BILL ANALYSIS Ó AB 2790 Page 1 Date of Hearing: April 12, 2016 ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS Rudy Salas, Chair AB 2790 (Nazarian) - As Amended March 18, 2016 NOTE: This bill is double-referred, and if passed by this Committee, it will be referred to the Assembly Committee on Transportation. SUBJECT: Taxicab drivers: Taxicab Commission: state licensure requirement. SUMMARY: Establishes the Taxicab Commission (Commission) within the Department of Consumer Affairs (DCA) to license and regulate taxicab drivers. EXISTING LAW: 1)Establishes the DCA within the Business, Consumer Services and Housing Agency, which is comprised of 41 licensing boards, bureaus, committees and commission, any other board, office or officers subject to the DCA's jurisdiction. (Business and Professions Code (BPC) Sections 100 and 101) 2)Specifies that the boards, bureaus, and commissions within the DCA, are established for the purpose of ensuring that those private businesses and professions deemed to engage in activities which have potential impact upon the public health, AB 2790 Page 2 safety, and welfare are adequately regulated in order to protect the people of California; to that end, establish minimum qualifications and levels of competency and license persons desiring to engage in the occupations they regulate upon determining that such persons possess the requisite skills and qualifications necessary to provide safe and effective services to the public, as specified. (BPC Section 101) 3)Specifies that if at the end of any fiscal year, an agency within the DCA, as specified, has unencumbered funds in an amount that equals or is more than the agency's operating budget for the next two fiscal years, the agency must reduce license or other fees, as specified. (BPC Section 128.5) 4)Authorizes any agency within the DCA to promulgate regulations requiring licensees to include their license numbers in any advertising, soliciting, or other presentments to the public, as specified. (BPC Section 137) 5)Requires certain regulatory entities, under the DCA, to require applicants to furnish a full set of fingerprints for purposes of conducting criminal history record checks. (BPC 144) 6)Requires a board within the DCA to expedite and assist with, the initial licensure process for an applicant who supplies satisfactory evidence that he or she has served as an active duty member of the Armed Forces of the United States and was honorably discharged and permits the boards to adopt regulations to administer the expedited process. (BPC Section 115.5) 7)States that any and all matters relating to employment, AB 2790 Page 3 tenure, or discipline of employees of any board, agency or commission is to be initiated by that board, agency or commission, but before being referenced to the State Personnel Board, should receive approval of the appointing authority. (BPC Section 154) 8)Establishes, in the state treasury, the Professions and Vocation Fund. (BPC Section 205) 9)Requires every city or county to protect the public health, safety, and welfare by adopting an ordinance or resolution in regard to taxicab transportation service rendered in vehicles designed for carrying not more than eight persons, excluding the driver, which is operated within the jurisdiction of the city or county. (Government Code (GC) Section 53075.5(a)) 10)Requires each city or county to provide, but is not limited to, providing for the following: (GC Section 53075.5(b)) a) A policy for entry into the business of providing taxicab transportation services, including, but not limited to: i) Employment, or an offer of employment, as a taxicab driver in the jurisdiction, including compliance with a mandatory controlled substance and alcohol testing certification program; ii) The driver's permit becomes void upon termination of employment; iii) The drivers permit states the name of the employer; and, iv) The employer notifies the city or county upon AB 2790 Page 4 termination of employment. b) The establishment or registration of rates for the provision of taxicab transportation services; c) A mandatory controlled substance and alcohol testing certification program, as specified. 11)Authorizes each city or county to levy service charges, fees, or assessments in an amount sufficient to pay for the costs of carrying out an ordinance or resolution adopted in regard to taxicab transportation services. (GC Section 53075.5(c)) 12)Permits a transportation inspector, authorized by a local government to cite any person for operating as a taxicab without a valid certificate, license or permit, required by any ordinance, to impound and retain possession of any vehicle used in violation of the ordinance. (GC Section 53075.61) 13)Requires every taxicab transportation service to include the number of its certificate, license, or permit in every written or oral advertisement of the services it offers. (GC Section 53075.9) 14)Permits a city or county to adopt additional requirements for a taxicab to operate in its jurisdiction. (GC Section 53075.5(c)) 15)Requires the development of plan for the establishment and operation of a proposed