Assembly Standing Committee on Judiciary

As we proceed with our Bill hearing, I want to make sure everyone understands our Committee rules to ensure we maintain order and run a fair and efficient hearing with the goal of hearing as much from the public within the limits of our time. Rules of conduct by Members of the public include no talking or loud noises from the audience. Public comment may be provided only at the designated time and must be limited to your name, organization, and support or opposition of a Bill.

No engaging in conduct that disrupts, disturbs, or otherwise impedes the orderly conduct of this hearing. No engaging in personal attacks of Members of the Committee, authors, or staff. Please be aware that violations of these rules may subject you to removal or other enforcement processes. We obviously do not have a quorum, but we'll start as a Subcommitee and we'll hear our first item. I see Senator Cortese is here. SB 646. I apologize. You snuck in while I was reading.

Good morning, Assembly Members, and thank you so much for having us here today. I am pleased to present SB 16, which would allow local agencies to bring enforcement actions under the Fair Employment and Housing Act. California's workers have a fundamental right to freedom for a discrimination free work site.

All right, item number one, then we will go in order. SB 15, Senator Smallwood-Cuevas, welcome. zero, 16. Yeah, it's 15 without my glasses. 16 with my glasses. Yeah, it is. Yeah. Welcome.

And when left unchecked, discrimination in the workplace can deny workers their right to basic human dignity and rob communities of opportunities to improve and strengthen themselves and limit the self sufficiency that we need for every resident of California to have. The principal protections against discrimination based on factors like race, religion, disability, sexual orientation, gender expression, and many others come from the Flare Employment and Housing Act, otherwise known as FIHA.

FIHA is enforced by the California Civil Rights Department through investigating and bringing suit for individual cases or through issuing right to sue orders to those pursuing their own cases.

However, despite concerted efforts by the Department, far too many workers do not feel their discrimination cases are getting the attention needed to appropriately respond to workforce discrimination, and that limits our ability to really change the culture of work so that so many residents can be their fullest selves and work to their fullest potential in order to address civil rights issues in a more focused way.

Several local entities, like the City of Los Angeles, the County and City of San Francisco, the City of San Diego, have created their own agencies to address violations of civil rights. And while these agencies are doing good work to end discrimination in their jurisdictions, state law prohibits them from pursuing enforcement actions when it relates to violations under FIHA.

We have a tremendous opportunity today to allow local governments seeking to protect their residents in the state civil Rights Department to develop partnerships, collaborative enforcement, that Californians desperately need to protect themselves from discrimination. As we have so many workers, so many sectors, and too often far too many schemes, SB 16 seizes on the opportunity by removing preemption provisions in FIHA that prevent local agencies from participating in enforcement actions. I have with me today to testify in support of this Bill.

Elder Solomon, on behalf of the Southern California Black Workers Hub for Regional Organizing, welcome. You may proceed. Good morning, Mr. Chair and Members.

My name is Elder Solomon. I am the policy manager for the Southern California Black Worker Hub for Regional Organizing. We are a sponsor of this Bill. I'm speaking in support of SB 16. Our organization works directly with workers to unify Black worker voice and power in the Southern California region and beyond. The need for SB 16 is urgent and complex.

The addition of local enforcement would give workers a fighting chance against discrimination by empowering workers to file complaints with local agencies and departments in their own communities. In our work with workers, we've learned that workplace discrimination is disturbingly common among Black workers and other vulnerable workers.

In the largest study of Black workers in California by the UCLA Center for the Advancement of Racial Equity at Work surveyed 2000 Black workers at the height of the pandemic and found that about a third of Black workers reported experiencing prejudice or discrimination at work during the pandemic. Many of these respondents were also female workers.

And for Low wage workers, who compose a growing number of California's workforce, finding justice within the judicial system is far too costly and has diminishing returns for Black workers, vulnerable workers, and other marginalized groups. We cannot rely on the current system to address adequately worker complaints without the power and reach of local enforcement.

By allowing local governments to share and enforcing workplace discrimination issues and laws, SB 16 would increase enforcement of the state's antidiscrimination protections, a far more effective strategy in protecting workers from civil rights violations. The need for stronger enforcement in addressing workplace discrimination is not only a matter of more enforcement, but a matter of the kind of enforcement that local governments are able to provide. Local governments are equipped to understand the nuances and the intricacies of local economies, local employers and local worker issues.

Civil rights offices in Los Angeles, San Diego and San Francisco are newly implemented and uniquely poised to tackle these issues. A more local approach will certainly create more opportunities for workers to file complaints, but will also play a really critical role in the enforcement landscape by preventing discrimination in the first place, allowing local governments to respond swiftly to discrimination that occurs in their own backyards.

Kalifasa Guy for the Greater Sacramento Urban League and Strong Support.

Thank you. Any other witnesses in support? Name and organization only, please.

By placing a share of enforcement in the hands of local departments, the passage of SB 16 moves us one step closer to becoming a more equitable system of discrimination enforcement. The Southern California Regional Worker hub for regional Organizing is proud to sponsor SB 16. Thank you.

Good morning. Nick Cruz, California Labor Federation in support.

Good morning, Assembly Members Tia Koontz with the UCLA Labor center in Strong Support, as well as the LA Worker Center Network, which includes the Warehouse Workers Resource Center, the Los Angeles Black Worker Center, the LA Restaurant Opportunities Center, the Koreatown Immigrant Workers Alliance, the Garment Worker Center, the Filipino Workers Center, and the Clean Car Wash Worker Center. Thank you so much.

Greetings. Good morning. Dallas Fowler, Los Angeles African American Women's Public Policy Institute, as well as helping empowered individuals reach success and strong support. Thank you.

Thank you. Seeing no further witnesses in support. Witnesses in opposition? Seeing none. Any questions? Comments from the Committee? Seeing none. We don't yet have a quorum. As soon as we do, we will take a motion. So thank you on that item. We will now move to your next item, item number Five, SB 497. Thank you. Good morning again, Assembly Members.

I'm pleased to present SB 497, which would help ensure workers brave enough to report violations of labor code or Equal Pay Act are protected from retaliation by their employers. California has some of the strongest workplace and equal protection in this country, and largely because of all of you ensuring that workers are protected and particularly the most vulnerable worker. However, our strong workplace protections are meaningless if workers are too afraid to speak up and to utilize them when their rights are violated. California's laws do prohibit employers from retaliating against a worker for exercising their rights. However, the labor Commissioner is unable to prosecute many retaliation claims because it is difficult for workers to show that the employer took action, the employee specifically in response to their reporting of a labor violation. It is extremely difficult for vulnerable workers to come forward, and it is almost nearly impossible for a worker to prove that intent. So SB 497 would provide real protections for these workers by creating a rebuttable presumption that an action taken against an employee was retaliatory if it occurred within 90 days of the employee reporting a violation. This kind of rebuttable presumption already exists in other parts of the labor code and is working well to protect workers from immigration related retaliation, such as threats of deportation, and retaliation for the use of paid sick leave. Adding this protection to the Labor Code Violation allows the Labor Commissioners to identify retaliation more quickly and prevent law-breaking employers from avoiding accountability. In other words, helping our residents be able to stay in their jobs and to provide for their families in a safe and free environment. I have with me today to testify in support of this bill Ruth Silver Taube from California Coalition for Worker Power and a worker will also share their story. Thank you.

