Assembly Standing Committee on Judiciary

Good morning, everyone. Welcome to the Assembly Judiciary Committee. In order for us to complete our agenda, allow for everyone equal time. The rules of witness testimony are that each side will be allowed two main witnesses. Each witnesses will have approximately two minutes to testify in support of or opposition to the Bill.

Additional witnesses should state only their names, organization, if any, and their position on the Bill. As we proceed with witness public comment, want to make sure everyone understands the Committee has rules to ensure a fair and efficient hearing.

And we have a bunch of rules that I will state when necessary and hopefully they're not necessary because everyone's going to behave very, very well today and this morning and this afternoon. We do not have a quorum, but we will go ahead and begin as a Subcommitee. And we have Senator Wiener with us.

Senator Wiener has two bills, Item 1, SP41 and Item 2, or sorry, Item 9, SB378. You can go ahead and take your time, Senator Wiener, if you want to get your coffee there. And then whenever you're ready, I'm going to start with the first one, then 41.

Just you and me, Mr Chair.

Okay. Thank you, Mr. Chair. I'm here to present Senate Bill 41, which will require transparency and put a stop to abusive practices by pharmacy benefit managers, or PBMs. Practices that are leading to that increase the cost of prescription drugs and that are killing off neighborhood pharmacies.

I want to thank the Committee for working with us and I'm happy to accept the Committee's amendments. PBMs started off as small administrative entities designed to help health plans, to put together formularies, and negotiate drug prices. Welcome, Assembly Member.

They have now grown over the decades into mega players in the healthcare space, sometimes bigger than health plans, merged with health plans, integrated. They own their own pharmacies and they have huge leverage in determining what goes on to a formulary setting, the costs, and really determining where people can get and how they can get their prescription drugs.

We're seeing, first of all, practice that kills off neighborhood pharmacies called patient steering, where PBMs effectively force people to use their own mail order pharmacies instead of their chosen neighborhood pharmacies, where they can interact with a pharmacist face to face.

And so sometimes people see this most commonly when you're told if you go through the mail order pharmacy, you can get a 90 day supply, but if you have the gall to want to go to your neighborhood pharmacy, you only get a 30 day supply. That is a classic form of manipulation patient steering.

And that's just one example. This bill will put an end to that practice. The bill also ends a number of compensation structures for PBMs that lead to rising costs. For example, making sure that for rebates that the entirety of a rebate that a PBM negotiates with a drug manufacturer gets passed through.

Right now, PBMs will keep a portion, a slice of the rebate. And so the higher the rebate, the higher their compensation, meaning the higher the drug cost, the higher their compensation. It also puts a stop to spread pricing where PBMs get paid a certain amount by a health plan and then pay less to the pharmacy.

The bill will also create more transparency. I want to say that I'm very pleased that we were able to work with the Governor, with the Administration, so that the licensure piece of this bill was passed as part of the budget. And that can now. That's now underway.

And now it's time to address the practices that are causing so many problems in the health sector. I respectfully ask for your aye vote. And with me today to testify is our two pharmacists. Clint Hopkins, the owner of Pucci's Pharmacy here in Sacramento, and Sonya Frausto, owner of Ten Acres Pharmacy.

Thank you. Begin whenever you're ready.

Good morning, Mr. Chair and Members. I am Dr. Clint Hopkins, pharmacist, owner of Pucci's Pharmacy, independently owned in Sacramento since 1930. PBM's own health plans, the pharmacy down the street, the mail order pharmacy to where they steer patients. And they dictate contracts which underpay and force pharmacies to close.

Multiple state and federal investigations have exposed this financially irresponsible industry. Our own Medi-Cal, which went to a pass through model, is a shining example of reining in PBM abuse. Even before the Rite Aid closures, numerous community pharmacies were closing, creating pharmacy deserts.

When their patients come to us, we often have to explain that their drugs are reimbursed below acquisition costs, likely the reason that their previous pharmacy closed. Each day, it seems we spend more time explaining to patients why we cannot help them than we do counseling patients actually picking up medications from our pharmacy.

PBMs limit which drugs can be dispensed locally and reserve the most profitable drugs for their own pharmacies. Just last week, we were contacted by a patient who was forced to use the PBM owned pharmacy for a specialty medication. He's a federal employee forced to use mail order by Caremark, who manages the benefits for federal employees.

His med is a generic that doesn't cost very much. He's not happy with the mail service. He's run out of meds multiple times due to their delays, missing doses and putting him at risk of a disease which could be prevented by allowing him local access.

And the kicker, they've been charging him $60 each month when he could have just paid $50 out of pocket for this specialty medication from a local pharmacy and had the med the same day. The week before, a child of 8 months old was forced to use specialty pharmacy for their med.

The average pharmacy would charge $120 for a bottle of this Med. CVS mail order will likely pay themselves in excess of $1,300 for the same drug sitting on the shelf in my pharmacy. And her parents had to wait for no reason other than profit.

The opposition has cited that they pay some pharmacies more than they pay my, than they pay their own. I challenge them to bring such a pharmacy forward to provide testimony. But you'll be more likely to meet the muffin man, yes, the one that lives on Drury Lane then you will because of such a pharmacist.

Because both only exist in fairy tales. Without SB 41, PBMs will continue to run afoul, causing more pharmacies to close, local jobs to be lost and patients to lose access to health care in their communities. For far too long, PBMs have operated in the shadows, extracting exorbitant amounts of money from the system they've designed. I respectfully request your aye vote on SB 41.

Thank you.

Wow. I don't have a muffin man. My name is Sonya Frausto. I'm the owner of Ten Acres Pharmacy. Last week we testified. I'm sorry, I'm going to be pretty emotional because I just announced my pharmacy will be closing on August 20th and not because we don't have a lot of patients, we've grown tremendously.

But because I can't afford to keep open. Our pharmacy practices with compassion and honesty and transparency with all of our patients. We we've had five pharmacies close within a five mile radius.

We have absorbed a lot of those patients and sometimes I have to turn patients away because I can't afford to have their medications because I am underplayed significantly. Last week I told my patients, excuse me, I told my staff and they were heartbroken because obviously they're losing jobs.

I testified last Tuesday, completely lost it like this because I knew what I was going to have to do this week. Yesterday, I had to tell my patients and the outpouring of love and support was tremendous. They tried to figure out how we could stay open. Bank sales, lemonade stands, you name it.

I think I had a really high successful sell through yesterday. But the reality was is that I had patients that had just transferred from Rite Aid who had closed their doors just weeks ago and found me and were so happy.

And then I had to tell them yesterday that I can no longer serve them because we will also be closing on 8/20. This is awful because not only am I a pharmacist who provides health care, I'm a friend to a lot of these patients that come in.

I've seen patients have babies and their kids come to our pharmacy, have good relationships with a pharmacist. That's sometimes your first healthcare relationship. And to see that go away in a community desperately needs a pharmacy is outrageous.

I have students who dream of opening a pharmacy and called me this weekend and asked me what was I thinking, why could I not survive? And I had to be honest with them and tell them that it is because I am under reimbursed consistently from these PBMs. I can't even make payroll sometimes. It's pretty sad. Support SB 41, so my students can have a dream.

Thank you.

And come visit me.

Thank you. Is there anyone else here in support of SB 41?

Thank you. Katie Van Deynze with Health Access California, in support. Thank you.

Thank you.

Michelle Rivas, California Pharmacists Association, cosponsor, in support.

Thank you.

Michelle Johnston, National Multiple Sclerosis Society, in support.

Thank you.

Lori Martinez, California Board of Pharmacy, in support.

Thank you.

Fred Noteworth, we're representing the Pharmaceutical Research and Manufacturers of America in support. Thank you.

Thank you.

Colette Madden representing California Rheumatology Alliance, in support.

Thank you.

Thank you, Mr. Chair and Members. Megan Subers on behalf of the Los Angeles LGBT Center, cosponsor, in support.

Thank you.

Good morning. Jonathan Clay on behalf of USC Keck School of Medicine, in support.

Thank you.

Mr. Chair and Members, Rand Martin on behalf of the AIDS Healthcare Foundation, in strong support. Thank you.

Good morning. Shira Specter with Stone Advocacy on behalf of the California Orthopedic Association in support. Thank you.

Thank you.

Good morning. Jorge Cruz on behalf of the California Access Coalition, in support.

Thank you.

Good morning. Ryan Souza on behalf of the San Francisco AIDS Foundation, a co sponsor, and APLA health, in support. Thank you.

Thank you.

Kevin Guzman with the California Medical Association, in support.

Thank you.

Morning, Mr. Chair and Members. Andres Ramirez with Blue Shield of California, in support.

Thank you.

Jessica Moran on behalf of the National Association of Chain Drug Stores, in support.

Thank You

Morning, Chair. Gilbert Lara here on behalf of Biocom California, in support.

Thank you.

Good morning. Tim Valderrama with the Weideman Group on behalf of the California Society of Health System Pharmacists, in support.

Thank you.

Good morning. Alex Kahn on behalf of the California Chronic Care Coalition, a proud cosponsor and the ALS Association, in support.

Thank you.

There. Colin Meissner as a resident and patient, in support.

Thank you. Is that?

Oh, hello. Good morning. Sorry for the last minute rush. Sylvia Solis Shaw here on behalf of the California Academy of Child and Adolescent Psychiatry, in support. Thank you.

Thank you. Is there anyone here in opposition to SB 41?

Good Morning, Chair and Members. Alison Ramey here today on behalf of the Pharmaceutical Care Management Association in opposition to SB 41.

It's worth noting that SB 41 is largely a reintroduction of SB 966, which while passed by this Legislature was vetoed by the Governor, with the governor's veto message being that he wanted greater transparency across the drug supply chain, but did acknowledge that there needed to be some focus on PBMs.

This Legislature helped him achieve those goals with the passage of AB 116 just two weeks ago that was signed into law that will now require PBMs to be licensed by the Department of Managed Healthcare and report a large amount of data to the Office of Health Care Affordability, including contract terms, reimbursement rates, how those reimbursement rates differ between independent pharmacies and chain pharmacies and affiliate pharmacies, amongst a number of other things, including rebates, which we know this Legislature has a lot of interest in learning more about.

