(a) A nonprofit veteran service agency shall be eligible for certification as a small business under the Small Business Procurement and Contract Act, as described in Chapter 6.5 (commencing with Section 14835) of Part 5.5 of Division 3 of Title 2 of the Government Code, and may be granted a small business bid preference if it meets all of the following conditions:

1. (1) The goods or services meet the specifications and needs of the purchasing agency.
2. (2) The goods or services are purchased at a fair and reasonable price, as determined by the appropriate state or local agency.

3. (3) The nonprofit veteran service agency complies with all of the following requirements:

   1. (A) The nonprofit veteran service agency shall employ veterans receiving services from the nonprofit veteran service agency for not less than 75 percent of the person-hours of direct labor required for the production of goods and the provision of services performed pursuant to a contract under this section.
   2. (B) The nonprofit veteran service agency agrees to make those elections permitted of any nonprofit corporation under the Federal Insurance Contributions Act (26 U.S.C. Sec. 3103 et seq.) and the Unemployment Insurance Code in order to provide social security and unemployment and disability benefits for its employees, commencing with its first contract or purchase order under this section and continuing thereafter. In the event that the nonprofit veteran service agency ceases to provide those benefits, any existing contract or purchase order under this section with the nonprofit veteran service agency is terminated and no further contracts or purchase orders shall be awarded to that nonprofit veteran service agency for the period of two years after the nonprofit veteran service agency ceases to provide the benefits.
   3. (C) The nonprofit veteran service agency does not commit any unfair labor practices, as defined in the National Labor Relations Act, at Section 158 of Title 29 of the United States Code.
   4. (D) The nonprofit veteran service agency abides by the provisions of the federal Fair Labor Standards Act of 1938 (29 U.S.C. Sec. 201 et seq.), the Walsh-Healy Public Contract Act (41 U.S.C. Sec. 35 et seq.), and the regulations of the Department of Industrial Relations (8 Cal. Code Regs. 1 et seq.).

(b) For purposes of this section:

1. (1) “Nonprofit veteran service agency” means a community-based organization that meets the following requirements:

   1. (A) It is exempt from tax under Section 501(c)(3) of the Internal Revenue Code.
   2. (B) Its principal purpose is to provide housing, substance abuse, case management, and employment training services for low-income veterans, disabled veterans, or homeless veterans and their families.
2. (2) “Direct labor” includes all work required for preparation, processing, and packing of a good, or work directly relating to the performance of a service, excluding supervision, administration, inspection, and shipping.
3. (3) A veteran receiving services from the nonprofit veteran service agency shall be considered an employee when performing productive work.