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 ----------------------------------------------------------------- |Author: |Jones | |----------+------------------------------------------------------| |Version: |May 25, 2016 | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Mark Mendoza | |: | | ----------------------------------------------------------------- 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; AB 873 (Jones) Page 2 of ? 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 AB 873 (Jones) Page 3 of ? 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 AB 873 (Jones) Page 4 of ? 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 AB 873 (Jones) Page 5 of ? 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 AB 873 (Jones) Page 6 of ? 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. AB 873 (Jones) Page 7 of ? 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 AB 873 (Jones) Page 8 of ? 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 AB 873 (Jones) Page 9 of ? 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 AB 873 (Jones) Page 10 of ? 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 AB 873 (Jones) Page 11 of ? California Tire Dealers Association Les Schwab Tire Centers Opposition: None on file as of June 21, 2016. -- END --