BILL ANALYSIS                                                                                                                                                                                                    

                                                                      AB 24

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          Date of Hearing:  May 20, 2015


                                 Jimmy Gomez, Chair

          24 (Nazarian) - As Amended April 22, 2015

          |Policy       |Utilities and Commerce         |Vote:|8 - 2        |
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          |             |Transportation                 |     |11 - 5       |
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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   


          This bill places new safety-related operating requirements on  
          transportation network companies (TNCs) and their drivers.  
          Specifically, this bill:


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          1)Prohibits the California Public Utilities Commission (PUC)  
            from issuing or renewing a permit or certification to a TNC  
            unless the applicant, in addition to meeting existing  
            requirements, participates in the DMV's Employer Pull Notice  
            (EPN) system, and clarifies that all charter-party carriers  
            (CPCs) are also subject to this requirement.
          2)Requires TNCs to register any vehicle used in the  
            transportation of passengers for compensation with the PUC,  
            and requires TNC vehicles to display a distinctive identifying  
            symbol as prescribed by PUC. 

          3)Requires TNCs to provide a mandatory controlled substance and  
            alcohol testing certification program.

          4)Stipulates that drivers hired or initially retained by a TNC  
            on or after January 1, 2016, are subject to mandatory drug and  
            alcohol testing prior to employment or retention. Drivers  
            hired or initially retained before January 1, 2016, are  
            required to complete a drug and alcohol test before January 1,  

          FISCAL EFFECT:

          1)DMV. There are likely over 150,000 TNC drivers currently in  
            California-and many more over the course of any year-who would  
            have to be enrolled in the EPN by their respective TNCs. (Uber  
            alone indicates that it has more than 100,000 active drivers  
            in the state.) The DMV's costs for this enrollment will be  
            covered by a $5 per enrollee fee. Likewise, DMV's costs for  
            providing reports to a TNC following any moving violation by  
            their drivers will be covered by a $1 fee per report. DMV  
            indicates this additional workload can be managed within  
            existing resources.


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          2)PUC. Given the significant number of current, and probably  
            future TNC drivers, the PUC's workload will expand  
            considerably. PUC staff currently process by hand vehicle  
            registration information provided by CPCs. This database  
            currently includes about 18,000 vehicles. The commission  
            believes that developing an online registration system will be  
            the most cost-effective approach to handling the exponential  
            increase in workload associated with this bill, though the  
            imposition of the bill's requirements could dissuade some  
            portion of TNC drivers, most of which work part-time, from  
            continuing in this occupation. One-time costs are estimated to  
            be at least $500,000 for an IT consultant and $180,000 for  
            three positions to implement the initial volume of  
            registrations. Ongoing workload related to registering  
            additional TNC vehicles, oversight of the TNC's drug and  
            alcohol testing program, responding to questions from TNCs and  
            their drivers regarding requirements, forms, suspensions,  
            reinstatements and revocations, and maintenance of the IT  
            system, will require three to five positions at an annual cost  
            of $230,000 to $350,000. [Transportation Reimbursement  


          1)Background. TNCs allow patrons to prearrange transportation  
            services through an online application on their smartphone or  
            computer.  Patrons request a ride to a predetermined location,  
            and the application connects 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.  Under this model, drivers are  
            considered independent contractors and TNCs take a commission  
            on each trip. 


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            In a September 2013 decision, the PUC, which regulates various  
            transportation services, began regulating TNCs by creating a  
            distinct new category of CPCs. The decision requires TNCs to  
            obtain a permit from the PUC, conduct criminal background  
            checks on drivers, check driver's records, establish a driver  
            training program, implement a zero-tolerance policy on drugs  
            and alcohol, conduct vehicle inspections, and obtain  
            authorization from airports before conducting any operations  
            on or into airport property. The commission is currently in  
            the process of rolling out the second phase of this decision,  
            which will include an evaluation of the original set of  
            regulations and also consider any modifications to existing  
            regulations relative to other CPC categories.

          2)Purpose. AB 24 is the author's second attempt to remedy  
            inconsistent requirements between TNCs and other categories of  
            CPCs. The author notes, "overall, AB 24 ensures the public is  
            safe and closes the gaps that currently exist when  
            transporting people for hire.  AB 24 sets minimum safety  
            standards that do not go beyond current regulations of  
            transportation companies while not overbearing an innovative  

            DMV's EPN was established as a voluntary program in 1983 to  
            provide employers and regulatory agencies with a means of  
            providing driver safety through the ongoing review of driver  
            records. The current EPN system is designed to automatically  
            generate a report of a driver's record and electronically send  
            the report to the employer under specific circumstances,  
            including: upon enrollment of a driver, annually from the date  
            of employment, or whenever a driver commits certain moving  
            violations. Approximately 1.6 million commercial drivers are  
            currently enrolled in the EPN system. Due to their status as  
            independent contractors, TNC drivers are not subject to the  
            same requirement. AB 24 will expand the EPN system by  
            clarifying that all CPC drivers, including TNC drivers, are  
            required to enroll.


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            The commission's decision required TNCs to implement a zero  
            tolerance policy and to suspend a driver promptly after a zero  
            tolerance complaint is filed. However, the PUC regulations do  
            not require TNC drivers to undergo mandatory and periodic  
            alcohol and controlled substance testing like other CPCs, as  
            will be required under AB 24.

            In support, the California Labor Federation asserts "AB 24  
            will level the playing field for all transportation companies  
            regulated by the PUC regardless of the technology used to book  
            the service.  AB 24 sets reasonable standards to ensure public  
            safety and a fair market for transportation services."

          3)Opposition. Uber and Lyft contend that their systems, which  
            allow for instant feedback on driver performance from  
            customers, including suspected driver impairment, are more  
            effective than random drug testing. Both companies note that  
            the vast majority of their drivers are part-time. Lyft states  
            that 78% of its drivers work less than 15 hours per week, and  
            Uber states that its average driver works between 15 and 20  
            hours per month. Both companies argue that the bill would  
            create unnecessary regulatory burdens on their drivers. 

          4)Related Legislation. AB 1422 (Cooper), also on today's  
            committee agenda, requires TNCs to participate in the EPN.

          5)Prior Legislation. AB 612 (Nazarian) of 2014, which required  
            CPCs, including TNCs, to participate in DMV's EPN and to  
            submit all drivers to a Department of Justice criminal  
            background check, which held in the Assembly Committee on  


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          Analysis Prepared by:Chuck Nicol / APPR. / (916)