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 14, 2014 Consultant: Marie Liu SUSPENSE. AS AMENDED. 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 (as approved on August 14, 2014): 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 AB 612 (Nazarian) Page 2 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 program. AB 612 (Nazarian) Page 3 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. Author Amendments: Amend the Vehicle Code pertaining to the DMV's pull-notice system to explicitly allow charter-party carriers that are subject to the CPUC's regulation to participate. Restrict the background check to felonies committed within a seven-year period from the date of his or her application. Specify that existing drivers have until January 1, 2016 to complete a background check and drug and alcohol test. Exempt drivers who are required to undergo a criminal background check under §33192 of the Education Code from the background check requirement so long as the driver is employed by the same employer for whom the criminal background check was performed.