HOUSE BILL REPORT

ESHB 2000

As Amended by the Senate

BYHouse Committee on Agriculture & Rural Development (originally sponsored by Representatives Rayburn, Chandler and Baugher)

Establishing fair practice standards for produce handlers and associations.

House Committe on Agriculture & Rural Development

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (10)

      Signed by Representatives Rayburn, Chair; Kremen, Vice Chair; Nealey, Ranking Republican Member; Baugher, Chandler, Grant, Jesernig, H. Myers, Rasmussen and Youngsman.

Minority Report:  Do not pass.  (1)

      Signed by Representative McLean.

House Staff:Kenneth Hirst (786-7105)

AS PASSED HOUSE MARCH 15, 1989

BACKGROUND:

The state's Consumer Protection Act declares unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade or commerce to be unlawful.  The act authorizes the Attorney General to bring actions in the name of the state to prevent persons from performing acts in violation of its provisions and authorizes the court to order the restoration of moneys or property.  The act also permits the court to award attorney's fees and damages in certain circumstances.  Civil penalties are also established for violations of certain provisions of the act.

SUMMARY:

Negotiating Units.  An association of producers may file an application with the Director of Agriculture requesting accreditation as the exclusive negotiating agent for its members within a negotiating unit with respect to any farm product. The director must approve an application if the director finds (among other requirements) that the association: is owned and controlled by producers; has binding contracts with its members empowering the association to sell or negotiate the sale of its members' products; and represents a sufficient number of producers or quantity of product to function as an effective agent in bargaining with handlers.

Negotiations.  The director must designate an annual negotiation and arbitration period of not more than 60 days, called a contract settlement period, applicable to each crop for which an association of producers is accredited.  The director must also set a time and place for associations and handlers of crops to meet and commence bargaining for the terms of the contract for the coming crop year.  The bargaining required by a handler extends only to an association that represents producers with whom the handler has had a prior course of dealing, as specified.  None of the bargaining provisions apply to processors which only clean, sort, grade, and package farm products for sale without altering the natural condition of the products.

Mediation & Arbitration.  If the parties have not reached an agreement after 3 consecutive weeks of bargaining, the director must order the matter into arbitration.  All bargaining must cease by a date specified by rule.  If mediation is requested by either party, both must engage in mediation in good faith.  Binding arbitration is required if the negotiations have failed to produce agreement on all terms of the proposed contract.  Not later than 10 days after appointment, the arbitrator must choose the final offer of one party.  The director shall direct that the contract so developed be executed by the parties.

Prohibited Acts.  It is unlawful for a handler to: coerce a producer regarding the producer's right to belong to or contract with an association; discriminate against any producer in price or other terms because of such a membership or contract; offer inducements to a producer for refusing or ceasing to belong to an association; make certain false reports regarding an association; refuse to negotiate in good faith with an accredited association; or engage in certain related activities.  It is unlawful for an association to: refuse to negotiate in good faith with a handler; coerce or intimidate a handler to terminate a contract with an association or a member of the association; make certain false reports regarding an association or a handler; or engage in certain related activities.  The director must hear certain complaints regarding alleged violations of these requirements.  The director must, based on the preponderance of the evidence taken, make findings of fact and may issue orders.  An order of the director may be appealed to superior court.

Any person injured by an action which is prohibited may sue to recover damages, reasonable attorneys' fees and costs within two years.  A person who violates a prohibition may be assessed a civil penalty by the director of not more than $10,000 and any person who knowingly violates a prohibition is guilty of a gross misdemeanor.  Violations are also deemed to be unfair practices under the Consumer Protection Act.

Other.  The director may require the establishment of certain records, reports, and other information.

The provisions of the bill expire on July 1, 1993.

EFFECT OF SENATE AMENDMENTS:

General.  The only agricultural commodities governed by the act under the Senate amendments are sweet corn and potatoes.  A cooperative association owned by producers is exempted from regulation as a handler under the Senate amendments only when it contracts for crops from its own members rather than being exempted from the application of the act entirely.