state board or new category of licensed professional to be developed by the author or sponsor of legislation, prior to consideration by the Legislature of legislation creating a new state board or creating a new category of licensed professional, as specified. (GC Section 9148.4) AB 2790 Page 5 THIS BILL: 1)Adds the Commission under the jurisdiction of the DCA and adds the Taxicab fund to the Professions and Vocations Fund, beginning July 1, 2016 and requires the Commission to be responsible for the licensure and regulation of the profession of taxicab driving, and that regulation of the business of providing taxicab transportation services remains under the jurisdiction of cities, counties, and cities and counties, as specified in Section 53075.5 of the GC. 2)Establishes the Taxicab Driver Act. 3)Defines "Commission" to mean the Taxicab Commission. 4)Defines "Department" to mean the Department of Consumer Affairs. 5)Defines "taxicab" as a passenger vehicle designed for carrying not more than eight persons, excluding the driver, and used to carry passengers for hire, but does include a charter-party carrier of passengers, as specified. 6)Specifies that the Commission is subject to review by the appropriate policy committees of the Legislature, and repeals the provisions of the Commission on January 1, 2022. 7)States that protection of the public is the highest priority for the Commission in exercising it licensing, regulatory, and disciplinary functions; whenever the protection of the public AB 2790 Page 6 is inconsistent with other interests sought to be promoted, the protection of the public is paramount. 8)Specifies that the Commission is comprised of nine members, including five public members and four taxicab driver licensees; the Governor appoints three public and four licensee members and the Senate Committee on Rules and the Speaker of the Assembly each appoint one public member. 9)Specifies that an initial licensee member of the Commission may be a person applying for a license, but who currently maintains a permit in good standing as a taxicab driver in at least one city, county, or city and county, who meets specified requirements and must have obtained his or her license by an unspecified date. 10)Requires members of the Commission to be appointed for a term of four years, except that initial members and two of the licensee members must be appointed for an initial term of two years; no member may serve longer than two consecutive years. 11)Authorizes the Commission to appoint an executive office (EO) who is exempt from civil service, who is authorized to exercise the powers and perform the duties delegated by the Commission. 12)Specifies the EO is subject to approval of the director of the DCA. 13)Authorizes the Commission to employ examiners, inspectors, and other personnel necessary. AB 2790 Page 7 14)States that is unlawful to drive a taxicab unless the driver has been issued a license by the Commission. 15)Requires the Commission to issue a license to a person who meets the following: a) Has a valid California driver's license; b) Participated in a pull-notice system, as specified, and prohibits drivers with convictions for reckless driving, driving under the influence, hit-and-run, or driving with a suspended or revoked license from obtaining a license, but an applicant may have a maximum of two points on his or her driving record; and, c) Participates in a mandatory controlled substance and alcohol testing certification program, as adopted by the Commission. 16)Authorizes a person to apply for a license on a form developed by the Commission, and requires the person to pay an unspecified application and initial licensing fee. 17)States that a license expires in three years and may be renewed prior to the expiration if the licensee completes a form developed by the Commission and demonstrates compliance with a safe driving record, and pays an unspecified renewal fee. 18)Requires all fees collected to be deposited in the Taxicab fund and subject to appropriation by the Legislature. 19)States that any person who violates the provisions of the Taxicab Act is guilty of a misdemeanor, punishable by a fine not exceeding $1,000 or imprisonment in a county jail not AB 2790 Page 8 exceeding six months or both. 20)States that the Taxicab Act does not prohibit a city, county, or city and county from imposing more stringent requirements on taxicab transportation services to the extent not consistent with the Taxicab Act. FISCAL EFFECT: Unknown. This bill is keyed fiscal by the Legislative Counsel. COMMENTS: Purpose. This bill will establish the Commission for the licensure and regulation of taxicab drivers while leaving the regulation of taxicab businesses to the local regulatory entities who are currently charged with regulation of both the taxicab drivers and the businesses. This bill is author sponsored. According to the author, "unlike other drivers and professions, taxi cab drivers face overlapping licensure requirements. Overall, [this bill] simplifies the licensure of the taxicab profession, protects consumers and ensures a competent and fair marketplace