gets re-elected, the law could be challenged in court on the basis that voters knew about the allegations and his resignation, and elected him anyways.

If the California Legislature truly wants to address this issue, it could put a constitutional amendment on the ballot and have the voters decide on whether or not a member of the Legislature who resigned or was expelled from their position can be allowed to be re-elected to a position in the Legislature. Constitutional amendments, unlike bills, are not beholden to legislative deadlines and can be introduced in the Legislature at any time. That constitutional amendment could be on the ballot come November. And a statewide vote on the amendment, were it to pass, would counter the voter argument Mendoza could use against a change in statute that I mentioned earlier.

However, as was shown recently with Prop 8, even constitutional amendments that are passed by California’s voters can be challenged and taken to the California Supreme Court. But for this to go that far, it will come down to appetite of Mendoza, and/or some other Senators to be named, to continue the fight to that point.

 

 

 

As I’ve discussed before, the #MeToo and We Said Enough movements are starting to bring change to the California legislature’s persistent culture of sexual assault and harassment. That process of bringing change has been slow, perhaps too slow.

Furthering that concern are the reports about state Senator Tony Mendoza. He is under investigation for sexual harassment and misconduct and agreed earlier this month to take a paid leave of absence. However, after taking his leave, he has returned to the Capitol to work on legislation as well as attend and host events. He’s remained active in his district as well, posting pictures from a boat tour he hosted for high school seniors this past weekend. It needs to be noted that he has consistently denied the allegations against him. His actions – which fly in the face of the spirit of, if not the letter of, taking a leave of absence – are in line with these denials.

Mendoza’s actions led to current Senate President Pro Tem Kevin De León stating that Sen. Mendoza “does not have an understanding of the gravity of the situation with no decency and little respect for the institution.” My feeling is that statement driven as much by De León’s need to create space between the sexual harassment scandal that came to light while he was Pro Tem and the rest of his record in the California legislature if he wants to have any chance of being competitive in his campaign against incumbent U.S. Senator Dianne Feinstein as it is by outrage at Sen. Mendoza’s actions.

That leads me to an interesting report by Melanie Mason of the Los Angeles Times about local Democratic Party activists who are asking candidates “in explicit terms to divulge any history of sexual harassment.” This development could be a tipping point in changing the culture in the California Legislature and rooting out bad actors.

I’ve worked with candidates and shepherded them through the party endorsement process in the past. Questionnaires sent to candidates by local party clubs are the first, and sometimes the only, step in gaining that group’s endorsement. That endorsement means access to volunteers, it means potential campaign contributions, and it makes securing the party’s endorsement easier. When it comes to earning the party’s endorsement, these local club endorsements are beneficial because they send delegates to the party convention who are bound to vote for the candidate their club endorsed. By racking up club endorsements it becomes much easier to get the requisite number of votes at convention to receive the party endorsement. That’s the background to why these endorsements matter. The main reasons they matter are the access to volunteers that their endorsements bring, and more importantly, the potential access to money.

Campaigns run on volunteers. They are the foot soldiers who are out knocking on doors and calling voters. The more volunteers that a campaign has access to, the more voters it is able to directly contact. But these local clubs also collect membership dues and fundraise and can donate to candidates’ campaigns. Party endorsed candidates – and again, local endorsements help lead a state party endorsement – can receive contributions from the state party. More importantly, the state party can raise unlimited amounts of money, and through independent expenditure councils (I.E.’s), spend unlimited amounts of money. If sexual harassment becomes a line in the sand for local activists there is potential for incumbents who have sexual harassment in their history to lose support that they previously had. If that happens, volunteers go to other campaigns or stay home, money for direct mail or TV or radio ads dries up, and I.E.’s either disappear or fail to materialize.

All of that combines for a much harder reelection bid, and potentially, lead to a new wave of elected officials replacing an older crop of bad actors.

 

 

 

Recent action at the state, federal, and private corporate levels provides a window into the many ways to attack the problem of nondisclosure agreements in sexual harassment settlements.

Bar Nondisclosure Agreements in Settlements

A decade ago, the California Legislature changed the law to bar nondisclosure agreements in settlements of certain serious sexual abuse claims. The Legislature expanded it in 2016 to cover other types of claims with the passage of AB 1682. Now, Senator Connie M. Leyva (D-Chino) has announced her plan to introduce a bill to ban nondisclosure provisions in settlements of a broader list of sexual assault and harassment claims when the Legislature reconvenes in January. A similar bill is pending in the New York Legislature.

Remove Tax Deductibility of Payments if the Settlement Includes an NDA

In Congress’s new tax plan, there is a provision that takes away the business tax deduction for sexual harassment settlements that contain nondisclosure agreements. In the New York Times, University of Chicago Law School Professor Daniel Hemel called it “a nudge, not a hammer,” because most businesses will likely forego the deduction when forced to a choice.  It is also important to note that while the new provision impacts businesses, it does not affect government entities, such as the California Legislature.

Bar Mandatory Arbitration of Sexual Harassment Claims

Employers’ use of mandatory arbitration provisions has mushroomed over the last decade.  Now, over half the non-union U.S. employees are subject to such clauses.  In a series of cases, the U.S. Supreme Court has upheld employers’ rights to impose arbitration requirements, finding that federal law forbids states to limit them.  Given these holdings, a change in the law at the federal level is required to restrict employers’ use of arbitration provisions to keep women claiming sexual harassment out of court.

Now, California Senator Kamala Harris is one of several sponsors of a bipartisan bill the federal level that aims to end sexual harassment secrecy another way – by forbidding terms of employment contracts that require confidential arbitration, rather than an open lawsuit, for sexual harassment claims. The bill is co-authored by Rep. Cheri Bustos (D – Ill.) and Sen. Kirsten Gillibrand (D – N.Y.). According to Marina Fang’s reporting, the “Senate bill is also backed by Sens. Lindsey Graham (R – S.C.), Lisa Murkowski (R – Alaska)” and the “House version has support from Reps. Walter Jones (R – N.C.), Elise Stefanik (R – N.Y.), and Pramila Jayapal (D Wash).”

Private Action Instead of Legal Change

And a change in the law is not always necessary to address a problem like secret settlements, if powerful corporations decide, or can be nudged, to change on their own.  Microsoft recently announced that it will no longer force women alleging sexual harassment into mandatory arbitration.