The California Chamber of Commerce has identified Senate Bill 7 from Jerry McNerney (D-Pleasanton) as a “Cost Driver,” arguing that it could saddle business owners with significant new costs.

SB 7 restricts the use of automated decision systems (ADS) in making employment decisions. It passed an Assembly policy committee last week.

CalChamber designated the bill as a Cost Driver because its restrictions would be an impediment to making California more affordable for businesses and consumers.

A blog from law firm CDF Labor Law LLP outlines how ADS are defined in SB 7:

“… any computational process that uses machine learning, statistical modeling, data analytics, or artificial intelligence to produce simplified outputs — such as a score, classification, or recommendation — that assist or replace human decision-making and materially impact individuals. However, common workplace technologies were omitted from the definition, such as spam email filters, firewalls, antivirus software, and identity management tools.”

At the June 25 hearing of the Assembly Labor and Employment Committee, supporters of the bill told lawmakers that SB 7 will help workers by allowing more human oversight of decisions made using ADS, reported the CalChamber Alert.

Employer representatives agreed there should be “a human in the loop” for employment decisions, but highlighted continuing concerns with SB 7, including:

• the need to remove independent contractors from the scope of the bill;
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• the need for additional clarity in defining the use of ADS in employment-related decisions;
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• the volume of notices required by the bill;
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• the size of the businesses that would be affected;
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• the bill’s onerous appeal provisions;
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• the need to rely on ADS for safety purposes.
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An analysis of SB 7 prior to the June 19 amendments, conducted for the CalChamber-affiliated California Foundation for Commerce and Education, found that it requires an expansion of human resources staff and will saddle businesses with new, annual costs.

The analysis uses employment and salary data provided by the state and independent sources and is decidedly conservative, noted the CalChamber — it assumes only 2% of workers (including independent contractors) would invoke their right under SB 7 to review all their employment data collected using ADS technology.

With the passage of SB 7, CDF Labor Law LLP is warning employers to play close attention.

“As AI continues to gain traction across industries to improve efficiencies and reduce costs, it is important for California employers to proactively assess their current practices and implement safeguards if they use AI in employment decisions.”

Key Vote

SB 7 passed Assembly Labor and Employment on a vote of 5-0.

Ayes: Ortega (D-San Leandro), Elhawary (D-Los Angeles), Kalra (D-San Jose), Lee (D-San Jose), Ward (D-San Diego).

Not voting: Flora (R-Ripon), Chen (R-Yorba Linda).

SB 7 will be considered next by the Assembly Privacy and Consumer Protection Committee.