for taxicab professionals by creating the [Commission], under the [DCA]." Taxicab Regulation and Local Control. Under current law, taxicab businesses and taxicab drivers are regulated through various local ordinances. Each local jurisdiction can and does create its own requirements for taxis to operate, unlike other models of passenger carriers, who are regulated under one statewide requirement, established by the Public Utilities Commission (PUC). GC Section 53075.5 requires cities and counties to protect the public health, safety, and welfare by adopting an ordinance or resolution in regard to taxicab transportation services. Each ordinance or resolution must include a policy for entry into the business of providing AB 2790 Page 9 taxicab services, the establishment or registration of rates, and a mandatory controlled substance and alcohol testing certification program. Local jurisdictions may include additional requirements for taxicab businesses and drivers, many of which do. The San Francisco Municipal Transportation Agency requires taxicab drivers to be a legal resident, maintain personal hygiene, be free of disease, possess a current California driver's license, be 21 years of age, speak, read and write the English language, get fingerprinted, attend and complete a taxi school training program, have an offer from a taxi company to drive and pay an application fee, among others. In the City of Los Angeles, an applicant for a taxicab driver license, must be sponsored by one of LA City's franchised taxicab companies, provide a driving history record, pass an examination, and pay a fee. According to information obtained from the Senate Committee on Energy, Utilities, and Communications and the Committee on Transportation and Housing background paper for their February 17, 2016 joint informational oversight hearing, Ride-hailing Disruption: Establishing a Level Playing Field in the Transportation-for-hire Market, "Taxicab Service Unlike services regulated and licensed by the [PUC], taxicab service in California is regulated by cities and counties. Taxis are the only transportation for-hire service explicitly allowed to pick up passengers via a street hail. Taxicab owners, fleets, and drivers are often subjected to extensive regulations, particularly in large cities, and generally less extensive regulations in mid-sized and smaller cities. Therefore, the range of regulations varies across jurisdictions, including among neighboring cities. In general, taxi fares are regulated. Additionally, cities often cap the number of taxis to protect against an oversupply that could result in excessive competition that undermines public safety with unsafe vehicles, drivers, and driving practices?The cities and counties restrict the number of taxis by limiting the supply of permits, or medallions (named AB 2790 Page 10 for the metal ornament affixed to the vehicle)." Because cities regulate the number of taxis permitted in each jurisdiction, the number of taxicab drivers may vary by location. At this time, it is unknown how many taxicab drivers will seek state-wide licensure. The Bureau of Labor Statistics reports that there are just over 13,000 taxicab and chauffer drivers in California. This bill aims to create a statewide regulatory system for taxicab drivers that would alleviate the need for local governments to regulate the drivers, while still maintaining control of the profession. Department of Consumer Affairs. This bill would require the Commission to be located within the DCA, which regulates 40 entities, including 25 boards, nine bureaus, three committees, two programs, and one commission, which combined regulate more than 250 business and professional categories. These entities establish the minimum qualifications for licensure, issue licenses, and investigate and discipline licensees. These entities are primarily funded by licensing fees. Each year, the Senate Committee on Business, Professions and Economic Development and the Assembly Committee on Business and Professions (Committees) conduct joint sunset oversight hearings to review those regulatory entities under the DCA on a rotating basis. The sunset review process itself provides a formal opportunity and mechanism for the DCA, the Legislature, the entities, and interested parties and stakeholders to discuss the performance of the entities and make recommendations for improvements. This has been the traditional forum for the legislature to respond to concerns about unfairness, redundancy, or AB 2790 Page 11 inefficiency in the licensing process for various regulatory entities. As is standard with other entities regulated by the DCA, the commission would be subject to the sunset review process, providing the Legislature with the opportunity to review the performance of the commission. The provisions of this bill are scheduled to be repealed on January 1, 2022, unless the Legislature seeks to continue the operations of the commission. Other Vehicle Transportation Service Providers. California law regulates different modes of passenger transportation for compensation, in addition to taxi services, which are regulated