And before we turn it over to witnesses, we do have a quorum, so I'd ask the clerk to please call the roll.

Maienschein. Here. Essayli. Here. Connolly. Dixon. Haney. Here. Kalra. Pacheco. Papan. Reyes. Rivas.

Thank you. Okay, first witness in support. You have two minutes. Go ahead.

Good morning, assemblymembers. At the clinics I supervise at Santa Clara University School of Law, I hear from workers all the time who experience retaliation after speaking up about workplace violations. Yet retaliation cases are notoriously difficult to prove. This fact is borne out by Labor Commission statistics. From 2020 to 2022, about 90% of retaliation complaints were dismissed, largely because it's often impossible for a worker to show the employer's retaliatory intent. For example, in one case I had, the worker was fired several weeks after making a complaint about not receiving overtime pay. The employer gave no explanation. They just stopped putting him on the schedule. In this case, it would be nearly impossible for the worker to produce evidence to show he was terminated because he complained about his paycheck. This evidence to show the employer's true state of mind most likely does not exist. However, if the employer had a legitimate, nonretaliatory reason for terminating this worker, the employer would be able to produce this evidence. That is why it's more appropriate in these cases for the burden to be on the employer, because they have access to all of the documents and information regarding their decision to take an adverse action. And if the employer produces evidence to show a legitimate, nonretaliatory reason for the adverse action, the burden shifts back to the worker, and it's still ultimately the worker's burden to prove that it was retaliation that caused the adverse action. 90-day rebuttable presumptions are not outliers. They exist in several other labor code provisions, including immigration-related retaliation, labor Code 1019, and the Warehouse Worker Bill, Labor Code 2105, SB 497 is important because it will deter retaliation, make it more realistic for workers to prove retaliation, and ensure consistency in the labor code. I will now turn it over to Maria Moreno.

You may proceed.

From Jobs with Justice.

Good morning. My name is Maria. I'm here with Jobs with Justice, and I'll be reading the testimony of one of our worker leaders from our coalition members, Travahalo Unilos, Workers United. My name is Ilcid Rivas. For the past several years, I've worked at a Subway sandwich shop in San Francisco. I'm the only worker there, but I didn't receive all the tips customers left. I worked 10 hours each day without overtime and couldn't take any breaks. The owner and I were good friends, so much that she would call me her superwoman until a few nights ago, when I asked her why I wasn't receiving my full tips or pay. My boss told me that she couldn't pay me overtime or give me sick days. Soon after, she started to change my work hours, even though she knew I couldn't work at night because I had another job. Then she told me she was going to reduce my pay to minimum wage. I became very worried because it's so expensive where I live, and I would no longer be able to afford my rent or support my family back in Guatemala. With the help of Travahalo Unilos, Workers United, I began to talk with coworkers from other subways owned by the same owner to see if they were experiencing the same violations of their rights. The next day, my boss fired me on the spot, saying I had no right to speak to her employees. I contacted two Travahalo Unilos, Workers United, and the organizers helped me feel empowered and safe to speak against my boss. If we don't raise our voices against these injustices, we are only helping our bosses get rich thanks to our silence. So now I am the one who informs others about their rights. But the fear of retaliation also convinces many people to stay silent, even when they know they're being exploited. With the support of TUWU and the California Worker Outreach Project, I have learned so much about my rights at work, such as paid sick leave, paid overtime and breaks and lunch. However, my situation was rare because I had TUWU fighting with me to get my job back. Most workers face this retaliation alone. If you want people to speak up about violations. They have to know that the state of California has their back. That's why I'm asking you to advance SB 497 for stronger protections against retaliation. Thank you.

Thank you. Witnesses in support, name and organization.

Good morning. James Michael Agpalo with AFSME California, strong support.

Good morning. Dallas Fowler, Los Angeles African American Women's Public Policy Institute and helping empowered individuals reach success pack, in strong support.

Mariko Yoshihara, on behalf of Equal Rights Advocates, one of the proud co-sponsors of the bill and California Employment Lawyers Association, in support.

Nick Cruz, California Labor Federation, in support.

Hello, my name is Lorena, and I am Member of Mujeres Sonidos Activas, and I am here to support SB 497.

My name is Leticia Garcia from Mujeres Sonidos Activas, and I'm a strong support for 97.

Good morning, Assemblymembers. My name is Nicole Christian with SEIU Local 1021, and we are in very strong support of SB 497.

Good morning, Assemblymembers. My name is Tia Kuhns and I'm here to give MeToos on behalf of a list. So buckle up. CAUSE, the Central Coast Alliance, United for a Sustainable Economy, CPI, the Center on Policy Initiatives, the Chinese Progressive Association in San Francisco, the Clean Car Wash Campaign Worker Center, E-BASE, the East Bay Alliance for a Sustainable Economy, Jobs with Justice, SF, KIWA, the Koreatown Immigrant Workers Alliance, LANE, the LA Alliance for a New Economy, the LA County Federation of Labor, the National Domestic Workers Alliance, the California Domestic Worker Coalition, the National Employment Law Project, the Partnership for Working Families, the Wade Chef Coalition of Santa Clara County, as we've already heard from the lovely Ruth, SoCal COSH, the Coalition for Occupational Safety and Health, SEIU California, and UFCW, United for Respect, as well as, of course, the UCLA Labor Center. Thank you.

Brian Justie, on behalf of the UCLA Labor Center, in strong support.

Good morning. Kristen Hardy, SEIU 1021, I'm in support of SB 497. Sorry, I almost forgot. Los Angeles County Democratic Party is also in strong support.

... Caduceus Justice, San Francisco in support. Thank you.

See no further witnesses in support. Witnesses in opposition.

Mr. Chair and members, Courtney Jensen on behalf of California Chamber of Commerce. We do not condone the events like the ones you've heard today, and we absolutely find that behavior unacceptable. Temporal proximity is already something taken into account by courts today. If you had a situation where a complaint was made and the person was terminated the next day, I think you would find it very hard-pressed to find a California state court that would deny that the plaintiff had settled their burden. Our concern is that when you start to get out 60, 90 days, that's when judges tend to look at other circumstances. Totality of the circumstances. Was there an intervening event? What was the pattern of conduct? Was this something that happened to other workers who did not file a complaint? So really, courts today are already taking this into account, and our concern is that these presumptions are starting to be inserted into every bill. There was a bill last year, for example, that if any disciplinary action took place within an entire union campaign, which could be months on end up to a year or even more, that would be retaliation. So we have a concern about the precedent that this bill would set. Thank you.

Thank you. Any other witnesses in opposition?

Yeah. Good morning, Mr. Chair. And members of the committee. Matthew Allen with Western Growers, also opposed. Thank you.

Good morning. Lizzie Coostona with Shaw, Yoder, Antwih, Schmelzer and Lang, on behalf of public risk innovation, solutions and management, in respectful opposition.

