BILL ANALYSIS Ó 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 --