Negotiation in Lieu of Mediation and Binding Arbitration.  The provisions of the engrossed substitute bill authorizing mediation and requiring binding arbitration for contracts between handlers and accredited associations of producers are stricken by the Senate amendments.  In their place are provisions requiring that negotiations between such parties commence at least 60 days before the normal planting date and conclude within 30 days of the normal planting date.  A serious, fair, and reasonable attempt to reach agreement by acknowledging or refuting, with reason, points brought up by either party is required.  This obligation to negotiate does not require either party to agree to a proposal, to make a concession, or to enter into a contract. Neither party to a negotiation is required to disclose proprietary business or financial records or information.

Prohibited Acts.  The Senate amendments prohibit a handler from taking certain actions against a producer if they are taken because of the producer's promotion of legislation on behalf of an association of producers.  Offering an inducement to a producer for refusing to contract or negotiate with a processor is prohibited.  Stricken from the engrossed substitute bill is a provision which prohibits a handler from offering more favorable terms on a commodity to a producer in an accredited association than the handler offers to the association.

Charges APA Procedures.  After an investigation by the Director of Agriculture, charges of violations of the act are to be reviewed in a contested case proceeding under the Administrative Procedure Act rather than under the special rules established in the engrossed substitute bill for examining such charges and reviewing decisions.  Stricken by the Senate amendments are the provisions of the engrossed substitute bill which permit the Director to enter premises to gain access to certain records and which permit certain records to be available for public inspection.

Penalties.  The maximum civil penalty that may be assessed by the Director under the act is reduced to $5,000/offense (from $10,000/offense) by the Senate amendments.  Stricken by the Senate amendments are provisions of the engrossed substitute bill which declare violations of the act to be gross misdemeanors and which declare violations of the act by handlers also to be unfair business practices under the Consumer Protection Act.  The Senate amendments permit the Director or an aggrieved producer, or handler to seek injunctive relief regarding violations.

Appropriation, Termination & Other.  The sum of $25,000 is appropriated by the Senate amendments from the General Fund to carry out the purposes of the act.  The act no longer terminates on July 1, 1993.  The amendments require the Director to appoint a 12 member advisory committee.

Fiscal Note:      Requested on substitute March 1, 1989.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:    Darrel Ries; Ray Clayton; Steve Jorgensen; Don Didier; Dick LaFramboise, Central Washington Farm Crops Association; Larry Jorgenson; Bill Watson; Bob Holloway; and Greg Richardson.

House Committee - Testified Against:      Bill Fritz and Dave Klick, Washington Food Processors Council; George White, Carnation; Keith Ker, Lamb-Weston; Don Heitmann, Twin City Foods; David Blair, Bellingham Frozen Foods; Arthur Symons, Jr., Symons Frozen Foods, Inc.; Jim Jacobs, Del Monte Foods; Lyle Hunter; and Randy Garberg, Seattle Cold Storage.

House Committee - Testimony For:    (1) The bill will promote good faith bargaining between growers and processors.  (2) It will permit negotiations to take place at a time which favors neither party over the other; currently processors wait so long to negotiate that producers have too much invested in their crops to make alternative choices.  (3) Decisions governing local processing plants are no longer made locally, they are made outside of the state or nation.  Local relationships no longer prevail.  (4) Processors have ceased negotiating with associations; they will deal only with farmers one-on-one.  (5) The bill will stop predator pricing policies.  (6) Growers will not try to affect processors adversely since they need markets for their crops.

House Committee - Testimony Against:      (1) The bill removes the foundation of the free enterprise agricultural community.  (2) Most processors in this state are at a competitive disadvantage when compared to those in other states.  Washington is so far from the principal markets that a very small change in the price a processor charges for a commodity can have a substantial impact on its markets.  (3) Growers may organize under state or federal laws but processors cannot.  (4) Binding arbitration does not work; Washington's prices are not independent of the prices offered elsewhere.  (5) Growers want a predictability that processors simply cannot offer.  (6) Growers can force arbitration by failing to bargain.

VOTE ON FINAL PASSAGE:

      Yeas 93; Nays 5

Voting Nay: Representatives Bowman, Brumsickle, Doty, McLean and Rector