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.