Recall Actions, Minimum Wage and Paid Sick Leave

March 23, 2016

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Recall Bills Reintroduced

Bill Would Require Dealers to Notify Potential Buyers of Outstanding Recalls

Assembly Consumer Affairs Chairman Paul Moriarty reintroduced legislation that would require dealerships to check the National Highway Traffic Safety Administration’s (“NHTSA”) website and notify potential buyers of any outstanding recalls concerning the sale of used vehicles.   The bill would not require dealers to fix open recalls. Under the bill, A755, dealers would not be liable for any errors contained on the NHTSA website.  The bill makes clear that: (1)  there would be an “irrebutable presumption” that the dealer had no knowledge of a recall if the information was not on the NHTSA website at the time of the sale; and (2)  dealers would not be required to fix open recalls prior to selling a vehicle (which often would not be practical).  The bill would not apply to wholesale transactions or sales between owners and operators of junk businesses or motor vehicle junkyards or any person involved in dismantling, destroying or recycling motor vehicles.  Failure to disclose an outstanding recall under the bill would constitute a violation of the New Jersey Consumer Fraud Act subjecting dealers to actions brought by the Attorney General’s office for fines, attorney’s fees and costs of collection as well as cease and desist orders or civil suits by retail consumers for treble damages (three times compensatory damages) and attorney’s fees.    

The legislation has been referred to the Assembly Consumer Affairs Committee but has not yet been considered. The Senate version, S711, sponsored by Senator Nilsa Cruz-Perez (D Camden), has been referred to the Senate Commerce Committee but has not yet been scheduled for consideration.

Bill Would Require Motor Vehicle Repair Before Sale

Assemblywoman Nancy Munoz (R-Morris, Somerset and Union) also reintroduced legislation (A2555) that would prohibit the sale of a motor vehicle with an outstanding recall. The bill requires a seller to first contact or access information provided by the vehicle manufacturer or the National Highway Traffic Safety Administration to determine if there are any outstanding recalls on the vehicle that have not been corrected or addressed. The bill prohibits the sale of such a vehicle until any such issues have been corrected. The bill has been referred to the Assembly Consumer Affairs Committee but has not been considered. For the fourth consecutive legislative session, the Senate has not introduced a counterpart to the bill.  

This bill potentially would bring the sale of used vehicles to a virtual standstill.  

• According to some estimates, one in six vehicles has an open recall and only about 70% of vehicle recalls are ever closed or fixed. 
• Not all recalls involve safety concerns.  For example, recalls may concern non-functioning air conditioners and radios, ordinary wear of equipment that has to be inspected, maintained and replaced periodically. Such equipment includes shock absorbers, batteries, brake pads and shoes, and exhaust systems.

In some cases, especially for non-safety related recalls, the parts may be back ordered or hard to obtain for weeks or months.  A blanket rule that would bar sales of any vehicles with an open recall would negatively, and perhaps unfairly, impact a dealer’s costs and inventory, yet may not make the public any safer in many instances.

Federal Trade Commission Recall Enforcement Actions

The Federal Trade Commission (“FTC”) has brought recent enforcement actions against a manufacturer and two dealer groups concerning open recalls.  The manufacturer and the dealer groups  advertised that many of the vehicles had undergone a comprehensive inspection process, often as part of a certified pre-owned program.  The FTC alleged in separate complaints that the manufacturer and the dealer groups violated the Federal Trade Commission Act by touting those inspection processes but not informing consumers about the existence of unrepaired safety recalls.  The companies denied wrong doing and were not assessed fines but are now prohibited from claiming their vehicles have under gone a rigorous inspection unless they are free of unrepaired safety recalls.  If a safety recall is not repaired, those companies against whom the actions were brought must disclose the existence of any safety related recalls in close proximately to any statement about the inspection process.  

Employment Legislation Continues to Advance

Paid Sick Leave Bill Amended to Allow Employers to Meet Requirements Through PTO Days

Lawmakers have resumed efforts to enact paid sick leave after the bill stalled at the close of the last legislative session due to differences in both houses. S799, sponsored by Senate Majority Leader Loretta Weinberg (D-Teaneck) would mandate that all NJ businesses provide employees with one hour of earned sick leave for every 30 hours worked up to 72 hours of accrued time. For employers with less than 10 employees in the state, that number drops to 40 hours of earned sick leave to be accrued or carried-forward. The bill provides that employees may use earned sick leave for themselves or to care for a family member.

On March 13, 2016, the Senate amended legislation allowing employers to meet the requirements if they provide “paid time off,” a pool of time including vacation, personal, and sick days, instead of sick leave. The bill has not yet been scheduled for a vote by the full Senate.

The legislation has been a top-priority for the Democratically-controlled Legislature; however, differences remain between leadership in the Assembly and Senate. Even if the bills pass both houses, Republican Governor Chris Christie is widely expected to veto the partisan measure. The Assembly version of the bill, A1446, sponsored by Assemblywoman Pam Lampitt (D-Voorhees), has not yet been considered by the Assembly Labor Committee.

Business groups have been critical of the bill as harmful to small business. Sick leave has already been mandated in many large cities in New Jersey.

Democratic Leaders Introduce $15 Minimum Wage Legislation

Legislative leaders Senate President Steve Sweeney (D West Deptford) and Assembly Speaker Vincent Prieto (D Secaucus) have introduced bills in their respective houses (A15/ S15) that would raise New Jersey’s minimum wage to $15 an hour by 2021 with annual increases based on the Consumer Price Index (CPI). If it becomes law, the bill would immediately increase the minimum wage to $10.10.

Governor Christie has already vowed to veto the legislation. The sponsors have announced they will seek a constitutional amendment if and when this happens. If successful, a ballot initiative would most likely be on the ballot in November 2017.

For more information about the NJIADA, contact Paula Frendel at njiada.pfrendel@gmail.com.  For more information about any of the issues above, or any other legal issues impacting your dealership, contact Tony Bush at (609) 989‐5056 or abush@eckertseamans.com.

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