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Lawletter No. 230 The California hours law We have recently received a number of inquiries regarding an oil company's right to impose hours of operation requirement on a service station dealer. California law limits the franchisor's right to require late night or early morning hours to specified situations. A review of that law is therefore appropriate. Until 1994, there was some question as to whether the PMPA preempted this law. Now, however, the PMPA has been amended to validate state laws such as California's hours-of-operation law. Although our state statute applies to only a minority of major-brand stations, a detailed review is appropriate in light of the new legislation. Basic provisions: California Business & Professions Code section 21150.1 provides that a dealer may close during unprofitable hours, i.e., hours during which expenses exceed revenues. Expenses include a proportionate share of overhead costs such as rent. However, in order to avoid franchise cancellation, the dealer must follow very specific procedures. Exceptions: The law does not apply to: (a) Stations located within one-half mile of the access point of any highway which is a part of the California freeway and expressway system; (b) Stations within a quarter mile of the nearest station to the access point of any highway which is a part of the California freeway and expressway system if that nearest station is more than a half-mile from the access point; (c) Any business which is not primarily a gasoline station but which sells gasoline incidentally to its business; and (d) Stations which the oil company leases from a third party under a lease which requires the company to keep a service station open during specified hours. The California Freeway and Expressway System: As noted above, the California hours law does not apply to stations located near the access point of any part of the state freeway and expressway system. The California Freeway and Expressway System is designated in Division 1, Chapter 2, Article 2 of the California Streets and Highways Code, commencing with section 253.
Routes included in their entirety: Section 253 designates the following routes as part of the system in their entirety: 5, 6, 8, 10, 14, 15, 18, 24, 28, 30, 32, 34, 37, 40, 44, 47, 48, 50, 51, 52, 53, 54, 55, 5657, 59, 60, 61, 63, 65, 67, 68, 70, 71, 73, 74, 78, 80, 81, 83, 85, 87, 88, 89, 90, 93, 97, 100, 102, 103, 105, 107, 108, 118, 121, 122, 124, 125, 126, 133, 134, 136, 139, 140, 145, 148, 149, 154, 156, 157, 161, 163, 164, 171, 179, 181, 183, 184, 199, 205, 210, 215, 217, 221, 223, 230, 232, 234, 235, 237, 238, 239, 242, 247, 249, 251, 252, 256, 257, 258, 259, 280, 330, 371, 380, 405, 505, 580, 605, 680, 710, 780, 805, 880, and 980. Routes partially included: The code also designates specified portions of certain Routes as part of the system. Space limitations forbid a complete listing of which portion of which routes are included. However, the information is readily available from any law library. All you need do is to look at the pages of the Streets and Highways Code following section 253. Portions of the following routes are designated as part of the system: 1, 2, 3, 4, 12, 13, 16, 17, 20, 22, 23, 25, 26, 29, 33, 35, 36, 38, 39, 41, 43, 45, 46, 49, 58, 62, 76, 77, 79, 84, 86, 91, 92, 94, 95, 99, 101, 110, 111, 113, 116, 120, 127, 128, 132, 137, 138, 142, 152, 160, 166, 168, 170, 178, 180, 190, 193, 198, 227, 244, 299, 395 and 905. Administrative designation: Under the Code, the California Transportation Commission has the authority to include additional routes in the system. However, the last time we checked the Commission informed us that they had not designated any additional routes, and that it is not normally their practice to do so. Required procedures: If the dealer believes that certain hours are unprofitable, he must: (1) Continue to operate during the required hours while completing the rest of the following steps; (2) Compile written records showing that the particular hours are unprofitable; (3) Send the records to the company together with a written notice that the hours are unprofitable; (4) The franchisor must then respond within 15 days after it receives the dealer's letter with an indication that it intends to compile its own study to show that the hours are profitable; (5) If the company does elect to make such a study, it may require reimbursement from the dealer for the costs of compiling such information, but the fee may not exceed $300. (6) The franchisor must provide the dealer with its own study within 30 days after it receives the original letter; (7) If the supplier does not meet either the 15 or 30-day time limit, the dealer can then close during the hours in questions; (8) If the company does dispute the dealer's claim, the dealer can submit the matter to binding compulsory arbitration. Recommended procedures: In order to take advantage of the California hours law, we recommend that you carefully follow the procedures required the statute as set out above. Here is a suggested letter for transmitting your profitability data to your supplier: CERTIFIED-RRR (Your franchisor's name and address) Dear sir, I lease the (brand) station located at (insert station address) under a franchise agreement dated (insert effective date of current lease). My lease requires the station to be open for business during the following hours (insert hours and days). However, the following hours are unprofitable for me as that term is defined in California Business & Professions Code section 21150.1. You will find attached hereto copies of the records I have compiled demonstrating the unprofitability of these hours. Please consider this letter and the attached records a notice of unprofitability under section 21150.1. Pursuant to section 21150.1, I will discontinue operating during the unprofitable hours specified hereinabove unless, (1) Within 15 days of your receipt of this letter you notify me that you intend to compile its own study disputing my contention of unprofitability; and (2) within 30 days of your receipt of this letter you provide me with a copy of any such study the company elects to make or rely on. Please be further advised that, upon receipt of any such study within the statutory time limits specified above, I am prepared to reimburse the company for the cost of such study pursuant to section 21150.1, in an amount not to exceed $300. Please be further advised that I hereby request arbitration pursuant to section 21150.1 in the event that the company does prepare its own study and provide me with a copy in a timely manner. |
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