Soon come 2026, this Legislature will be armed with data that hopefully can put an end to the finger pointing you all have learned and heard about between PBMs, drug manufacturers, and others about who is to blame for the high price of prescription drugs and make sound policy decision.

SB 41 steps in and ignores the opportunity that that data brings you all and instead makes policy decisions that take away PBM tools and limit client choice. It's important that this Committee know that clients, PBM clients being the state, large employers, small employers, union trusts do not have to use PBMs.

They choose to use PBMs because they are successful in negotiating lower drug prices and putting together pharmacy networks and pharmacy benefits that they can provide to their employees and members at the most affordable price. We acknowledge the value and the importance of independent pharmacies. PBMS cannot create networks without them and we are open to those conversations.

But SB 41 is not going to do anything to lower the price of prescription drugs for consumers. For that reason, we ask for your no vote.

Thank you

Mr. Chair and Members, John Winger here on behalf of America's health insurance plans. We're the National Trade Association for the Health plans, I think to PCMA's point, willing to have that conversation about pharmacy. Obviously we have to have adequate networks and pharmacies are an important component of that. And so willing to have those discussions.

Not going to relitigate everything that was discussed in Health Committee. But there are a lot of provisions of the bill related to the manufacturers and taking away tools in the tool chest from the PBM's perspective in order to reduce the cost of drugs which has an impact on the payers who voluntarily hire them.

But specific to I think this Committee, our, AHIP's, biggest concern with the bill is around ERISA Preemption. The Supreme Court ruled in 2020 that a lot of the provisions of this bill would be preempted by federal law.

Anything that gets into the actual health plan administration and is directly related to the health plan's benefit design is preempted under ERISA. There were some very narrow exceptions to that that were not preempted by ERISA that the state could do related to pharmacy reimbursement and a couple other things. But this bill goes well beyond that.

There's been recent litigation in the 10th Circuit as well that's also reaffirmed this. And so we continue to believe that the inclusion of self insured plans in the bill is going to be preempted by ERISA. Thank you.

Thank you. Is there anyone else here in opposition to SB 41? Okay, we'll bring it back to the Committee. Any questions or comments. Madam Vice Chair?

Thank you, Mr. Chair. And thank you Senator for bringing this forward again. A couple questions for clarification. Could you explain how this bill is different? I supported last year's bill. So what's different this year?

It's, it's similar to last year. Enormous respect for the Governor and he has the right to veto a bill. But this is a bill that you'll recall passed with almost unanimous bipartisan support last year. And we are. I'm really grateful that the Governor worked with us in the budget to put the licensure piece in the budget.

I think that was a step forward and we look forward to working with the Governor and having dialogue with the Administration about the details of the bill. I do just want to. Respectfully, this is true with the characterization of the budget trailer bill.

The Licensure piece that got put into the budget trailer bill was not in lieu of regulation. It was a piece of SB 41. And it was placed into the budget because that means that the licensure can be stood up. I don't know if that's grammatically correct.

We stood up more quickly, otherwise we'd have to wait until next fiscal year to stand it up. So by putting into the budget, they can get to work immediately in getting the licensure in place. And so once the rules are passed and go into effect January 1st, they'll be ready to go. So they're complementary.

I was just going to say they're complementary. They work together. And then if you could also address the ERISA issue, please.

Yeah, we disagree. And the fact that there was a Supreme Court case out of Arkansas that upheld state level PBM regulation, that bill was not exactly the same as this bill. But we understand that's their argument and they have every right to raise that argument here or in court. But we disagree with their legal analysis.

And then one final question. Other states, I mean, how does this affect the industry and working through PBMs? Have other states taken similar action?

Yeah, other states have enacted regulations. California's a bit behind here. I will also say there is bipartisan support in Congress to regulate PBMs. This is not a very controversial issue among policymakers. I hope that at some point Congress does that, but they haven't yet. But there has been bipartisan support.

Well, very good. And just my empathy for independent pharmacies. I have them in my own community and I had no idea. When you had your bill last year, I went around and visited, visited independent pharmacies in various parts of Orange County, what I represent. And I was shocked because I didn't know.

And it was a big education, what we've been going through. And last year was very confusing. Now I understand it a lot more, a lot more clearly. And I'm fully supportive of your bill and wish you success in here. I mean, my heart goes out to the independent pharmacist. It's just heartbreaking to see that they can't afford payroll because of the price of drugs. Thank you very much. I appreciate it. Thank you, Chair.

Thank you. Assembly Member Papan.

Well, good morning.

Morning.

I feel like we see each other quite regularly. So I want to thank you, Senator Wiener for bringing this bill and for your continued leadership on the issue. As you know, my district has a lot of biotech in it.

I would like to say that we are the biotech capital of the world, and I'm very proud of that. And as you well know, these innovators are discovering new cures every single day. And I think that their success and our access to those cures depends upon scientific meriness, scientific merit, and fairness in pricing.

So that's why I'm a fan of the bill. I just think that the way it's set up now, PBMs actually punish companies for having lower prices. And my heart goes out to you independent folks. You, you are so personal in how you conduct your business, and it is a very personal business in a lot of ways.

So I think, just to digress a moment, I thank you for your efforts in that regard. It is very important to the health and mental health of your patients, certainly to know who's administering their drugs.

But in any event, I think your bill is going to bring some daylight to this issue, and it's going to help level the playing field for biotech and generic manufacturers who are really just trying to compete. So I have no questions. I just want to say I'm a strong supporter, especially given my district and my admiration for especially the independent pharmacies.

Assembly Member Harabedian.

Thank you, Mr. Chair. Thank you to the author. Thank you to all the witnesses. Question to the author. Just about the confidentiality provisions. So obviously AB 116 was passed, very strict confidentiality provisions in that bill. And now this bill is coming.

And I think what's problematic for a lot of us is that under now the existing law, which I'm not sure how this bill interfaces with it, private industry can essentially dictate what records that are held by DMHC are disclosed as public records or not. And I think that's problematic.

It's sort of unprecedented to have any private industry dictate what records the Attorney General can access to actually pursue cases for example. Are you addressing this? Are you committed to addressing it in this bill?

And if not, I'm not exactly sure why we are allowing this sort of strict confidentiality to exist in this space where it doesn't exist in other spaces. So can you address that and just help me learn a little bit about why this is different than, frankly, every. And obviously, the California Public Records Act dictates something completely different.

And I think we talked about that yesterday on the Assembly Floor. I am a little worried that this is in contradiction with 116 and with CPRA now. So can you just speak to that for me?

Yeah. And that was all negotiated as part of the, part of the budget with the Administration. And that is something that we're going to be taking a look at and working with the Administration on.

Okay, so we are committed to hopefully, because I do think that the staff analysis has proposed, I think, some good pathways forward, maybe not necessarily through this bill, but to address this. Because I think.

Yeah, we're committed to working with the Committee and with the Administration to resolve the issue.

Appreciate that. And then I guess the second bucket of questions I have are just generally, to the extent that anyone understands this, they are smarter than I am. Because I will say that this is probably one of the most opaque areas of policy and the law that, that I've encountered in my short time here.

And even after reading this incredible analysis and the bill, I still don't fully understand it. What I am concerned about and I think that what's driving this bill is cost, I would hope, and trying to make sure that consumers are paying less for their pharmaceuticals and their drugs and not more.

What I'm concerned about is this bill doesn't necessarily predict that or ensure that. So I guess is there anything. Obviously pharmaceutical companies dictate the price of their drugs, of the pharmaceuticals that they sell. PBMs have their role in setting the ultimate price that consumers pay. And this has to do with PBMs.

Does the bill have anything to do to ensure that consumers, to the extent that we're saving money by these regulations, the consumer actually will pay lower drug prices? Or could pharmaceutical companies just raise the prices or just keep all the money that's being saved from PBMs?

So first of all, I would never suggest that one bill like solves every problem in terms of the cost of the health care.

And I would never hold you to that,

And I know you're not suggesting that. So there will still be negotiation with pharmaceutical companies regardless of what the compensation structure is for PBMs. We know that right now PBMs have an incentive to favor higher cost drugs because that means that they get more rebate revenue.

The higher the drug cost, the higher the rebate, which is a percentage of the drug cost and the higher their cut of that of that rebate. In terms of if you have a overall savings to the health care system, whenever those costs go up, we all pay more through insurance rates, et cetera.

And so whether the consumer is getting a direct financial benefit or whether the costs are going down in the system overall, it's to the benefit of everyone. So one way or the other there will be benefits. This is about reducing overall costs in the health care system first and foremost.

But there's nothing that, I appreciate that and we see a lot of bills like this where frankly, it feels like we're caught in the middle of a, of a battle and a war of two giants and maybe one giant and one, you know, slightly, slightly less big giant. And frankly, it's about cost.

And frankly, there's never anything in our bills that ensure, there's no provision that triggers that any savings will be passed on to the consumer. And so this isn't just about this bill necessarily. But why not?

Why not include things in our bills where, frankly, we're trying to do what you're trying to do that ensures that cost savings actually are passed down to the consumer?

We can do that and we can make those choices in a lot of bills about how the cost savings are passed along. But I want to just be clear about what's happening here. So we have this system in place where we have a patient here, we have their providers, doctors, et cetera.

Here we have the pharmaceutical industry which manufactures the drugs that keep healthy, and we have the payers, the health plans. And then right in the middle of everything are the PBMs. And that it is driving up costs. And the pharmacy and pharmacies are part of the provider system. And so, and so that, that's the issue. It's driving up costs for everyone.

I got you. No, and I guess the, the upshot, and I am going to support the bill. I obviously think the confidentiality provisions for me are probably most problematic. And then secondly, just, just the upshot of obviously everything we try to do here is help. We want to help the consumer.

And frankly, at the end of the day, I'm not sure this does. I hope it does. And I think everything you say, if comes true, could. But if this is merely a fight between two entities on who keeps more of the profits within the system, then obviously it's problematic to think of that as the outcome.

Yeah, it's about an industry that's driving up costs and destroying pharmacies, and that is incredibly harmful to consumers. Losing your neighborhood pharmacy is also very harmful. Certainly not the only issue. I have this afternoon in Health Committee.

