Legislature(2015 - 2016)BELTZ 105 (TSBldg)
03/10/2016 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB168 | |
| SB55 | |
| SB197 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 55 | TELECONFERENCED | |
| *+ | SB 197 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 168 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
March 10, 2016
1:30 p.m.
MEMBERS PRESENT
Senator Mia Costello, Chair
Senator Cathy Giessel, Vice Chair
Senator Kevin Meyer
Senator Gary Stevens
MEMBERS ABSENT
Senator Johnny Ellis
COMMITTEE CALENDAR
SENATE BILL NO. 168
"An Act relating to the membership of the Board of Barbers and
Hairdressers."
- MOVED SB 168 OUT OF COMMITTEE
SENATE BILL NO. 55
"An Act relating to the practice of optometry."
- HEARD & HELD
SENATE BILL NO. 197
"An Act relating to motor vehicle franchises, motor vehicle
transactions, motor vehicle dealers, motor vehicle
manufacturers, and motor vehicle distributors."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 168
SHORT TITLE: BOARD OF BARBERS AND HAIRDRESSERS
SPONSOR(s): SENATOR(s) MCGUIRE
02/03/16 (S) READ THE FIRST TIME - REFERRALS
02/03/16 (S) L&C, FIN
03/08/16 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/08/16 (S) Heard & Held
03/08/16 (S) MINUTE (L&C)
03/10/16 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 55
SHORT TITLE: OPTOMETRY & OPTOMETRISTS
SPONSOR(s): SENATOR(s) GIESSEL BY REQUEST
02/18/15 (S) READ THE FIRST TIME - REFERRALS
02/18/15 (S) HSS, L&C
03/18/15 (S) HSS AT 1:30 PM BUTROVICH 205
03/18/15 (S) Heard & Held
03/18/15 (S) MINUTE (HSS)
02/01/16 (S) HSS AT 1:30 PM BUTROVICH 205
02/01/16 (S) Moved SB 55 Out of Committee
02/01/16 (S) MINUTE (HSS)
02/08/16 (S) HSS RPT 3DP 1NR
02/08/16 (S) DP: STEDMAN, STOLTZE, GIESSEL
02/08/16 (S) NR: ELLIS
03/10/16 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 197
SHORT TITLE: MOTOR VEHICLE DEALER FRANCHISES
SPONSOR(s): SENATOR(s) COGHILL
02/22/16 (S) READ THE FIRST TIME - REFERRALS
02/22/16 (S) L&C, JUD
03/10/16 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
JANE CONWAY, Staff
Senator Cathy Giessel
POSITION STATEMENT: Presented the sectional analysis for SB 55
on behalf of the sponsor.
JANEY HOVENDEN
Director
Division of Corporations, Business and Professional Licensing
Department of Commerce, Community and Economic Development
Juneau, Alaska
POSITION STATEMENT: Stated that the division does not have a
position on SB 55.
FORREST MESSERSCHMIDT, Optometrist
Alaska Optometric Association
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 55.
JILL MATHESON, Optometrist
Alaska Optometric Association
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 55.
OLIVER JORSHIN, Ophthalmologist
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to SB 55.
RACHEL REINHARDT, Ophthalmologist
American Academy of Ophthalmology
POSITION STATEMENT: Testified in opposition to SB 55.
JEFF GONNASON, Optometrist and Legislative Chair
Alaska Optometry Association
POSITION STATEMENT: Testified in support of SB 55.
RYNNIEVA MOSS, Staff
Senator John Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Delivered the sectional analysis for SB
195.
KELLEN FISCH, Intern
Senator John Coghill
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced SB 195 on behalf of the sponsor.
ACTION NARRATIVE
1:30:09 PM
CHAIR MIA COSTELLO called the Senate Labor and Commerce Standing
Committee meeting to order at 1:30 p.m. Present at the call to
order were Senators Giessel, Meyer, Stevens, and Chair Costello.
SB 168-BOARD OF BARBERS AND HAIRDRESSERS
1:30:34 PM
CHAIR COSTELLO announced the consideration of SB 168. She noted
this is the second hearing and public testimony is closed.
Finding no questions, she solicited a motion.
1:31:02 PM
SENATOR GIESSEL moved to report SB 168, labeled 29-LS1385\A,
from committee with individual recommendations and attached
fiscal note(s).
CHAIR COSTELLO announced that without objection, SB 168 is
reported from Senate Labor and Commerce Standing Committee.
1:31:19 PM
At ease
SB 55-OPTOMETRY & OPTOMETRISTS
1:32:55 PM
CHAIR COSTELLO reconvened the meeting and announced the
consideration of SB 55.
SENATOR CATHY GIESSEL, Alaska State Legislature, sponsor of SB
55, introduced the legislation, speaking to the following
sponsor statement:
SB 55 modernizes and updates the Alaska Optometry
Statute.
This bill moves the continuing education (CE)
requirements back into regulation, as desired by the
Department of Commerce, Community and Economic
Development. Continuing education is still required by
current statute, but the hours and subjects will be
determined by the Board of Optometry, as with other
professions. The current regulations require more CE
hours than the statute subsection deleted by this
bill.
SB 55 allows the board to determine prescribed drug
schedules anticipating federal regulations that may
change again in the future as they did in 2014; that
regulation required another statute change, and this
bill would allow the board to move in step with its
industry.
This bill updates the optometry definition to reflect
current education and training, but specifically
prohibits invasive surgery. This allows for future new
and improved diagnostic and therapeutic procedures as
determined by the board, while not having to return to
the legislature for every new technological advance.
