BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON
          BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
                              Senator Jerry Hill, Chair
                                2015 - 2016  Regular 

          Bill No:            AB 873          Hearing Date:    June 27  
          2016
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          |Author:   |Jones                                                 |
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          |Version:  |May 25, 2016                                          |
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          |Urgency:  |No                     |Fiscal:    |Yes              |
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          |Consultant|Mark Mendoza                                          |
          |:         |                                                      |
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                            Subject:  Automotive repair.


          SUMMARY:  Deletes the current list of minor repairs exempted from  
          registration with the Bureau of Automotive Repair (BAR),  
          effective January 1, 2018, and requires the director of the  
          Department of Consumer Affairs (DCA), prior to January 1, 2018,  
          to adopt regulations defining a new list; excludes propulsive  
          batteries from the current list of minor services; excludes  
          motor clubs and operators of tow trucks from the definition of  
          roadside services.  

          Existing law:
          
          1)Establishes BAR under the supervision and control of the  
            Director of DCA.  (Business and Professions Code (BPC) § 9882)


          2)Regulates the business of automotive repair and makes it  
            unlawful for any person to be an automotive repair dealer  
            unless registered with the BAR.  (BPC §§ 9880-9889.68)


          3)Defines the "repair of motor vehicles" to mean all maintenance  
            of, and repairs to, motor vehicles, except the following  
            services:  (BPC § 9880.1(e))


             a)   Repairing tires; 







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             b)   Changing tires; 


             c)   Lubricating vehicles; 


             d)   Installing light bulbs, batteries, windshield wiper  
               blades and other minor accessories; 


             e)   Cleaning, adjusting and replacing spark plugs;


             f)   Replacing fan belts, oil and air filters; and 


             g)   Other minor services the Director determines to be  
               customarily performed by a gasoline service station. 


          4)States that the Director shall not designate a service as  
            minor if the Director finds that performance of the service  
            requires mechanical expertise, has given rise to a high  
            incidence of fraud or deceptive practices or involves a part  
            of the vehicle essential to its safe operation.  (BPC §  
            9880.1(e))


          5)Defines an "automotive repair dealer" (ARD) as a person who  
            engages in the business of repairing or diagnosing  
            malfunctions of motor vehicles for compensation. 


          (BPC § 9880.1(a))
          6)Defines "automotive technician" as a dealer or a person  
            employed by a dealer who performs maintenance, diagnostics,  
            repair, removal or installation of specified integral  
            automotive components, excluding the services excluded from  
            repair of motor vehicles.  (BPC § 9880.1(g))


          7)Regulates motor clubs and makes it unlawful to provide motor  








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            club services, including emergency road services, without a  
            certificate of authority from the insurance commissioner.   
            (Insurance Code (INS) §§ 12140-12159) 


          8)Defines "emergency road service" as the adjustment, repair or  
            replacement by a motor club of the equipment, tires or  
            mechanical parts of a motor vehicle so that it may be operated  
            under its own power.  (INS § 12146)


          This bill:

          1)Excludes propulsive batteries from the current list of minor  
            services.


          2)Requires the Director of DCA, prior to January 1, 2018, to  
            adopt comprehensive regulations defining "minor services".


          3)Prohibits the changing of "propulsive batteries" from being  
            categorized as minor services. 


          4)Repeals BPC § 9880.1 and adds an identical section that  
            becomes operative January 1, 2018.  It is identical to the old  
            section, except that it:     


             a)   Recasts the definition of "repair of motor vehicles" to  
               delete the list of excluded services and instead exclude  
               minor services as defined by the Director and roadside  
               services;


             b)   Recasts the definition of "automotive technician"  as an  
               employee of an automotive repair dealer or is that dealer,  
               who for salary or wage repairs motor vehicles as set forth  
               in the new definition of "repair of motor vehicles";


             c)   Defines "roadside services" as the services performed  
               upon a motor vehicle for the purpose of transporting the  








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               vehicle or to permit it to be operated under its own power,  
               by or on behalf of a motor club holding a certificate of  
               authority issued by the insurance commissioner, or by an  
               operator of a tow truck that is owned or operated by a  
               person or entity who possesses a valid motor carrier permit  
               and is enrolled in the Basic Inspection of Terminals  
               program, as specified. 


             d)   Declares that the regulations adopted by the Director  
               that defines "minor services" continue in effect on and  
               after January 1, 2018 and allows the director to amend or  
               repeal the regulations, consistent with the chapter.


