BILL ANALYSIS Ó AB 24 Page 1 Date of Hearing: May 20, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 24 (Nazarian) - As Amended April 22, 2015 ----------------------------------------------------------------- |Policy |Utilities and Commerce |Vote:|8 - 2 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Transportation | |11 - 5 | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill places new safety-related operating requirements on transportation network companies (TNCs) and their drivers. Specifically, this bill: AB 24 Page 2 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, 2017. 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. AB 24 Page 3 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 Account] COMMENTS: 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. AB 24 Page 4 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 industry." 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. AB 24 Page 5 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 Transportation. AB 24 Page 6 Analysis Prepared by:Chuck Nicol / APPR. / (916) 319-2081