It also defines that optometrists must be qualified
for any procedure that they perform.
SENATOR GIESSEL noted that detractors will say the bill would
allow optometrists to perform surgery on the eye, and that is
not true. That authority is specifically prohibited in the bill.
Current statute already authorizes Alaska optometrists to do
superficial surgical procedures such as removal of corneal
foreign bodies, but nothing invasive would be allowed.
She said the vast majority of Alaskans visit one of Alaska's
[195] optometrists for their eye care needs. By contrast, there
are approximately 20 ophthalmologists in Alaska. They are eye
surgeons. It's these 20 ophthalmologists who are opposing this
bill, she said. She discussed the history of the credible, safe
healthcare providers that were routinely opposed by physician
groups to regulate themselves and highlighted that safe,
affordable healthcare was expanded when the legislature listened
to the facts. She also point out that optometrists have one of
the lowest malpractice insurance rates in the nation.
SENATOR GIESSEL summarized that SB 55 gives the Board of
Examiners in Optometry the authority to oversee and regulate its
own profession, just as other professional boards are trusted to
do.
1:39:27 PM
JANE CONWAY, Staff, Senator Cathy Giessel, presented the
following sectional analysis for SB 55 on behalf of the sponsor:
Section 1 requires the Board of Examiners in Optometry
to adopt regulations governing prescription and use of
pharmaceutical agents.
Section 2 amends AS 08.72.181(d) by removing specified
hours and period of continuing education requirements
for the renewal of an optometrist's license but
retains delegation of those requirements to the board
in regulation.
Section 3 repeals and reenacts AS 08.72.272(a) to
provide that pharmaceutical agents, including
controlled substances, may be used by a licensed
optometrist if consistent with standards adopted by
the board and any limitations on practice under
section 5 of the bill.
Section 4 reenacts and modifies the prohibition by a
licensee to perform an intravitreal injection.
Section 5 provides that a licensee may perform only
services within the licensee's training and experience
as provided by board regulation.
Section 6 revises the definition of optometry.
Section 7 adds a definition of "invasive surgery."
1:41:34 PM
CHAIR COSTELLO asked what pharmaceutical agents optometrists are
currently allowed to prescribe and how the bill expands that
authority.
SENATOR GIESSEL said optometrists can prescribe simple
antibiotics as well as schedule II and schedule III opioids.
Responding to a further question, she said the bill would allow
any updates to be regulated by the board. For example, it could
adjust to federal regulation changes without coming before the
legislature.
CHAIR COSTELLO asked the statutory definition of "optometry" and
if the bill changes that.
MS. CONWAY read the definition of "optometry" in AS 08.72.300(3)
found on page 2, lines 24-27. The bill repeals and reenacts that
section of statute.
CHAIR COSTELLO asked how the definition changed when the
definition was repealed and reenacted.
1:44:53 PM
MS. CONWAY said it's very similar but the new definition removed
specific reference to x-rays and scans. They were removed
because those things are already being practiced within the
scope of optometrists' education.
CHAIR COSTELLO asked if including the term "preventive
procedures" within the definition is intentional.
SENATOR GIESSEL deferred the question to optometrists online.
CHAIR COSTELLO asked if the bill makes Alaska unique compared to
other states.
MS. CONWAY said it's unique in that other states allow more use
of lasers and other techniques that will continue to be
prohibited in Alaska.
1:46:59 PM
SENATOR STEVENS asked who makes up the board, its powers, and if
it is limited to regulating optometrists.
SENATOR GIESSEL said ophthalmologists are eye surgeons and are
regulated by the State Medical Board. Optometrists are regulated
by the Board of Optometry, which is a five-member board
consisting of one public member and four practicing
optometrists.
SENATOR STEVENS asked if the Board of Optometry has the power to
authorize the increased use of lasers.
SENATOR GIESSEL clarified that laser technology currently is
used in diagnostic procedures, and the board only authorizes
practices for which the person is educated.
SENATOR STEVENS asked for information on injections in the eye.
SENATOR GIESSEL explained that optometrists are prohibited from
performing an intravitreal injection.
SENATOR STEVENS asked what modifications were made to [AS
08.72.272].
1:51:30 PM
MS. CONWAY explained that subsection (e) was added to
specifically state that a licensee cannot perform an
intravitreal injection.
SENATOR MEYER asked what the educational requirements are for
optometrists.
SENATOR GIESSEL read the qualifications in AS 08.72.140; the
education is doctoral level and has a residency option.
MS. CONWAY added that it's 4 years for a bachelor's degree, an
additional 4 years in optometry school, and an optional
residency.
SENATOR MEYER asked if optometrists would be prohibited from
treating conditions of the eyelid.
SENATOR GIESSEL replied optometrist currently are qualified to
remove fish hooks, metal fragments from the cornea, debris from
the eye, and treat maladies of the eyelid such as a stye.
SENATOR MEYER asked if the bill expands what optometrists can do
to the eyelid.
SENATOR GIESSEL answered no.
CHAIR COSTELLO asked if she said that ophthalmologists do not
have a separate board; they are regulated by the State Medical
Board so they.
SENATOR GIESSEL replied ophthalmologists are specialty surgeons
regulated by the State Medical Board. An ophthalmologist may or
may not sit on that board, but they do not have their own board.
CHAIR COSTELLO mentioned the list in the packets and asked if
the bill will shift work away from ophthalmologists toward
optometrists.
SENATOR GIESSEL indicated that optometrists will continue to
practice within the scope of their education and refer patients
to ophthalmologists when appropriate.
