BILL ANALYSIS                                                                                                                                                                                                    



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        SENATE THIRD READING
        SB 1004 (Huff)
        As Amended  May 28, 2010
        Majority vote 

         SENATE VOTE  :34-0  
         
         TRANSPORTATION      11-0        APPROPRIATIONS      17-0         
         
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        |Ayes:|Bonnie Lowenthal,         |Ayes:|Fuentes, Conway,          |
        |     |Jeffries,                 |     |Bradford,                 |
        |     |Bill Berryhill,           |     |Charles Calderon, Coto,   |
        |     |Blumenfield, Buchanan,    |     |Davis,                    |
        |     |Furutani, Hayashi,        |     |De Leon, Gatto, Hall,     |
        |     |Miller, Niello,           |     |Harkey, Miller, Nielsen,  |
        |     |Portantino, Solorio       |     |Norby, Skinner, Solorio,  |
        |     |                          |     |Torlakson, Torrico        |
        |-----+--------------------------+-----+--------------------------|
        |     |                          |     |                          |
         ----------------------------------------------------------------- 
         SUMMARY  :  Updates statutes regarding salespersons licenses.   
        Specifically,  this bill  :  

        1)Allows motor vehicle dealers and salespersons to post exact copies  
          of their licenses, in lieu of the actual licenses, at the dealer's  
          place of business.  

        2)Allows a salesperson to work for more than one dealer if all of  
          the dealers for whom he or she works have common controlling  
          ownership, which is defined as when more than 50% of the ownership  
          interests in each dealer are held by the same person or persons,  
          either directly or through one or more wholly owned subsidiary  
          entities.  

        3)Requires the salesperson's license, or license copy, to be posted  
          at each dealership where he or she is employed.  

        4)Requires any copy of the salesperson's license to be destroyed by  
          the dealer upon termination of the salesperson's employment with  
          that dealer.  

        5)Allows the Department of Motor Vehicles (DMV) to refund a dealer's  
          cash deposit that has been submitted in lieu of a dealer bond  








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          after five years from the date a bond is secured and maintained,  
          if the DMV is satisfied there are no outstanding claims against  
          that deposit.  

         EXISTING LAW  :  

        1)Requires vehicle dealers to post in a conspicuous, public place in  
          each and every location where the dealer does business the  
          dealer's license as well as the sales license of each salesperson  
          employed by that dealer at that location.  

        2)Prohibits a salesperson from working for more than one dealer,  
          although he or she can work at different locations of a single  
          dealer, provided each location has identical ownership and  
          structure.  

        3)Allows DMV to refuse to issue or to revoke or suspend a vehicle  
          salesperson's license if, among other things, the salesperson has  
          acted as a salesperson for more than one licensed dealer.  

        4)Allows DMV to refund a dealer's cash deposit that has been  
          submitted in lieu of a dealer bond after three years from the date  
          the dealer has ceased to do business or from the date the dealer  
          has ceased to be licensed, if DMV is satisfied that there are no  
          outstanding claims against the deposit.  

         FISCAL EFFECT  :  Unknown.  This bill was withdrawn for the Senate  
        Appropriations Committee pursuant to Senate Rule 28.8.  

         COMMENTS  :  The author has introduced this bill to update California  
        law governing motor vehicle dealers and salespersons to reflect  
        changes in the operation and structure of companies selling motor  
        vehicles.  The bill specifically recognizes that dealerships today  
        are organized in a wide variety of structures from sole  
        proprietorships to publicly traded corporations.  State law  
        governing dealers' employment of salespersons dates from an earlier  
        era.  This bill changes that law to allow dealers to post copies,  
        rather than originals, of occupational licenses.  It also allows a  
        salesperson to work for multiple dealerships so long as 50% the  
        ownership of each of those dealerships is the same.  
        
        It is unclear why existing law precludes a salesperson from working  
        for more than one vehicle dealer.  This provision dates from at  
        least the 1950s.  DMV staff has speculated that the prohibition was  








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        put into the law to avoid a salesperson having conflicting  
        allegiances and thus being tempted to steer business one way or  
        another between competing dealers for whom the salesperson worked.  

        The sponsor, the California New Car Dealers Association, notes that  
        corporate structures for individual stores may differ for tax or  
        business reasons, "but so long as the controlling owner is the same,  
        a dealer should have the ability to shift a salesperson from one  
        store to another.  Under current law, in order to move between  
        dealerships, a salesperson would likely be forced to resign his or  
        her employment and be "rehired" at the second store unless both the  
        ownership and structure are identical.  For large dealer groups,  
        including publicly traded companies, this rule is a serious  
        impediment, yet serves no particular purpose.  Dealers should have  
        the flexibility to move salespeople to stores under common  
        controlling ownership where sales potential is the greatest at any  
        particular time."  

        An alternative to allowing the posting of duplicates of a  
        salesperson's license would be to have the salesperson take the  
        license down and with him or her when going to work at another  
        location or dealer.  The sponsor explains that the salespersons'  
        licenses are frequently kept under a locked glass cover and that  
        moving licenses could create needless problems, including licenses  
        getting left behind at the wrong location upon occasion.  

        Finally, the bill addresses the instance of a dealer who initially  
        posts with DMV a cash deposit in lieu of the $50,000 bond that is  
        required to protect against fraud and monetary loss to a purchaser,  
        seller, financing agency, or government agency.  If such a dealer  
        subsequently obtains a bond, he or she can only have the deposit  
        refunded by waiting for three years after having ceased to do  
        business.  This has the unintended consequence of requiring the  
        dealer to close his or her shop in order to secure the return of  
        that deposit.  The bill therefore allows a refund of the deposit  
        five years after the dealer has secured and maintained a bond,  
        provided DMV is satisfied that there are no outstanding claims  
        against the deposit.  

         
        Analysis Prepared by  :    Howard Posner / TRANS. / (916) 319-2093 


                                                                 FN:  0005217








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