Bill Summary and Fact Sheet for An Act to Ensure Expenditure of and Accounting for State Funds

Bill Lead Sponsors: Representative Martin Walsh, 13^th Suffolk

Bill Number: HB3458

Bill Co-Sponsors:

Current Law Affected:
Chapter 7, Section 56

Proposed Law:
This law amends Section 56 of Chapter 7 by further specifying prohibited practices of contractors. This clarification of Section 56 would ensure that state funds given through contracts to employers for the purchase of goods, services, and the performance of public contracts or public works would be used explicitly for the reasons given in the contract.  It would make it a prohibited practice to advise, consult or provide any other service to such contracting person or entity relative to persuading employees thereof to support or oppose any organization of said employees or any other employee self-organization or concerted activity for mutual aid or protection. If a state-funded employer were suspected of misappropriating funds by using them towards contracting people or an entity relative to influencing employees' activities, the state auditor would investigate the contract to determine if the contractor improperly used state funds. If the Auditor determines that state funds have been misappropriated the Auditor would refer the case to the Attorney General for further investigation. State funded employers would be required to maintain records to show how state funds have been appropriated and expended which will be available to the state auditor or attorney general upon request.

Rationale:
The Massachusetts AFL-CIO believes that funds provided to contractors should be used specifically for the goods or services within that contract. Any diversion of the Commonwealth's funds other than for the purpose that the contractor was hired constitutes should be explicitly prohibited within Chapter 7. 

AN ACT TO ENSURE PROPER EXPENDITURE OF AND ACCOUNTING FOR STATE FUNDS

SECTION 1.  Section fifty-six of chapter seven of the General Laws is hereby amended by striking the entire text thereof and substituting following:

§ 56.  Ensuring proper expenditure of and accounting for state funds; prohibiting expenditures for influencing employees with state funds       

            (a) It is hereby declared to be the policy of the commonwealth that payments by the commonwealth, or by any agency, authority or political subdivision thereof, pursuant to a contract with any person or entity shall not be made for the costs of any attorney, consultant or other person to advise, consult or provide any other service to such contracting person or entity relative to persuading employees thereof to support or oppose any organization of said employees or any other employee self-organization or concerted activity for mutual aid or protection.  This section shall not apply to the costs of attorneys or consultants to assist in collective bargaining with a union or other employee organization recognized as said employees' bargaining agent or to administer a collective bargaining agreement. 

            The general court hereby finds, and it is hereby further declared to be the policy of the commonwealth that (1) sound fiscal management, protection of taxpayers, and proper use of the commonwealth's resources require vigilance to ensure that funds appropriated or granted by the legislature for or in connection with the purchase of goods and services, the performance of public contracts or public works, or the provision of services for or on behalf of the commonwealth, are ultimately expended solely for the purposes for which they were appropriated or granted, and that public agencies, and vendors and suppliers to, contractors with, and grantees of the commonwealth, perform their functions in the most economical and efficient manner, consistent with the requirements of law, public policy, and the rights of the people; (2) when public funds are appropriated for the purchase of goods and services, the performance of public contracts or public works, or the provision of services for or on behalf of the commonwealth, but are instead used to exert or to attempt to exert influence on employees as described herein, interruptions or impairments in quality occur in the supply of such goods and services, the performance of such contracts or public works, and the provision of such services; the proprietary interests of the commonwealth are adversely affected; public funds are misused; and the scarce resources of the commonwealth are misapplied.

            (b) The following words and phrases as used in this section fifty-six shall have the following meaning unless the context clearly requires otherwise:

            "Attorney general", the attorney general of the commonwealth.  "State auditor", the auditor of the commonwealth.  Whenever the word "he" appears herein in reference to an official, it shall mean "he or she", as the case may be.

            "The commonwealth" or "commonwealth", the state of Massachusetts or any agency, office, department, division, board, commission, office, officer, authority, or political subdivision thereof, or any corporation, entity, or body created by state law.

            "Employee", any individual employed by the commonwealth or by a state funded employer as defined in this section whose wages, salary, or compensation are, in whole or in part, directly or indirectly, paid for, financed, derived, or subsidized by, with, or from state funds; or any individual engaged in performing work or providing services that are, in whole or in part, directly or indirectly, paid for, financed, derived, or subsidized by, with, or from state funds.  "Employee" shall include any individual employed by a state funded employer who performs duties related, in whole or in part, to the state funded employer's provision of goods or services to the commonwealth, or its performance of a public contract or public works, or its provision of services to or on behalf of the commonwealth.