1:56:38 PM
CHAIR COSTELLO asked Ms. Hovenden to address the fiscal note and
tell the committee whether or not the administration has a
position on the bill.
1:57:11 PM
JANEY HOVENDEN, Director, Division of Corporations, Business and
Professional Licensing, Department of Commerce, Community and
Economic Development (DCCED), said the division doesn't have a
position on SB 55 because of the situation that two boards have
opposing views. She explained that the fiscal note reflects a
$2,500 regulations project. This is a receipt supported service
so the costs would be paid for by licensing fees.
CHAIR COSTELLO opened public testimony.
1:58:19 PM
FORREST MESSERSCHMIDT, Optometrist, said he is representing
himself and the Alaska Optometric Association testifying in
support of SB 55. He has been practicing for 27 years and just
completed a four-year term on the Board of Examiners in
Optometry. He described SB 55 as good legislation. It puts the
regulation of optometry where it belongs, modernizes the
statutes, allows details of regulation to be determined by the
board, and is the current standard with other professions in
Alaska. Optometrists should be held to the same high standard of
care as other medical professionals, but it defies logic to
suggest that the profession cannot regulate standards through
its own board.
He talked about how eye care has changed in the last 27 years;
now more than 70 percent of his patient business is medically
oriented. A few years ago many of the cases he manages would
have required referrals. Consultations and close work with eye
surgeons and other medical providers is done on a daily basis.
DR. MESSERSCHMIDT said there will be claims that harm will come
if SB 55 passes, but the past 40 years of optometry scope
expansion law has not shown that to be the case. Optometry
malpractice insurance rates are among the lowest of all
providers for a reason. He said the people that don't like the
bill miss the point that this is all about patients' best
interest. There are not enough skilled ophthalmologists to serve
the population, so all eye care physicians need to be able to
practice to their full level of training and expertise.
DR. MESSERSCHMIDT said his practice won't change with the
passage of SB 55, and it probably won't change for other
optometric physicians practicing in Alaska. He concluded saying
that SB 55 is good for optometry and it's good for Alaskans.
2:02:26 PM
SENATOR STEVENS asked if the responsibilities of the board will
increase if SB 55 were to pass.
DR. MESSERSCHMIDT replied it will be a bigger job for the board
but it won't change the mindset.
2:03:36 PM
JILL MATHESON, Optometrist, said she is representing herself and
the Alaska Optometric Association testifying in support of SB
55. She has served two terms on the board, once as chair. As a
practicing optometrist for over 24 years she has testified on
four different optometry bills. Each time the legislature has
carefully considered the information put forth and passed bills
to get the optometry profession where it is today. SB 55 is the
next step. It gives the board the autonomy to run the optometric
profession in the state. The legislature continues to have
oversight by approving members of the board. The malpractice
insurance rates are under $500 per year, which is an indication
that the profession is run safely and conservatively. She opined
that the bill protects the public by keeping optometrists at the
highest level of training.
2:06:42 PM
SENATOR STEVENS asked how she gets training.
DR MATHESON replied continuing education is offered in different
locations throughout the state and approved classes are also
offered at the numerous optometry conferences. Optometry schools
also offer continuing education classes. She discussed what
qualifies as continuing education and noted that when
optometrists were approved to do injections, a class was offered
in the state to ensure that optometrists received the training
if they hadn't gotten it in school.
CHAIR COSTELLO asked if optometrists charge by the hour or
procedure.
DR. MATHESON replied charges are based on the procedure.
CHAIR COSTELLO asked how optometrist charges compare to
ophthalmologist charges.
DR. MATHESON said she doesn't know but the reimbursement rate
from insurance companies is the same because it's based on the
procedure.
2:09:24 PM
OLIVER JORSHIN, Ophthalmologist, testified in opposition to SB
55. He has been in private practice since 1985 and before that
was chief of ophthalmology at the Alaska Native Medical Center.
He related that he has had four years of medical school, a year
internship in internal medicine, and an obligatory three-year
residency in ophthalmology. He has worked alongside optometrists
and is well acquainted with their skills in diagnosing and
treating eye conditions. His respect for the profession is
great, but optometrists are not medical doctors.
DR. JORSHIN maintained that the broad language in SB 55
substitutes the judgement of the members of the board of
optometry for the years of training and experience
ophthalmologists must go through before they can practice. The
bill defines what surgery an optometrist cannot perform, but
leaves open what they can perform. Invasive surgery is
prohibited but is defined in such narrow terms that optometrists
could legally perform complex procedures that involve the
eyeball, eyelid, eye socket, and surrounding tissues. He
questioned why the bill permits optometrists to use controlled
substances when they are used so infrequently in ophthalmology.
He related his experience is to write such a prescription every
couple of years. Also, adding a new class of subscribers won't
help alleviate the epidemic of misuse of prescription narcotics.
He urged the committee to vote against the bill in the interest
of patient safety.
2:13:28 PM
RACHEL REINHARDT, Ophthalmologist, American Academy of
Ophthalmology, testified in opposition to SB 55. She explained
her concern with how the bill relates to surgery. She noted only
four other states allow lasers. The language is misleading and
would allow optometrists to do all procedures not mentioned in
the bill. The bill does not list all surgical procedures needed;
there are more procedures not listed, such as laser surgery. The
bill removes existing safeguards about injections. She stressed
the importance of understanding that the bill creates loopholes.
