Job Killer Update: 1 Bill Stopped, 1 Bill Stalled

A job killer bill that effectively prohibited consideration of conviction history in employment has been stopped this year after missing a key deadline on Friday. Another job killer bill that taxes digital advertising revenue has stalled and is likely dead for the year, as tax-related proposals are not subject to the normal legislative deadlines.

SB 1345 Stopped

SB 1345 (Smallwood-Cuevas; D-Los Angeles) would have effectively prohibited most employers from considering conviction history of an applicant, existing employee, or contractor in employment or contracting decisions.

While the CalChamber agreed with the importance of ensuring that applicants with a conviction history are provided with fair access to the job market, the potential unintended consequences of SB 1345 were significant.

Outside of showing a “business necessity,” which would be a difficult bar to meet as discussed below, the only other exception is those employers that are required to conduct a background check or consider conviction history by law. That tends to only apply to heavily regulated industries (such as financial institutions or health care) or jobs the government has perceived to be sensitive in nature (schools or security guards).

In a letter to legislators, the CalChamber pointed out that SB 1345’s flaw is that many of the same rationales that served as the impetus for laws directing certain industries to conduct background checks, such as interacting with children or access to consumer financial information, apply to businesses not covered by those laws. For example, youth sports/organizations operated through a park and recreation league or school district qualify for an exception, but private youth sports organizations do not.

Other reasons the CalChamber opposed SB 1345 include:

  • The burden established under SB 1345 was so high that it effectively banned background checks unless the employer was required by law to conduct them;
  • Requires employers already subject to background check laws to new requirements that may conflict with existing state/federal laws.
  • Restrictions on the use of conviction history was expanded to independent contractors; and
  • Certain convictions are relevant to every workplace. It is every employer’s goal to create a safe working environment for their workers and customers. Prohibiting an employer from becoming aware of or reacting to convictions for violent crimes, sex offenses, theft, or other serious crimes can undermine that goal.

AB 2829 Stalled

AB 2829 (Papan; D-San Mateo) implements a new tax on digital advertisements of 5% of the revenue generated by the ads. In addition to increasing taxes on businesses, it is likely unconstitutional.

The CalChamber opposed AB 2829 because it would enact an unnecessary, unimplementable, and likely unconstitutional digital ad tax on California’s employers. The bill punishes businesses of all sizes and communicates that employers will be fiscally targeted by the state merely for operating here. Moreover, AB 2829 will subject the state to an onslaught of litigation and drive employers elsewhere.

AB 2829 aims to tax businesses that have annual global revenue of at least $100 million at a rate of 5% of the revenue derived from digital ad services. The bill is nearly identical to Maryland’s digital ad tax that was signed into law in 2020.

Maryland’s legislation has been the subject of litigation since its inception and provides a glimpse into California’s future should AB 2829 be signed into law – namely unending and expensive litigation, the CalChamber pointed out in a recent letter to legislators.

AB 2829 also appears to violate the Internet Tax Freedom Act (ITFA), the First Amendment, and the Commerce Clause. Specifically, the ITFA was enacted in 2016 and establishes policy regarding federal and state taxation of the internet, based upon its unique characteristics as a mode of interstate and global commerce uniquely susceptible to multiple and discriminatory taxation.

The ITFA preempts multiple or discriminatory taxes on electronic commerce. The Act states that a discriminatory tax is any tax on electronic commerce that is not generally imposed and legally collectible by such state or political subdivision on transactions involving similar property, goods, services, or information accomplished through other means.

An ITFA and Commerce Clause violation appear to be the most pressing issues in this case. AB 2829 would impose a tax only on digital ads, which is obviously the assessment of a targeted and discriminatory tax. Furthermore, the bill expressly exempts usual forms of advertising while aiming its sights on entities with $100 million or more in annual revenue. In regard to the First Amendment, the bill exempts broadcast and news media, which is content-based discrimination.

Staff Contacts: Ashley Hoffman, Preston Young

The California Chamber of Commerce is the largest, broad-based business advocate to government in California, working at the state and federal levels to influence government actions affecting all California business. As a not-for-profit, we leverage our front-line knowledge of laws and regulations to provide affordable and easy-to-use compliance products and services.