BILL ANALYSIS                                                                                                                                                                                                    Ó

                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair

          AB 612 (Nazarian) - Charter-party carriers of passengers: permit  
          requirements: drivers.
          Amended: July 2, 2014           Policy Vote: EU&C 8-2
          Urgency: No                     Mandate: No
          Hearing Date: August 4, 2014                      Consultant:  
          Marie Liu     
          This bill meets the criteria for referral to the Suspense File.
          Bill Summary: AB 612 would require all charter-party carriers,  
          including transportation network companies (TNCs), to submit all  
          of its drivers to a Department of Justice (DOJ) criminal  
          background check and to participate in the Department of Motor  
          Vehicle's (DMV) Employer Pull Notice Program (EPN).

          Fiscal Impact: 
           One-time costs of $185,000 from the Public Utilities  
            Commission Reimbursement Account (special) and the Public  
            Utilities Commission Transportation Reimbursement Account  
            (special) to the CPUC costs to oversee new requirements and to  
            update the general order regarding charter-party carriers. 
           Costs of $219,000 in FY 2014-15, $367,000 in FY 2015-16, and  
            $187,000 in subsequent years (special) to the DOJ for  
            background checks. These costs will be fully reimbursed by  
            fees charged to the charter-party carrier.

          Background: Under existing law, the California Public Utilities  
          Commission (CPUC) regulates various transportation services,  
          including charter-party carriers of passengers. Charter-party  
          carriers are defined in PUC §5360 as every person engaged in the  
          transportation of persons by motor vehicles for compensation  
          over any public highway in California. Existing law establishes  
          a number of requirements that must be fulfilled in order for the  
          CPUC to issue a permit or certificate to a charter-party  
          carrier, such as requirements that it is financially and  
          organizationally capable of conducting an operation that  
          complies with the rules and regulations regarding highway  
          safety, it has a preventative maintenance program in effect for  
          its vehicles used in transportation for compensation, it has a  
          safety education and training program, it regularly checks the  


          AB 612 (Nazarian)
          Page 1

          driving records of all persons operating vehicles used in  
          transportation for compensation, and it provides for mandatory  
          controlled substance and alcohol testing.

          Last fall, the CPUC issued a decision that establishes  
          transportation network company (TNC) as a new category of  
          charter-party carriers (D.13-09-045) under its jurisdiction.  
          TNCs were defined as an organization that provides prearranged  
          transpiration services for compensation using an online- enabled  
          application (app) or platform to connect passengers with drivers  
          using their personal vehicle.

          Proposed Law: This bill would require that all drivers of a  
          charter-party carrier shall be subject to the Department of  
          Justice fingerprint images and related information for a  
          background check. The Department of Justice (DOJ) would be  
          required to charge a fee sufficient to cover its costs in  
          providing the background check.

          This bill would specify that a charter-party carrier must  
          participate in the DMV's EPN  Program in order to fulfill the  
          existing requirement that it regularly checks the driving  
          records of all drivers.

          This bill would explicitly state that the requirements for  
          driver background checks, mandatory participating in the DMV's  
          EPN program, and mandatory controlled substance and alcohol  
          testing apply to all charter-party carriers regardless of class  
          or category. 

          This bill states that it is the intent of the Legislature to  
          give direction to the CPUC to investigate and implement proper  
          identifying decals and trade dress for charter-party carriers. 

          Related Legislation: AB 2293 (Bonilla) amends the Passenger  
          Charter-party Carriers' Act to require liability insurance  
          coverage for transportation network companies and their drivers.  
          AB 2293 is set for hearing by the Senate Appropriations  
          Committee on August 4, 2014.

          Staff Comments: The background check requirement under this bill  
          would be a new responsibility for all charter-party carriers,  
          including TNCs, and would apply to both existing and new  
          drivers. Compliance with background check requirements for  


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          existing drivers will be required immediately as the bill does  
          not specify a phase-in schedule for existing drivers. Thus, in  
          the first year after the effective date of this bill, the DOJ  
          will experience a large surge in background checks. Staff notes  
          that the bill requires that the charter-party carrier request  
          subsequent notification services from the DOJ. Thus, a driver  
          will only need to undergo a background check once so long as  
          they are employed with the same carrier. Assuming that there  
          will be 59,000 drivers that will be subject to the background  
          check requirement and that there is a 30% turnover each year  
          (i.e. 17,700 new drivers each year), the DOJ anticipates  
          $219,000 in costs in FY 2014-15, $367,000 in FY 2015-16, and  
          $187,000 in each subsequent year. These costs will be fully  
          reimbursed by fees charged to the charter-party carrier.

          While compliance with the background check requirement will be  
          required immediately upon the effective date of the bill, the  
          CPUC will check for compliance as charter-party certificates  
          come up for renewal every three years. The CPUC will also have  
          some additional workload associated with ensuring compliance for  
          mandatory controlled substance and alcohol testing for TNCs only  
           (other charter-party carriers are already subject to this  
          requirement). Under last year's CPUC decision, TNCs were  
          required to have a no-tolerance policy, but were not explicitly  
          required to have a mandatory testing program. Thus, for the next  
          three years, the CPUC anticipates a temporary increase in costs  
          of $185,000 total for additional certificate application review  
          and to amend their general order on charter-party carriers to  
          reflect the bill's requirements. Enforcement costs will be  
          charged to the Public Utilities Commission Transportation  
          Reimbursement Account while proceeding costs will be charged to  
          the Public Utilities Commission Reimbursement Account.

          This bill will also result in additional demand on the DMV EPN  
          program as TNC drivers will need to be enrolled. Compliance by  
          other charter-party carriers is existing law. Because the EPN  
          program is largely operated through an electronic process, the  
          DMV estimates that adjusting the EPN Program to apply to TNC  
          will cause minor costs that will be covered by program fees.  
          Additional positions would also not be needed on an ongoing  
          basis to add and delete drivers because companies are  
          responsible this activity themselves. Staff notes that there are  
          approximately 1.4 million drivers currently enrolled in the EPN  


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          The requirement that charter-party carriers participate in the  
          DMV's EPN Program will only affect TNCs as charter-party  
          carriers already participate in the DMV's program. Staff notes  
          TNCs currently cannot participate in the EPN Program as the  
          program is designed for the employer to receive notifications  
          about their driver employees. However, TNCs do not consider  
          their drivers employees. Staff recommends that this bill amend  
          Vehicle Code §1808.1 to expand the EPN program to allow TNCs to  
          participate in the program.