BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
                              Senator Ben Hueso, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 1360           Hearing Date:    7/13/2015
           ----------------------------------------------------------------- 
          |Author:    |Ting                                                 |
          |-----------+-----------------------------------------------------|
          |Version:   |7/2/2015    As Amended                               |
           ----------------------------------------------------------------- 
           ------------------------------------------------------------------ 
          |Urgency:   |No                     |Fiscal:      |No              |
           ------------------------------------------------------------------ 
           ----------------------------------------------------------------- 
          |Consultant:|Nidia Bautista                                       |
          |           |                                                     |
           ----------------------------------------------------------------- 
          
          SUBJECT: Charter-party carriers of passengers: individual fare  
          exemption

            DIGEST:    This bill allows charter-party carriers of  
          passengers, including transportation network companies, to  
          charge individual fares, rather than a single group fare when  
          providing carpool services. 

          ANALYSIS:
          
          Existing law:
          
          1)The Passenger Charter-Party Carriers' Act generally requires  
            charges for the transportation to be offered or afforded by a  
            charter-party carrier to be computed and assessed on a vehicle  
            mileage or time of use basis or on a combination therefore.   
            These charges may vary in accordance with the passenger  
            capacity of the vehicle, or the size of the group to be  
            transported. (Public Utilities Code 5401)

          2)Directs the California Public Utilities Commission (CPUC) to  
            issue permits or certificates to charter-party carriers,  
            investigate complaints against carriers, and cancel, revoke,  
            or suspend permits and certificates for specific violations.   
            (Public Utilities Code 5387)

          3)Defines "charter-party carrier of passengers" as every person  
            engaged in the transportation of persons by motor vehicle for  
            compensation, whether in common or contract carriage, over any  
            public highway in the state.  (Public Utilities Code 5360)








          AB 1360 (Ting)                                      Page 2 of ?
          
          
          4)Defines a "transportation network company" to mean an  
            organization, including, but not limited to, a corporation,  
            limited liability company, partnership, sole proprietor, or  
            any entity operating in California that provides prearranged  
            transportation services for compensation using an  
            online-enabled application or platform to connect passengers  
            with drivers using a personal vehicle.  (Public Utilities Code  
            5431)
          5)Restricts charter-party carriers from offering the  
            transportation computed, charged or assessed on an  
            individual-fare basis.  (Public Utilities Code 5401)

          6)Exempts contractors from the prohibition to assess individual  
            fares who are compensated by parents of children attending  
            public, private, or parochial schools and except operators.   
            (Public Utilities Code 5401)

          7)Exempts a round-trip sightseeing tour service conducted with  
            an authorized certificate or permit from the prohibition to  
            assess individual fares.  (Public Utilities Code 5401)

          This bill:

          1)Exempts charter-party carriers, including transportation  
            network companies (TNCs), that prearranges a ride among  
            multiple passengers who share the ride in whole or in part,   
            from the prohibition to charge individual fares, provided that  
            all the requirement are met: 

               a.     The vehicle seats no more than seven passengers,  
                 excluding the driver.

               b.     The driver is a participating driver of a TNC.

               c.     The vehicle is not used to provide public transit  
                 services or to carry passengers over a fixed route.

               d.     The vehicle is not used to provide pupil  
                 transportation services.

               e.     The individual fare is less than the fare that would  
                 be charged for the same ride to a traveling alone. 

          2)States that this subdivision does not change the insurance  
            requirements established for a TNC and any participating  








          AB 1360 (Ting)                                      Page 3 of ?
          
          
            driver. 
          
          Background

          California law regulates different modes of passenger  
          transportation for compensation, including taxi services, which  
          are regulated by cities and counties, and charter-party carriers  
          and passenger stage companies which are regulated by the CPUC.   
          Beginning as early as 2009, a new model of transportation  
          services began springing up in cities across the United States.   
          Now known as TNCs, these original companies, including UberCab,  
          allowed patrons to prearrange transportation services through an  
          online application on their smartphone or computer.  Patrons  
          would request a ride to a predetermined location and the  
          application would connect them with a TNC driver.  Payment is  
          processed through the application so that no physical financial  
          transaction occurs during the trip itself between the patron and  
          the driver.  The TNC takes a commission on each trip.  The  
          development of the TNCs has made the ability for passengers  
          seeking transportation for compensation more readily available  
          to the general public. 