at the local level; there are charter-party carriers and passenger stage corporations, and transportation network companies (TNCs). TNC's are defined as an organization, including, but not limited to, a corporation, limited liability company, partnership, sole proprietor, or any other 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, as specified in the Public Utilities Code (PUC) Section 5431(a). The license to operate ride-hailing services has been provided at the state level by the PUC whereas taxis are permitted exclusively by individual local cities and counties. This bill will not require those entities which are currently regulated under the jurisdiction of the PUC to obtain licensure under the Commission; this bill will only apply to individuals who wish to drive taxicabs. Occupational Licensing. The issue of occupational licensing and its impacts on the ability to enter the labor market and mobility within have been raised at both the state and federal level. Currently, The Little Hoover Commission, which is a statutorily created independent agency that conducts research studies about state government operations, is currently in the process of conducting a study on occupational licensing. The study will partly explore the impact of occupational licensing on upward mobility for various groups, as well as the effect of AB 2790 Page 12 licensing regulations on consumers and the economy. The Little Hoover Commission's study will have a broad policy perspective, and will not place emphasis on licensing testing, education, and other requirements for specific professions. Federal Occupational Licensing Report. In addition, the White House released a report in July of 2015, titled, Occupational Licensing: A Framework for Policymakers. According to that report's executive summary, the report addresses "the growth of licensing over the past several decades, its costs and benefits, and its impacts on workers and work arrangements. The report recommends several best practices to ensure that licensing protects consumers without placing unnecessary restrictions on employment, innovation, or access to important goods and services." This bill would create a state-based licensure program for taxicab drivers, through a newly established commission. Although, this bill is creating a new state-wide framework of licensure for taxicab drivers, the current requirements in this bill do not appear to be more burdensome than the permit requirements placed upon taxicab drivers through various local ordinances. However, the author's aim is to seek a consistent licensing or permit scheme for taxicab drivers across the state (with no variances in each district); as currently drafted this bill specifies that the regulation of the business of providing taxicab transportation services will still be at the discretion of the local authorities as specified in the GC. Further, it does not exempt drivers licensed by a city or county. This could result in duplicative licensing requirements at the state and local level, contrary to the author's intent. Sunrise Review Process. The Legislature uses a Sunrise process for the purpose of assessing requests for new or increased occupational regulation, pursuant to GC Section 9148.4 and policy committee rules. The process includes a questionnaire and a set of evaluative scales to be completed by the group supporting regulation. The questionnaire is an objective tool for collecting and analyzing information needed to arrive at AB 2790 Page 13 accurate, informed, and publicly supportable decisions regarding the merits of regulatory proposals. This process accomplishes the following: (1) places the burden of showing the necessity for new regulations on the requesting groups; (2) allows the systematic collection of opinions both pro and con; and, (3) documents the criteria used to decide upon new regulatory proposals. This helps to ensure that regulatory mechanisms are imposed only when proven to be the most effective way of protecting the public health, safety and welfare. Central to the Sunrise process was the creation of nine Sunrise criteria developed to provide a framework for evaluating the need for regulation. These criteria are: 1)Unregulated practice of the occupation in question will harm or endanger the public health, safety or welfare. 2)Existing protections available to the consumer are insufficient. 3)No alternatives to regulation will adequately protect the public. 4)Regulation will alleviate existing problems. 5)Practitioners operate independently, making decisions of consequence. AB 2790 Page 14 6)The functions and tasks of the occupation are clearly defined. 7)The occupation is clearly distinguishable from other occupations that are already regulated. 8)The occupation requires knowledge, skills and abilities that are both teachable and testable. 