          
          FISCAL  
          EFFECT:  This bill is keyed "fiscal" by Legislative Counsel.   
          According to the Assembly Appropriations Committee analysis  
          dated April 29, 2015, this bill will result in minor and  
          absorbable costs to DCA to update regulations.

          
          COMMENTS:
          
          1. Purpose.  The  Author  is the sponsor of the bill.  According  
             to the Author, this bill "will require the BAR, within the  
             DCA, to determine through regulation which automotive  
             services are minor and which necessitate oversight. 
             
             The Automotive Repair Act of 1971 has not been significantly  
             updated since it was enacted.  Existing law should be updated  
             and a determination of what constitutes minor repair work and  
             major repair should be developed through the formal  
             rulemaking process so that: 

             a)   BAR takes a comprehensive technical approach to  
               determine what business practices necessitate registration  
               as an automotive repair dealer; and 

             b)   This determination can be periodically updated through  
               the rulemaking process, as the automotive industry  
               continues to evolve.  This approach allows the industry to  
               participate through the rulemaking process to help  








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               determine which services are minor and should be excluded  
               from registration and which services are major and require  
               registration."

          1. Background.  In 2014, the Assembly Committee on Business,  
             Professions and Consumer Protection and the Senate Committee  
             on Business, Professions and Economic Development  
             (Committees) conducted joint oversight hearings to review the  
             BAR and eight other regulatory entities.  As a part of the  
             review, staff of the Committees made recommendations for each  
             agency and program reviewed by the Committees.


             In its Sunset Report to the Committees, the BAR raised the  
             issue of ancillary services which have typically been seen as  
             simple enough to be considered exempt areas of practice, and  
             therefore not subject to regulation and registration, such as  
             replacing spark plugs, batteries and fan belts.  The BAR  
             noted that, because of advances in automotive technology,  
             many of the services require specialized repair skills and  
             may require the removal of automotive systems, engine  
             components, shrouds, or other electrical equipment. 


             One of the examples cited by the BAR was tire services.  The  
             federal Transportation Recall Enhancement, Accountability and  
             Documentation (TREAD) Act requires that, beginning with the  
             2006 model year, every new vehicle of less than 10,000 pounds  
             gross vehicle weight rating be equipped with a Tire Pressure  
             Monitoring System (TPMS) (Title 49 of the United States Code  
             §§ 30101-30170).


             As a result, many modern vehicles are equipped with a TPMS  
             that may require the technician to update the vehicle's  
             on-board diagnostic system when serviced.  A malfunctioning  
             TPMS can lead to tire blowouts, undetected slow leaks and  
             other dangerous conditions. 


             Another example is spark plugs.  According to the BAR, some  
             vehicle manufacturers have made spark plugs inaccessible  
             without removal of other major systems, even the removal of  
             motor mounts and, in a few cases, the entire engine.  Because  








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             these examples can lead to dangerous situations for  
             consumers, BAR still believes that an automotive repair  
             dealer registration should be required for those performing  
             those types of repairs.  By requiring the Director to  
             determine a new list of exclusions that can change to keep up  
             with technology, this bill seeks to ensure the regulation of  
             complicated repairs and maintenance.


          2. 2014 Stakeholder Input.   AB 1665  (Jones) of 2014 would have  
             deleted repairing and changing tires from the list of  
             excluded minor services.  The bill was vetoed by Governor  
             Brown to give the BAR the opportunity to include more  
             stakeholder input and decide which other automotive repair  
             services require regulation. 


             To address the concerns of the veto, BAR held an industry  
             stakeholder workshop following its quarterly April 25, 2015  
             BAR Advisory Group meeting.  At this Advisory Group meeting,  
             industry stakeholders and BAR representatives discussed a  
             range of issues including major/minor services, compliance  
             with advertising requirements, and the definition of roadside  
             services.  Based on the discussion and future introduction of  
             this bill, stakeholders decided to see the outcome of the  
             bill before developing any formal regulations.    