She described the education needed to become an ophthalmologist;
four years of medical school and four years of surgical
residency. She expressed concern that the bill allows the use of
prescription narcotics, which undermines state and federal
efforts to stem the epidemic of prescription narcotic abuse. She
said the claim that Alaskan's have limited access to
ophthalmologists isn't a valid argument. The ratio of
ophthalmologists to residents is about one in 24,000 in
Washington state and about one in 27,000 in Alaska. She
concluded that if the proponents of the bill say it's not a
surgery bill, it either needs to be rejected or redrafted.
CHAIR COSTELLO asked how the malpractice rates were affected in
the four states that allow lasers.
DR. REINHARDT said it's too early to have any data.
SENATOR STEVENS asked how often she prescribes a prescription
narcotics to a patient.
DR. REINHARDT said it's rare and generally for a surgical
patient.
2:23:32 PM
JEFF GONNASON, Optometrist and Legislative Chair, Alaska
Optometry Association, testified in support of SB 55. He shared
his professional background. He shared the history of Alaska's
optometric journey and the opposition by the American Academy of
Ophthalmology. He described how optometrists work, their
limitations on practice, and that they use their professional
judgement as to when to refer patients to specialists.
Optometrists have been defined as physicians under Medicare for
many years and have had the authority to prescribe narcotics for
nine years. SB 55 updates the statutes and gives the state board
better autonomy to regulate itself. The board would never
authorize optometrists to do anything they are not trained to
do.
2:27:56 PM
CHAIR COSTELLO held SB 55 in committee with public testimony
open.
SB 197-MOTOR VEHICLE DEALER FRANCHISES
2:28:40 PM
CHAIR COSTELLO announced the consideration of SB 197.
2:29:07 PM
RYNNIEVA MOSS, Staff, Senator John Coghill, introduced herself
and Mr. Fisch who is carrying the bill for the sponsor.
2:29:34 PM
KELLEN FISCH, Intern, Senator John Coghill, stated that SB 197
is about protecting auto dealerships in the state. He continued
the introduction speaking to the following sponsor statement:
This bills brings Alaskan dealers up to date with
standards adopted by other states and helps to add
language for Alaska specific circumstances. This is
done in a variety of different ways.
By adding good cause language for termination and
putting good faith requirements upon the
manufacturers, which includes performance goals and
supplying inventory. Its sets out required procedures
for returning inventory to the manufacturer, which was
previously required by the manufacturer. This helps to
properly compensate the dealer, to keep the dealer
supplied, and to compensate the dealer properly on
termination.
This bill also strengthens notice requirements in
cases of termination and discontinuation of franchise
agreements. It establishes a procedure for determining
fair compensation to dealers for warranty work. It
sets out rules governing manufacturer audits. It puts
forth procedures for dealerships to succeed, sell,
transfer, or exchange the dealership. The bill,
contains provisions governing the establishment of new
dealerships in order to make them more appropriate for
Alaska.
It contains provisions allowing dealers to provide
warranty work for consumers over 100 miles from the
dealer or in locations not accessible by road.
These provisions help to address issues with Alaska's
unique landscape and limited number of roads. The
manufacture warranty work is not allowed to be done by
local mechanics. This causes a great problem for
people in the areas that are isolated. This bill
creates needed assistance for people in these areas
which includes, Nome and Tanana.
2:35:00 PM
CHAIR COSTELLO asked for the context for introducing the bill.
MS. MOSS said this is a national trend and a recognition that
Alaska has unique issues with warranty and recall work due to
geography. Getting a vehicle to a dealer can be expensive and
inconvenient. The bill allows a dealer to contract with someone
in the community where the vehicle is located to do that work.
It is also a matter of the industry changing considerably since
2002 when car dealership statutes were passed. She provided
examples of specialty tools needed and new signage that dealers
may need. The bill also has provisions for leases that are
canceled if a dealership is terminated.
She directed attention to the sectional analysis, a list of the
repealed language and a comparison to the new language, and
definitions cited in statutes.
CHAIR COSTELLO asked how the relationship between the dealer and
manufacturer is established.
MS. MOSS replied they are franchise agreements, many of which
are years old and have been amended. The bill is designed to
make changes to the way the manufacturer treats the franchisee.
2:39:16 PM
SENATOR MEYER asked if the bill is retroactive.
MS. MOSS said yes, but the applicability clause on page 2, line
2, clarifies that none of the provisions in the bill can violate
the U.S. Constitution or the Alaska State Constitution.
She provided the following sectional analysis for SB 197:
[Original punctuation provided.]
Sec. 1. Legislative Findings.
Findings that this bill is a cure to some issues
in the new vehicle industry that affects the general
economy, the public interest and public welfare of the
state by insuring the new vehicle manufacturers
provide reasonable incentives to new vehicle dealers
to keeping prices low and warranty and recall services
timely.
Alaska is a unique market that has unique
geographical challenges for motor vehicle owners that
need warranty and recall work. Getting a vehicle from
Hoonah to Juneau or Bethel to Anchorage for warranty
work or recall work can be expensive and time
consuming. This bill will allow technicians in remote
areas to do the work.
Manufacturers make franchises invest large
amounts of money in facilities, signage, equipment,
specialty tools, supplies, and parts. Some facility
requirements are unfeasible for Fairbanks or Anchorage
but feasible for Los Angeles. One example is
requirements for windows versus solid, insulated
walls. While signage used to be leased to dealers,
dealers are now required to invest upwards of $100,000
for signage.
All these investments need to be protected should a
manufacturer terminate an agreement without cause. At
the same time, the manufacturer should be able to
terminate a franchise when there is cause without
having to pay the price for a bad business practice.
