Are car-buying or referral services like AAA's car-buying program legal under Maryland's vehicle salesman licensing law?

Plain-English summary

Maryland's Secretary of Transportation asked the Attorney General to assess whether car buying and referral services, businesses that connect prospective new-car buyers with participating dealers at negotiated prices in exchange for a fee, complied with Maryland's vehicle dealer and salesman licensing laws. The opinion focused on two examples: United Buying Service (UBS), which had operated in Maryland since the 1960s using its own staff who held vehicle salesman licenses tied to participating dealers, and a proposed alternative from the American Automobile Association (AAA) under which AAA's own employees, who would not themselves be licensed, would advise members and pass them along to a dealer's licensed "contact" salesperson.

The opinion concluded that these buying/referral services could not be licensed as dealers, since they lack the manufacturer franchises and fixed sales locations Maryland law requires of dealers, and that their referral activity, connecting a buyer to a specific dealer for a fee in exchange for special pricing, falls squarely within the broad statutory definition of "vehicle salesman," which covers anyone who "induces or attempts to induce" a vehicle sale for compensation. Because the AAA proposal's own staff would not be licensed at all, the opinion found it plainly unauthorized. But even UBS's existing arrangement, where individual UBS staff did hold salesman licenses nominally tied to a participating dealer, failed the statute's separate requirement that a licensed salesman actually be "employed" by that dealer: applying ordinary master-servant employment principles, the opinion found that UBS, not the dealer, actually hired, paid, supervised, and could fire these employees, meaning the real employment relationship ran to the buying service rather than to the dealer the license nominally named. The opinion recommended that the Motor Vehicle Administration stop authorizing new buying/referral services and let existing ones wind down when their current salesman licenses expired, unless the General Assembly enacted new legislation specifically authorizing this kind of business.

Currency note

This opinion was issued in 1982. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The opinion applied Title 15 of the Maryland Transportation Article, the vehicle dealer and salesman licensing statute in effect in 1982, and federal and Maryland case law on master-servant employment relationships current through that year. The Maryland General Assembly may have since enacted legislation specifically regulating vehicle brokers or buying services (the opinion itself notes two prior unsuccessful legislative attempts to do so, in 1978 and 1979), and Maryland's vehicle licensing statutes have likely been amended since 1982. Anyone researching whether a current car-buying, referral, or broker service complies with Maryland law should consult the current Transportation Article and MVA guidance rather than relying on this 1982 analysis.

Common questions

Why couldn't these buying services just register as car dealers themselves?
The opinion explained that Maryland's dealer licensing requirements include holding an unexpired franchise from a vehicle manufacturer and operating from a fixed, appropriately equipped sales location, requirements a referral service, which does not itself sell or hold inventory of vehicles, cannot meet. Because buying/referral services cannot satisfy these dealer-specific requirements, the only path to legal operation was for their staff to be licensed individually as vehicle salesmen tied to an actual dealer.

If the referral service doesn't sell the car itself, how can it be a "vehicle salesman"?
The opinion read the statutory definition broadly. Maryland law defines a vehicle salesman to include anyone who "induces or attempts to induce" a vehicle sale for a commission, and the opinion found that steering a customer to a specific dealer with the promise of a special price available only through the referral clearly counts as inducement, even if the referral service never itself signs the sales contract or takes possession of the vehicle.

UBS's own staff did hold valid salesman licenses, so why was that still a problem?
The opinion found that holding a salesman's license tied to a dealer was not enough by itself; the statute also requires the salesman to actually be "employed" by that dealer, not merely nominally associated with one. Applying the traditional legal test for an employment relationship, who hires, pays, supervises, and can fire the worker, the opinion concluded that UBS itself, not the participating dealers, actually controlled its licensed employees in every meaningful respect, so the real employer was the buying service, not the dealer named on the license.

Could the General Assembly fix this by passing a new law?
Yes, and the opinion said so directly. It noted that similar bills to create a licensing scheme specifically for vehicle brokers had been introduced in 1978 and 1979 but never passed, and recommended that if the legislature wanted to allow buying/referral services to operate, it should adopt legislation clearly specifying the terms and conditions for that kind of business, rather than leaving the MVA to stretch the existing dealer/salesman framework to cover it.

Background and statutory framework

Maryland has comprehensively regulated motor vehicle sales for decades, requiring separate licenses for manufacturers and distributors, for dealers, and for individual salesmen under Title 15 of the Transportation Article. United Buying Service, based in Chevy Chase, had operated in Maryland since the 1960s: it advertised savings on new vehicle purchases, provided customers with a brochure of pre-negotiated prices, and, once a customer chose a vehicle, issued a purchase certificate redeemable at a participating dealer, who then paid UBS a referral fee. The American Automobile Association's D.C. Division separately proposed a similar arrangement in which AAA's own (unlicensed) staff would advise members generally and then hand them off to a dealer's own licensed "contact" salesperson, who would complete the transaction and remit a fee to AAA.

