BILL ANALYSIS Ó
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THIRD READING
Bill No: SB 1092
Author: De León (D)
Amended: 4/9/12
Vote: 21
SENATE TRANSPORTATION & HOUSING COMM : 9-0, 04/10/12
AYES: DeSaulnier, Gaines, Harman, Kehoe, Lowenthal,
Pavley, Rubio, Simitian, Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Brokers of construction trucking services:
surety bonds
SOURCE : California Construction Trucking Association
DIGEST : This bill requires that brokers of construction
trucking services provide written evidence to specified
parties and in a specified manner of possession of a valid
surety bond.
ANALYSIS : A broker of construction trucking services
(broker) is someone who arranges services from and is
responsible for paying an independent contractor who
provides dump truck services (dump truck operator).
Existing law requires that a broker pay a dump truck
operator by the 25th day following the last day of the
month in which the dump truck provided services, provided
that the dump truck operator documents the charges, the
dump truck operator is properly permitted, and no dispute
CONTINUED
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exists between the two over the charges. If the broker
does not pay in a timely fashion, state law prescribes a
penalty of two percent per month of withheld charges.
Since 2011, existing law has required a broker to secure a
surety bond of not less than $15,000 to ensure that a
contracted dump truck operator receives payment, even if
the broker fails to pay the dump truck operator by the 25th
day of the month following when services were rendered. A
broker who does not secure this surety bond is guilty of a
misdemeanor and subject to a fine of up to $5,000.
This bill:
1.Requires a broker to post evidence of its bond to its
website or annually to provide written evidence of the
broker's surety bond to a third-party nonprofit
organization that is related to the industry and
regularly maintains a published database of bonded
brokers. The broker must remove the evidence from its
web site or notify the third party organization when its
surety bond expires or is canceled.
2.Prohibits a broker from engaging the services of any dump
truck operator unless prior to the commencement of work
in each calendar year, the broker first provides written
evidence of its valid surety bond to any person that
hires the broker to furnish construction transportation
services and also to the hired dump truck operator.
3.Defines "written evidence of the broker's valid surety
bond" as a copy of the bond, a certificate of insurance,
a continuation certificate, or other similar
documentation originally issued from the surety that
includes the surety and broker's name, bond number, and
effective and expiration dates of the bond.
Comments
The author introduced this bill at the request of the
California Construction Trucking Association, which
represents construction-related trucking companies that
operate fleets of dump trucks. In 2010, the author and
sponsor of the bill teamed up on AB 145 (DeLeon), Chapter
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429, Statutes of 2010, in response to reports from dump
truck operators that construction trucking brokers were
engaging in unscrupulous practices toward the dump truck
operators whose services they broker. AB 145 requires
brokers of construction trucking services to secure a
surety of bond of $15,000 to ensure payment of contracted
dump truck operators.
The sponsor now reports that some unscrupulous,
unprofessional brokers are shirking their bonding
responsibilities under AB 145. Specifically, these brokers
have either failed to obtain a bond or have refused to
provide bond information to the dump truck operators whose
services they broker. AB 145 included no affirmative
obligation that brokers notify others of the bond
information. This bill addresses that problem by adding
notification requirements to the existing broker bond. By
creating easier access to a copy of the bond, a contracted
dump truck owner will know up front if in fact he or she is
contracting with a bonded broker. Moreover, if the dump
truck operator has already completed the work for the
broker and has not been paid, he or she can easily access
the bond information in order to file a claim on the bond.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 5/1/12)
California Construction Trucking Association (source)
California Teamsters
OPPOSITION : (Verified 5/1/12)
California Trucking Association
ARGUMENTS IN SUPPORT : According to the sponsor:
Since January 1, 2011, the new broker bond law has had
considerable success in cleaning up the abuses within
construction trucking industry. While CCTA has no
ability to determine exact figures, it is our
understanding that many reputable construction
trucking brokers have obtained a surety bond as a
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result of AB 145.
However, CCTA has been notified by a number of its
member owner-operators that some unscrupulous,
unprofessional brokers have continued to shirk their
bonding responsibilities under the law. Specifically,
these brokers have either failed to obtain a bond at
all, or have refused to provide bond information to
their subhaulers as there is currently no affirmative
obligation to notify others of the bond information.
Without a copy, subhaulers do not have the requisite
information to file on a broker's bond and a broker
can continue to refuse to pay their obligations
without repercussions.
This bill, SB 1092 by Senator De Leon is designed to
resolve this problem by creating transparency and
adding notification requirements to the existing
broker bond. By creating easier access to a copy of
the bond, a subhauler will know up front if in fact
they are contracting with a bonded broker. Moreover,
if they have already completed the work for the broker
and have not been paid, they can easily access the
bond information if they choose to file on the bond.
This is accomplished through a series of strategic
points of access for a subhauler including from the
broker him- or herself, online from a 3rd party
organization or broker's website, or from a person
that hires the broker. This would provide for
assurance of payments.
ARGUMENTS IN OPPOSITION : According to the California
Trucking Association:
SB 1092 would conflict with federal law that forbids
states to enact laws related to the "enact or enforce
a law ? related to a price, route, or service of any
motor carrier," 49 U. S. C. §14501(c)(1) or "enact or
enforce any law?relating to intrastate rates,
intrastate routes, or intrastate services of any
freight forwarder or broker" 49 U.S.C. §14501(b)(1).
The provisions of this bill are similar to a Maine law
that was found to be pre-empted by the Supreme Court
based on the fact that it directly affected the manner
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in which services are provided. (Rowe v. New Hampshire
Motor Transport Association et al.)
SB 1092 directly regulates the manner in which the
services of motor carriers and brokers are provided.
Also, it would require carriers and brokers to offer a
system of services that the market does not now
provide by establishing disclosure, recordkeeping and
reporting requirements as a precondition of arranging
transportation services, thereby creating a
significant and adverse impact in respect to the
federal Act's ability to achieve pre-emption related
objectives.
JJA:nl 5/1/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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