          Passenger carriers.  The CPUC is in charge of regulating  
          passenger carriers. Passenger carriers include services, such as  
          passenger stage corporations and charter-party carriers.   
          Passenger stage corporations are services that provide  
          transportation to the general public on an individual fare  
          basis, such as scheduled bus operators, which are buses that  
          operate on a fixed route and scheduled services, or airport  
          shuttles, which operate on an on-call door-to-door share the  
          ride service.
          Charter-party carriers are services that charter a vehicle, on a  
          prearranged basis, for the exclusive use of an individual or  
          group.  Charges are based on the mileage or time of use, or a  
          combination of both.  The CPUC does not regulate the level of  
          charges for charter-party carriers.  Types of charter-party  
          carriers include limousines, tour buses, sightseeing services,  
          and charter and party buses.

          The CPUC requires charter-party carriers to meet a number of  
          requirements before an operating permit or certificate is  
          issued.  For example, the CPUC requires sufficient proof of  
          financial responsibility, a preventative maintenance program for  
          all vehicles, a safety education and training program, and  
          regular checks of  the driving records of all persons operating  








          AB 1360 (Ting)                                      Page 4 of ?
          
          
          vehicles used in transportation for compensation. 

          Taxis and other transportation.  Taxis are excluded from the  
          definition of charter-party carriers and are regulated by cities  
          or counties.  The key distinction between charter-party carrier  
          rides and taxis is that charter-party carrier rides must be  
          prearranged, while taxis are allowed to pick up passengers via  
          street hails.  In addition to taxis, other transportation  
          services that are not considered charter party carriers include:  
           transportation services licensed and operating wholly within  
          the limits of a single city or city and county, transportation  
          services contracted to transport school students, publicly owned  
          transit systems, passenger vehicles carrying passengers on a  
          noncommercial enterprise basis, vehicles used exclusively to  
          provide medical transportation, and others.

          Cease and desist orders ignored.  Back in June 2010,  
          then-UberCab was utilizing its application platform to help  
          prearrange rides for patrons of CPUC licensed charter-party  
          carriers, particularly limousines and towncars.   However, as a  
          new service that didn't fit very well within the existing  
          regulatory framework - not a taxi not a charter-party carrier -  
          the CPUC and San Francisco Metropolitan Transportation Authority  
          issued a "cease-and-desist" order against Uber.  The order  
          directed Uber to stop advertising and cease its operations until  
          it had acquired a valid permit to operate from the CPUC.   
          However, even under threat of penalties (at $1,000 per day) and  
          potential prison time, UberCab continued to operate.  In 2012,  
          Sidecar and Lyft were launched as new app based prearranged  
          transportation services, except that these companies used  
          individuals who weren't licensed with the CPUC, drove their  
          personal vehicles, and operated on a donations basis.  About a  
          month after Lyft was launched, on September 2012, the CPUC  
          issued "cease-and-desist" orders against Sidecar and Lyft.  Once  
          again, the companies remained on the road operating their  
          services.  In the spring of 2013, Uber transformed its business  
          model to compete with the Lyft and SideCar.  In the face of  
          protest from its existing Uber Black drivers who drove CPUC  
          licensed vehicles, Uber expanded to Uber-X, allowing non-CPUC  
          licensed individuals to drive their personal vehicles to  
          transport passengers using the Uber platform.  In late 2012,  
          both Lyft and SideCar would abandon the donations-based fees and  
          move to a minimum fee approach.