Michael Miller with California Association of Wine Grape Growers, respectfully opposed due to the circumstances of the bill, where it's unpredictable how it could be applied. Thank you.

Thank you. See no further witnesses in opposition. Any questions or comments from... Mr. Kalra?

Thank you. Mr. Chair. I'd like to move the bill. Thank you.

We have a motion for Mr. Kalra, second for Mr. Haney,

And I just want to thank the senator for her continued work on issues regarding empowering our workers. And Ms. Silver Taube, who I've worked with for many, many years in strengthening workers rights, I think in this case, although judges can still look, they still can look at all the other circumstances, but that rebuttable presumption is critical, especially when you think of the power imbalance of workers in their workplace environment. So appreciate the bill. Thank you.

And, Mr. Haney.

Thank you. I want to echo that and thank the senator for your leadership and all that, I know there are many organizations here, including from San Francisco, and I want to thank them for coming. I agree with my colleague here that the power imbalance that can exist to speak out on rights and protections that we have afforded workers can make it so that they're not worth the paper they're written on. So we need to make sure that they know that they have these protections. And I think the rebuttable presumption in this scenario does make sense. It does allow, as the Assemblymember said, for if there is more circumstances and information that needs to come forward, a worker should know that they have that presumption and the protections will allow them to assert their rights. So very happy to support the bill today.

We have a motion in a second. Senator, you may close.

Well, I want to thank the assemblymembers for their comments and certainly all of the witnesses who spoke today. I think the words of the worker whose testimony was read, California has to have the backs of these workers. These are the most vulnerable, many of them women of color, where too often workers need 2 and 3 jobs to make ends meet. In a place like my district in LA County, if we don't have those workers' backs, then they will not have the lifeline that they need to sustain themselves and their families. And we want a level playing field, and we think that this is a way to ensure that all workers and businesses have that. And so with that, I ask for your aye vote.

Okay, we have a motion in a second. The motion is due, pass to Labor and Employment. Ask the clerk to please call roll.

Maienschein. Aye. Maienschein, aye. Essayli. No. Essayli, no. Connolly. Dixon. No. Dixon, no. Haney. Haney, aye. Kalra. Kalra, aye. Pacheco. Papan. Papan, aye. Reyes. Rivas.

Your bill is on call. Thank you very much. Well, let's also. I'd ask for a motion on item number one. Motion from Mr. Kalra. Second from Mr. Haney. Ask the clerk to please. The motion is due, pass to approach. Ask the Clerk to please call the roll.

Maienschein. Aye. Maienschein, aye. Essayli. No. Essayli, no. Connolly. Dixon. Dixon, no. Haney. Haney, aye. Kalra. Kalra, aye. Pacheco. Papan. Papan, aye. Reyes. Rivas.

That bill is also on call. Thank you very much. Next is item number two, SB 27, Durazo. As she is walking up, I'd ask for a motion on the consent agenda. Motion, Mr. Kalra. Second from Ms. Papan. The consent agenda includes SB 75, SB 446, SB 75, Roth, SB 446, Wilk, SB 459, Rubio, SB 578, Ashby and SB 599, Caballero. Ask the clerk to please call the roll.

Maienschein. Aye. Maienschein, aye. Essayli. Aye. Essayli, aye. Connolly.

Connolly. Dixon. Dixon, aye. Haney. Haney, aye. Kalra. Kalra, aye. Pacheco. Papan. Papan, aye. Reyes. Rivas.

It's out. Thank you. Senator Durazo, welcome.

Thank you, Mr. Chair and Members, and thank you to the Committee staff for your thoughtful analysis. SB 27 creates an ability for employees to recover their earned but unpaid wages. The University of California established an equal pay for equal work policy which requires vendor companies to pay their company employees the wages and benefits equal to what UC pays the service workers that it employs. The UC has approximately 500 service contracts.

To address this problem, the Bill requires vendors to supply UC and the appropriate joint labor management company the basic payroll information necessary and any audit outcomes to know if a vendor is in fact abiding by UC policy. This Bill also requires a vendor to supply a written notice to their employees about the relevant compensation rates. This Bill would allow a contracting vendor company an opportunity to correct and cure any discrepancies before facing further consequence.

If the employer refuses to comply with the UC equal pay for equal work policy or correct and cure, employees would then have the right to pursue recovery of their earned but unpaid wages from the contracting vendor in court. The Bill advances the strides UC continues to make towards third party vendor compliance, and it will not interfere with the UC's hiring ability. This Bill has passed through two Senate committees and I accepted 16 amendments that UC requested.

This Bill simply allows a UC worker to stand up for a vendor's co-worker whose private employer owes them money under UC policy. These employees do not have the same level of job security and therefore are very vulnerable to intimidation. The only money we are talking about is what a contract worker is owed and their employer was given a chance to pay. UC can't get sued under SB 27. UC won't be liable for unpaid wages under this Bill and UC will continue outsourcing under SB 27.

Finally, UC's own summary of its own audit concluded that over 1000 Californians have not been paid what they earned. SB 27 will protect contract workers from intimidation and give them a recourse to recover the wages they won't have without this Bill. My witness today, Mr. Chair, is Monica De Leon with AFSCME 3299. Thank you.

Welcome.

Good morning, Assembly. Good morning, Chair. My name is Monica De Leon. I'm the statewide treasurer for AFSCME 3299 and a 17 year employee of the University of California at the UCI Medical Center in support of SB 27. I'm here on behalf of service workers, cleaning toilets, cutting grass, picking up trash, cooking food, and cleaning hospital bedpans, helping to make UC one of our greatest public institutions run and succeed. I am advocating for workers who have no protection if they were to speak out today in fear of retaliation.

These colleagues work alongside us at UC, but who work for third party vendors and companies doing business with the university. Those workers need the recovery of Earned But Unpaid Wages Act because they need their money and we can help them get it. UC has a policy titled Equal Pay for Equal Work. That means for service work being performed at the University of California by outside vendors, those workers should get the same pay and benefits that UC employees like me receive.

Recently, the University concluded an audit to determine to what extent its vendors are adhering to the policy. UC contracts with nearly 500 vendor companies. They audited just 59 of them, and still UC found over 1000 vendor employees who have not been paid the money they are owed for work already performed in 2020 and 2021. But nothing in the UC policy or any audit provides a way for a worker to recover their earned but unpaid wages. This Bill fixes that problem.

In human terms, SB 27 means being able to get their child a backpack for school, putting gas in their car, paying for their utility bills or rent. The Bill is fair for both the workers and their employers. Before a worker can pursue recovery of unpaid wages and benefits, their employer will have an opportunity to cure and correct the shortfall. We ask for your consideration. Thank you.

Thank you. Any other witnesses in support?

Good morning. James Michael Agpalo with AFSCME California, strong support.

Good morning. Cassie Mancini on behalf of the California School Employees Association in support.

Good Morning. Nick Cruz, California Labor Federation in support.

Seeing no further witnesses in support. Witnesses in opposition?

