BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 1422           Hearing Date:    7/14/2015
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          |Author:   |Cooper                                                |
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          |Version:  |4/22/2015                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Randy Chinn                                           |
          |:         |                                                      |
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          SUBJECT:  Transportation network companies


            DIGEST:  This bill increases public safety by requiring  
          transportation network companies (TNCs) to participate in the  
          Department of Motor Vehicles' (DMV) pull notice program.

          ANALYSIS:
          
          Existing law establishes a pull notice program which requires  
          employers of drivers to obtain a report showing the drivers'  
          current driving record from the DMV, and to obtain an updated  
          report at least annually.  An employer who, after receiving the  
          record, continues to employ a person against whom a  
          disqualifying action has been taken is guilty of a public  
          offense, punishable by up to six months in jail and a fine of up  
          to $1,000.

          This bill requires TNCs to participate in the pull notice  
          program.

          COMMENTS:
          
          1)Purpose.  According to the author, the pull notice program  
            helps businesses and government agencies ensure that unsafe  
            drivers are taken off the road quickly.  But because the pull  
            notice program is limited to those businesses and agencies  
            operating under an employer-employee relationship, TNCs and  
            their drivers are not covered.  The intent of this bill is for  
            TNCs and those who drive for them to participate in the DMV's  








          AB 1422 (Cooper)                                      PageB of?
          
            pull notice program.  In effect, for purposes of the pull  
            notice program in Section 1808.1, the TNC is the employer and  
            the TNC drivers are the employees.

          2)What's a pulled notice?  The pull notice program provides  
            employers with their drivers' public driving record, which  
            includes any accidents, citations, and license suspensions.   
            An employer who receives a report on a driver whose license  
            has been suspended or revoked must discontinue employment.   
            This could happen because of a DUI or falling behind on child  
            support payments.  In the case of the TNCs, this means that  
            the TNC would need to discontinue allowing the driver to  
            participate in their service.  The purpose of this program is  
            to protect the public from the most unsafe drivers by  
            preventing them from carrying passengers.

          3)The growing TNC industry.  In California, the TNC business is  
            large and growing rapidly.  A January 2015 report from  
            Uber<1>, the largest TNC, reports 20,000 active Uber drivers  
            in Los Angeles, 16,000 in the San Francisco area, and almost  
            5,000 each in San Diego and Orange County, up from zero in  
            July 2012.  Some estimates put the total number of active TNC  
            drivers in the United States at 150,000.  TNCs are  
            successfully competing with taxi cabs, limousines, and other  
            regulated transit operators.  

          4)An unlevel playing field.  The different types of  
            transportation companies (e.g., TNCs, limousines, Super  
            Shuttles, taxis) are all regulated differently.  Rates,  
            routes, insurance requirements, vehicle inspections, and  
            driver requirements vary.  State law has begun to address the  
            biggest differences between TNCs and others, but there's  
            little dispute that big differences remain.  In an ideal  
            world, companies would compete based on the differences in  
            their business models and competence, not on the differences  
            in how they are regulated.

          5)Creating a level playing field slowly.  The laws and  
            regulations governing the provision of transportation services  
            are many decades old.  These laws and regulations have evolved  
            slowly, as evidenced by the arcane and complicated carrier  
            classifications.  At least over the last several decades, the  

          ---------------------------
          <1>"An Analysis of the Labor Market for Uber's Driver-Partners  
          in the United States," by Jonathan V. Hall and Alan B. Kreuger;  
          January 22, 2015.








          AB 1422 (Cooper)                                      PageC of?
          
            few new laws have focused on safety issues.  The rapid growth  
            of TNCs has disrupted this relatively quiet corner of our  
            economy, changing the economics of transportation and  
            challenging the economic models of the traditional  
            transportation providers.  This has upended the lives of many  
            people in the transportation industry, while at the same time  
            providing many benefits to transportation consumers.