          3. 2015/2016 Stakeholder Meetings and Mechanisms for Consumer  
             Protection.  Over the interim and beginning of this year,  
             Committee staff, BAR, DCA, Author's staff, and other industry  
             stakeholders sat down and discussed the main issue with this  
             bill - the definition of roadside services.


             Since this bill seeks to amend provisions related to the  
             Automotive Repair Act and BAR's regulatory duties, concerns  
             were raised that the new term "roadside services" within the  
             definition of "repair of motor vehicles" might require motor  
             clubs and other tow truck operators to register with BAR.   
             While BAR does receive input or complaints from the public  
             regarding the towing industry, they do not directly regulate  
             or license tow truck operators.   









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             After discussions, industry representatives have argued and  
             highlighted that there are other mechanisms in place that  
             provide proper consumer protection.  In addition to  
             contractual obligations and remedies with law enforcement and  
             motor clubs, tow companies/emergency roadside service  
             operators currently must hold a motor carrier permit (MCP),  
             administered by the Department of Motor Vehicles (DMV),  
             post/provide a copy of the Towing Fees and Access Notice  
             (Notice) to consumers, and be enrolled in the Basic  
             Inspection of Terminals (BIT) Program. 


             Currently, all tow companies must obtain a MCP from the DMV  
             in order to operate a commercial vehicle.  In order to obtain  
             an MCP, a tow company must produce: proof of financial  
             responsibility (generally no more than $750,000), proof of  
             workers' compensation insurance, a Carrier Identification  
             number (CA#) issued by the California Highway Patrol (CHP),  
             payment of fees, and enrollment in the BIT program.


             Starting in 2016, all tow companies are subject to the CHP's  
             BIT program due to the enactment of  AB 529  (Lowenthal,  
             Chapter 500, Statutes of 2013).  Under the BIT program, after  
             payment of fees, the CHP conducts a rigorous inspection of a  
             towing company that includes the safety of the vehicles as  
             well as compliance with a wide variety of laws related to  
             drivers and commercial motor carrier businesses. 


             Additionally, consumers have rights under law in the event  
             they are unsatisfied with a towing/emergency roadside service  
             company, as detailed in the Notice in Vehicle Code §  
             22651.07, enacted by  AB 519  (Solorio, Chapter 566, Statutes  
             of 2010).  A tow company's office must post the Notice and  
             provide a copy, upon request, to the consumer.  The Notice  
             answers questions a consumer may have related to charges,  
             complaints, liability, and remedies if anything on the Notice  
             is violated.  


             AB 519 also mandated that each consumer receive a detailed  
             written itemized invoice of actual charges and imposes civil  








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             penalties of up to two times the amount charged, not to  
             exceed $500, for any violation of the section.  
             Finally, from a business standpoint, industry members have  
             underscored that economically it would be extremely  
             difficult, if not impossible, to survive in the industry  
             without towing for at least one of the 23 motor clubs  
             certified by the Department of Insurance, or at least one of  
             the hundreds of local police and sheriff departments or CHP.   
             If a tow company exclusively performed private property tows  
             (which are not dispatched by law enforcement or motor clubs)  
             it would be extraordinarily rare and such a company would be  
             subject to the extensive, rigorous requirements of Vehicle  
             Code § 22658 which permit a consumer to obtain four times the  
             amount of the towing and storage charges in the event a  
             violation occurs.  Nevertheless, such a company, if it  
             exists, would only be removing a vehicle from private  
             property, not performing any type of minor automotive repair  
             services that are the subject of AB 873.  


             While the Legislature has kept a close eye on tow truck  
             operators, this bill's goal was not to directly license tow  
             truck operators/motor clubs.  Representatives have argued  
             that tow truck operators and motor clubs are there to help  
             move a vehicle off the road and into a safe and secure area.   
             This activity has never been regulated by BAR.  While there  
             is an exemption for these groups under the definition of  
             "roadside services", by no means does it exempt them from BAR  
             jurisdiction if they perform activities regulated by a  
             license.   