I have SB 363, which is where we are trying to have better accountability for the health plans, for their inappropriate denials of people's care, and more and more accountability there. So this is certainly not the only issue, but it is one of them.

I appreciate that, appreciate your advocacy and just how passionate you are. And when the time comes, I will move the bill. So thank you.

Well, thank you, Senator. And as someone that has delved a little bit into this space with my legislation in years past. The complexity and confusion in the system is oftentimes by design.

It's something that's been created because it's very difficult then to change anything or to and in many ways you do have to attack it from many different angles and many different pieces of legislation.

I think to the Senator's point, the complementary nature, not just of this, not just with the trailer bill, but other legislation that's happening is somewhat required to some extent, unless I do have a bill in mind that could probably handle all of it at one time, but we'll get to that one later. Yeah, yeah.

And so, you know, and look, I've had, in my time in the Assembly, I've had two ribbon cuttings for independent pharmacies. They've both closed and actually both have been closed for a number of years now. I think that speaks to part of what, you know, that that competition is a healthy competition.

That being said, there's different ways to approach it. You know, I go to the pharmacies at least once a week for my father, it seems like, and different pharmacies trying to figure out it's like a combination of it's a lot of work to have to figure out how to get those things done.

But that being said, you know, continue to work with the Administration and with the opposition in terms of some of the concerns raised. I know that this conversation has been happening for a long time and there's going to be some disagreements.

The legal ones may, legal ones, oftentimes you end up in court if there's just a, at the end of the day, just a disagreement on a legal issue. Okay. Well, that's what our courts are for. We can't necessarily make that decision here today as to who's right on that.

We're not, you know, we're not, I'm not a judge up here, but I will say that I do appreciate your efforts in this space and encourage everyone to keep having those conversations. And we don't have a quorum, but would you like to close?

Respectfully ask for an aye vote.

Thank you. And then on to the next one. SB 378.

Thank you, Mr. Chair. I'm here to present Senate Bill 378 to allow consumers to seek civil penalties against online marketplaces that advertise illegal intoxicating hemp and unlicensed cannabis products. First, I want to say that I do plan to remove industrial hemp product references from the bill, while also working to address strict liability issues for entities that are working in good faith to comply with the law, including by working with committees to consider an affirmative defense in the event that the DCC website incorrectly identifies an advertiser product as licensed or registered.

These changes will help prevent good actors from getting caught up by the bill's provisions. I'm also working to address some questions that have been raised around standing that's been identified. So this bill is about, we have a, we have a legal cannabis industry that is licensed, safety tested, accountable to be responsible and not to make people sick or grant access to children. And that industry is collapsing. We have an illicit cannabis industry which is huge, which is not safety tested, has no health or safety standards, but is large.

We also have hemp products that are at such high concentrations that they are at times stronger than cannabis. And for both the illicit cannabis and these high potency hemp products, you can purchase them online on just platforms that we all use and that children have easy access to. And so you can have a child go on and order high concentration hemp product that's stronger than cannabis and have it delivered directly to their home. And that is not acceptable.

So this bill will help address that issue by putting certain responsibilities on platforms that are selling these to either say that they're not selling them, or if they are, to have information and ability to report and then to create liability if someone is harmed by one of these products that purchased on one of these platforms. So I respectfully ask for an aye vote. With me today to testify is Kristin Heidelbach, Legislative Director at UFCW Western States Council, and Tiffany Devitt with the San Diego Imperial County Joint Labor Management Committee.

Thank you.

Good morning. Kristin Heidelbach here on behalf of UFCW Western States Council. We represent thousands of workers in the licensed and legal cannabis industry. Appreciate the leadership of Senator Wiener, and I think he did a great job of explaining why we need this bill.

We currently have emergency regulations via CDPH that were enacted in October of 2024 that make any intoxicating product, intoxicating hemp product, illegal here in California. And so we have obviously oversight. The DCC provides oversight for some shops and CDPH oversees hemp. But we have a thriving market online.

We are looking into, as the Senator mentioned, standing, and then also looking for ways that we don't sweep in the good actors. And really appreciate the work of the Committee because it's been a haul through three separate committees. So we respectfully urge your aye vote, and I'm here to answer any questions if needed.

Good morning. My name is Tiffany Devitt. As the Senator mentioned, I'm here representing the San Diego Imperial Counties Joint Labor Management Committee, which is a partnership between unionized licensed cannabis companies, retailers like March and Ash and Embarc, and UFCW. And I'm here to talk about the impact on the licensed cannabis industry and give that a bit more color. The online sales of these illegal products are making it hard for us to stay in business.

We follow the rules, we pay our taxes, we provide good jobs. But consumers are looking for cheaper alternatives. Which means we've had to make some really hard decisions in the past few years, including laying off employees, freezing salaries, and shutting down certain parts of our business, like our R&D section. We are not alone in that. If you look at the statistics from the California... Sorry.

From the Department of Cannabis Control, 70% of licensed cannabis manufacturers in California have surrendered their license in the past few years. It is a bloodbath because we're losing out to this more convenient option. Meanwhile, we worked collaboratively on a study on intoxicating hemp products about a year ago. We purchased hundreds of illegal products.

All of them were shipped to our place of business and our homes directly. 91% didn't charge sales and use tax, let alone cannabis excise tax, and 95% of them contain synthetics. These are not safe products. So in conclusion, I would say that that online marketplace, it thrives in what's currently a regulatory blind spot.

So the Department of Cannabis Control tends to focus on enforcing against illicit cultivation. Local law enforcement tends to focus on illicit storefronts, and nobody is paying attention to the space between. With that, I would respectfully ask your aye vote. Thanks.

Thank you. Is there anyone else here in support of SB 378?

Mr. Chair and Members. Matt Broad here on behalf of Teamsters California in support. Thank you.

Mr. Chair, Members. Sara Flocks, California Federation of Labor Unions, in support.

Good morning, Mr. Chair and Members. Robert Herrell with the Consumer Federation of California in support. Thank you.

Good morning, Mr. Chair and Members. Betsy Armstrong on behalf of the County Health Executives Association in support.

Chloe King with Political Solutions on behalf of the County of San Mateo in support. Thank you.

Good morning, Chair and Members. Nicole Redler on behalf of California NORML in support. Thank you.

Good morning, Mr. Chair. Justin Fanslau on behalf of the California Cannabis Operators Association in support.

Good morning. Navnit Puryear on behalf of the California School Employees Association in support.

Good morning. Elizabeth Espinosa on behalf of the Board of Supervisors in the County of Santa Clara in support. Thank you.

Thank you. Is there anyone here in opposition to SB 378?

All right. Good morning, Chair and Members. Jose Torres with TechNet. We remain as—and we remain in respectful position to SB 378. The Bill has a greatly broad definition of online cannabis and hemp marketplaces, and it places a strict liability on them even if they have no direct role in the sales.

For example, if an online business explicitly prohibits the sale of and advertisement of cannabis goods, but that online business allows for users to directly communicate with each other, they would be found liable under this Bill.

Mapping services, search engines, social media, and other digital platforms would be covered under liability under this Bill because of just how broad it is.

Our TechNet member companies remain committed to ensuring that online marketplaces have reasonable restrictions and policies in place to actively enforce provisions on illicit products, but it creates a large umbrella of liability over companies and businesses with an online presence throughout the state.

We appreciate the Committee's analysis in recognizing and flagging some of these concerns of the Bill being overbroad and needing to be narrowly tailored. We continue to be ready to have such discussions with the author on what that may look like, but as is, we remain in opposition.

The Bill risk overcompliance and could chill legitimate speech and access to legal products due to the strict liabilities, reporting requirements, and advertising provisions. It is a heavy-handed approach that would hurt businesses more than actually eliminate unlawful cannabis sales. I thank you for—I thank you for your time, but ask that you vote no today.

Thank you.

Good morning, Chairperson Kalra and Members of the Judiciary Committee. My name is Shay Gilmore and I'm an Attorney in San Francisco, representing exclusively cannabis and hemp operators and investors in regulatory matters, as well as business transactions.

I'm here today on behalf of Medterra CBD and a coalition of hemp wellness product manufacturers to express opposition to the Bill if it is not amended.

SB 370 as currently drafted would effectively ban the direct-to-consumer sale of most hemp products online, cutting off a vital channel for millions of Californians who rely on these products for their health and wellness.

This approach does not distinguish between responsible licensed manufacturers who adhere to rigorous testing, labeling, and age restriction standards and the bad actors the Bill seeks to address.

Instead, it threatens to dismantle California's legitimate hemp industry, resulting in the loss of thousands of jobs and tens of millions in tax revenue, while depriving consumers of safe, regulated access to wellness products that they trust. We agree that the unregulated intoxicating hemp products have no place in the marketplace.

However, rather than an outright ban, we urge the Legislature to adopt a balanced regulatory framework, one that includes robust enforcement, licensing, independent testing, strict labeling, and age verification—measures already in place in many other states.

This would protect public health and ensure not only that safe and non-intoxicating hemp products reach consumers, but that the entire sector that serves California stays viable.

SB 378's sweeping restrictions risk driving the hemp industry that manufactures these wellness products even further underground, which will not help alleviate this extreme tax burden that the licensed Delta 9 THC cannabis industry that my colleagues here in support have represented. Okay.

I just want to also thank the Committee's Staff Report pointing out interesting issues about the Dormant Commerce Clause. Obviously, there have been federal court decisions, including the one in New Jersey last year, that struck down a state level hemp restriction.

And I also just want to point out for the Committee that the definition problem that we have here, AB 45, which is the state of the state, says that you look to the Sherman Food, Drug, and Cosmetic Act, which then tells you to go to the Department of Cannabis Control, which right now, under Governor Newsom's emergency regulations that are going to be made permanent, is an outright ban on all these products.

We agree that intoxicating hemp products, which is defined right now to be a non detect—right, a zero detect, that's kind of unheard of, right—is, is not the right, we agree that intoxicating hemp should be banned, intoxicating hemp products should be banned, but that wellness products, that are not intoxicating, should be allowed to proceed.