Good morning, Mr. Chairman and Members, Michael Bedard here on behalf of the University of California, appreciate the amendments the author has taken on a lot of areas, but we remain opposed unless amended since one of our top issues remains unaddressed. To be clear, we fully support wage and benefit parity. It's in Regents Policy and in the bargaining agreement with AFSCME. And our neutral audit of our vendors, as the author mentioned, was completed. And all of those employees, I'm told, have already received their checks.

They've all been put through remediation. So we're working in good faith to enforce wage of benefit parity. We already have the tools necessary to collect and verify payroll and to ensure remediation for any noncompliance. But as drafted, SB 27 would allow UC employees to sue a vendor even though they've suffered no underpayment themselves. We're opposed to allowing UC employees to sue vendors since the appropriate venue for UC's represented staff is to raise concerns about their CBA through PERB, not the civil courts. For this reason, we request your no vote on SB 27 unless it's amended to allow only the underpaid employees to file litigation and not UC employees. Thanks.

Thank you. Any other witnesses in opposition? Seeing none. Motion for Mr. Kalra, second from Mr. Haney. Ms. Pacheco?

Thank you. Thank you to the author for bringing this Bill forward. I just had a question as to respect with what the opposition mentioned. Is there any inclination to take up any of the amendments that they have offered or any conversations with them so that maybe possible amendments can be taken?

Well, we've had many, many conversations. We've had 16 amendments that they have proposed. So it's not for lack of having conversations or having conversations we believed aggrieved--the employees of the vendor do not have the same rights as those who are covered by a collective bargaining agreement, and they work side by side. But the, the people who really are hurt when they don't get paid, they just are intimidated. They are afraid to speak up.

So it's really important for an employee that works side by side with them and does have the ability and the right to speak out that they can do this on their behalf, because frankly, the entire workforce is impacted when you have some with some wages and others are not, and the fear that they're all facing. So that to us, does mean that they are a grieved employee.

Okay, we have a motion and a second. The motion is do pass to labor and employment. You may close.

I appreciate all of your attention, and I ask for your aye vote.

Thank you. We have a motion a second. Ask the Clerk to please call the roll.

[Roll Call]

Your Bill is on call. Thank you, Senator.

Thank you, Members.

Senator Cortese, thank you for your patience and we appreciate you being here.

Welcome. Good morning.

Good morning, Mr. Chairman and Members. Today I'm here to present SB 646, a Bill that seeks to hold social media companies liable for distributing child sex abuse material, or CSAM. Victim advocates use a federal statute, Marsha's Law, to seek restitution and hold platforms accountable for their culpability. Through that statute, victims are able to sue their abusers and their enablers in federal court. This Bill seeks to provide victims the same standing in state court.

Any person or entity who transmits CSAM is liable to be sued for damages under SB 646 in state court. SB 646 also requires that platforms list an agent who will be responsible for notice for filling requests to remove content. If the platform does not act within two business days, liability will incur along with civil remedies. Crucially, CSAM is excluded from the immunity provided by Section 230 of the Federal Communications and Decency Act.

Moreover, the Supreme Court has consistently allowed more leeway to the government when reviewing First Amendment questions pertaining to CSAM. Any chilling effect to free speech is vastly outweighed by the irreparable harm caused by the most vulnerable among us. Sexually exploited children are re-victimized every time a predator watches CSAM content. Tragically, that abuse leads to horrible mental health problems such as anxiety, depression, substance abuse, and, as we all know, suicidal ideation.

The victim may also experience negative physical health outcomes such as high blood pressure and chronic illness. My own, in-district experience with this circumstance was several years ago as a local affected...local elected official trying to deal with the family trauma incurred when a young woman named Audrey Pott, 15 years old, had images of herself being exploited by two males, put up online, and several days later she committed suicide.

In talking to her family, which I have done several times, their main concern beyond the tragedy itself was the fact that they could not get the content taken down. Their daughter was asking them over and over again, please help get the content taken down. Obviously not in those exact words, but we don't have a way to do that by way of the state court system. This Bill attempts to create a path for that.

Victims have also testified that the worst part of the revictimization process is knowing that the content may be used to normalize the abuse and groom future victims. I would submit that that's been occurring now for a long, long time. Joining me today as a witness is Micah Starr Liberty of the Soaring Center.

And let me just add, before she's called upon, Mr. Chair, I want to thank you very much for discussing the Bill with me directly, but also with the very, very significant work that your Committee staff has done. I know that involved numerous conversations with my staff. We can all see just by looking at the analysis, the depth and breadth of effort that was put in to try to essentially flesh out the various issues around Section 230, 1st Amendment and the concerns that we're bringing forward as well.

And I'm sure everyone on the Committee has benefited from that analysis. It's tough issues to deal with. Many of us have been working on these issues for several years, trying to find a path to some remedies here. So again, thank you, and I will turn it back over to you, Mr. Chair.

Thank you very much. And just to confirm, too, you are accepting the amendments?

Yes, I am accepting the amendments.

Thank you. First witness, welcome.

Thank you. Good morning. My name is Micah Star Liberty and I have been representing victims of sexual abuse, sex harassment, and human sex trafficking for 23 years. SB 646 provides a much needed civil, private right of action to have accountability for all of the victims who suffer the horrors of having their CSAM material disseminated widely on social media. And here's why. Law enforcement is overwhelmed.

When I started doing this work, I was told by FBI agents, when a victim is over the age of 12, we just don't have the resources to do anything about it. We can't investigate, and we're certainly not going to recommend prosecution. It then went to the age of 10. It's now at the age of seven.

And what I'm hearing is, yes, it's an unwritten rule, we're not going to investigate any victims under the age of seven, but really, we only have time to focus on toddlers and younger. This is horrifically painful and difficult and lifelong trauma inducing. What I want to focus on rather than the statistics, because we can all read them, and I've lived them with my clients for the past 23 years.

I want to focus on the legal arguments and the technical arguments that our opponents raise so we can have a conversation about them and dismiss them. First and foremost, I have heard time and time again that an immediate takedown provision is unworkable. Even 24, 48 hours. Those time frames are unworkable. Before Elon Musk bought Twitter, Twitter self reported that it was able to take down these images within 48 hours. They can do it, and it's easy for them to do it.

Moreover, they can build algorithms where they.

I need you to wrap up.

Sure. The First Amendment provides no protection for these types of crimes. The plain language of Section 230 indicates that it is there to protect children against trafficking. All we need to do is read the Supreme Court precedent and Section 230. Thank you.

Thank you. Any other witnesses in support? Seeing none, witnesses in opposition, it's. You may proceed.

Thank you.

Mr. Chair and Members Lia Nitake with TechNet and we are respectfully opposed to SB 646. We fully support the author's goal with this Bill to eradicate CSAM and online sex trafficking. The presence of this content anywhere is terrible and tragic. Our platforms take aggressive action to combat these types of harmful content. The bill's approach will unfortunately impede this work runs afoul of constitutional principles and is preempted by federal law.

First, we believe that requiring the window to remove, destroy, or return actionable material would have unintended consequences. Our platforms work constantly to remove actionable material before any user even sees it or reports it. They work in good faith to review the ever-changing volume of various types of reported content that includes actionable material.

