BILL ANALYSIS Ó SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 1092 SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: de leÓn VERSION: 4/9/12 Analysis by: Carrie Cornwell FISCAL: yes Hearing date: April 10, 2012 SUBJECT: Brokers of construction trucking services: surety bonds DESCRIPTION: This bill requires that brokers of construction trucking services provide written evidence to specified parties and in a specified manner of possession of a valid surety bond. ANALYSIS: A broker of construction trucking services (broker) is someone who arranges services from and is responsible for paying an independent contractor who provides dump truck services (dump truck operator). Existing law requires that a broker pay a dump truck operator by the 25th day following the last day of the month in which the dump truck provided services, provided that the dump truck operator documents the charges, the dump truck operator is properly permitted, and no dispute exists between the two over the charges. If the broker does not pay in a timely fashion, state law prescribes a penalty of two percent per month of withheld charges. Since 2011, existing law has required a broker to secure a surety bond of not less than $15,000 to ensure that a contracted dump truck operator receives payment, even if the broker fails to pay the dump truck operator by the 25th day of the month following when services were rendered. A broker who does not secure this surety bond is guilty of a misdemeanor and subject to a fine of up to $5,000. This bill : 1.Requires a broker to post evidence of its bond to its website SB 1092 (DE LEÓN) Page 2 or annually to provide written evidence of the broker's surety bond to a third-party nonprofit organization that is related to the industry and regularly maintains a published database of bonded brokers. The broker must remove the evidence from its web site or notify the third party organization when its surety bond expires or is canceled. 2.Prohibits a broker from engaging the services of any dump truck operator unless prior to the commencement of work in each calendar year, the broker first provides written evidence of its valid surety bond to any person that hires the broker to furnish construction transportation services and also to the hired dump truck operator. 3.Defines "written evidence of the broker's valid surety bond" as a copy of the bond, a certificate of insurance, a continuation certificate, or other similar documentation originally issued from the surety that includes the surety and broker's name, bond number, and effective and expiration dates of the bond. COMMENTS: Purpose . The author introduced this bill at the request of the California Construction Trucking Association, which represents construction-related trucking companies that operate fleets of dump trucks. In 2010, the author and sponsor of the bill teamed up on AB 145, Chapter 429, in response to reports from dump truck operators that construction trucking brokers were engaging in unscrupulous practices toward the dump truck operators whose services they broker. AB 145 requires brokers of construction trucking services to secure a surety of bond of $15,000 to ensure payment of contracted dump truck operators. The sponsor now reports that some unscrupulous, unprofessional brokers are shirking their bonding responsibilities under AB 145. Specifically, these brokers have either failed to obtain a bond or have refused to provide bond information to the dump truck operators whose services they broker. AB 145 included no affirmative obligation that brokers notify others of the bond information. This bill addresses that problem by adding notification requirements to the existing broker bond. By creating easier access to a copy of the bond, a contracted dump truck owner will know up front if in fact he or she is contracting with a bonded broker. Moreover, if the dump truck SB 1092 (DE LEÓN) Page 3 operator has already completed the work for the broker and has not been paid, he or she can easily access the bond information in order to file a claim on the bond. POSITIONS: (Communicated to the committee before noon on Wednesday, April 4, 2012) SUPPORT: California Construction Trucking Association (sponsor) OPPOSED: None received.