Service Employees International Union 1000 says State Compensation Insurance Fund’s management is trying to stop a bill that would prevent former SCIF executives from using the quasi-public agency’s confidential information if they go to work for competitors.

As currently written, AB 1263 (authored by Das Williams, D-Ventura) would require that State Fund executives who leave the workers’ comp carrier would be prohibited from being employed by a competitor if doing so would result in competing with State Fund and using its trade secrets or confidential information.

Further, like other governmental employees, including legislators, it would prohibit them from using the knowledge and relationships they gained in their former position for consulting with or lobbying State Fund for others.

The legislation is still in flux as amendments are likely to be introduced, but State Fund’s highly paid lobbyist, who takes directions from its management, suggests they are less concerned with language that protects proprietary information than with the notion that former State Fund execs may not be able to seek work in the industry for two years. The current language may have that broad effect, almost akin to a non-compete clause.

Nonetheless, unless the bill seeks to enact a statute changing the law, the intent will need to be made very clear to pass legal scrutiny. Attorneys tell Workers’ Comp Executive that non-compete clauses, except in selling a business, are not legal and are unenforceable in California.

Randy Cheek of SEIU 1000 says SCIF’s president Tom Rowe is already trying to “kill the bill,” and that State Fund’s lobbyist George Miller is doing his bidding. “We’ve been contacted by the author’s office saying they want amendments,” Cheek says, adding that he expects to see amendments and plans to work with the author and SCIF.

“We want everyone to have a job. We just don’t want anyone stealing from SCIF.”
—Randy Cheek, SEIU 1000

“We’re not trying to keep people from working. We’re not trying to keep someone from working in the industry,” Cheek says. “We want everyone to have a job. We just don’t want anyone stealing from SCIF,” he says.

Currently, State Fund executives are bound by the Milton Marks Postgovernment Employment Restrictions Act of 1990, which prohibits certain state employees from receiving compensation to appear or communicate with an agency or to influence certain agency decisions for one year.  Former legislators are prohibited from lobbying the Legislature for a year.

Rowe’s employment contract contains a clause that says in pertinent part: “If State Fund or the executive terminates this agreement for any reason, Executive agrees that for one a (1) year period following termination of Executive’s employment with State Fund, Executive shall not improperly use State Fund Confidential Information to solicit the business of any customer with whom State Fund is doing or has done business during that one year period preceding termination, encourage any such customers to use the facilities or services of any competitor of State Fund.”

But defining “improperly” could make for a lot of deposition.

Cheek says SEIU’s bill could just expand on that covenant and increase that number to two years to better protect State Fund’s proprietary information.

“A legislator has a restriction of one year before he or she can lobby the Legislature. Many times they get hired by a firm and are put on the payroll for that first year, then they lobby,” Cheek says. “SCIF has staff with proprietary knowledge that could be beneficial to another company and thus let someone sit on payroll for a year.”

Susan McEntire, chief of staff for Assemblyman Williams, says a fact sheet on the intent is still being prepared, but she had no comment yet.

Other staffers say they see the drive behind the bill, but the intent is certainly on the fuzzy side.

“I’m not convinced that it doesn’t have the broad effect. I also believe it’s quite unclear in its language, so it is susceptible of differing views of how broad it is,” says Mark Rakich, chief consultant for the Assembly Insurance Committee, adding that it could possibly keep a company from recruiting a SCIF person.

Cheek says that SEIU is willing to amend the bill, just so long as there is a way to prevent someone in an exempt position from leaving SCIF and then using its trade secrets.

State Fund’s lobbyist George Miller tells Workers’ Comp Executive that it does not have a position on the bill as yet, and at this point has submitted only technical amendments to the author’s office. The intent of the bill is still in question.

“If the intent is that in the future [a company] is seeking to bring in new management expertise, it’s going to be harder to recruit someone [if an employee has to wait two years],” says Miller. “But if the intent is to [protect] proprietary information, I don’t think we’re arguing with that.”  

(Filed by Bess Shapiro in Sacramento)