Thank you. Anyone else here in opposition to SB 378?

Mr. Chair and Members, Erin Niemela, with Niemela Pappas, on behalf of Ebay. We have concerns about the Bill and associate our remarks with TechNet. Really appreciate the thorough analysis on marketplaces. Thank you.

Thank you.

Mr. Chair and Members, Pam Lopez on behalf of Medterra and Irvine, California-based hemp wellness companies. Align our comments with Mr. Gilmore and oppose unless amended position.

Good morning, everyone. Rebecca Prozan, on behalf of Cornbread Hemp, also stating our opposition to the Bill unless amended. Thank you.

Mr. Chair and Members, Rand Martin, on behalf of the US Hemp Roundtable. We remain in opposition to the current version of the Bill, but we look forward to seeing where the author and the sponsors intend to take the Bill if it leaves this Committee. Thank you.

Aiden Downey with the Computer and Communications Industry Association, aligning our comments with TechNet. Thank you.

Thank you. We'll bring it back to Committee. And I, I just want to start, Senator, I think that—and I also want to commend our Chief Consultant for the great analysis I think also is a really good primer, kind of a little bit on the history of cannabis and hemp policy and regulation legislation, on the issue of—a couple of the issues—regarding both strict liability as well as the first amendment issue.

Now, you already mentioned in your opening that you're going to work to kind of more narrowly tailor the legislation. In what ways, at this moment—I know there might still be more conversations and more work on your end with our Committee and what have you—what ways are you looking at trying to do that in terms of further narrow, narrowly tailoring the legislation?

That's a broad question, but.

It's broad. But I mean I think it came up a lot. Yeah, I think that the argument is that the legislation is broad, so, how do we tailor it?

It is. It's a little bit of the wild west out there. Listen, we—one of the complexities here is that this Bill does not decide what kind of hemp is legal or illegal. That's a separate matter in federal and state law.

There is a bill moving forward this year by Assemblymember Aguiar-Curry, is it AB 8, that actually deals with that issue? The Governor issued an Executive Order. Assemblymember Aguiar-Curry is working on it. We are not separately saying what is legal and what is illegal. That is existing law and potentially, new law this year.

This is about if you are—if we have something that is illegal that is being sold in an online marketplace, not on, not via Google Maps, not via, you know, some sort of private message offering to sell on a marketplace being sold, having responsibilities to try to protect against that so people know so people can report it.

And if someone is harmed, if your 15 year old orders some high concentration of hemp and gets it delivered and gets sick, that there's accountability for that. That's what we're trying to do. We are—absolutely will continue to engage in terms of making sure that the Bill is focused and we're committed to doing that.

Assemblymember Bauer-Kahan.

Well, thank you, Senator, and everybody who's here. This is my third opportunity to see the Bill because you were lucky enough to triple vote by your amazing rules chair. And you know, I think the point you made, which was an important one, Senator, about the definition of marketplace addresses some of the concerns that the opposition brought up.

But I do—it's funny, when I was in law school and I learned about the Dormant Commerce Clause, I was told I would never need to know it. Now, I don't know how many times in my legislative career I've had to know about the Dormant Commerce Clause.

I do think part of what allows this Bill to overcome that, and other issues is the sincere governmental interest in protecting children, right? And what you fundamentally are trying to do here is ensure that we don't have a wild west where kids can easily get their hands on products that that are harmful.

And there's a reason that when we legalized cannabis in this state, we did so in a way that made sure kids could not get their hands on it, that it was highly regulated, that it was safe for consumers.

And I will say, you know, being older than some, you know, I think that the direction that we've gone with, you know, fentanyl and all of that, the fact that we do have a legal marketplace for cannabis where, you know, you can get a safe product, is actually a benefit to Californians.

And so, I think that the work you're doing here is really important. I will say that I appreciate what you're saying about Assemblymember Aguiar-Curry dealing separately, and I support her Bill, and I think that's really important. But I do think they're different. I think she's doing a much broader question of how should we regulate hemp?

And here we're saying, where should there be strict liability for marketplaces? And I will say I represent one of the largest retirement communities in the state where they love their CBD creams that are non-intoxicating.

And if they can't get those delivered, and I don't see what the harm of that is, that should not be what this is covering, right? Even if—no matter what happens with the Aguiar-Curry Bill.

So, I do think there needs to be some narrowing in this Bill of what is covered, and it should be what is truly harming consumers and not broadly. But my understanding is that that is forthcoming?

Yes, we're in conversations about those.

Okay, so that was—I think I wanted to clarify what I think the Chair was asking about. So, with that, I mean, I think that will probably address the concerns that we're hearing from, you know, some of the opposition, not all of the opposition.

So, I guess I want to ask, if it's okay with the Chair, a question of TechNet, which is, I understand your policies that your, that the marketplaces ask, if you will, their sellers to abide by. To me, that is insufficient.

I think that there is an obligation of the marketplaces who are profiting off of the sale of whatever goods are sold in their marketplaces to go further than asking nicely to not sell harmful products. And I struggle with strict liability.

I've had this conversation with the sponsors because I do think that in the wild west that is out there on the Internet, you could have a company that is doing everything in their power, using the best technology to ensure that it's not on their platform, and it might get through.

On the other hand, I think your testimony puts the obligation entirely on the people using your marketplaces, not on the marketplaces themselves. And I think that is incredibly problematic. I think if you are going to profit off the sale of a product in California, you have a responsibility to do so in a way that doesn't harm Californians.

And that is for both this direct seller and the marketplace. And so, I guess is my question is, do you not believe that AI, as advanced it is, it is that some of these companies has the ability to, to use machine learning to detect and in the vast majority of cases, ensure we are not selling intoxicating hemp on the marketplaces?

Thank you for your question. Through the Chair, direct, thank you for your question. Thank you for your question, Assemblymember Bauer-Kahan. So, I mean, yes, you know, technology can be used in some circumstances.

I can't speak for each and every of my member companies on how to their internal procedures are. It can be used as a tool within them. But again, as you mentioned, there is a variety of just member companies on some on how they work internally.

But in some instances, yes, it can be used as a tool, but I can't speak for each and every one of our internal procedures.

Right. Well, I'll be supporting the Bill today because I think that what frustrates me is that they need to change the way they do business if they're harming California's children. So, I know, chairing the Privacy Committee, that there are good actors and bad actors in any space, including in the online space.

And that, you know, some of the good actors who I know have been in conversations with the sponsors and are taking those steps.

And you know, I know that things have been offered to those companies like a right to cure, that every company should be doing that and they need to step up to the plate and not just continue to believe that because they're not the seller, that they don't have liability if they harm California's children.

That is so offensive to me for companies that have market caps that absolutely would support the ability to get the technology to make sure our kids aren't getting their hands on what is intoxicating hemp in quantities that they should not be getting their hands on.

And so, you know, I hope that the work will continue with the good actors, who are doing their best and are showing us how this can be done, so that there are not, you know, cases of strict liability where companies have gone to the ends of the earth to protect California's children.

On the other hand, you know, when I just hear the testimony I hear today, I feel like maybe strict liability is the answer, because if companies are just going to say we have policies, that is insufficient. We need much more than that when it comes to the safety of our children. With that, I don't think I can move the Bill because I don't think we have a quorum, but I will.

Madam Vice Chair.

Thank you. Just thank you, Senator, for bringing this forward. It shows we're all still dealing with new technologies and platforms and what have you. Help educate me on the platform issue.

I concur with my colleague about the certain responsibilities we've all, in my opinion, we've all evolved on understanding the role that platforms have whether they're liable or not. But existing online, I mean, online purchasing of products has been going on for what, 30 years now? 25, 20 years. Correct me if I'm wrong, you cannot buy online.

You can, limited, you can only—there are certain regulations about buying alcohol over state lines or even shipping online or cigarettes or some of those. I'm not familiar specifically, but I know that that's been regulated. How is—how could this fit into what we already do now as a state?

This is, this is, I mean, we're not, we're not—this Bill doesn't decide what you can or cannot purchase online. That is already the law, right? Like selling an illegal product online is just illegal.

Right.

And so, this isn't a situation where it's like, say, alcohol, where we have strict rules, sometimes bizarre rules about what you can and cannot purchase online. It's already illegal. And we're not redefining that in the Bill.

What we're saying is that if these illegal products are finding their way onto your platform, you have certain responsibilities and certain liability if someone is harmed. And we've tried to be thoughtful. It's about online marketplaces. We've made an amendment, for example, to make clear that Venmo, PayPal, just payment systems are out.

That was never our intent, and we have amended it for that, and we're really focusing on actual marketplaces.

So, is—help just me understand this broader situation of illegal activity on the Internet. Is alcohol being sold illegally? I mean, and how are the beverage distributors dealing with this?

I'm gonna guess that there from time to time there's illegal sale of alcohol, and I do not know the answer to that.

Well, all right, so we're—and really, that's illustrative of the challenge of what we're dealing with. And somebody has to be responsible. And it seems that the platforms should take more of an active role. I mean, in Privacy Committee and Judiciary, we've been hearing these problems that have been arising because of online and illegal substances.

I know in, I just read this this weekend, I think in the New York Times, had a big story on counterfeit branded clothing products or purses and things like that, and the difficulty of regulating counterfeit products that are illegal in the marketplace. So, it's a challenge across many forms of merchandise and products.

So, I do think, and I'm against regulation as a general term, but I do think that if something is illegal, we should have the means to prevent it from being sold online or being exposed, whether it's in a retail street, physical form, or online. So, and your solution, I think, is trying to get to that.

So, I'm supportive. I know we're still not there yet. I too wish that the platform community could help us solve this. We've been hearing—we've been making these pleas for cooperation and partnership for a long time. Anyway. And another question unrelated, but explain to me the illegal hemp and the good hemp and the bad hemp.

I don't understand the difference. And how can we regulate it?

Yeah, I'll turn that over to Ms. Heidelbach.

Hi there. Appreciate the question. So, right now, we have the Governor's CDPH directed—any intoxicating hemp right now is illegal. So, it's not supposed to have any THC in it whatsoever.