          4. New Registration for Unlicensed Shops.  At the beginning of  
             April 2016, Oil Changers, a quick oil changing shop that  
             provides a number of preventative maintenance services,  
             requested an amendment excluding their shops from BAR  
             regulation.  Specifically, Oil Changers feared that by  
             updating "minor services", services the company has  
             historically provided would now require them to register as  
             an ARD.  They are currently not required to register or apply  
             for a license with BAR.    


             Since there is a gray area about whether these shops actually  








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             fall under BAR's jurisdiction, Oil Changers agreed to a new  
             registration category that will give BAR authority over their  
             activities.  This compromise was discussed in conjunction  
             with other issues raised with  AB 778  (Allen, 2015).  During  
             stakeholder meetings convened by Senator Allen's office on SB  
             778, committee staff has also engaged in discussions  
             regarding this new registration category.  This new  
             registration category, deemed "automotive maintenance  
             provider", is defined as a person who, for compensation,  
             engages in the business of the preventative automotive  
             maintenance services associated with fluid and filter  
             changes, fluid treatment, and belt and windshield wiper blade  
             replacement. 


             This new registration category will allow these unregistered  
             shops to explicitly fall under BAR's regulatory purview and,  
             in turn, allow these newly registered shops to maintain their  
             current business model.   


             AB 873 will be amended to reflect the new registration  
             category in SB 778.     


          5. Previous Legislation.   AB 1665  (Jones) of 2014, would have  
             deleted "repairing tires" and "changing tires" from the list  
             of repair services exempt from registration as an automotive  
             repair dealer under the BAR.  It would have also required an  
             automotive repair dealer to be capable of diagnosing and  
             servicing TPMS, as specified.  (  Status:  This bill was vetoed  
             Governor Brown who wrote in his veto message that "Before a  
             new licensing scheme is enacted, a more comprehensive review  
             is needed.  I am directing the Bureau to work with interested  
             parties to determine which, if any, automotive repair  
             services merit further regulation.")


              SB 202  (Galgiani) of 2013, would have deleted repairing and  
             changing tires from those exclusion lists.  It would have  
             also excluded tire services provided by or on behalf of a  
             motor club holding a specified certificate of authority or an  
             operator of a tow truck owned or operated by a person or  
             entity possessing a valid motor carrier permit from the  








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             definitions of "repair of motor vehicles" and "automotive  
             technician."  (  Status:  This bill was held in the Assembly  
             Committee on Appropriations.)


              AB 2065  (Galgiani) of 2012 was essentially the same as SB  
             202.  (  Status:  This bill was held in the Assembly Committee  
             on Appropriations.)


          6. Arguments in Support.  The  Automotive Service Councils of  
             California  writes in support, "Current law (more than 40  
             years old) declares certain minor services such as: repairing  
             and changing tires, lubricating vehicles, installing light  
             bulbs, batteries, windshield wiper blades, replacing spark  
             plugs, replacing fan belts, oil and air filters are exempt  
             from BAR oversight.  Because of the advances in automotive  
             technologies many of these minor services now require more  
             specialized training and skills and may necessitate the  
             removal of engine components and other electrical and  
             computer equipment.
             
             There also is an unfair playing field for those businesses  
             that are currently registered/licensed by BAR who must  
             compete with repair facilities that provide the same repair  
             services but are not registered or licensed."

             The  California Autobody Association  writes in support,  
             "Existing law does not adequately address the current market  
             realities regarding services provided by auto repair  
             businesses.  Certain automotive services were designated  
             minor in [the] early 1970's and did not require oversight by  
             the BAR.  However, automotive technology has advanced  
             significantly since then, which requires much more  
             specialized training and equipment to properly repair  
             vehicles."

          SUPPORT AND OPPOSITION:
          
           Support:  

          Automotive Service Councils of California 
          California Autobody Association
          California Automotive Business Coalition 








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          California Tire Dealers Association
          Les Schwab Tire Centers

           Opposition:  

          None on file as of June 21, 2016.


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