9)The economic impact of regulation is justified. Sunrise Questionnaire for Taxicab Driver Regulations. According to information provided in the sunrise questionnaire, the author reported, "for decades there has been significant public demand for regulation. An unregulated taxi industry is harmful to everyone including consumers, drivers and operation companies. The need for regulation dates back to the 1930s. During the Great Depression, people flooded the taxicab market at the absence of stable jobs. These drivers were largely unlicensed. As a result, American cities quickly enacted laws to address safety, liability and driver rights issues. Fast forward 40 years, in the 1970s, cities decided to reduce regulation for the taxicab industry. Local governments in cities across the country enabled open-entry and removed regulations on fares, licensing and accessibility requirements. However, deregulation is these cities proved to be a failure for many reasons. In just of matter of years, almost every city re-regulated its taxi market because: Prices for taxi riders increased. Vehicle quality decreased. AB 2790 Page 15 Fares became confusing and unpredictable to passengers. Taxi riders in low-density areas were neglected and access to 24/7 transportation became difficult. Taxi riders became prone to price inflation and exploitation. Drivers struggled to make a living wage due to an increase of new drivers and an abundance of supply vs. rider demand. Driver quality decreased. Accidents increased due to an increase of inexperienced, unlicensed (and sometimes untrained) drivers on the road. Operators struggled to fund business operations and maintain top quality standards because of increased competition and decreased revenue. Traffic in high-density areas increased due to an influx of cars on the road and more " cruising" activity. Air quality decreased. To ensure that the public is safe, cities have long-implemented basic standards for drivers and the industry." POLICY ISSUES FOR CONSIDERATION: This bill seeks to create a new regulatory entity under the DCA for taxicab drivers. Although the author explains the need for a new licensure program is to ensure a consistent, statewide regulatory framework for the taxicab drivers in California, as currently drafted, there are several policy and implementation issues associated with the provisions of this bill. 1)Is DCA the appropriate entity to regulate this industry? As noted above, the DCA houses numerous licensing entities. Although the DCA is well suited to administer a regulatory program, given that statewide regulation of most other passenger transportation systems is currently vested within the PUC, should the statewide regulatory framework for licensing taxicab drivers be placed under a separate entity? AB 2790 Page 16 2)Does the profession of being a taxicab driver meet the threshold for statewide licensure and regulation (the potential for serious injury or death, or severe financial harm)? When considering the establishment of a new licensure category, the standard for those seeking licensure is whether the unregulated profession poses a serious threat to the public health and safety, or can cause severe financial harm. Otherwise, licensure merely for the sake of licensure can create an unnecessary barrier to entry into the profession. In the past, some professional licensing boards have had a tendency to be driven by the interests of the profession, rather than the public interest, and the sunset review process was developed as a check against this tendency, and to periodically re-evaluate the need for licensure in the first place for every profession. At this time, it is unclear whether an additional licensing scheme for taxicab drivers is necessary for consumer protection. 3)Local Control. This bill aims to create a statewide-regulatory framework for the regulation of taxicab drivers, while maintaining local control for the businesses. However, as currently drafted, this bill continues local government's authority to regulate the business of providing taxicab transportation services pursuant to GC Section 53075.5 which may include overlapping provisions for local jurisdictions to regulate both the professional (the driver) and the taxicab business. Further, it may even add additional state-level requirements if localities choose not to accept the state license. 4)Licensure Requirements. As currently drafted, this bill authorizes the commission to hire examiners, inspectors, or other personnel necessary to carry out the duties of the commission; however, this bill does not contain an examination AB 2790 Page 17 component or any specified requirements for licensure, including education or other pre-requisites other than a driving record with no more than two points, and a clean criminal history report. 5)Commission vs. Board vs. Bureau? Although there may not be a significant difference between a commission and a board under the DCA in terms of operations, they are both structured as semi-autonomous bodies, have rulemaking authority, are comprised of an appointed membership, and are regulated under the DCA; however, commissions are less common under the DCA, as the more common regulatory structure is the board or bureau model. At present, the DCA only has one commission, the Athletic Commission, which is currently comprised of only public member appointees. Bureaus under the DCA are comprised of an advisory body appointed by the bureau chief rather than a statutorily mandated appointing authority such as the Governor, the Speaker of the Assembly or the Senate Speaker Pro Tempore. Given that the Commission would have four professional members, a board may be more appropriate. 