New California law to affect school foodservice-contract business: in bid to protect jobs of union workers, mandate limits districts' cost-cutting outsourcing

Nation's Restaurant News, Oct 14, 2002 by Paul King

SACRAMENTO, CALIF. -- School districts in California must demonstrate quantifiable benefits to taxpayers before they can outsource support functions such as foodservice, according to a state law Gov. Gray Davis recently signed.

The law, which takes effect Jan. 1, also was designed to protect the rights and jobs of tens of thousands of support staff in the state's 1,055 school districts.

One of the primary requirements that school districts must fulfill in order to enter into what the state refers to as "personal services contracts" is to prove that they are not hiring a contract company in order to reduce staffing or cut wages.

The law, proposed by state Sen. Richard Alarcon, D-Sacramento, and passed by the state Assembly last month, mandates that "proposals to contract out work shall not be approved solely on the basis that savings will result from lower contractor pay rates or benefits." In addition, districts must ensure that "the contract does not cause the displacement of school district employees through such means as "layoff, demotion, involuntary transfer to a new classification, involuntary transfer to a new location requiring a change of address and time-base reductions."

School districts that currently have personal-services contracts in place are exempt from the law and will be allowed to renew such contracts when they expire.

Alarcon's spokesman, Pat Henning, said the lawmaker drafted the bill at the request of the California School Employees Union, which Henning said represents more than 200,000 school-support personnel in the state.

"We were approached by union members, who complained that there were school districts that were contracting out, or getting ready to contract out, a variety of services," Henning explained. "The union was worried that they were going to be losing jobs in the process.

"Our view was that other state government agencies have to go through these legal hoops when they contract services," he added. "School districts didn't have those specific criteria to follow. This will standardize the contract procedure."

Executives of the nation's three largest school-foodservice contractors were not ready to comment on the possible effects of the law on their businesses.

John Stepnoski, president of School Support Services for Philadelphia-based Aramark, said he could not address the law specifically until after the company's legal department had studied the legislation. However, Stepnoski noted that Aramark currently provides only food-consulting services to California districts.

According to Henning, such consulting contracts are exempt from the new law because they do not involve classified-service employees.

Katie Miller, spokeswoman for Compass Group North America, said California-based executives of Chartwells, Compass Group's school-foodservice subsidiary, were unavailable for comment.

Stacey Hade, public-relations manager for Sodexho, said school-foodservice executives of the Gaithersburg, Md., contractor still were evaluating the potential effects of the new law.

Barry Sackin, legislative-affairs director for the American School Food Service Association, said his organization also was unaware of the passage of the legislation.

However, there is little doubt that the legislation will alter the way foodservice contractors vie for business in California. Most contractors save their clients money by reducing payrolls, often by cutting staff, reducing wages or both.

Still, in recent years contractors have managed to operate successfully on the campuses of large state universities, even though such institutions' employees -- and their pay scales -- are protected either by state law or pre-existing union contracts.

Employees' rights are not the only things the new California statute is designed to protect. The law also appears to be a safeguard against school districts creating financial and legal problems in the future. For example, the legislation requires that:

* the amount of savings justify the size and duration of the contracting agreement;

* there be minimal potential for future economic risk to the school district from potential contractor rate increases;

* contracts be awarded through a publicized, competitive bidding process;

* a contract include specific provisions pertaining to the qualifications of the staff that will perform the work under the contract as well as assurances that the contractor's hiring practices meet applicable nondiscrimination standards; and

* the potential economic advantage of contracting is not outweighed by the public's interest in having a particular function performed directly by the school district.