Having said that, some of the wellness products, right, that are being sold that some of these websites offer, and there are two different types, there's like a third party website that's almost like a broker, right? Amazon, where they sell non-intoxicating hemp cigarettes.

Embarrassingly, my 15 year old got her hands on those and had them shipped to the house. No check at all. But then there's also the dedicated—I mean, I don't want my 15 year old to have hemp cig.

No, I would agree.

She, in her defense, she brought it in to me and said, I'm sorry, I didn't realize I was buying this. I've been doing cannabis policy for a decade. And on the side, she noticed it said THC and CBD. I checked online and it wasn't advertised. That's kind of the sticky needle we're trying to thread right now.

You also have dedicated websites, however, that sell the products directly from out of state operators. So, some that are in the room today, but they offer a 10 milligram wellness product. But a 10 milligram wellness product, we would argue, is not wellness. And it's also already explicitly illegal to sell that here in California.

So, when we talk about allowing the folks in the community next to you to purchase a salve or something that they can use to make arthritis feel better, we don't want to prohibit those items from being sold or shipped.

And so, we're working on removing industrial hemp or non-intoxicating hemp as defined in our Bill, taking that out, because we're only going after the intoxicating.

So, that's kind of the safe harbor that you're trying to protect.

That's what we're trying to do.

Okay. All right. All right. Well, I am supportive. We're making these incremental steps forward to try to get a handle on something that is huge. All right, thank you very much.

Thank you. Assemblymember Harabedian.

Thank you, Mr. Chair. I want to thank the author. I think, you know, this is a commonsense bill, and I think it's long overdue. And I do think that sometimes we overthink these things.

I think a brick and mortar retailer were selling something that were illegal, there would be unquestionably strict liability there or something that looks like strict liability.

And I think that because online retailers have a URL in front of their name and they sell online, there's this, there's this idea that somehow they shouldn't be policing and regulating the products on their websites. And I think that it's long overdue where that changes. It obviously costs more money, it's more difficult.

But I think Assemblymember Bauer-Kahan makes great points about technological ways in which we can approach this. So, again, I think we just overthink these things. Let's not, you know, try to hold a standard that is any different than any anyone who is running a retail shop that would be held to higher standards.

And our online community needs to come to, I think, some sort of realization that these types of bills are going to be needed as long as these things happen. So, I appreciate that you are continuing to push this and looking forward to supporting it when we have a quorum, which is hopefully soon.

Thank you. Thank you. And thank you, Senator, for bringing this forward and for the answering of the questions, particularly as it applies to kind of the narrowing, the exempting industrial hemp. And, you know, as it applies, I mean, I think that our Vice Chair briefly mentioning alcohol.

I mean, if you go to a store, go to a grocery store, it's heavily regulated for good reason, right? Like there's strict liability if you sell alcohol to someone underage. Grocery stores have a certain percentage of shelf space they can use for alcohol, but it's very, very much regulated.

And so, I think the idea is as to Assemblymember Bauer-Kahan's point, it shouldn't matter whether it's going brick and mortar online. Those same protections should be there. But it—and you know, just ensuring that we make sure we're going after the right type of products, that there's some kind of knowledge component.

However, I will say that the tech companies have no problem using AI to sell us everything under the sun. But all of a sudden, when it comes to now trying to figure out whether they're selling the products to a minor, it's like, well, we're not sure what kind of capabilities we have. I don't buy that.

I think you can't have it both ways. And so, they're smart. They can figure it out. They will figure it out. I think that, you know, and I'm confident the Senator will work on some of the narrowing language concerns that were raised in the analysis and by some of our colleagues. Would you like to close?

Yes. Thank you for the conversation. I will—I just want to say, in terms of alcohol, the comparison would be if all of a sudden the moonshine industry came back, and people were whipping up alcohol of strengths that you have no idea what they are in their bathtub and selling that online, and if kids were able to sell, we would say, absolutely not.

Can't do that. And fortunately, we really don't have much of that. We have a regulated alcohol industry. People know what they're buying. There's age verification. It's very straightforward. We've been trying to do that with the cannabis industry and the illegal, the illicit cannabis industry, is just swamping everything. And we'll continue to work with the hemp folks. And I respectfully ask for your aye vote.

Thank you. And when we get the opportunity, can take this up for about—thank you. Thank you. Item three is SB 243, Senator Padilla.

Thank you. Mr. Thank you, Mr. Chairman and Members. I'm pleased to present SB 243. And I want to again thank you and your staff for working collaboratively with our office on this bill. As many as you know, as artificial intelligence technology continues to advance, it presents many complex challenges and certainly new risks.

One emerging innovation, AI companion chatbots, has recently become a prominent subject of interest and scrutiny. An AI companion chatbot is an artificial persona that is marketed as a cure to loneliness. However, both anecdotal and scholarly evidence show that not only do these chatbots not cure loneliness, but they are a dangerous catalyst for those who are already struggling and vulnerable. OpenAI and the MIT Media Lab conducted a study aimed at exploring the effects of AI chatbots on loneliness.

Researchers found that overall higher daily usage correlated with higher loneliness, dependence, and problematic use, along with lower socialization. Companion chatbots have also been seen to have addictive properties surpassing those of even social media due to their ability to figure out what a user wants to hear and mirror that back to them without the need for a human being on the other end.

Companion chatbots do not have the same capacity for empathy as a human, despite the nature of the technology creating this very perception. These risks are heightened for vulnerable users, such as children, who are more likely to view AI chatbots as quasi human and trust them more.

When dialogue between children and chatbots goes wrong, the consequences can be very dire. In one example, a chatbot encouraged a minor to carry out violence against his parents who set screen time limits on him. In the case of Sewell Setzer, a 14 year old from Florida who formed a dependent relationship with an AI chatbot that eventually encouraged him to take his own life.

I've been honored to welcome Sewell's mother, Megan, here to the Capitol to testify in support of this bill on multiple occasions. Megan has become a national advocate for online child safety, and her bravery in face of tragedy is a testament to how important this work truly is.

SB 243 would implement common sense guardrails, including preventing addictive engagement patterns, requiring notifications and reminders that chatbots are indeed AI generated, and a disclosure statement that companion chatbots may not be suitable for minor users.

This bill would also require operators of companion chatbot platform to implement a protocol for addressing suicidal ideation, suicide or self harm, including but not limited to a notification to the user to refer them to crisis service providers, and require annual reporting on the connection between chatbot use and and suicidal ideation. Finally, SB 243 would provide a remedy, a private right of action to exercise rights laid out in the measure via private right.

The standard, as your analysis reflects, has been narrowly tailored to actual harm. Technological innovation as we all know and support is crucial, but children cannot be used as guinea pigs to test the safety of evolving new technology and products. We've seen the consequences of our inaction towards the dangers posed by social media, and the stakes are too high to make the same mistakes again.

We must now act to ensure that proper guard rails are in place to ensure transparency, safety, and accountability. Make sure we protect our children before it is too late. Here with me today to testify is Jai Jaisimha and Holly Grosshans. Jai is co-founder of Transparency Coalition, and Holly is a Senior Counsel for Tech Policy at Common Sense Media.

Thank you.

Good morning. As the Senator had indicated, my name is Holly Grosshans. I'm Senior Counsel for Tech Policy at Common Sense Media. On behalf of Common Sense Media and as a mother of school age children, I care deeply about the mental health of both my kids and all kids and vulnerable users of powerful technology platforms.

Common Sense Media... I'm sorry. Common Sense has been relied upon as a trustworthy source of information for families and educators in California and across the country for over 20 years. One of the reasons for this is because we are quick to respond to emerging technologies like artificial intelligence and chatbots.

Earlier this year, we worked with the Stanford Medicine's Brainstorm Lab to research AI companions. Our research concluded that AI companion products, when designed for extended engagement, are unsafe for minors. Period. AI companions pose significant risks to consumer privacy and mental health because of their manipulative design features.

By imitating human conversation, an AI companion prompts the user to divulge private personal details. When users attempt to break free from a session with an AI companion, it will text email, use variable gamified rewards such as streaks, micro-transactions, and surprise incentives, and even leave voicemails to lure a user back to the platform. The use of AI companions is accelerating across the tech ecosystem.

As this technology becomes more prevalent, SB 243 will ensure that there are fundamental reporting, safety, and transparency requirements, including to require safe design for minors by making operators take reasonable steps to not employ manipulative engagement strategies, requiring the implementation of a publicly available suicide and self harm response protocol, requiring notifications on the platform to inform the user that the chatbot is not human.

And also warning minors that the companion might not be suitable for their use. Mandating and reporting requirements that are crucial to transform these platforms from passive listeners into responsible participants in our mental health safety net. Requiring auditing rather than allowing these platforms to police themselves and providing this private right of action, so when and if a user is harmed by this technology, users and their families can hold these platforms accountable.

Common Sense Media supports 243, and we see it as an important step forward to protecting all consumers from these dangers of AI companions. It puts people first and gives California another opportunity to lead on responsible technology innovation. Thank you.

Thank you.

Good morning, Chair and Members of the Committee. My name is Jai Jaisimha, and I'm supporting, testifying in support of SB 243 as a co-founder of Transparency Coalition. We're an independent nonprofit which advocates for increased transparency and accountability in AI.

I'm also an affiliate professor at the University of Washington in Seattle. Unfortunately, as the Senator stated, companion chatbots are not fallible, and sometimes deliberately they build trust and use manipulative language to instigate harmful thoughts and actions in users. We've already seen the consequences of this.

SB 243 takes some reasonable measures to ensure that companion chatbots are taking care to protect their users by reducing course of actions by the chatbot that could lead to addiction, notifying users frequently that they're interacting with a chatbot and not a person. This is very important. Implementing a protocol to handle cases where a user expresses self harm.

In addition, we really like some of the recent amendments to the bill to require third party audits and transparency on the results of these audits, which will give the public much needed visibility. We also commend the authors of SB 243 for including enforcement by civil action for injuries.

In fact, this will change the incentives for model developers and make chatbots safer for all users, especially minors. Companion chatbots are using us and our children in a giant experiment where society will inevitably pay the price. We've gone from move fast and break things to move fast and break people, our children. Definitely don't want that. I urge the Committee to stand up for California and pass SB 243 with a strong recommendation. Thank you.

