On September 30, Governor Newsom signed into law Assembly Bill 334 (AB 334, Rubio), a significant update to clarify California Government Code Section 1090's conflict of interest prohibition and its application to independent contractors engaged by public agencies.

Government Code Section 1097.6 will go into effect on January 1, 2024 and will provide public agencies with new options to maintain independent contractors' continuity of services through a multistage project.

Section 1090 prohibits public agency "officers or employees" from having a personal financial interest in any contract they make in their official capacity. Previous court decisions have established that an independent contractor may be considered an "officer" subject to Section 1090, if the contractor has the potential to exert influence over the agency's contracting decisions. (See People v. Superior Court (Sahlolbei) (2017) 3 Cal.5th 230; Davis v. Fresno Unified School District (2015) 237 Cal.App.4th 261, 300; Hub City Solid Waste Services, Inc. v. City of Compton (2010) 186 Cal.App.4th 1114, 1124-1125.)

The application of Section 1090 to independent contractors has been fraught with many uncertainties, often requiring public agencies to rely on interpretations of court decisions and Fair Political Practices Commission Opinions. Coupled with Section 1090’s harsh penalties (e.g., contract recission or criminal charges for willful violations), this has led many public agencies to take conservative approaches in structuring their procurements of projects utilizing independent contractors to avoid potentially running afoul of Section 1090.

AB 334 establishes a new statute, Government Code Section 1097.6, to clarify Section 1090 in two ways, and the law is very beneficial to public agencies. First, Section 1097.6 states that an independent contractor who did not prepare or assist in preparing solicitation materials for a subsequent contract is not an "officer" of the public agency. Second, Section 1097.6 explains that even if an independent contractor did participate in preparing a public agency solicitation, the contractor is not prohibited from entering into the subsequent contract so long as the prior participation was (1) limited to conceptual, preliminary, or initial plans or specifications and (2) all bidders or proposers for the subsequent contract have access to the same information, including the conceptual, preliminary or initial plans.

Hanson Bridgett’s Government Group routinely provides advice and counsel on compliance with Section 1090. We will be hosting a series of trainings on this new law and offering tips for navigating this complex topic. If you are interested in attending a training please let us know via the link below.

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