          CPUC takes a different tack.  In December 2012, after its "cease  








          AB 1360 (Ting)                                      Page 5 of ?
          
          
          and desist" orders had largely been ignored by the TNCs, the  
          CPUC announced it would open a formal proceeding to evaluate  
          services like Lyft, SideCar and Uber.  By January 2013, about  
          one month later, the CPUC announced it had reached an agreement  
          with Uber whereby Uber would continue to operate as the CPUC  
          underwent its proceeding.  The CPUC would also drop its $20,000  
          penalty against Uber.  In September 2013, the CPUC formally  
          announced it would recognize these app-based transportations  
          services as a new category of charter-party carriers,  
          transportation network companies.  The CPUC required each TNC  
          (not each driver) to register with the CPUC, require criminal  
          background checks of all its drivers, and specified insurance  
          requirements.  The CPUC also acknowledged it would open a second  
          phase to consider effects on limousines and other charter party  
          carriers and the need to update transportation rules, including  
          any direction from the legislature. 

          Locals issue cease and desist orders.  2014 was marked by  
          growing tensions between local governments, including airports,  
          and TNCs.  First, the City of San Francisco cracked down on  
          unauthorized entry into airports by TNCs.  In June, the City of  
          Los Angeles Department of Transportation issued cease and desist  
          orders against Lyft and SideCar.  In the fall of 2014, both San  
          Francisco and Los Angeles County District Attorneys sent letters  
          to the TNCs, Uber, Lyft and Sidecar, claiming they are operating  
          illegally and warning them that legal action could follow if  
          they don't make major changes.  The DA's offices had conducted a  
          joint investigation and found a number of practices that violate  
          California law.  The CPUC also issued letters to the TNCs, based  
          on the investigations and claims of local airports, which  
          expressed "personal disappointment" by then- CPUC President  
          Peevey regarding the violations by TNCs and stipulated the  
          CPUC's ability to revoke permits. 

          Legislature adopts new insurance requirements.  The Legislature  
          passed AB 2293 (Bonilla) Chapter 389, Statutes of 2014, which  
          codified the CPUC's definition of TNCs and imposed certain  
          liability and other insurance coverage for TNCs and their  
          participating drivers.  The bill defines when personal and  
          commercial auto insurance requirements come into effect, and at  
          what levels, when the driver logs onto the application until the  
          driver accepts a ride request, and for when a ride request is  
          accepted until the passenger exists the vehicle.  The CPUC  
          subsequently strengthened its insurance requirements in-line  
          with the requirements of AB 2293. The CPUC established 28 rules  








          AB 1360 (Ting)                                      Page 6 of ?
          
          
          and regulations, including requiring a minimum of $1 million  
          per-incident, primary commercial insurance coverage, for  
          incidents involving TNC vehicles and drivers in transit to or  
          during a TNC trip.  The rules also provide for personal auto  
          insurance requirements when the app is off or open for a match.

          More of the same?  In September of 2014, the CPUC sent letters  
          to Uber regarding Uber's advertisement and news reports about a  
          new service, Uber Pool, that allows for fare splitting.  The  
          CPUC warned Uber that such activity would require a different  
          type of permit to provide service under a different model.  The  
          CPUC further stated that such a business plan is prohibited  
          under California law, citing Public Utilities Code Section 5401,  
          the section TNCs are now looking to change in AB 1360.

          Employee or Independent Contractor?  The question about whether  
          TNC drivers are employees or independent contractors has become  
          a growing debate in recent years.  Most recently, the California  
          Labor Commission ruled that a former Uber driver was, in fact,  
          an employee and ordered Uber to pay over $4,000 for expenses  
          incurred while driving.  As employees, Uber drivers in the state  
          would qualify for minimum wage, overtime, and worker's  
          compensation.  Uber has maintained that its drivers are  
          independent contractors.  The Ruling became public when Uber  
          filed an appeal in a state court on June 16th.  Uber's appeal is  
          one of several cases currently up for consideration in the  
          courts that could decide whether TNC drivers are employees or  
          independent contractors.  Two other cases - O'Connor, et al., v.  
          Uber Technologies, Inc. et al. (Case No. C-13-3826 EMC) and  
          Cotter, et al., v. Uber Technologies, Inc. et al. (Case No.  
          13-cv-04065-VC) - are both to be heard in the U.S. District  
          Court in San Francisco.  Both lawsuits were filed by drivers who  
          claim that, although the TNCs classify them as independent  
          contractors, they are actually employees and are therefore owed  
          certain benefits, reimbursements, and protections.  The drivers  
          are seeking class action status in both cases. 