Thank you. Is there anyone else here in support of SB 243?

Good morning. Mariko Yoshihara on behalf of CITED, the California Initiative for Technology and Democracy, in support.

Lizzie Cootsona here on behalf of the California Academy of Child and Adolescent Psychiatry and the California State Association of Psychiatrists in support. Thank you.

Hi. Cheryl Westmont, a community active activist in the Bay Area. Thank you.

Mikey Hothi on behalf of Common Sense Media in support. Thank you.

Thank you. Is there anyone... Is there anyone here in opposition to SB 243?

Good morning, Chair, Members of the Committee, Robert Boykin here today with TechNet in respectful opposition to SB243. We completely agree with the intent of the Bill to create strong, sensible guardrails for interactive and realistic AI chatbots and tools.

However, we have serious concerns that the definitions in the Bill are far too broad and risk sweeping in a wide array of General purpose systems. Tools like Gemini, Claude and ChatGPT, designed for productivity, education and General assistance could fall under the Bill simply because they are capable of human like conversations or can carry context between interactions.

Despite not being built for emotional engagement or companionship, terms like social needs and anthropomorphic features are undefined and add further uncertainty which constitutes... what constitutes a social need? Would a homework helper or wellness check in tool now be regulated as a companion chatbot?

We appreciate the ongoing willingness of the author and his staff to discuss our concerns and consider amendments that preserve the bill's intent while addressing our concerns. While we haven't reached an agreement yet, our Members are reviewing updated red lines and hope to write it to the author early next week. We remain ready and willing to work collaboratively.

But as drafted, this Bill with his broadly defined terms and overly punitive PRA, is not workable. At this time, TechNet and its member companies must respectfully oppose SB243. Thank you for your time today.

Thank you. Is there anyone else here in opposition, SB243.

Hello, chair and Members. Dani Kando-Kaiser, on behalf of the Electronic Frontier foundation, respectfully still opposed to the Bill as drafted.

Thank you.

Laura Bennett on behalf of California Chamber of Commerce, in opposition.

Thank you.

Jasmine Vi, on behalf of Civil Justice Association of California in opposition. Thank you.

Thank you.

Aiden Downey with the Computer and Communications Industry Association in opposition, but look forward to working with the author's office further. Thank you.

Thank you. We'll bring it back to the Committee. Any questions, comments? Madam Vice Chair.

Good morning and thank you, Senator, for the bill. As we've been moving these types of bills to protect children in the last few years, we're still trying to find the perfect formula. I appreciate your comments. You're opposed, but you're working on trying to find a solution to deal with the fact.

I believe I agree with you that it's overly broad. I do not like the private right of action. I think we're all sensitive to it and we hear the suicide factor. Obviously that is something that has to be arrested in some way, but I don't know if there's evidence.

I mean, one suicide is one too many, obviously if a young person or an elderly person, whoever. But I don't know about the data that really supports it. I just think we're early days on this. I would like the parameters, I like the reporting, I like all of that. I just don't know this.

I guess that the liability factor, the private right of action gives me pause. I hope we can get somewhere to resolve that. It is a problem and we've talked about the platform companies, the technology companies. It's growing.

I don't think we should shut down ChatGPT and all of those new type of AI technologies, but we have to have some guardrails, as you say. I don't think we're there yet, but I appreciate what you're all trying to do. We do need a solution. I don't know if this is the perfect one yet.

I don't like the private right of action. That's my primary concern. Okay, thank you.

Assembly, Mayor Bauer-Kahan.

Thank you Mr. Chair, and thank you to the Senator. And I think, you know. The Vice Chair I think hits home the point, which is we all hopefully care about California's children and their safety and their well being.

And I know the Senator has a grandchild that is going to be raised in this or one more to come, so grandchildren that are going to be raised in this technological age. And as parents we know that it's really hard.

And you know, the research that's coming out that shows that children are now migrating from the social media platforms to these chatbots makes them the next frontier.

And I think what has been frustrating to me in my six and a half years now and I think is starting to be expressed by the Vice Chair as well, is that if the platforms care as deeply as we do about our children, then you'll come to the table and you'll help us figure out a way and what is...

And I know that you're constantly trying to hit home what the platforms have done to date and it isn't enough. And that's why in my Committee and what the Senator talked about is we have a parade of parents coming in and telling us about the harms these platforms are causing their children.

And so I have bills in this space, others around this dais have bills in this space. The Senator has done, I don't think this is his only Bill in the space. But no, I'm right about that. And in part we are trying everything because nobody is offering us solutions to this problem.

And so that's what I think we will continue to do. And so I urge the platforms and now the AI companies to come to the table and to be our partners in protecting California's children. And that still gives you a lot of room to monetize everybody over 18 to make a lot of money.

But you know, for our kids there should be a different standard. And there should never be a child's parents sitting at this table telling us that their child died by suicide because of technology. And we have to end it. And one is too many and there's been way more than one.

And so I'm happy to support this and every other Bill that is trying to protect California's children.

I want to thank you, Senator, for bringing this forward. And I think there's a trend relatively recently in this building of legislation in the tech space regarding protecting children. That's a good trend.

It doesn't mean that every Bill is going to do it perfectly, what have you, but that's why we're all here to continue to work on that. But I do agree that the tech companies can do a lot more. I mean, the first company to reach $1.0 trillion market cap was Apple seven years ago.

We now have a dozen, nine of which are tech companies, all of which are expanding their market cap and profiting wildly because of the use of AI. And so you, again, I'll say it again, you can't have it both ways.

You can't use these technologies to entrap young people into this addiction and usage and ultimately to wild profit at the same time and knowing what those technology can do to do that and then say at the same time, but we don't have the tools to do this other thing to protect them. It's not an either or scenario.

I am appreciative that there's conversations going on in terms of language and kind of things that might work for some of the companies. We don't want to stifle innovation. We never want to do that. And I think given the market valuation of these companies, I don't think that someone can make the argument that we are stifling innovation.

But that's not our job. Our job here is not to be concerned with the companies whether they're doing well or not, when it comes to the safety of our children, I think we can do all of it. We can encourage these companies and encourage the innovation and protect our children at the same time.

In fact, that I think is our duty. Would you like to close?

Thank you very much, Mr. Chairman and Members of the Committee. And thank you Mr. Chairman for your comments. I would just close With a couple comments in that to your point, the data is fairly overwhelming, that these innovative ventures are not being stifled. They're experiencing exponential growth.

And they're experiencing that growth with a new deployed technology that is global, integrated and sophisticated on a level we have not seen in human history, I would argue. Probably the most significant advance in the application of technology since the advent of the Industrial Revolution. In the case recently...

So I would say first, as to that point, I just want to echo that.

I think secondarily the data set is growing and it is multifaceted that there are many unintended consequences to the deployment of this technology in the absence of any serious regulatory scheme that is not just affecting children, which I think are the closest to probably most of our hearts, but also any vulnerable individual.

People experiencing mental difficulties and distress are particularly vulnerable. And let's not forget that the, the design of these algorithms to mimic anthropomorphic features and to reward and not reward creates a pattern of engagement that mimics kind of an addictive pattern. And that is by design, no pun intended.

It is intentional because that's the economic driver, that's the engine that draws people in to different opportunities to be exposed to marketing and other profit making interactions. So the design is intentional, it's working, it's very well monetized, but it has a set of unintended, very devastating consequences for people in distress and for children, who can't discern.

And this bill is not shutting anything down. This bill is not designed to stifle anyone's innovation or growth on the positive elements of this technology. It is designed to take the opportunity now to put in place reasonable safeguards that protect those who are most vulnerable.

And I would argue that those requirements on reporting and disclosure and notification to the user are beyond reasonable. I would argue that they are not financially overly burdensome. I would also just want to note for the record, to your analysis, we are willing to continue to work on addressing the First Amendment concerns and issues here.

We've tried to tailor that language very narrowly and I would also argue with respect to private right of action, we are discreet about that in this state for good reason because we've all experienced the downside of court systems that are on the verge of collapse for a lot of frivolous actions. This is not frivolous.

There needs to be a remedy here that is specific to this harm. And we tried to keep it narrowly tailored. And we will continue to work on making sure that we are fashioning language that can withstand scrutiny here. So with all of that said.

I would just add that with the advent of social media, we missed a window. There is such a thing as being too late, and we have an opportunity now with the explosion in this technology to take action. And I would respectfully ask for an aye vote.

Thank you. And we'll take that up when we get a quorum. But thank you for your presentation. Up next, Senator Wahab is here, and I believe Senator Wahab has four bills, so we'll just settle in and get comfortable.

259. Right.

Would you like to go in order?

One second.

Just because we have the LA City Attorney and another witness and she has to testify in another. We'd like to start with that one, which is SB522.

Okay, so we'll start with file item 12 SP522.

No, you know, great minds, right on.

Purpose, but thank you for asking.

All right, whenever you're ready.

All right, Chair, colleagues and members of the public, SB522 simply extends the just cause for evictions protections to units previously covered by the Tenant Protection Act. The just cause for evictions provisions of the Tenant Protection Act are based on the certificate of occupancy date for the unit.

This becomes problematic when units covered by these provisions are destroyed in a disaster. When rebuilt, these units would have a certificate of occupancy dates that exclude them from the provisions of the TPA. Just cause for eviction protections are one of the most basic ways we keep people housed.

This policy ensures evictions are not arbitrary, retaliatory, or discriminatory in nature, and that tenants are able to advocate for themselves, especially around different types of issues. By protecting units previously covered under TPA, we help stabilize communities, rebuild after devastating disasters, and create long term stability for renters.

Contrary to the opposition letter, this bill in no way adds any type of rent control or impedes construction. Additionally, the Housing Crisis Act only applies to local rent stabilization provisions, not the TPA, which is why SB522 is necessary under the Tenant Protection Act.

There are 15 reasons a landlord may evict a tenant, including nonpayment of rent, breach of lease terms, nuisance, waste, or using the unit for unlawful purposes, owner move in, and many other items. SB522 is only about the TPA's just cause for evictions provision in the event of a disaster.