This bill brings a balance to what is good faith, fair
practices and what is unfair practice.
Maintaining a healthy new vehicle dealer industry in
Alaska provides better consumer protection for
Alaskans and provides good paying, private sector
jobs.
Sec. 2. Applicability.
The applicability clause states that any
provision of this legislation that does not violate
the Constitution of Alaska or the U.S. applies to any
franchise agreement in effect in Alaska between a new
motor vehicle dealer and a new motor vehicle
manufacturer.
Unlike most other contracts, new motor vehicle
franchise agreements are not renewed in a time certain
manner. There are franchise agreements that are
thirty years old and have had some amendments but
never renewed.
Sec. 3. Termination of Franchise agreements.
This section amends language requiring a
manufacturer to have good cause to terminate a
franchise agreement to include provisions of
AS.25.115, a new section of law found in Sec. 4 of the
bill that clearly lays out "good cause is", what
notification requirements are, allows for corrective
actions on the part of the dealer, and sets timelines
for both the manufacturer and the dealer.
Sec. 4. Good cause.
(a) Good cause exists if:
1. Dealer fails to comply with a franchise agreement that
is reasonable and materially significant;
2. The manufacturer notifies the dealer of a failure in
the agreement and the dealer does not take
corrective action in 180 days;
(b) If the failure of performance is in sales,
service, or level of customer satisfaction it must be
a standard that is applied uniformly across the state,
the manufacturer must notify the dealer in writing of
the failure that the dealer has no less than 180 days
to take corrective action, and, if the dealer does not
comply, the noncompliance was because of factors in
the control of the dealer.
(c) If the manufacturer did not provide adequate
supply, both in quantity and product mix, the
franchise agreement cannot be terminated.
(d) Good cause to terminate is also insolvency,
bankruptcy or receivership proceedings, failure to
open for business for seven consecutive days,
principal operator is convicted of a felony, the
dealer has had a license revoked or suspended for more
than 30 days.
(e) Unfair practices by the manufacturer are not good
cause for termination.
2:43:40 PM
SENATOR STEVENS asked for an explanation of subsection (e).
MS. MOSS explained that a contractor cannot terminate a contract
on the basis of good cause if the practice is listed as an
unfair practice.
SENATOR STEVENS asked if that doesn't apply to every franchise.
MS. MOSS opined that this is called for due to the nature of the
industry and the investment required for a franchise.
(f) Burden of proof for good cause is on the
manufacturer.
Sec. 5. Notice of Termination.
Amends AS 45.25.120 added a good cause for 15-day
notice to terminate for a dealer having a license
revoked or suspended for more than 30 days.
Sec. 6. Termination by dealer.
A new section that provides that a dealer may
terminate a franchise agreement by notifying the
manufacturer at least 90 days before the termination.
Sec. 7. Payment for inventory, equipment, and
other items.
When a franchise is terminated, this section
outlines in detail how the dealer will recover the
cost of his investment in vehicles, equipment, parts,
supplies, signage, office equipment, and special tools
that were required by the manufacturer, less certain
credits.
Vehicles are reimbursed at the dealers cost
for two model years in inventory, plus charges for
distribution, delivery and taxes, less allowances to
dealer by the manufacturer, repairable damage to a
vehicle, and 20 cents per mile for all mileage over
200 miles. This includes vehicle required by the
manufacturer to be used as loaners, demonstrators, or
display purposes.
2:46:59 PM
CHAIR COSTELLO asked if this type of description currently is
included in franchise agreements.
MS. MOSS replied it is in some and not in others.
Sec. 7 continued.
All unsold supplies, parts, and accessories
in the original unbroken package that are listed in
the manufacturer's current catalog and those supplies,
parts or accessories that the manufacturer required
the dealer to buy will be reimbursed at the dealer's
cost.
For each undamaged sign that bears a common name,
trade name, or trademark and the manufacturer
recommended or required the signs purchase will be
reimbursed at fair market value.
All equipment, furnishings, and special tools
owned by the dealer because the manufacturer
recommended or required the purchase will be
reimbursed at fair market value. If items were
leased, the manufacturer will reimburse the dealer the
amount necessary to terminate the lease agreement.
All computers, software and printers required by
the manufacturer or reasonable necessary to operate
the dealership to the manufacturer's standards will be
reimbursed at fair market value. If the items were
leased the manufacturer will reimburse the dealer the
amount necessary to terminate the lease(s).
The manufacturer will pay the dealer for the cost
to transport, handle, pack and load the items above.
If the franchise agreement requires the
manufacturer to pay the dealer an amount higher than
stipulated in statute, the provisions of the franchise
agreement prevail.
The dealer will return all the items to the
manufacturer within 90 days of the termination of the
franchise and the manufacturer will pay the dealer
within 30 days of the delivery of the items. The
title to items are not clear, the manufacturer will
jointly pay the holder of the security interest and
the dealer.
2:48:47 PM
Sec. 8. Payments for dealership facilities and
business.
Dealers make significant investments in dealer
locations. Manufacturers require renovations and
renovations that require hundreds of thousands of
dollars for the dealer to comply. This section
provides for the manufacturer to pay the dealer the
cost of relocation, substantial alteration, or
remodeling of a dealer's facilities if the franchise
agreement is terminated and the improvements were
completed in the three years prior to the termination.
If the facility was leased, the manufacturer
would pay the dealer for the shorter period of time of
the unexpired term of the lease or 24 months or the
time provided the time provided for in the franchise
agreement.
