Labor rate reform for the auto body repair industry in Massachusetts appears to be moving forward. In early July, language from the Massachusetts Auto Body Labor Rate Bill (H-1085) was included in the final version of the state’s Budget Conference Report and presented to Gov. Deval Patrick. The labor rate portion of the budget, included as Outside Section 108, calls for the formation of a special commission to study the way labor rates are set, the establishment of a shop rating system, and a new formula for setting labor rates based on national averages and information from the Bureau of Labor Statistics. If that portion of the budget is approved, the commission’s initial report will be due in December 2008. “Massachusetts has the lowest labor rate in the country and some of the highest labor costs,” says Rick Starbard, president of Alliance of Automotive Service Providers (AASP) Massachusetts/Rhode Island, and owner of Rick’s Auto Collision in Revere, Mass. “Labor rate reform here is really a no-brainer.” The original bill was introduced into the state legislature in January of 2007 by the AASP and the Central Mass. Auto Rebuilders Association (CMARA), and sponsored by State Rep. Robert Spellane (D-Worcester). The AASP also set up a Web site to drum up support for the bill at www.passthelaborratebill.org. “It’s taken us nearly two years to get to this point,” says Tom Ricci, president of CMARA and president of Body & Paint Center in Hudson, Mass. “We will not wake up tomorrow and have a realistic labor rate, but the good news is that by December 31, if this is adopted in its current form, the commission will have to come up with an answer to this problem.” While H-1085 is currently in the hands of the House Rules Committee, its language was incorporated into the budget document in an effort to expedite passage. The repair industry groups could still push for the original bill to continue through the legislative process, but it is unclear if they will do so at this point. The Massachusetts legislature will recess on July 31. Section 108 calls for a commission to study existing practices in setting rates and the benefits and costs associated with developing a new system, including “establishing a tiered rating system for auto body shops, an average national hourly compensation rate, and use of a cost of labor multiplier for the commonwealth utilizing data provided by the Bureau of Statistics for the U.S. Department of Labor.” The commission will also determine how many repair shops have closed in Massachusetts since 2000. “It’s a somewhat complicated but necessary piece of legislation,” says Steve Regan, spokesperson for the Massachusetts Auto Body Association (MABA), which also is supporting the bill. “It takes the national average and applies an adjustment for Massachusetts’ cost of living,” The proposed 11-member commission will include two members of the state senate, two members of the state house of representatives, three members from the auto insurance industry (appointed by the Automobile Insurers Bureau), three members from the repair industry (appointed by the AASP and Massachusetts State Auto Dealers Association), and a chairperson designated by the Secretary of Consumer Affairs and Business Regulation. The delivery of the labor rate language in the state budget comes after 18 months of an intense, grassroots lobbying campaign that involved repairers gathering support from a significant number of state legislators. “We’ve made a lot of noise at the state house,” Ricci says. “It was not just the trade groups pushing for this. There were employees, owners, managers, and even relatives and vendors involved. You have to have a strong political movement to get results.” A significant portion of the original bill (which is more detailed than the budget section) also outlines a classification system that would distinguish shops based on their equipment, training and certifications. Shops would be classed as A, B, or C shops, with the C category including shops that meet minimum standards for registration under Chapter 100A of current Massachusetts law. The classification system would be voluntary, but labor rates would be tied to the categories. Shops in the A category would receive 100 percent of the established labor rate, while B shops would be paid at 90 percent of the rate. C shops would negotiate their rates as they always have, as would shops that don’t participate in the inspection program. Each registered shop would pay a $100 annual fee to be inspected and classified. “If a shop doesn’t want to participate, they are not forced to,” Regan says. The current body shop licensing law in Massachusetts does not include any equipment or training requirements. The shop classification system was modeled on standards developed by the Collision Industry Conference (CIC). “Our goal from the beginning was to classify shops,” says Starbard. “One of our problems is that all shops get held to the lowest common denominator. We wanted to establish a minimum rate.” Starbard also points out that shops could potentially use the promise of an increased labor rate to help justify investment in new equipment. “If you go to your bank with these numbers, now there’s a way to show how you can pay for this investment that we didn’t have before,” he says.” The tiered classification provisions in the labor rate bill and the equipment requirements in the reform bill are similar to licensing legislation that was introduced in Virginia several years ago at the behest of the Virginia Auto Body Legislative Committee (VALC). The AASP-Minnesota also developed legislation to establish employee training and equipment standards, but that measure failed to pass during the current legislative session. Industry organizations in Colorado, Florida, Georgia, North Carolina, Pennsylvania, Texas and other states have also discussed or pursued licensing legislation. Critics of licensing programs have described them as a tax on shop owners, and a way to squeeze smaller shops out of the market. They also point to the stormy relationship California repairers have had with that state’s Bureau of Automotive Repair (BAR), which overseas licensing. “We’ve had some positive and some negative reaction to this,” Starbard says. “It can be a tough pill to swallow for some shops, but you have to keep up with the training and the technology. And if you don’t, why should everybody else be held to your standard on labor rates? If you look at the CIC Class A shop list, we feel these are easily attainable standards if you are going to play in this market.” The insurance industry has argued that the labor rate bill would lead to an increase in insurance premiums. The Automobile Insurers Bureau of Massachusetts issued a report earlier in the year predicting that the average insurance premium could rise by 2.4 percent if labor rates were raised to the national average. Supporters of the bill counter that insurance companies have received a free ride over the past two decades, during which labor rates in Massachusetts have barely increased (the state has traditionally had the lowest collision repair labor rates in the country). The Massachusetts Auto Damage Appraisers Licensing Board is currently considering a regulatory change that would allow for an expedited supplement process, which Ricci and others in the industry say would help offset the labor rate increase. “In terms of claims dollars paid out, labor is one of the smallest pieces of the pie,” Ricci says. “When the expedited supplement process is passed, it will save them money on rental car fees and other expenses.” The $28.2-billion state budget was approved three days after the start of the state’s fiscal year on July 1. Gov. Patrick has ten days to sign the proposed budget document, and has the option to veto Section 108 as a separate line item. The AASP indicated in a press release that there is enough support in the legislature to override a veto if necessary. |