We agree that CSAM is not protected by the First Amendment, but faced with the threat of liability, requiring this takedown window for reported content will lead platforms to overcorrect, resulting in an overremoval of content sweeping in and silencing lawful speech that could include First Amendment protected content, things like teens posting about gender identity or sexual orientation, which will likely be targets of these CSAM reports, as well as other false reporting by bad actors whose aim it is to see any lawful content that they personally dislike to be taken down.

We also believe that this Bill is preempted by Section 230 since it does not fit within the narrow exception created by Sesta-Fosta. The scope of Sesta-Fosta is limited to platforms knowingly benefiting having actual knowledge of the trafficking, and must assist, support or facilitate that trafficking. This Bill significantly goes beyond that scope. Again, we appreciate and fully support the intent of this Bill, but for these reasons, we must respectfully oppose SB 646.

Thank you. Any other witnesses in opposition?

Good morning. Ronak Delami with the California Chamber of Commerce for the reasons stated by Technet. Also opposed.

Thank you, Courtney Jensen on behalf of CJack, also in opposition.

Thank you. See no further witnesses in opposition. Do we have a motion? MotIon for Mr. Haney, second from Mr. Essayli. Mr. Essayli.

Good morning, Senator. I intend to support this Bill today, but I have some questions about who makes the determination or who's responsible for making the determination, what is or isn't CSAM? I know obviously the examples you've given are clear, right?

I mean, if they're minors or toddlers or if the victim, their self, is reporting it, but when it's not clear that it is CSAM or not, and if someone reports an image, does the platform have to automatically assume it's CSAM or they have 48 hours to make that determination? I'm just concerned about what do you envision that process looking like?

To be clear, of course, we're dealing with minors. So if a minor's parent or guardian essentially puts the agent that's identified on notice that there is an image that meets the description here in the Bill, which is pretty clear, pretty explicit in terms of what is considered an identifiable image under this Bill, an image of an intimate body part, probably not hard to confuse what that is, parts of an identifiable person or image of the person depicted engaged in sexual intercourse, probably not hard to determine.

Sodomy? Probably not hard to determine. Oral copulation, probably not hard to determine. Sexual penetration? Probably not hard to determine. An image of masturbation by the person depicted or in which the person depicted participants, probably not hard to determine. I think then, just trying to follow your question in terms of process. In terms of process, that notice is going to have to assert that minor is being depicted in that way.

And then to your accurate point, there's 48 hours allowed without any judicial remedy coming into play for that platform to agree and take that down. So if they don't, then the question becomes, are they correct? Are they correct? Is it a permissive, there's a series of exceptions here. They're called out very well on page three of the analysis. Agreement. An otherwise permissive image waiver, essentially a news story, meaning a public place where somebody doesn't have a reasonable expectation of privacy.

I know the idea of a protest of young people who are topless was put in the analysis as an example. How do you determine if that's exempt or not? So those are some examples of what's listed here, a to f, as exemptions that the platform is going to have to take a look at and say, do we have an exemption here? But I think the most important thing is there's nothing in the Bill that says that they have to take that image down permanently.

What we've created is a safe harbor for the platform. If you can't figure it out within 48 hours, if it's just not obvious, I think, I don't want to speak for attorneys, corporate attorneys, but as an attorney myself, I would strongly encourage my client to take the image down while further investigating. If it's that important to them and they're that concerned about protecting First Amendment rights, commercial speech, or maybe their business model, put it back up.

If they can determine that they've got an exemption here, that's kind of the way it works.

Okay, so in your Bill, it would only cover these illicit images and pictures you've mentioned. I know we had another companion Bill. It was more targeting the solicitation of minors or sort of like grooming stuff, if you will. But your Bill is specifically narrowly tailored to illicit images, which, regardless if they're atune or not, I hope that's not being distributed on these social media platforms. So let me ask the opposition.

I mean, do you think that is a difficult, what he just laid out, is that difficult to implement as written?

I think some of the examples that were given, there are things that fall into the category. There are things that don't. I will say that a vast majority of that content does come down before that two day window. The challenge is that sometimes it does take longer.

If we are trying to do a thorough and good faith review, depending on a number of factors, including the volume of reports that we're getting in the different types of reporting that we're receiving, we, under the threat of liability, would very likely over remove content that is lawful.

And that's where the concern lies, is that if it's unverified and we don't know whether it's lawful content or not, we know that just as bad actors are uploading this terrible and illegal content on our platforms, they will also be abusing the reporting mechanism to get any lawful content taken down that they don't like. And so that's the tension right now. And ultimately the consequence will be that for platforms, it becomes even more difficult and more time consuming to review everything that has been flagged.

That's my concerns. I'll let you respond in a second if you'd like. And I support the Bill. I support the effort. I'm going to vote for it. I do worry about some of those chilling effects she mentioned, because I'll tell you, even in the political world, people know how to manipulate these reports. A big one they like to use is copyright violations. So if they don't like a post for political reasons.

They just have all their people flag it as a copyright violation, gets taken down, and then it's on the author to call the Facebook or reach out or whatever and have them put it back up. But I don't think that's the intent of the Bill. So if there's any way to sort of negate that, I'd appreciate it.

I think in true, especially when you start getting into the constitutional issues and really a balancing test here, I understand the strict scrutiny has to be applied to any content based regulation like this. But at the same time, there's a fundamental question here, and I don't mean this directed to anybody on this Committee. I would say to ask myself this question, as a father of two daughters, how long is it okay for their platform to keep one of these images up of my daughter?

I would ask, how much time do you need to get my daughter's image down? Do you need three days, four days? If my daughter's crying out for help, should I tell her it's going to take you seven days because you can't move anymore quickly to take one of these images down? We're saying 48 hours is enough. When I go to deal with almost any platform that I use from a consumer standpoint, I hit the delete button. It deletes.

I can take something out of my shopping cart right now while we're talking, while the witness is answering questions. We're at a point in technology where it uploads quickly, but we can also get it back down quickly. And all we're saying in terms of chilling effect is if it turns out it's a work of art and it was permissive platform has every right, obviously, to put it back up again.

Yeah, I appreciate that, Mr. Chair. And if people do abuse that process, then maybe they should be removed from the platform. So just something to think about. Thank you, Mr.

Chair. Ms. Dixon.

Thank you, Chair. I commend the author and the sponsor for putting this Bill forward. We have to start somewhere. So this is important data that you have in the content of the Bill. So am I correct in understanding that while the platforms have identified 13 million images on Facebook and Instagram, there are other groups that have identified 69 million images. So there's a wide gap there.

There is.

So this is an attempt to get to that. Where do these images come from? I mean, do young people upload them? Are they already in an abusive relationship?

There is a community, unfortunately, globally, that traffics in these images. And so there are a segment of traffickers who are those that are creating the image. And by the way, by the time we get to that image, we're talking about months, sometimes years of abuse that occurred before they got the child to engage in those kinds of acts. So this is years long abuse that's going on now. This kind of purium behavior has been pushed underground, but with social media now it's exploded.