If the facility is owned by the dealer the
manufacturer will pay the dealer a reasonable rent for
the facilities for 24 months or until the facilities
are leased or sold.
The payment for the facilities will be for only
that portion of the facilities that was used for
activities under that specific franchise agreement.
Many dealers have multiple franchise agreements and
sell more than one make of vehicles.
If a manufacturer discontinues the sale and
distribution of a vehicle line nationwide, the
manufacturer will pay the dealer fair market value for
the franchise.
If the manufacturer is making payments for rent
of the facilities, the manufacturer is entitled to
possess and use the space.
2:50:26 PM
Sec. 9. Application of payment provisions.
Reimbursement for vehicles, equipment, supplies,
parts, furnishings, computers, software, signage, and
facilities space by the manufacturer is not required
when the manufacturer terminates a franchise agreement
because the dealer is insolvent, the subject of a
bankruptcy or receivership proceeding, has failed to
conduct its customary operations for seven consecutive
days, is convicted of a felony, has had a license
revoked for more than 30 days, or when a dealer
voluntarily enters an agreement to sell the franchise
and the manufacturer has approved the agreement.
2:51:22 PM
Sec. 10. Sale, transfer, or exchange of a franchise.
This section defines what a qualified buyer of a
new motor vehicle franchise is. A qualified buyer
must meet normal reasonable, and uniformly applied
standards established by the manufacturer, or already
hold a franchise from the manufacturer, or is capable
of being licensed as a new motor vehicle dealer in
Alaska. A dealer must possess a business license
renewable every two years and a DMV license which is
$50.
A qualified buyer must promptly provide personal
and financial information to the manufacturer and
agree to be bound by all reasonable terms and
conditions of the franchise.
If a manufacturer refuses to approve a qualified
buyer, they must serve written notice on the applicant
and the dealer not later than 60 days after the date
the manufacturer received the dealer's written request
for the transfer or, if personal or financial
information was requested, not later than 60 days the
information was received. The notice of denial must
be made by personal delivery or certified mail, return
receipt requested.
The manufacturer's failure to respond in a timely
manner is considered consent by the manufacturer.
The manufacturer must state specific grounds for
the denial in the written notice.
2:52:28 PM
Sec. 11. Mitigation of damages.
This section clarifies that the dealer has an
obligation to justify any damages it claims upon
termination.
Sec. 12. Successions.
Dealers make a huge investment in their business
and as with any major investment they want to pass on
their investment to family or other designated
successors. Section 11 lays out the process for
assigning succession for a franchise dealership
agreement.
The owner of a franchise has two methods of
appointing a successor. At any time the dealer can
appoint a designated successor to succeed ownership of
the franchise to someone upon the owner's death or
incapacity by giving a written notice to the
manufacturer.
OR if the dealer has owned the franchise he or she may
designate someone to succeed ownership at a time
certain date before the dealer's death or incapacity
by giving the manufacturer written notice.
The designated successor must meet the following
guidelines:
1. Meets the normal, reasonable, and uniformly applied
standards of the manufacturer or agree to employ
someone who meets those standards.
2. Give written notice to the manufacturer within 60
days of the death or incapacity of the dealer of the
intention to succeed the franchise or in the case of
a time certain designation, give written notice to
the manufacturer at least 30 days prior to
succeeding.
3. Agree to be bound by all terms and conditions of the
existing franchise.
The manufacturer may request personal and
financial information of the successor.
The manufacturer with good cause refuse to honor the
successor by giving written notice to the designated
successor not earlier than 60 days after manufacturer
received written notice, or if the manufacturer
requested financial information not later than 30 days
after receipt of that information. The notice must
state specific grounds for the denial.
If the manufacturer does not serve notice of
refusal in a timely manner the successor if approved.
A manufacturer has the burden of proof to show good
cause exists.
If the dealer enters into a purchase agreement
with a person who is related in the first or second
degree or is the husband or wife of a relative of the
owner in the first or second degree, the manufacturer
cannot exercise a right of first refusal.
A manufacturer cannot require changes in
capitalization or facilities of a franchise as a
condition of approving a purchase agreement of a
relative.
2:54:00 PM
Sec. 13. New or relocated dealership
Before a manufacturer can establish or relocate a
dealership within a dealers relevant market area the
manufacturer must give the any existing dealer in the
relevant market area 90-day notice.
"relevant market area" means the greater of the area
(A) within a radius of 14 miles around an
existing new motor vehicle dealer; or
(B) of responsibility defined in a governing
franchise agreement;
Notification is not required for:
1. the relocation of an existing dealership;
2. the sale or transfer of an existing dealership if
the location is within 10 miles of the current
location and the same line make will be sold;
3. or if the new dealership location is at or within 10
miles of a former dealership that ceased operation
within the previous 24 months;
4. the proposed relocation is two miles or less from
the existing location of the relocating dealer; or
5. if the proposed relocation of an existing dealership
is farther away from any other dealer of the same
make line than the existing location.
Before the manufacturer can create a new
dealership location or relocate a dealership into an
existing relevant maker area, the manufacturer must
show good cause for such an action by considering
existing circumstances such as:
1. The ability of the existing dealer to perform its
investment obligations and profitability of the
dealership and the impact a new dealership would
have on that ability;
2. Growth and decline in population and the five year
trend of new motor vehicle registration;
3. Effect on the consumer public;
4. Effect on the existing dealers, including adverse
financial effect;
5. Reasonable expected or anticipated market including
age of population, income, education, product
popularity, etc.;
6. Would an additional dealership would injure or
benefit the public welfare;
7. Whether the existing dealership is providing
adequate competition and convenient customer care;
8. Whether manufacturer is motivated by good faith and
economic considerations;
9. Whether the manufacturer has denied the existing
dealer the opportunity for reasonable growth.