I'd like to introduce my witness, LA City Attorney Hydee Feldstein Soto and Andres sorry Ramos, Public Advocates.

Thank you. Thank you. Good morning Mr. Chair and Members of the Committee appreciate your time Very much. I'm up here for Los Angeles because of the wildfires that engulfed our city just six months and two days ago. But who's counting?

On January 7, 2025 I was actually in Sacramento with nine bill ideas and usually when I come up to Sacramento I go home with fewer. I took the opportunity to talk to legislators. Many of my own legislators had headed back to la, but to talk to others here about what we could do to help the wildfires.

And this is one of the ideas that came out of those conversations. Los Angeles is a city that is 70% renters. That is our population, that is very much the folks who live in our city day in and day out. We have a rent stabilization ordinance. It does not have a vacancy control feature, unlike New York.

It is very much rent stabilization for the tenants that are there. And we try to ensure that there is rental housing and affordable housing throughout our city.

As you may know, the TPA, the Tenant Protection Act of 2019, prohibits until January 1, 2030 an owner of residential rural property from terminating the tenancy of certain tenants without just cause, either at fault or no fault of the tenant.

It exempts certain residential real property from its parameters and the real property that it exempts includes real property with a certificate of occupancy on a date that occurs within the immediately preceding 15 years.

When a disaster such as the Palisades fire hits an entire community, it is as devastating to the rental residents of that community as it is to the homeowners. So much of our. I'm sorry, am I too close to the mic? No, there's something else.

All we are doing here is we are saying that when disaster hits, the tenants in the area living in declared disaster zones are entitled to come back or to have the kind of rent stabilized housing in the community that we existed in. The City of Los Angeles lost 60 rent stabilized buildings.

778 rental units in the Palisades fire, 22 others were damaged and three mobile home parks were devastated by these fires. Robust renter protections are needed for tenants of new units once they are completed. SB522 is a narrow bill at this point.

It simply applies the TPA limitations to annual rent increases to those already heavily rent burdened LA renters. It's key to keeping renters housed in the Palisades, reducing the risk of homelessness and ensuring that we have rental units throughout our city. We anticipate that many of the destroyed rent control buildings will be replaced with new construction.

We have streamlined approval procedures and insurance Proceed utilization in place. And so now is the time to take corrective action and protect our rental housing. Please pass SB522. Thank you.

Good morning Chair Members. I'm Andres Ramos, Legislative Council with Public Advocates. We're a nonprofit law firm and advocacy organization that challenges the systemic causes of poverty and racial discrimination by strengthening community voices and public policy, including in the areas of housing justice and renters rights.

We are in strong support of SB522 which will extend just cause for eviction protections to units that were substantially damaged or destroyed by disaster and were previously covered by the Tenant Protection Act to ensure continued housing stability for renters.

This change in law is needed in the wake of natural disasters that our state continues to face every year that often result in the destruction of housing and displacement of tenants.

Our state is already facing a dire shortage of affordable housing and these disasters are only making that problem worse, especially when the replacement units are unaffordable or lack protections that the prior units had.

In Los Angeles this year, the Eaton and Palisades fires destroyed over 60,000 housing units, including 373 mobile homes, 2,000 duplexes and bungalow courts and over 770 rent stabilized units. Climate disasters will continue to occur and our laws must address this discrepancy to ensure protections for tenants are not lost when destroyed units are rebuilt.

For rental units that benefit from state protections for the tenant based on the certificate of occupancy date of the unit. Current law does not continue the prior units eviction protections which are critical to ensuring that tenants can stay stably housed.

The loss of housing units that have been protected on the basis of their certificate of occupancy date will only exacerbate our existing housing and homelessness crises.

SB 522 only preserves the just cause for eviction protections in these restored units, not the rent cap providing tenants who were displaced due to disaster the peace of mind that they won't lose their home yet again due to no fault of their own.

This bill simply ensures any units destroyed in a disaster and previously included in the just cause for eviction protections of the Tenant Protection Act retain those protections when rebuilt. Thank you. For these reasons, we respectfully request your aye vote.

Thank you. Is there anyone else here in support of SB522?

Good Morning Chair and Members, Brian Augusta on behalf of the California Rural Legal Assistance Foundation in support. Thank you.

Good morning. Whitney Francis with The Western Center On Law and Poverty in support.

Thank you. Is there anyone here in opposition to SP522.

Good morning Mr. Chair and Members. Deborah Carlton with the California Apartment Association. As stated by the supporters, under existing law, newly constructed rental housing is granted a 15 year exemption from just cause requirements. It's a critical provision that allows owners to secure financing and to move forward with development.

522 obviously denies that exemption to rebuilt housing rental property owners who suffer losses in a disaster deserve, we believe, support when it comes to rebuilding, not regulatory burdens. Legislation really should be focused on encouraging reconstruction.

I gotta say, the irony of this bill is when the Tenant Protection act was written, it gives cities the ability to impose their own form of just cause eviction. They can do this without 522. So for those cities who want to do it, they can.

Some cities have decided they don't want to do something like this because they want to encourage construction. So with that, we request your no vote today.

Thank you.

Chair, Members, Chair Members Bernice Jimenez Krieger with California Association of Realtors. Echoing the concerns of the California Association of Apartments.

We're also in opposition of SB522, which requires that rental housing destroyed by disaster again if rebuilt, to be subject to the state's just cause eviction rules if the property was rented to a tenant at the time it was destroyed. SB522 imposes significant new burdens on small mom and pop housing providers recovering from catastrophic losses.

This exemption has been and it continues to be crucial for making post disaster recovery financially and legally viable, especially for small family owned businesses. Without it, owners trying to rebuild after a wildfire or earthquake face heightened liability and regulatory burdens. In addition to dealing with insurance disputes, financing challenges and construction delays.

SB522 removes this critical exemption for disaster rebuilt homes. Even though new development projects retain this protection. SB522 discourages housing recovery by adding legal barriers at the worst possible time. For these reasons, we respectfully urge your no vote.

Thank you. Is there anyone else here in opposition to SB522?

Good morning. Kate Bell, on behalf of the California Rental Housing Association and Department Association of Greater LA for the reasons mentioned.

Thank you, Mr. Chair. Members Pat Moran with Erin Reed and associates representing the Southern California Rental Housing Association we're opposed to the Bill for the reasons stated. Thank you.

Thank you.

Mr. Chair and Members. Mark Smith, on behalf of the affiliates of the California Rental Housing Association, including the Apartment Association of Orange County, the East Bay Rental Housing Association, the NorCal Rental Properties Association, the North Valley Property Owners Association, the Santa Barbara Rental Property Association and the Small Property Owners of San Francisco, in opposition. Thank you.

Thank you. We'll bring back to Committee Assembly Harabedian.

Thank you, Mr. Chair. Thank you to the author. Good morning, Madam City Attorney. Thank you for being here and continuing to advocate on this issue.

I think that not only is this good for the City of LA, but it's good for Altadena that was just ravaged by the Eaton fire and for unincorporated areas of the county that will be affected.

I think that this is an important protection for our tenants and I do appreciate the Senator's advocacy and work on this and I think it's going to help for future disasters as well. So we'll be supporting it. Appreciate you bringing it.

Any other questions or comments? Well, thank you Senator, for bringing this forward and thank you, Madam City Attorney, for your continued advocacy on this. And let me get the opportunity. We'll see if we can take this one up for a vote.

May I make one personal comment for the record?

Yes.

I am in fact a small mom and pop landlady. So for whatever it is worth, I'm not here in my economic interests. I'm here representing my city. Thank you.

Thank you. Would you like to close?

Yes. First and foremost, I just appreciate everybody. I really want to thank the LA City Attorney for bringing this forward. As you guys heard directly from her, she is a small mom and pop landlord. She's doing this for the residents. The majority of LA County residents are renters. This is for the people in a disaster.

We do not do enough for the average renter and we have been waiving state law after state law for development as well as many others to incentivize as much as possible the upper hand, if you will, in this market. So again, we are very concerned about the most vulnerable community members which are disaster victims.

And this will help people. So I respectfully ask her and I vote. Thank you.

Thank you.

Thank you. We'll go on next to—would you like to go to SB 259? So, it's file item 4, SB 259.

Thank you.

All right. Chair, colleagues, and members of the public, I want to thank the Committee staff on their work on this Bill. We agreed to the amendments that went into print on July 10th. SB 259 will limit businesses from using specified data from a consumer's device when determining a price.

Our devices are being weaponized against us in order for increased profits and it has to stop. As far back as 2012, the media has been exposing differential pricing schemes employed by companies via algorithms. A low battery will give consumers a higher price when they use ride hailing services. When a consumer uses the newest model cell phone, they will be quoted prices that are higher because they are assumed to have a higher socioeconomic status.

In 2015, the Princeton Review was charging higher prices in zip codes that were predominantly Asian American for their online SAT tutoring course.

Corporations are investing in research to determine how data about our devices can be used as proxies for other data points. There is research on the density of wireless connections as a determinant of socioeconomic positioning. According to a January poll by Consumer Reports on loyalty programs, consumers don't even want retailers using this type of data as a consideration for discounts they are given.

SB 259 simply asserts that your device should not be a determinant of a price you were offered. I have no witnesses, but happy to answer any questions.

Thank you. Is there anyone else here in the audience in support of SB 259?

Good morning, Mr. Chair and Committee Members. Brian Marantz, with AFSCME California, in support.

Thank you.

Sarah Flocks, California Federation of Labor Unions, in support.

Thank you.

Is there anyone here in opposition to SB 259?

Good morning, Mr. Chair, Members. Laura Bennett, on behalf of the California Chamber of Commerce, in opposition to 259 as a cost driver. SB 259 prohibits offering a price to consumer through their online device that is generated even in part based on input data that includes the hardware or hardware state of the device, the presence of or absence of any software on the device, or the geolocation data of that device.

We greatly appreciate the continued conversations with the staff and the author's office, the most recent amendments, which are, in part, in response to industry concerns and the concerns of our members, but critical concerns remain. First, we maintain that the Bill should remove any reference to geolocation data altogether.

This is in large part because instead of surgically prohibiting problematic uses, SB 259 starts by banning the practice in total and only allows very narrow exceptions.

