BILL ANALYSIS Ó
SB 1092
Page 1
Date of Hearing: June 11, 2012
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
SB 1092 (De Leon) - As Amended: April 9, 2012
SENATE VOTE : 36-0
SUBJECT : Brokers of construction trucking services: surety
bonds
SUMMARY : Requires brokers of construction trucking services
(brokers) to provide written evidence of a valid surety bond, as
provided. Specifically, this bill :
1)Requires a broker annually to provide written evidence of a
valid surety bond, as defined, to a third-party nonprofit
organization within the industry that regularly maintains a
published database of bonded brokers; alternatively, the
broker may post a current copy of the surety bond on his or
her own Internet web site.
2)If the surety bond is cancelled or expires, requires the
broker either to notify the third-party nonprofit organization
or to remove the bond from his or her own Internet web site.
3)Specifically provides that a third-party nonprofit
organization is not liable for any damages caused by
publishing erroneous or outdated surety bond information
provided by a broker.
4)Prohibits a broker from hiring, or otherwise engaging the
services of, a motor carrier of property to provide
construction transportation services unless the broker
provides written evidence of his or her valid surety bond to
any person that uses the broker's services or is hired by the
broker as a motor carrier of property.
EXISTING LAW:
1)Defines a "broker of construction trucking services" to mean
any person, excluding a licensed contractor, that, as a
principal or agent, arranges for transportation services to be
SB 1092
Page 2
provided by an independent contractor motor carrier of
property in dump truck equipment and who is responsible for
paying the transportation charges of the motor carrier.
2)Requires that a broker pay a subhauler by the 25th day
following the last day of the month in which the subhauler
provided services, provided that the subhauler documents the
charges and is properly permitted and that there are no
outstanding disputes. If the broker does not pay in a timely
fashion, state law prescribes a penalty of 2% per month of the
withheld charges.
3)Requires a broker to secure a surety bond of at least $15,000
to ensure payment of claims to a contracted subhauler. A
broker who does not secure this surety bond may be guilty of a
misdemeanor and subject to a fine of up to $5,000.
FISCAL EFFECT : Unknown
COMMENTS : This bill is essentially a clean-up bill to
legislation passed last session (AB 145, De Leon, Chapter 429,
Statutes of 2010). AB 145 required brokers to post a $15,000
surety bond to address unscrupulous brokers failing to pay
subhaulers for services provided.
According to the bill's sponsor, the California Construction
Trucking Association, "ÝAB 145] has had considerable success in
cleaning up the abuses within the construction trucking
industry." However, the author notes that some unprofessional
brokers have shirked their bonding responsibilities established
by AB 145 and have either failed to secure the required bond or
have refused to provide bond information to their subhaulers.
Consequently, the author argues that an unscrupulous broker is
allowed to refuse to pay their obligations without
repercussions.
It is the author's intent in introducing SB 1092 to increase
transparency in construction trucking services by adding
notification requirements to the existing broker bond law.
According to the author, "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."
SB 1092
Page 3
Writing in opposition to this bill, the California Trucking
Association (CTA) argues that SB 1092 conflicts with federal law
that prohibits states from enacting laws related to a price,
route, or service of any motor carrier. CTA argues that the
provisions of this bill are similar to a Maine law that sought
to curb access to tobacco products by minors and that was found
to be pre-empted by federal law on the grounds that the law:
1)Requires motor carriers of property to use a delivery service
that includes a special kind of recipient-verification service
for the delivery to tobacco products; and
2)Prohibits any person knowingly to transport a tobacco product
to a person in Maine unless either the sender or the receiver
has a Maine license.
The court ruled that these two provisions are forbidden under
federal law because they had a "significant impact" on carrier
rates, routes, or services.
Although CTA did not oppose AB 145 in 2010 that originally
required the surety bond, it is opposing this measure stating
that 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..."
Suggested amendment: The bill should be amended to prohibit a
third-party nonprofit organization from charging a broker to
post evidence of a valid surety bond or to limit the posting of
bonds only to the organization's members.
REGISTERED SUPPORT / OPPOSITION :
Support
California Construction Trucking Association (co-sponsor)
California Teamsters (co-sponsor)
Southern California Contractors Association
Opposition
California Trucking Association
SB 1092
Page 4
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093