          The bill was incorrectly amended by the Senate Committee  
          onTransportation and Housing. Per the Senate Committee on  
          Transportation and Housing, the author and committee may wish to  
          consider striking line 26 (B) on page 2, otherwise the exemption  
          will only apply to TNC charter-party carriers, not charter-party  
          carriers more broadly.  

          Prior/Related Legislation








          AB 1360 (Ting)                                      Page 7 of ?
          
          
          
          AB 828 (Low, 2015) exempts vehicles operating in conjunction  
          with TNCs from the definition of commercial vehicle.  The bill  
          is pending in the Senate Rules Committee. 

          AB 1422 (Cooper, 2015) requires TNCs to participate in the  
          Department of Motor Vehicles program for notifying employers of  
          the driving records of their drivers.  This bill will be  
          considered on July 14th in the Senate Committee on  
          Transportation and Housing.

          AB 612 (Nazarian, 2014) would have required charter-party  
          carriers to participate in the Department of Motor Vehicles  
          Employer Pull Notice system and to submit all drivers to a  
          Department of Justice criminal background check.  AB 612 was  
          held in the Assembly Committee on Transportation.

          AB 2293 (Bonilla, Chapter 389, Statutes of 2014) established  
          guidelines for insurance coverage for TNCs to ensure personal  
          and financial safety of consumers.

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             No           Local:          No


          PRIOR VOTES:


          Senate Transportation and Housing Committee         (11-0)
          Assembly Floor                                 (73-0)
          Assembly Privacy and Consumer Protection Committee(11-0)
          Assembly Utilities and Commerce Committee           (14-0)


            SUPPORT:  

          Internet Association (source)
          TechNet (source)
          Bay Area Council
          California League of Conservation Voters
          Circulate San Diego
          City of Los Angeles
          Clean Coalition
          Climate Resolve
          Coalition for Clean Air








          AB 1360 (Ting)                                      Page 8 of ?
          
          
          Environment California
          Environmental Defense Fund
          Greenbelt Alliance
          Los Angeles Area Chamber of Commerce
          Lyft, Inc.
          Metropolitan Transportation Commission
          Natural Resources Defense Council
          Orange County Business Council
          Planning and Conservation League
          SF Transit Riders
          San Francisco African American Chamber of Commerce
          Sidecar
          Silicon Valley Leadership Group
          Southern California Association of Governments
          TransForm
          Uber Technologies, Inc.
          Valley Industry & Commerce Association

          OPPOSITION:

          Greater California Livery Association
          Los Angeles Taxi Workers Alliance
          Sacramento Taxi Cab Union
          San Francisco Taxi Workers Alliance AFL-CIO
          San Jose Taxi Drivers Association
          United Taxi Workers of San Diego

          ARGUMENTS IN SUPPORT:    The author's office states: "currently,  
          laws governing charter party services such as TNC's prevent them  
          from charging passengers individual fares for split rides.  This  
          statute was written in 1961 with the intent to protect consumers  
          from being forced to share limousine and taxi services with  
          other individuals.  It has not been updated since 1994, before  
          the advent of the technology utilized by TNC's, which can now  
          allow consumers to choose whether they want to share a ride for  
          a reduced costs.  With the advancement of the sharing economy,  
          this outdated statute needs to be updated in order to allow  
          flexibility for opt-in carpooling services that TNCs want to  
          provide and consumers want to utilize."
          
          ARGUMENTS IN OPPOSITION:    The San Francisco Taxi Workers  
          Alliance (SFTWA) AFL-CIO opposes this bill stating that "AB 1360  
          allows TNCs to encroach upon public transit, school buses, taxis  
          and other forms of transit that serve the public as a whole.  It  
          would extend and perpetuate TNCs failure to provide adequate  








          AB 1360 (Ting)                                      Page 9 of ?
          
          
          service to the disabled community. Fare-splitting is currently  
          illegal in California, but Uber and Lyft show no concern about  
          that.  Passage of AB 1360 would once more sanction and reward  
          their unlawful behavior, and encourage ore of the same."
          
          

                                      -- END --