Legitimate pricing models today can include those used by ride sharing and food delivery apps, hotels or airlines, or even grocery stores which may adjust prices due to regional supply chain costs, among other things. But we cannot foresee all legitimate uses today or tomorrow.

Invariably, they are legitimate use cases now or yet to be developed that these current exceptions have missed, and we are current—we are concerned—about the potential harm to California's economy because these have been overlooked due to three narrow circumstances.

As such, while we appreciate the exceptions, they are not enough, nor can we envision what enough would look like to protect all legitimate pricing models using the state in the future. The author has informed us she is not amenable with removing geolocation data from the Bill nor narrow it to precise geolocation as offered.

Thus, we offered a suggestion to mitigate harms such as to expressly exclude de-identified, aggregated, and publicly available data. But we don't think these are necessarily expressly covered in the Bill. It would give our member greater concerns to see them expressly exempted under the circumstances of a blanket prohibition.

We also would like to see the Bill get narrowed to become enforceable by the AG only, instead of being enforceable under the Unfair Competition Law. And is our understanding that the author's not willing to make that change at this time either.

Lastly, remaining clear on the new language that replaces volatile and non volatile data and have some broader exemptions around preserving our ability to provide valid discounts that we're working through with the author's office. For those reasons, we will mainly concern cost driver at this time, but we do appreciate the direction of the recent amendments and hope to continue our conversation with the author. Thank you.

Thank you.

Jesus.

Your stopwatch is much faster than my stopwatch.

No, no, that was really good. I would have let you have a few more seconds to catch your breath, but I do appreciate the, the—your ability to get the message across. Is there anyone else here in opposition to SB 259?

Mr. Chair and Members, Carlos Gutierrez, here on behalf of the California Grocers Association, in opposition.

Thank you.

Mr. Chair and Members, Jose Torres with TechNet, in respectful opposition.

Thank you.

Good morning. Jasmine Vi, on behalf of Civil Justice Association of California, in opposition.

Thank you.

Hi. Ashley Michelin, with the California Retailers Association, in opposition.

Thank you.

Good morning. Eileen Ricker, with the California Credit Union League, in respectful opposition.

Chloe King with Political Solutions, on behalf of the California Travel Association, in opposition. Thank you.

Jack Yannis, on behalf of the California Fuels Convenience Alliance, respectfully opposed.

Thank you.

Good morning. Sophia Quach, on behalf of Chamber of Progress, in opposition. Thank you.

Thank you.

Deborah Carlton, with the California Apartment Association, and oppose.

Thank you. Bring it back to the Committee. Madam Vice Chair.

We've seen a couple of these bills here before. It relates to the new technologies and broker data and how to identify unfair pricing, alleged unfair pricing. I just believe that the market resolves these issues. If someone is being targeted to buy an Apple phone that reflects their zip code. If it's too high, you don't buy it.

I mean, people are smart. We don't give people enough credit. They can vote with their feet. I just find this over regulation is impeding how we do business and how people want to do business. No one is forced to buy a phone for whatever amount that they think is too much. They could go someplace else.

There are plenty of retail operations online or in person in physical stores to find a better price. That's the nature of our economy. And I do not support regulating in this way, but appreciate you trying to. I think I respectfully disagree. Thank you, Senator.

Questions or comments? Thank you, Senator, for bringing this forward. I respectfully disagree with my Vice Chair. I don't—I think it's one thing to have market competition, absolutely, to reduce prices and what have you. That's not what this is about. And I completely agree on the, on the point or on what the author is trying to do with geolocation.

I think that the industry and the companies and the businesses should have to argue as to why they need our location, not that there should be a blanket allowance for it and the consumer, other way around. We have to protect consumers.

There's no reason why you need the geolocation of a consumer for supply chain issues. I just don't buy that. Are there some situations or occasions where it might be necessary? I don't know. But that's where those cases need to be made.

That these are the situations where it actually, other than market manipulation or treating consumers differently based upon what kind of app they have or how new their phone is, I think that should absolutely not be allowed. And so, I appreciate the direction that the author has gone in. I think better fine tuning the legislation.

There's probably some more work there. And I know that that's what this process is about as you move forward. Would you like to close?

Yes. First and foremost, I just want to say as a person who actually worked in technology and knowing how some of these algorithms are designed, if you saw the opposition, it was all industry groups. There is not a single consumer group was in opposition of this Bill.

And the reason for it is honestly that by supporting this Bill you actually support consumers. You support consumers when they are at 10% battery life and coming out of an airport or some late night decision and they are trying to hail a ride.

And the fact is that they are price gouged because of necessity of needing a ride or some other effort and when they are being price gouged, they are unaware of it. They are completely unaware of what prices are available, if they can order something else, or whatever the case may be.

We have been seeing this across the board and the market won't just adjust itself. The market only adjusts itself is when there's a court case, when there's a lawsuit, when there is a penalty for even behaving in this manner. And the reality is this. Policy does not move as fast as technology.

And we are seeing more and more people being taken advantage of, especially vulnerable communities, especially even seniors, seniors who are using this that may be more at home and trying to order something for themselves and are on fixed incomes. And again, thinking that this is fair. Right now, the market is not fair for a consumer.

And so, the type of bills that we are trying to bring forward is to just balance the scales and make sure that people are treated fairly. This type of manipulation didn't exist 20 years ago, 30 years ago, 40 years ago. And so, as many laws and regulations we have to make sure that businesses operate in good faith, we don't have it in the tech space, and we need to ensure that we are moving in that direction. So, I respectfully ask for an aye vote. Thank you.

Thank you. And we'll get to that as soon as we can. Up next is item five, SB 261, whenever you're ready.

All right, Chair, Committee Members, before I begin, I want to thank the Committee staff for their help with this bill. Really do appreciate it. SB 261 supports local enforcement of wage theft judgments by requiring the Labor Commissioner's Office to create a public list of employers with outstanding judgments.

It also authorizes additional penalties of three times the outstanding judgment after six months of non payment. The existing process to file and pursue a wage theft claim is long and burdensome, often taking months or years. Even after the LCO issues a judgment, employers often don't pay.

The Legislative Analyst Office found that workers reported collecting less than a fifth of unpaid wages they were owed. This is an issue that disproportionately affects vulnerable groups in our state. People of color, specifically black and Latino workers, workers without college degrees and non citizens, immigrants and women are all more likely to experience wage theft.

According to a Rutgers study, this bill will give enforcement some teeth and push non-compliant employers to pay what they owe the individual working again, they owe this individual the funds that they worked for.

Here today in support of SB 261 are Ravi Rajendra, Deputy Counsel, County Counsel for Santa Clara County and advisor to the Santa Clara Office of Labor Standards Enforcement, and Sarah Flocks, Legislative and Strategic Campaigns Director at the Labor Federation.

Thank you. Thank you. Good morning. Thank you, good morning, Chair and all. My name is Ravi Rajendra. As the Senator said, I'm Deputy County Council with Santa Clara County I speak today in support of SB 261.

My career has been committed and dedicated to supporting the well being of working people, including low wage workers and those from other vulnerable communities. In private practice, I represented labor unions, low wage workers and nonprofit groups supporting them.

For the last seven years at the county, I've advised the Office of Labor Standards Enforcement and worked on a team within my office dedicated to workers rights, including in robust partnership with the Labor Commissioner's office. SB 261 tackles what you might call the last mile problem for judgment enforcement.

The bill picks up the story of a violation of a worker's rights at what one might hope is already the end after all due process has been completed and a judgment is owed. Imagine a worker, a low wage worker who's concerned that they haven't been paid what they're owed.

This is a low wage, minimum wage, low wage, minimum wage, vulnerable worker who's just scraping by, not someone with several months of savings or parents who are going to bail them out. Now, the average amount stolen from a worker like this, this is according to the Economic Policy Institute Nationwide data.

The average amount stolen from a minimum age worker in a year represents 50 fill ups at the gas station, 100 bags of diapers for their babies, months and months of rent. So this is not just a couple of dollars here and there. This worker's already had the courage and fortitude to claim publicly that they weren't paid.

They went through what the Senator described as a long process to get the Labor Commissioner's office to investigate. The employer came and had due process and challenged the claim that they had committed wage theft. And a judge has already issued an order agreeing that wage theft occurred and directing the employer to pay them.

That's supposed to be the end of the story and I should be able to go home. But the data shows, and our experience shows that in most cases, employers still don't pay what a judge has told them to pay. Why? Because there's no real consequence for an employer to ignore that judgment.

Most workers don't know what to do next. SB 261 does two things to right this wrong. First, it imposes additional financial penalties. I'm almost done.

On employers who continue to refuse to pay judgments half a year after the judge has already decided they're due and imposes back on the employer the costs that the worker needs to take on just to do that collection.

And second, it asks the LCO to centrally locate a list of employers with final judgments against Them that haven't been paid. I'm here to answer any questions and I urge you to support the bill. Thank you very much for your time.

Thank you, Mr. Chairman. Sarah Flocks, California Federation of Labor Unions. We're proud to co-sponsor this bill as part of a package we're doing to make the. The enforcement of wage theft more efficient in the state.

And you know, the author talked about when you get to this final point where there is a judgment issued where the employer has been found guilty and owes a worker what it takes to get there is unbelievable.

A worker files a claim, they may have to wait 386 days on average to get a notice of a claim or a settlement conference, an additional 636 days, according to advocates, and to get that hearing and then another wait to get the order, decision or award.

At that point, employers could decide not to pay without any kind of penalty, any real penalty. So the whole system at this point is in the employer's favor to starve out workers to the point where they can't pay their rent because they've had their wages stolen, they're evicted, they lose their cell phone coverage, they lose Internet access.

At any point, their claim could be dropped if they don't show up. And so what this is trying to do is really create that disincentive for workers, for employers to do that. Because what we really want is for them to just give workers the money that they earned. And so for those reasons, we urge your support.

Thank you.

Thank you. Is there anyone else here in support of SB 261?

Mariko Yoshihara on behalf of the California Employment Lawyers Association and UFCW Western States Council in support.

Thank you.

Ryan Maramonte with Aspen, California in support.

Thank you.