The opinion traced the regulatory history of this arrangement: a 1968 Attorney General opinion had found buying services subject to dealer licensing because they "solicit or endeavor to procure" vehicle sales, prompting the MVA to order UBS to stop selling; UBS then restructured its fee arrangement to be nominally paid by the buyer rather than the dealer, leading the MVA to reverse course in 1969; the General Assembly broadened the statutory definition of "vehicle salesman" in 1970 to cover anyone who "induces or attempts to induce" a sale and "receives or expects to receive" compensation from either the buyer or seller; and, following that change, the MVA and UBS reached a 1971 accommodation under which UBS's own staff became individually licensed as vehicle salesmen affiliated with participating dealers, even though they worked out of UBS's own offices and were paid by UBS. A 1978 federal court decision, Detroit Automotive Purchasing Services, Inc. v. Lee, upheld Maryland's licensing scheme as constitutional and distinguished the approved UBS arrangement from a rival broker's unlicensed model, while twice noting "some question as to the legality" of the UBS accommodation itself, a warning the current opinion took up directly.

The opinion's analysis proceeded in two steps. First, it concluded buying/referral services cannot be licensed as dealers, because Maryland's dealer requirements, an unexpired manufacturer's franchise and a fixed, adequately equipped sales location, are simply incompatible with how these services operate. Second, it concluded the referral activity itself falls within the statutory definition of "vehicle salesman," since directing a customer to a specific dealer with an inducement like a lower price, in exchange for a fee, constitutes "inducing or attempting to induce" a sale under the ordinary dictionary and legal meaning of those terms, a reading the opinion found consistent with the 1968 opinion's characterization of buying services under the narrower prior statute and reinforced by the 1970 amendment's broader language. Because AAA's own proposed staff would not themselves hold vehicle salesman licenses at all, the opinion found that model plainly unauthorized without any need for further analysis.

The harder question was whether UBS's existing model, individually licensed staff nominally tied to a dealer, satisfied the statute, and the opinion concluded it did not, because the statute requires not just a license but actual "employment" by the named dealer. Applying the common law master-servant test (who selects and pays the worker, who can discharge them, and critically, who controls the manner of their work), the opinion found that UBS, not the dealers, hired, paid, supervised, and could fire its licensed staff, and that UBS, not the dealer, bore the Workmen's Compensation obligation for them, meaning the true employment relationship ran to the buying service rather than the dealer named on the license. The opinion quoted the federal DAPS decision's reasoning that the one-dealer-one-salesman structure exists specifically to let dealers meaningfully supervise their salesmen (since a dealer can lose its own license over a salesman's misconduct), a supervisory relationship the opinion found was not actually happening between UBS's licensees and their nominal dealer affiliations. The opinion concluded that the General Assembly's twice-failed attempts to pass dedicated vehicle-broker legislation (in 1978 and 1979) had not resolved this problem, and recommended the MVA stop authorizing new buying/referral services and allow existing ones to continue only until their then-current salesman licenses expired on April 30, 1983, unless the legislature acted to authorize the business model directly.

Citations

Statutes:

• Title 15 of the Transportation Article of the Maryland Code
• §15-202 of the Transportation Article
• §15-302 of the Transportation Article
• §15-402 of the Transportation Article
• COMAR 11.12.01
• Chapter 515, Laws of Maryland 1966 (former Article 66½, §2(a)(49a))
• Chapter 534, Laws of Maryland 1970 (Article 66½, §1-210(a))
• §15-101(b) of the Transportation Article
• §§13-113.1 and 15-305 of the Transportation Article
• §§15-105 and 15-304 of the Transportation Article
• §§15-103 and 15-308 of the Transportation Article
• §§15-312 through 15-315 of the Transportation Article
• §15-101(e)(1) of the Transportation Article
• §§15-401 through 15-412 of the Transportation Article
• §15-403 of the Transportation Article
• §15-102 of the Transportation Article
• §15-404 of the Transportation Article
• §15-405 of the Transportation Article
• §15-409 of the Transportation Article
• §15-109 of the Transportation Article
• §1-102 of the Transportation Article
• §15-409(b) of the Transportation Article

Cases:

