New California legislation would redefine truck broker bond requirements

The California legislature has proposed an amendment that would change the way truck brokers in the state file their bonds.

The purpose of the existing law was to cut down on broker fraud within California’s trucking industry. Since the law went into effect, however, industry stakeholders claim the bonding requirement has yet to be fully enforced.

The current law — which was signed on September 29, 2010, and enacted January 1, 2011 — requires construction trucking service brokers to purchase a surety bond before providing any construction transportation services to any construction project. The minimum surety bond amount accepted is $15,000. Failing to purchase the bond according to the law is a misdemeanor that could result in a $5,000 fine for the broker.

However, when the law was passed, no state or federal agency was assigned to oversee and report broker bonding infractions. Although brokers were told they must purchase a bond, they were not instructed to file it with any specific government agency. The broker was simply required to present the bond if a law enforcement agency required it.

Brokers were also encouraged to give their contractor and shipper customers a copy of their bond as a show of good business practice, but, they were not actually required to do so. In actuality, brokers are rarely expected to provide proof of their bonds, which means many simply don’t ever purchase one.

As such, industry stakeholders such as the California Construction Trucking Association assert that this lack of accountability allows brokers to skirt the bonding requirement and continue fraudulent brokerage activity.

This year’s Senate Bill 1092 would amend the existing law by requiring brokers to provide easy access to copies of their bonds to both industry professionals and clients. After being amended last week, the proposed amendment currently reads as follows.

“This bill would require a broker of construction trucking services to annually provide written evidence of the broker’s valid surety bond to a 3rd-party nonprofit organization that is related to the industry and regularly maintains a published database of bonded brokers or to post a current copy of the surety bond on the broker’s Internet Web site.

The bill also would prohibit a broker of construction trucking services from hiring, or otherwise engaging the services of, a motor carrier of property to furnish construction transportation services unless the broker provides, prior to the commencement of work each calendar year, written evidence of the broker’s valid surety bond to any person that hires, or otherwise engages the services of, the broker to furnish construction transportation services and also to the hired motor carrier of property.”

According to the existing law, a truck broker is defined as “an individual or company who arranges for the truck transportation of cargo belonging to others for compensation, utilizing for-hire carriers to provide truck transportation within the construction industry.” To put it simply, individuals must purchase a California truck broker bond if they manage the transport of construction materials and handle other truckers’ finances in the process.

If this amendment is passed as expected, truck brokers in California would likely have a much harder time avoiding the purchase of a surety bond.