10. Whether the existing dealer is substantially and
significantly violating the franchise agreement.
If the manufacturer is creating a new location in an
existing relevant market area, the existing dealership
is given the first offer by the manufacturer to
establish a new location by providing the dealer 90-
days advance written notice by certified mail to
include:
1. Specific location
2. Date to begin business
3. Identity of existing dealership(s) in relevant
market area and the names and addresses of the
principal investors
4. Specific grounds or reasons for proposed new dealer
or relocation
The manufacturer has the burden of proof to establish
good cause for a the new dealership or relocation.
2:55:32 PM
Sec. 14. Court Actions.
This section establishes a process to bring court
action for notice of termination, approval of sale or
transfer, and new dealerships.
Sec. 15. Rates for warranty and policy work.
This section sets rates for warranty and policy
work. It requires the manufacturer to provide the
dealer with a schedule of compensation for warranty
work, policy work, predelivery service, or other
service that the manufacturer requires the dealer to
perform. This schedule will include:
1. Compensation for parts, labor, and diagnostic work
2. A schedule that is not less than the rates that the
new motor vehicle dealer charges retail customers
3. An average retail percentage markup that will be
determined by the dealer submitting 50 sequential
service order invoices or 45 days of retail repair
order which is fewer, all of which were performed
less than 180 days prior to submission, establishing
the average
When calculating the retail price for parts and
labor there are half a dozen things that should not be
in the calculation. They include:
1. Repairs for manufacturer special events,
manufacturer specials, or retail customer repair
promotional discounts.
2. Insurances repairs, parts sold at wholesale or at
reduced or specially negotiated rates
3. Routine maintenance not covered under warranty
(replacement of belts, fluids, filters)
4. Items that don't have an individual part number like
nuts and bolts
5. Tires, batteries and light bulbs
6. Vehicle reconditioning
Once the percentage markup has been established
by the manufacturer the rate goes into effect no more
than 30 days after it is established.
A manufacturer will compensate a dealer for labor
and diagnostic work at the same hourly rates as
charged to regular customers plus any documentation
work or contact time with the manufacturer including
photographs, paperwork, consultation, and electronic
data.
A manufacturer can disapprove hourly rates or
other charges if the manufacturer can prove the rate
unreasonably exceed the rates and charges of all other
dealers.
A dealer is limited to one rate increase a
calendar year.
The manufacturer will pay for all repairs
performed by a dealer that are covered under a
manufacturer's warranty, policy, or service contract,
whether the need for repair was discovered by the
customer or the dealership personnel. In current
practice many manufacturers deny payment for warranty
work that was discovered by dealership personnel while
performing other warranty work.
The dealer must submit billing for warranty work
within 90 days of when the work was performed and the
manufacturer has 15 days to approve or deny the
billing. If the manufacturer does not deny or approve
a billing within 15 days, the billing is considered
approved. The manufacturer then has 30 days to pay
the billing.
If the manufacturer denies the claim the
manufacturer will contact the dealer in writing or
electronically and explain the denial. The dealer
will then have 30 days to resubmit the bill if it is
correctible.
Dealer incentive claims are handled the same way.
These are factory rebates on the purchase on cars
purchase.
If the manufacturer chooses to audit a dealer
they must initiate the audit within six months of the
date of the paid claims.
The manufacturer cannot deny or charge back a
claim on an audit if the dealer can demonstrate that
the reason for the repair existed, the repair was
performed, and the cause for the repair was cured.
This goes back to the manufacturer denying the claim
because a warranty issue was discovered by dealer
personnel while doing warranty work on another repair.
One issue that makes Alaska unique is the
remoteness of some of the new vehicles and the ability
to take the vehicle to a dealership for warranty and
recall work. Subsections (u) and (v) of this section
(page 20, line 28) allow for flexibility to
accommodate this issue.
If a certified technician cannot perform the
repairs within one business day, an uncertified
technician may perform the repairs under the
supervision of a certified technician or service
manager. The repairs will be billed at the same rate
as a certified technician.
If the dealership is not accessible by road or is
more than 100 road miles from the dealership, the
dealership can make arrangements with a technician
accessible to the vehicle to perform the repairs. The
manufacturer will reimburse the dealer at the current
schedule of compensation for parts and labor, plus any
freight or shipping charges OR the retail rate in the
community where the repairs are made, whichever is
less.
Sec. 15. Discontinuation or reduction of line.
This section provides that if a manufacturer
discontinues the sale or distribution of a vehicle
line or reduces the selection of a vehicle line to the
point it is not economically viable, the dealer can
terminate the franchise dealership agreement with good
cause.
2:56:02 PM
MS. MOSS noted that Section 16 addresses Senator Steven's
question about unfair practices.
Sec. 16. Unfair practices.
The section of the bill outlines practices that a
manufacturer should not impose on a dealer and use the
failure of the dealer to accept such a practice as a
reason for termination of the dealership agreement.
1. Sell vehicles or parts or accessories to one dealer
at a lower price than sold to another dealer.
2. Use a promotion plan or marketing plan that would
result in a one dealer being charged a lower price
for a vehicle than another dealer.
3. Use a promotion plan or marketing plan that provides
a rebate or incentive program that requires a dealer
inventory with a predetermined number or percentage
of vehicles.