And so they're posting and trading, and that's important because they don't want to purchase, but they're trading these images on every social media platform you can imagine. And so what's also important to know is the social media companies know what hashtags these perpetrators use, the disseminators and the traders use. They could create an algorithm that blocks any post using these specific hashtags.

Well, and I agree with you, I think we all hear about artificial intelligence. It seems to me an application that certainly the technology platforms are already embracing, beyond which we already know. I think it's doable. I agree with you. I will support the Bill. I think it should be done within seconds to delete those images. It's just a matter of keeping up with the worldwide traffic. I mean, these companies are huge. I commend these companies.

The burden is on them, but they have the capability and the technology to do it and do it quickly. So I support your Bill.

There's no question pending. Thank you. Any further questions or comments from the Committee? Seeing none. Senator, thank you for this Bill. Thank you for your work in this area. This is a significant step. It is very complicated. You're right. I appreciate your nice comments about my staff, who've worked very hard on this. These are complicated legal issues. But I think what's important here is the very real damage. You mentioned a story about somebody who ended up committing suicide, but that's actually not uncommon.

Sometimes when we have these bills, it's sort of a little bit of an anecdotal story from somebody, maybe kind of a one off. This is actually very common. And so you talked about your daughter. Certainly as somebody who has two daughters, it's striking home. And I agree.

These images can come down, and if there turns out later it is a work of art, for example, no harm, no foul, it goes back up 72 hours later, and the world will go on and move forward without some artistic image being up for 72 hours. That's much better than having a continued victimization of somebody, particularly somebody who's young, so happy to support this Bill. We have a motion in a second already, and I ask the Clerk to please call the roll of the motion.

Do pass is amended to approps. Would you like to close?

Thank you again so much. I would just repeat by reference everything I said earlier about the assistance with this very, very difficult and thorny set of legal issues. But we appreciate your help, and I respectfully ask for your aye vote.

Thank you. Ask the Clerk to please call the roll.

Maienschein? Aye. Maienschein, aye. Essayli? Essayli, aye. Connolly? Dixon? Aye. Dixon, aye. Haney? Haney, aye. cholera. Pacheco? Aye. Pacheco, aye. Papan? Aye. Papan, aye. Reyes? Aye. Rayes, aye. Rivas.

Your Bill is out. Thank you. Okay.

Thank you again.

We're waiting on. zero, no, we're not. Senator. Men. Welcome.

And I'd ask Senator Glazer to please come over. Its our last item after Senator Min.

Good afternoon, Chair, Members of the Committee. I am pleased to present to you SB 741, which would amend the Domestic Violence Prevention Act to allow discovery only if specifically authorized by the court upon a finding of good cause. While domestic violence restraining orders, or DVROs, have proven to be an effective legal remedy for survivors, lack of clarity in the discovery process has been too frequently exploited to the detriment of survivors.

Abusive parties have often used lengthy discovery processes as a means of intimidating or harassing victims, forcing contact with them, causing them to incur legal fees and other expenses, thus adding to the trauma of survivorship. Now, the reality is that most DVRO petitioners are unrepresented, and litigants are currently required to separately petition for a protective order from abusive discovery alongside their efforts to seek protection from abuse.

This can be overly burdensome, delay proceedings, and again lead to real fear and trauma among survivors. The State of Washington and the District of Columbia currently have restrictions on discovery tailored for DVRO cases. California does not. Now, I want to emphasize this is a narrow fix to a real problem that exists.

We're trying to strike the right balance between the appropriate need for discovery for defendants by the actual documented abuse of that by people that are committing domestic violence. SB 741 would reduce the risk of harassment and intimidation of DV survivors and prevent unnecessary delay in adjudicating DVRO requests. Today I have with me Professor Jane Stoever, Director of the Domestic Violence Clinic at UC Irvine, who also happens to be my better half, to testify in support of SB 741.

Well, it seems easy to have arranged this witness's attendance, so. Yes, welcome.

Thank you so much. Good morning. Chairman Maienschein and Members. The University of California Irvine School of Law Domestic Violence Clinic, on behalf of our clients, is honored to sponsor SB 741, which provides a needed discovery process for the unique context of domestic violence civil restraining order cases. Our clinic and domestic violence agencies and attorneys across the State of California report the increasing weaponization of discovery to intimidate abuse survivors from pursuing restraining orders and delay adjudication.

As one example, we have a clinic client who experienced severe abuse resulting in diagnosed traumatic brain injury. We recently spent more than 15 months litigating what should have been a basic request for restraining order. No children in common, no property issues here, it was a civil restraining order request because her ex boyfriend's attorneys used a series of discovery requests to repeatedly delay the hearings. Despite our arguments to the Court of the Legislature's intent that DVROs be expeditiously adjudicated.

That case law reinforces that our Domestic Violence Prevention Act is to be liberally construed to protect abuse survivors, consistent with the preponderance of the evidence standard, and that the lack of discovery limitations in civil DVROs is inconsistent compared to California's Marcy's Law, which permits abuse survivors to altogether refuse any interview, deposition, or discovery request in criminal matters in which incarceration is at stake.

Examples from across California demonstrate the need for discovery limits and protections in these cases, such as those that exist in other states, including Washington state and the District of Columbia. In closing, SB 741 will reduce litigation abuse and unnecessary delay and strikes that balance to ensure parties only use discovery, such as depositions and interrogatories, when necessary and with good cause. Respectfully request your aye vote.

Thank you. And just to confirm with the author, you've accepted the amendments, correct?

We have accepted the amendments.

Thank you. Any other witnesses in support? Seeing none. Witnesses in opposition? Seeing none. Let me turn it back to the Committee. Do we have a motion? Motion from Ms. Papan, second from Ms. Reyes. With that. Oh, Mr. Essayli.

Yes. Good morning, Senator. Having been a prosecutor, I've done a lot of these cases, so I'm kind of familiar with them. I actually think the difficulty is not often getting these, it's enforcing them. That's what I find to be the most problematic part. I know a lot of victims who've obtained these pieces of papers, and for whatever reason, they have very hard time getting law enforcement to support them or when they're violated, there's almost no teeth to them.

So I think we need to really look at that. I guess the concern I have here is taking one extreme to the other and basically saying that we should diminish due process in all proceedings because there's danger it may be abused in some proceedings. And I have reservations about that. I think anyone accused, and I think we'd be naive to say that people don't abuse these filings and this process, for whatever reasons, divorce proceedings, people try to get an advantage.

So I'm concerned about going from one extreme to the other. Why, in your experience, do you think it's not sufficient to just let a judge make that determination in the case? If they can see it's being abused, the judge could issue a protective order. Why is that insufficient?

Yeah. So here we are providing the standards set forth for good cause and that process to be able, for anybody, either party, to be able to request, and then that finding of good cause. And I do believe that this is, after talking with multiple stakeholders, the right process for this kind of matter, given the domestic violence dynamics and context and legal standard, and to not create a number of additional hearings for this to be able to brought forward on an oral or written motion and to be responded to in the moment.

So I actually would say that it does protect due process and gives us legal clarity, whereas we have none right now. And right now I have clients coming to our clinic who've already been deposed unrepresented and have been intimidated from moving forward with cases before. But this gives us those standards.