6)Enforcement Provisions. As currently drafted it is unclear what qualifies as unprofessional conduct for taxicab drivers. This bill does not specify activities which would violate the profession of taxicab driving other than driving a taxicab without a license issued by the commission. This bill does not specify the certain acts which would lead to a suspension, revocation, or the cause for probationary terms on a license. If there are no acts which would constitute a violation of the taxicab driver act once licensed, it raises the question about the necessity of establishing a statewide regulatory body. IMPLEMENTATION ISSUES: AB 2790 Page 18 In addition to the policy concerns raised above, there are a number of implementation issues with the establishment of the commission as currently drafted including the implementation date, a need for fingerprints, establishing a funding source, licensure requirements, member composition, and the establishment of the fees for licensure, among others. In order to address the implementation issues, the author may wish to consider the following: 1)Among other things, this bill would require the Commission to be operational on January 1, 2017 and would require taxicab drivers to be licensed in order to drive a taxicab on the same date. As drafted this bill does not provide a sufficient timeframe to establish a licensure program. 2)In order to obtain a local permit or license to drive a taxicab, most cities or counties require a taxicab driver to comply with fingerprint and background check requirements. As drafted, this bill does not have a fingerprint requirement. In order to enhance consumer safety and ensure taxicab drivers do not have criminal records which may be substantially related to the qualifications, functions and duties of a taxicab driver, a background check may be necessary. 3)As drafted, this bill does not provide a funding mechanism for the establishment of the Commission. A funding system may be necessary to implement the functions. 4)This bill, according to the author, "simplifies the licensure of taxicab profession"; however, as currently drafted, this bill requires a statewide licensure scheme for taxicab drivers, including a mandatory substance and alcohol testing certification program, while still requiring local jurisdictions to include in their ordinance a policy for entry into the business of providing taxicab services including a mandatory controlled substance and alcohol testing certification program. Potentially, this bill could lead to AB 2790 Page 19 double regulation of taxicab drivers, whereby drivers would be required to meet licensure requirements at both the state and local level. Although this bill includes a provision that states nothing in the taxicab driver act shall be construed to prohibit a city, county, or city and county from imposing more stringent requirements on taxicab transportation services to the extend not inconsistent with the act, clarification may be necessary. 5)This bill establishes a new regulatory authority under the DCA; however, as currently drafted, this bill does not provide the commission with the authority to establish regulations necessary to carry out its provisions. 6)This bill specifies that a person may apply for licensure on a form developed by the commission, and pay an unspecified application fee. Also, the bill requires a person who has been issued an initial license to pay a license fee to the commission in an unspecified amount. And, this bill specifies that a license is valid for three years, but can be renewed if the licensee completes a form and complies with the licensure requirements and pays a fee. However, this bill does not include a process for the commission to develop the appropriate fee. In addition to the numerous policy and implementation issues, the need for statewide licensure as specified in this bill, opposed to the current local regulatory model is not clear. However, given GC Section states the need for cities and counties to "protect the public health, safety, and welfare" regarding taxicab transportation services, an in-depth analysis of the current regulatory system pertaining to taxicab drivers is warranted. Instead of establishing a new regulatory AB 2790 Page 20 framework based on existing licensure requirements, the Committee may wish to request the author instead require the California Research Bureau to conduct an independent necessity and feasibility study for the statewide regulation of taxicab drivers. AMENDMENT: Delete the current contents of the bill and insert: On or before September 1, 2017, the California Research Bureau shall conduct a study on the necessity and feasibility of licensure for taxicab drivers. REGISTERED SUPPORT: None on file. REGISTERED OPPOSITION: None on file. Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301 AB 2790 Page 21