4. Adopt an unreasonable, unfair and unequitable method
for the allocation, scheduling, or delivery of new
vehicles, parts, or accessories.
5. Refuse or fail to deliver, in reasonable quantities
and a reasonable time, product if it is being
delivered to other dealers.
6. Require a dealer to remodel or renovate existing
facilities as a prerequisite to receiving a model or
series of vehicles.
7. Fail or refuse to offer the dealer all models
manufactured for that line make of vehicles.
8. Sell, lease, ship or deliver a new vehicle to a
person other than a dealer in the relevant market
area, unless the vehicle is sold, leased, or
delivered to a federal agency or the vehicle is
purchased in one relevant market area to be
delivered in a different relevant market area.
9. Own, operate, or control a dealership in Alaska,
except for a temporary period not to exceed two
years during a transition from one owner to another
is the dealership is currently for sale at a fair
and reasonable price; OR in conjunction with another
person who lacks resources to immediately purchase
the dealership but the person cannot be connected to
the manufacturer, has made a significant capital
investment in the dealership, has an ownership
interest, and will be able to acquire full ownership
in a reasonable time.
10. Own, operate, or control a service facility or
contract with a person other than its franchised
dealer for a service facility without written
consent of the franchised dealer unless the vehicles
being serviced are owned and operated solely by the
manufacturer.
11. Use of or sell of confidential or proprietary
information from a dealer to compete with dealer
such as trade secrets, business plans, market plans,
customer lists, etc.
12. Terminate a franchise the dealer holds additional
line make franchises and uses the same dealership
facilities for the sale of other line makes.
13. Coerce or attempt to coerce a dealer to refrain
from or prohibit or attempt to prohibit a dealer
from acquiring another make line.
14. Require the dealer to make material alteration
to, expansion of or addition to a dealership
facility unless all dealers similarly situated are
required to take the same action. The dealer will
select who does the work.
15. Require the dealer to order or accept delivery of
any vehicles, parts, accessories, equipment,
promotional material, display items or other items
not required by law. This does not apply to recall
of safety and emissions parts or to a vehicle
feature, part, accessory or other component required
by federal, state, or local law.
16. Coerce or attempt to coerce a dealer to join,
contribute to or affiliate with an advertising
association or participate monetarily in an
advertising campaign. If the dealer does participate
the dealer will be identified as the advertiser, not
the association.
17. Prevent the dealer from changing executive
management unless the manufacturer can prove the
change will result in management by a person who
does not have good moral character or who does not
meet reasonable, preexisting, and equitably applied
standards of the manufacturer. Rejection of such a
change must be given in written notice with 60 days
by the manufacturer.
18. Condition the sale, transfer, relocation, or
renewal of a franchise on the manufacturer obtaining
site control or requiring the dealer to make
substantial facility improvements or renovations
that exceed $5,000.
19. Require a dealer, as a condition of granting or
renewing a franchise, to waive, limit, or disclaim
the right to protest the establishment or relocation
of another dealer in the relevant market area.
20. Require the dealer to change the capital
structure of the dealership or means by which the
dealer finances the operation unless the dealership
does not at all times meet reasonable capital
investment requirements.
21. Increase the price of a vehicle for which there
exists a purchaser at the time of the order and the
order was made before the manufacturer provided the
dealer with a written price increase notification.
22. Fails to indemnify and hold harmless a dealer
when the manufacturer settles in writing a court
judgment for damages or when applicable law or a
franchise agreement requires indemnification and
holding harmless.
The provisions of Sec. 16(a)(1)-(3) lower price
for vehicles, parts, and promotional plans do not
apply to:
1. Sale for resale to a federal agency
2. Sells or donates the vehicles for use in a driver's
education program
3. Bona fide uniformly applied manufacturer promotional
program
4. Manufacturers bona fide quantity discount program to
sell parts or accessories
5. Manufacturer's bona fide discount program for a
fleet of 15 or more new vehicles
Subsection (c) has definitions.
Sec. 17. Redefines "terminate".
Repeals the current definition of "terminate"
which is "includes nonrenewal or cancellation;" and
redefines "terminate" as "includes to cancel, not to
renew, or to discontinue or make a reduction under AS
45.25.200".
Sec. 18. Definitions.
Adds definitions for "line make" and "relevant
market area".
Sec. 19. Repealer.
Sec. 45.25.110. Termination of franchise agreements.
(b) Notwithstanding (a)(1) of this section, a
manufacturer may not terminate a franchise agreement
with a new motor vehicle dealer because of the death
or incapacity of an owner if the owner is not listed
in the franchise as one on whose expertise and
abilities the manufacturer relied in the granting of
the franchise.
(c) In this section, "good cause" includes when the
new motor vehicle dealer fails to comply with or
observe a material provision of the franchise
agreement. For the purposes of determining good cause
under this subsection, reasonable sales and service
performance criteria and capital and facility
requirements may be considered material provisions
only if the criteria or requirements were communicated
in writing to the new motor vehicle dealer within a
reasonable period before the effective date of the
termination or nonrenewal so that a reasonable
opportunity was afforded over a period of not less
than six months to comply with the criteria or
requirements.
Sec. 20. Transition: Schedule of Compensation.
This section provides that the schedule of
compensation on the effective date of SB 197 cannot be
less than it was immediately before the effective
date. It also makes reference to definitions in
current law.
2:59:57 PM
CHAIR COSTELLO held SB 197 in committee.
3:00:25 PM
There being no further business to come before the committee,
Chair Costello adjourned the Senate Labor and Commerce Standing
Committee meeting at 3:00 p.m.