But isn't it true a lot of times when they're going these proceedings, they've already been granted a TRO, so they already have a protective order in place to provide emergency relief? You're talking about getting the permanent order. Why not give them counsel? I mean, why don't we set up services or programs to give them. I don't think they should be unrepresented. Give them services. I'm concerned about saying that you don't get discovery unless you make a showing of good cause.

I don't think that should be the American standard. I think every accused person should be presumed innocent until proven otherwise, and they should have the ability to do robust discovery. And if it's being abused, then the judge can rein it in. But why not get them counsel, for example?

So if I could respond to that, I would just say I would be very supportive of measures to do that. I'd also be very supportive of measures to try to increase enforcement. That's a chronic problem we see across the state and I appreciate that perspective. This Bill is not addressed at those problems. But I think my record on domestic violence Bill speaks for itself. And I have supported measures of the kind you're talking about.

But this Bill targets a unique problem that, again, there's ample documentation of abusive discovery process, and this can be life or death. We've tried to work with stakeholders. We can continue working forward to make this Bill right. Again, there's a balance that we have to strike here between legitimate discovery needs of defendants, but the life and death nature of domestic violence and the importance of granting DVROs when appropriate.

I appreciate that. Hopefully look forward to working with you on those.

Thank you. Appreciate it.

Thank you. Ms. Dixon.

Thank you, Chair. Just to further clarify, are we creating two different systems processes? I mean, is there any other place in existing civil or criminal law or civil law, statutory law that allows a different discovery process? I mean, this seems like this is upending centuries of due process procedure. Granted, the cases that you're citing or the circumstances you're citing are grievous and difficult, but yet we're creating a different class of people who are treated differently in our judicial processes. That concerns me.

So I'll defer to my witness in a moment. But I would just say that we would be the third state to do this after the State of Washington, State of the District of Columbia. So this wouldn't be unprecedented in my understanding. It's been a while since I took civil procedure, but I do think there are unique differences in the law for different types of cases. But I'll let my expert witness here try to answer the question.

Well said, Mr. Min. Expert witness, that's good.

In California already, civil harassment restraining orders discovery is limited there, and so there's case law on that that does not permit discovery for civil harassment restraining order cases. And we have Marcy's Law that allows victims to altogether refuse any interview, deposition, or other discovery request. And there we have actual incarceration and the collateral consequences of criminalization involved. Whereas here we're addressing this to civil restraining order cases, which are protective, not punitive in nature, and injunctive relief.

And to feel that this standard of anybody being able to just articulate to the judge good cause and why the kind of discovery is necessary then allows, in a largely unrepresented population, allows the right protections and right remedy to be able to be in place.

All right, thank you.

Thank you. Seeing no further questions or comments, we have a motion and a second. The motion is due pass as amended. Senator Min, you may close now.

Respectfully ask for your aye vote.

Thank you. Clerk, please call the roll.

Maienschein. Maienschein, aye. Essayli. Connolly. Dixon. Dixon, no. Haney. Haney, aye. Kalra. Pacheco. Pacheco, aye. Papan. Papan, aye. Reyes. Reyes, aye. Ravis.

Your Bill is on call. Thank you. Thank you for being here. We are on our last item. Senator Glazer. I would ask all the absent Members to please head over so we can do add ons. Welcome.

Thank you. Thank you. Chair Maienschein. I want to first accept the proposed amendments in the Committee analysis. I want to thank the Committee staff in particular for their work on this Bill, as well as the chair's consideration of the Bill. In 2018, the Legislature passed SB 1235. It's a law authored to require that financial providers give small business truth in lending disclosure, which included expressing the total cost of financing as an annualized rate.

The Department of Financial Protection and Innovation was given the authority to decide the exact metric financial providers would use. After three informal and six formal comment periods, the Department chose the time-tested APR annual Percentage Rate and released a 48-page guideline document on how financial providers could comply with that disclosure. A recent study by the Federal Reserve found that consumers like APR because they are familiar with it and it provides them with crucial information in a digestible manner.

APR importantly allows small business borrowers to compare apples to apples. That's very important. This Bill repeals the sunset incorporated into SB 1235, allowing for the continued disclosure of the total cost of financing to be expressed as an APR. The Bill ensures small business owners who borrow money continue to benefit from the protections that the Legislature adopted in 2018. Let me just note that we have accepted some amendments.

As I noted earlier, there was concern about safe harbor language that a financer relying upon these regulations and guidelines wouldn't be in jeopardy if the rate amount actually changed in the course of a loan. There are protections in the regulations, and we've enhanced it with their amendment. That's before the Committee today. With me to testify and support are Bianca Bloomquist, who is with the small business majority, and Louis Caditz-Peck, who is with the California Association for Micro Enterprise Opportunity, also known as CAMEO.

And we welcome there.

Thank you. Welcome. Up to two minutes each.

Thank you, honorable Members of the Committee. My name is Louis Caditz-Peck. The experience that I had starting a small business financing line at a fintech company led me to recognize the need for common sense transparency standards.

That's why I support SB 33 and why I joined the Coalition of over 500 small business groups, for profit financing companies, nonprofit CDFIs, chambers of commerce, civil rights groups and others in passing California's Small Business Truth and Lending Law in 2018, which SB 33 preserves. When I helped start the Small Business Lending Program at a for profit online lender, we set out a strategy to be the lowest cost provider in the market.

And while we succeeded in lending to over 10,000 small businesses, that lowest price strategy really struggled because we found that small business owners often couldn't tell that the financing was the lower price because high priced financing companies often didn't disclose their APRs transparently. The market didn't enable price competition because there wasn't transparent price disclosure, and small business owners paid the price.

California fixed that in 2018 by passing SB 1235, but the bad old days will be back if SB 33 does not pass with APR disclosures for all types of financing APR is crucial, and it can be calculated for any type of financing product. It's just math. In some cases, an estimate is required and the regulations provide clear instructions on exactly how to perform those estimates. I believe a financing company would not be liable for performing those estimates as the regulations instruct.

Even if the estimates turn out to be low, the regulations offer provide several other safe harbors for errors of arithmetic, self-identified errors, overstating the APR, and so on. If any further safe harbors are provided, we need to make sure that they don't enable financing companies to invent low APRs to mislead borrowers with impunity. Thank you.

Thank you, Chairman, Vice Chair, Members of the Committee. My name is Bianca Blomquist. I'm Policy Director for Small Business Majority. We're a research and education organization that empowers America's entrepreneurs to make informed decisions about their business and their livelihood, particularly as they compare the cost of various commercial financing products. I'm testifying on behalf of SB 33 because SB 33 protects SB 1230, Five's most critical protection, which is disclosure of the annual percentage rate.

APR is the only pricing metric that includes all the rates and fees over a common unit of time. It is the metric that borrowers know and trust because it's already mandated for consumer loans. The following story demonstrates how APR is critical for the small business owners I work for. Darren and Natasha Preston of Oakland opened Malibu's Burgers in 2019, struggled to access capital necessary to expand their business and government backed programs effectively left them behind.