            Regulators are struggling to keep up with the rapidly evolving  
            transportation industry, a bit hamstrung by laws which never  
            anticipated the different ways that TNCs operate.  In  
            September 2013, the California Public Utilities Commission  
            (CPUC), which has regulatory authority over much, though not  
            all, of the passenger transportation industry, issued its  
            first set of rules<2> intended to foster the growth of TNCs  
            without compromising public safety.  These rules started the  
            process of establishing a level playing field so that all  
            transportation companies would have similar regulatory  
            obligations, allowing them to compete based on their business  
            models.  Among the rules were requirements for obtaining an  
            operating permit from the CPUC, requiring criminal background  
            checks for drivers, establishing driver training programs,  
            implementing zero-tolerance policies on drugs and alcohol, and  
            minimum insurance requirements.  

            The CPUC has initiated a second phase of its investigation to  
            look more closely at the regulation of TNCs and the  
            traditional transportation companies, known as charter-party  
            carriers<3>.  A set of issues has been proposed and comments  
            on the scope of those issues have been submitted; a decision  
            on the scope of issues is expected shortly.  As the state's  
            regulatory agency over transportation matters, the CPUC is in  
            the best position to consider whether its current regulations  
            provide for a fair and competitive market.  It can recommend  
            specific changes to law and, in some cases, can implement  
            changes to its own regulations to achieve the goal of a level  
            playing field.  
          
          6)Taking a step forward.  This bill helps level the playing  
            field by making TNCs participate in the same pull notice  
            program as their competitors.
          ---------------------------
          <2> D.13-09-045; issued September 23, 2013.
          <3> Assigned Commissioner and Administrative Law Judge's Ruling  
          Amending the Scoping Memo and Ruling for Phase II of Proceeding;  
          Rulemaking 12-12-011; April 28, 2015.








          AB 1422 (Cooper)                                      PageD of?
          

          7)Casual driver exemption.  Current law allows an exemption from  
            the pull notice program if the employer has employed the  
            driver less than 30 days during the previous six months.  This  
            provides a bit of a loophole as a TNC driver could drive three  
            days per week, one each for, say, Uber, Lyft, and Sidecar, and  
            still be eligible for the casual driver exemption.  The author  
            believes this is not a concern as the TNCs intend on screening  
            all of their drivers.

          8)Clarifying amendment - While the intent of the bill is clear,  
            the language of the bill is not.  The author will accept the  
            following language, which will ensure that the bill can be  
            implemented as intended:

                 Page 2, line 3
          At the beginning of the sentence insert:  Notwithstanding any  
          limitations contained in section 1808.1 of the Vehicle Code,
          After "company" insert "is eligible to participate and"
          
          1)Double-referred.  This bill was heard by the Senate Energy,  
            Utilities and Communications Committee on June 30, 2015, and  
            approved 9-0.

          Related Legislation:

          AB 24 (Nazarian, 2015) - requires TNCs to participate in the  
          pull notice program and submit all drivers to a Department of  
          Justice criminal background check.  This bill was held in the  
          Assembly Appropriations Committee.

          AB 828 (Low, 2015) - exempts vehicles driven in connection with  
          TNCs from the obligation of registration as a commercial  
          vehicle.  This bill was heard by the Senate Transportation and  
          Housing Committee on July 7, 2015 and approved 6-5. This bill is  
          pending in the Senate Rules Committee.

          AB 1360 (Ting, 2015) - authorizes charter party carriers to  
          charge individual fares.  This bill is pending in the Senate  
          Energy, Utilities and Communications Committee.

          AB 612 (Nazarian, 2014) - required TNCs to participate in the  
          pull notice program and submit all drivers to a Department of  
          Justice criminal background check.  This bill failed on  
          concurrence in the Assembly.









          AB 1422 (Cooper)                                      PageE of?
          

          AB 2293 (Bonilla, Chapter 389, Statutes of 2014) - established  
          minimum insurance requirements on TNCs.
          
          Assembly Votes:

            Floor:    78-0
            Appr:     17-0
            Trans:    16-0
            U&C:      14-0
          
          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  Yes     
          Local:  Yes


            POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,
                          July 8, 2015.)
          
            SUPPORT:  

          Long Beach Police Officers Association
          Los Angeles County Professional Peace Officers Association
          Riverside Sheriff's Association
          Sacramento County Deputy Sheriffs' Association
          San Diego Regional Chamber of Commerce
          San Francisco International Airport
          Uber Technologies, Inc.

          OPPOSITION:

          Greater California Livery Association 


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