            "Employee influence activity", any activity, effort, or attempt by a state funded employer to (1) influence one or more of its employees with respect to their decision or choice whether to favor, support, or oppose unionization or a labor organization that represents or seeks to represent some or all of its employees; (2) encourage or discourage any employee from joining or refraining from joining a labor organization that represents or seeks to represents some or all of its employees; (3) encourage or discourage any employee from forming or assisting or refraining from forming or assisting any effort by a labor organization that represents or seeks to represent some or all of its employees, or any other form of employee self-organization involving some or all of its employees; or (4) assist, encourage, discourage, or deter any effort by its employees to obtain representation by a labor organization, or any effort by a labor organization to obtain the right to represent some or all of its employees.  The conduct of a meeting during working hours at any location, or at any time in a location where work is conducted or services performed that are in whole or in part paid for, financed, or subsidized by or with state funds, shall be deemed to be an employee influence activity, if such meeting involves, includes, or is conducted for the purpose of or in connection with an employee influence activity.  "Employee influence activity" does not include otherwise lawful activities in connection with addressing grievances; negotiating or administering a collective bargaining agreement; performing any action required by federal or state law or by a collective bargaining agreement; negotiating, entering into, or carrying out a voluntary recognition agreement with a labor organization; informing employees, in a manner truthful and not misleading, of their rights and of the state funded employer's obligations under this or any other law; or obtaining legal counsel with respect to compliance with this or any other law or with respect to any legal or administrative proceeding to which the state funded employer is or is likely to be a party.  If, so that employees are more fully informed of their rights, the law applicable to a state funded employer permits or requires the state funded employer to allow, on a non-discriminatory basis, the use of bulletin boards, email, or other facilities normally used for communication with or by employees, by any employee, labor organization, group of employees, or bona fide employee organization, not assisted, dominated, or interfered with by the employer, for discussion of issues related to unionization or collective bargaining, whether in favor, opposed, or undecided; or if said applicable law permits or requires a state funded employer to allow, on a non-discriminatory basis, access to its facilities or property by any employee, labor organization, group of employees, or bona fide employee organization, not assisted, dominated, or interfered with by the employer, then such allowance of use or access to facilities or property shall not be deemed an employee influence activity or expenditure.

            "Employee influence expenditure", any cost or expense made or incurred, directly or indirectly, by the commonwealth, or any expense made or incurred, directly or indirectly, by a state funded employer, where such expense is made or incurred (1) for or in connection with any employee influence activity; (2) for or in connection with an activity which the state funded employer knows or reasonably should know constitutes an employee influence activity; (e) to train managers, supervisors, or other personnel regarding methods or techniques of or related to employee influence activities; (4) to hire, retain, pay the salary of or any other compensation to, or defray any expenses of any individual, corporation, unincorporated association, partnership, firm, consultancy or other entity, or any individual acting for or on behalf of such individual, corporation, unincorporated association, partnership, firm, consultancy, whose duties include research, planning, advising, preparing, coordinating, carrying out, or engaging in employee influence activities or in connection with employee influence activities, or training managers, supervisors, or other employees and agents of the state funded employer to engage in any employee influence activity.  Any cost to a state funded employer associated with or occasioned by employee influence expenditures, including but not limited to the pro rata share of administrative, accounting, and legal costs attributable to considering, planning, preparing, carrying out, or engaging in an employee influence activity, and the pro rata share of managerial, administrative, or supervisory salaries and compensation attributable to considering, planning, preparing, carrying out, or engaging in an employee influence activity, shall be deemed to be an employee influence expenditure.

            "Prohibited expenditure", any employee influence expenditure which is defrayed or for which reimbursement is sought, in whole or in part, with or from state funds.

"State funded employer", the commonwealth, or any individual, corporation, unincorporated association, partnership, institution, trustee, trustee in bankruptcy, receiver, government agency or body, or other legal entity or association, or any director officer, or managerial employee acting as an agent for such individual, corporation, unincorporated association, partnership, institution, government agency or body, or other legal entity or association, that (1) employs at least one person in the commonwealth, and (2) receives state funds, whether through payment, grant, allocation, or reimbursement, for supplying goods or services pursuant to contract with the commonwealth, or for the performance of public works pursuant to contract with the commonwealth, or for or in connection with the provision of services to or on behalf of the commonwealth, or for the performance of any contract with the commonwealth.

"State funds", the revenues of the commonwealth, and any money drawn from the treasury or any special fund or trust fund of the commonwealth, which is appropriated, expended, paid over, granted, or transferred to any other person or entity for the purpose of supplying goods or services pursuant to contract with the commonwealth, for the performance of public works pursuant to contract with the commonwealth, or for or in connection with the provision of services to or on behalf of the commonwealth , or for the performance of any contract with the commonwealth.

            (c) The commonwealth shall not engage in any employee influence activity or make any prohibited expenditure.  No state funded employer shall make any prohibited expenditure.  The commonwealth shall not appropriate, pay, grant, or transfer state funds, or, with state funds, reimburse a vendor, supplier, grantee, contractor, or any other individual or entity, to defray the costs of or occasioned by any employee influence activity.  As a condition of receiving state funds, a state funded employer shall certify to the commonwealth that it shall not make any prohibited expenditures and it shall otherwise comply with the requirements of this section.

            (d) All state funded employers shall maintain records, audited as to their validity and accuracy, sufficient to show that no reimbursement is sought for employee influence expenditures, and that no state funds are, have been, or will be used for prohibited expenditures.  A state funded employer shall make such financial records available for inspection to the state auditor or to the attorney general, within ten business days of receipt of a request from the state auditor or the attorney general.