In 2022, the entrepreneurs filed for Chapter 11 bankruptcy, alleging that they fell prey to a bad loan with an alternative online lender that provides financing with opaque and changing terms, trapping Darren and Natasha in a cycle of high-cost debt one year and $30,000 in interest later. Their balance was higher than the cost of their original loan of $85,000, which ultimately became unfeasible for them to repay.

This lack of transparency is how countless other small business owners like Darren and Natasha have been exploited by high cost financing and predatory practices. Passing SB 33 presents an opportunity for you to set the standard for the rest of the country. Since the passage of SB 1235, New York's passed similar legislation and the 118th Congress has introduced federal truth and lending legislation.

We're so glad to see policymakers continue to protect this critical component of SB 1235 as SB 33 provides the price transparency that small business owners need and deserve. Thank you.

Thank you. Any other witnesses in support, name and organization?

Heidi Pickman on behalf of CAMEO and the 70 organizations that signed on that are refinancing these loans, we're in strong support.

Thank you. See no further. Sorry.

David Quintana with a revenue based finance coalition. We would like to thank the author, and we'd like to thank the Committee consultants for the amendments that are reflected in the Committee analysis. And with that, we would like to move from an opposed to a neutral position, but continue to work with the author on a more appropriate metric for an open ended product such as ours.

Thank you.

Joshua Dube, on behalf on the Consumer Federation of California in support. I see no further witnesses in support, witness in opposition.

Good morning, Mr. Chair and members. Marget Gladstein on behalf of the Secured Finance Network. Before I go any further, I would like to thank the author, his staff, the Committee staff who have graciously listened to the concerns of SF Network and addressed those with the amendments. Although we do have a remaining question. I have brought with me Mark Hefner with Celtic Keppel, who can answer any questions. Should we have them in the discussion? We are grateful that you've accepted the safe harbor.

Our Members offer factoring and open ended financing, and so the APR has been a challenge for us. We support total transparency and provide capital to small and medium sized businesses in California. Our long term default rates have been less than 1%. We do have the unposed last amended position. We're reviewing the language and our question, and we really would like clarification today, and I think that will help us get to the neutral position.

Our understanding is that the amendment provides a safe harbor if we comply with the regulations and provide the calculation of the APR. We also want to clarify that moving forward, if the regulations change from time to time, there would not be retroactive liability, and once new regs are adopted, if we comply with those, there's also a safe harbor. So with that clarification, I believe we'll be able to get to neutral. And agaIn, I want to thank all the participants for all the time they put in.

Thank you. Great. Any other witnesses in opposition? Seeing none. Do we have a motion from the Committee?

Comments?

Ms. Reyes moves. Mr. Haney seconds. See no further comments. Disclaimer may close. zero, Mr. Essayli, if you would mind.

Responding to those questions?

Yeah, thank you. The amendment language was done for the exact reason that the currently opponents have requested, which is that to provide the protections. Even if the guidance changes, that protections would be, if they were done under the regulations at that time, that it would be a safe harbor protection. That's the goal of the amendments that's drafted. No one wants to create traps, and we want a robust marketplace of lending.

Serves everyone's interests, and hopeful that we've managed to provide that additional enhancement to make everybody comfortable.

So my understanding is these amendments are fairly new, and you're still trying to get a hold of if they address all your concerns. Is that what's happening?

That's correct. Multiple lawyers reviewing. No offense to the attorneys in the room. It's always the question of what does notwithstanding mean? And I must say, I've Googled that term a few times in the last 48 hours just to clarify it. So I'm hopeful that we will get there, and I really appreciate all the work that's been in.

Senator, you seem like a man of your words. So if they have some technical issues or things, you'll still continue those conversations?

Of course. I think nobody wants to trap anyone. And as long as you're relying upon a good faith estimate, which are in the regulations and the safe harbor that's in the regulation, plus the language you have before you, I think they're all going to hopefully feel comfortable.

All right, well, with that assurances, I'll be supporting it today.

Thank you. Thank you. So, we have a motion and a second. The motion is do pass as amended, to approps. Senator, Vice, respectfully ask for your aye vote.

And thank you, chair, for your good work on this.

My pleasure. Clerk, please call the roll.

Maienschein? Aye. Maienschein, aye. Essayli? Aye. Essayli, aye/ Connolly? Dixon? Aye. Dixon, aye. Haney? Aye. Haney, aye. Kalra? Aye. Kalra, aye. Pacheco? Aye. Pacheco, aye. Papan? Papan, aye. Reyes? Reyes, aye. Rivas? Rivas, aye.

Your Bill is out. Thank you. So, with that, that concludes the items that we need to hear today. So we will do add ons. We'll start with the consent agenda. I'd ask the Clerk to please call the role.

Connolly. Reyes. Reyes, aye. Rivas? Rivas, aye. Did I vote on that? Sorry.

Pacheco.

I good job. Okay, item number one, we are lifting the call. SB 16, smallwood, quavis. Ask the Clerk. Call the roll.

Connolly. Pacheco, aye. Rayes, aye. Rivas, Aye

That Bill is out. Item number two, SB 27, Derazzo. Ask the Clerk to please lift the call.

Connolly. Rayes, Aye. Rivas, Aye.

That Bill is out. We have everybody on item three. Item five, SB 497, Smallwood Quavis, asks the Clerk to please lift the call.

Connolly. Pacheco, not voting. Rayes, aye. Rivas, Aye.

That Bill was pulled out of four was pulled, and this Bill, item five, is now out. Item six, SB 646, Cortese asks the Clerk to please call the roll.

Connolly. Kalra, Aye. Rivas, Aye.

Item number seven, SB 741. Min, ask the Clerk to please lift the call.

Connolly. Kalra, aye. Rivas, Aye.

Thank you, everyone. That Bill is out. We will keep the roll open for five more minutes for Mr. Connolly to get here. It's like electrolytes, like the special Gatorade. It was like 10 times the servant of electrolyte jumping. I got it this morning when I went boxing and then I didn't drink.

Check up. Blanca. Blanca, do you have five minutes to. I've got to go present a Bill and I'm just trying to keep the roll open for Mr. Connolly. Do you have five minutes to sit here and wait for him? Yeah. Great. And they'll just tell you what to do. Pretty much how I handle. Thank you. I'm presenting, so I'll call it. She'll want to.

I mean, democracy. Mr. Connolly, we're going to open up the roll for you. We'll start with the consent agenda. Ask Clerk to please call the roll.

Connolly, aye.

On consent item number one, SB 16. Ask the Clerk to please call the roll.

Connolly, Aye.

Item number two, SB 27, Dorazo. Please call the roll.

Connolly, aye.

Item three, SB 33, glacier. Ask the Clerk to please call a roll.

Connolly, Aye.

Item five, SB 497, Smallwood Quavis. Ask Clerk please call a roll.

Connolly, aye.

Item six, SB 646, Cortese. Ask Clerk to please call the role. Item seven, SB 741 Min. Ask the Clerk to please call the roll.

Connolly, aye.

Thank you. With that, that concludes today's Judiciary Committee. Thank you all very much.