            (e) Any taxpayer of the commonwealth who complains that a state funded employer has made or is making a prohibited expenditure may request the state auditor to investigate the matter; upon reasonable cause to believe a violation of this section has occurred or is occurring, the state auditor may commence an investigation on his own motion.  The state auditor shall issue reasonable regulations concerning the receipt and processing of complaints and investigations hereunder, which regulations shall, at a minimum, provide for prompt notice to the state funded employer against whom a complaint has been lodged or an investigation commenced, and for consultation with and the receipt of evidence from the complainant, the state funded employer, and any other party whom the state auditor believes has or may have relevant evidence or information in the matter.  Within forty-five days, the state auditor shall prepare and deliver to the complainant, the state funded employer, and the attorney general, a report summarizing his investigations and conclusions.

            (f) The attorney general shall review the state auditor's report and conduct such further investigation as he deems appropriate, on notice to the complainant and the state funded employer.  The attorney general shall attempt to resolve any dispute by agreement of the parties, provided that, if the attorney has reasonable cause to believe that a prohibited expenditure has occurred, he shall demand as a condition of any resolution the reimbursement of the amount of such expenditures, with interest, and an equal amount as liquidated damages, and, provided further, he shall, in his discretion, condition any such resolution on reimbursement of reasonable costs and attorneys fees incurred by the complainant in bringing a meritorious complaint to the attention of the attorney general.  The attorney general shall issue reasonable regulations pertaining to the procedures his office shall follow under this subsection.

            (g) Where it is alleged that a state funded employer other than the commonwealth has engaged in a prohibited expenditure, a civil action for violation of this section may be brought in the superior court, as hereinafter provided, within three years of the alleged prohibited expenditure.  If the attorney general is unable to bring about a resolution of a matter as provided in the preceding subsection (f), the attorney general may commence a civil action.  If the within forty-five days of receipt of the state auditor's report, the attorney general does not initiate a civil action in regard to a complaint, the complainant or any other taxpayer of the commonwealth may commence a civil action on behalf of the commonwealth, provided that, if at any time thereafter the attorney general commences an action under this section, the right of the taxpayer to proceed with a separate action shall terminate, provided further that, in that event, the taxpayer may intervene in the attorney general's action as a plaintiff.

(h) For a violation of this section, the court shall order the state funded employer to reimburse the commonwealth in the amount of any prohibited expenditure plus interest, and an equal amount as liquidated damages.  If the court finds that a knowing violation of this section has occurred, or that within the previous five years the state funded employer has been found to have committed one or more violations of this section, the court shall order the state funded employer to pay, in addition to the above remedies, a civil penalty in an amount equal to the amount of any prohibited expenditure plus interest.  The court shall provide such other and further relief, legal and equitable, as shall in its discretion seem just and appropriate. Any damages, interest, or penalties recovered in an action under this section shall be deposited in the treasury of the commonwealth, except that a taxpayer plaintiff in an action that results in a finding of a violation of this section may recover reasonable costs and attorneys fees.  A taxpayer who commences an action later superseded by an action brought by the attorney general that results in a finding of a violation of this section may recover reasonable costs and attorneys fees incurred prior to the initiation of the attorney general's action, and said taxpayer may recover reasonable costs and attorneys fees incurred thereafter if the taxpayer intervenes in and makes a substantial contribution to prosecution of the attorney general's action.

(i) If, on motion of  the plaintiff, either the attorney general or the taxpayer, as the case may be, the court finds that prohibited expenditures are occurring or are likely to occur or continue to occur unless restrained, the court may grant temporary or permanent injunctive relief to prevent such prohibited expenditures.  The provisions of section six of chapter two hundred and fourteen and of section one of chapter two hundred and twenty concerning the equity jurisdiction of the courts in cases involving or growing out of a labor dispute shall not apply to any proceeding under this section.

(j) In any action under this section, if a state funded employer is found to have engaged in any employee influence activity or to have made any employee influence expenditure, it shall be presumed that any expenditures for or in connection therewith are prohibited expenditures, unless the state funded employer establishes by clear and convincing evidence that the such expenditures were defrayed entirely with segregated funds derived entirely from revenue sources other than any state funds of which the state funded employer is a recipient, grantee, payee, or beneficiary, and that the segregation of such revenues not derived from state funds was established prior to commencing any employee influence activity or expenditure.

(k) Subsections (c), (d), (e), (f), (g), (h), (i), and (j) this section shall not apply to expenditures, contracts, or grants made prior to its effective date, unless such expenditures, contracts, or grants were continued, extended, renewed, or modified after said effective date.

SECTION 2.  If any section, subsection, sentence, clause, or phrase of this Act is for any reason held to be unconstitutional or invalid under the constitution and laws of the United States and of the commonwealth by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Act.  It is hereby declared that this Act and each and every section, subsection, sentence, clause, or phrase therein not declared unconstitutional or otherwise invalid would have been passed without regard to whether any portion of the Act would be subsequently declared unconstitutional or otherwise invalid.