• Detroit Automotive Purchasing Services, Inc. v. Lee, 463 F.Supp. 954 (D.Md. 1978)
• Aero Motors, Inc. v. Adm'r, M.V.A., 274 Md. 567 (1975)
• Hunt v. Montgomery Co., 248 Md. 403, 414-15 (1968)
• Pressman v. Barnes, 209 Md. 544, 558-59 (1956)
• Burlington Industries, Inc. v. Exxon Corporation, 379 F.Supp. 754, 757 (D. Md. 1974)
• LaPage v. U.S., 146 F.2d 536 (8th Cir. 1945)
• Commonwealth v. Mason, 112 A.2d 174 (Pa. 1955)
• Fromberg, Inc. v. Thornhill, 315 F.2d 407 (5th Cir. 1963)
• Aluminum Extrusion Co. v. Soule Steel Co., 260 F.Supp. 221 (C.D. Cal. 1966)
• Real Estate Comm'n v. Phares, 268 Md. 344, 348 (1973)
• Ritterspusch v. Lithographic Plate Service, Inc., 208 Md. 592, 600 (1956)
• Thompson v. Paul C. Thompson & Sons, 258 Md. 391, 394 (1970)
• Anderson Nursing Homes, Inc. v. Walker, 232 Md. 442, 444 (1963)
• Marine v. Service Trucking Co., Inc., 225 Md. 315, 318-19 (1961)
• People v. Grier, 128 P.2d 207, 210 (Cal. L.A. Co. App. Dep't Super. Ct. 1942)
• Tennessee Valley Appliances, Inc. v. Rowden, 146 S.W.2d 845, 848 (Tenn. Ct. App. 1940)
• Keitz v. National Paving Co., 214 Md. 479, 491 (1957)
• Sun Cab Co. v. Powell, 196 Md. 572, 578 (1951)
• L.M.T. Steel Products, Inc. v. Peirson, 47 Md. App. 633, 635-38 (1981)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1982/Volume67_1982.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

VEHICLE LAWS

Licensing of Dealers and Salesmen—Car Buying/Referral Services—"Employment" of Salesmen by Dealers—Sale of New Vehicle Through Buying/Referral Service Violates State Licensing Laws

June 8, 1982

The Honorable Lowell N. Bridwell
Secretary of Transportation

You have requested our opinion on the legality of the action of the Motor Vehicle Administration ("MVA") in authorizing certain car buying/referral service businesses to operate in Maryland. Specifically, you have asked whether these businesses are subject to the vehicle salesman licensing laws of Maryland and, if so, whether they are in compliance with the statutory requirements for licensure.

For the reasons discussed below, it is our opinion that the licensing and regulatory requirements of Title 15 of the Transportation Article of the Maryland Code do not adequately accommodate the operation of car buying/referral services, and such businesses are unauthorized to the extent that they receive or expect to receive a commission or other compensation for their referrals. Consequently, unless the General Assembly acts to amend current licensing requirements, the MVA should discontinue its current recognition of these businesses in an orderly manner.

I
Description of Buying/Referral Services

Although the operations of each car buying/referral service may differ in some of their details, we understand that the basic operations of these services are substantially similar to those of the first car buying/referral service to do business in this State: the United Buying Service. Accordingly, as a basis for our discussion, we will first review that we understand to be the method of operation of that company, as described in Detroit Automotive Purchasing Services, Inc. v. Lee, 463 F.Supp. 954 (D.Md. 1978) and 53 Opinions of the Attorney General 402 (1968). (We assume that United Buying Service has not changed its method of operation in any material respect from that described in that case and Opinion.) In addition, we also will review an alternative car buying/referral service proposed to the MVA by the District of Columbia Division of the American Automobile Association.

United Buying Service ("UBS") has its principal office in Chevy Chase, Maryland. UBS solicits new motor vehicle buyers through advertisements suggesting that buyers may be able to obtain savings on the purchase of a vehicle if they purchase through UBS. A potential buyer, desiring to take advantage of UBS's services, contacts UBS directly. UBS employees, who are licensed vehicle salesmen associated with various participating dealers, provide the customer with a brochure listing car models that may be purchased and the prices for each model and optional accessories that the buyer might desire.

When the customer decides which model and accessory package he or she desires to purchase, UBS provides the customer with a purchase certificate and the name of a dealer who, in participation with UBS, has agreed to sell the vehicle and accessories to UBS customers at the price listed in the brochure. The participating dealer takes the purchase certificate from the customer at the time of sale and returns it to UBS, together with payment of a prenegotiated referral fee.

The District of Columbia Division of the American Automobile Association ("AAA") has proposed an alternative car buying/referral service. Under its proposal, AAA would establish agreements with various car dealers to provide AAA members with automobiles at a fixed price above dealer cost. Licensed vehicle salesmen, located at and employed by various participating dealers, would act as the "contact" salespersons for AAA members. AAA employees, who are not themselves licensed vehicle salesmen, would advise members on general vehicle information, consumer ratings, models, available options, and pricing structures, but would refer members to participating dealers for specifics. The member would then be informed that an AAA authorization (confirmation of membership) would be forwarded to the "contact" salesperson at the dealer. On receipt of the authorization, the "contact" would call the member to set up an appointment. A referral or service fee would be remitted to AAA by the dealer in the same manner that dealers remit their referral fees to UBS.

A basic difference between the UBS operation and the AAA proposal is that UBS's own employees are themselves licensed vehicle salesmen associated with participating dealers, while AAA's employees would not be licensed salesmen but would be associated with "contact" licensees directly employed by participating dealers.

II
History of Buying/Referral Services in Maryland

For over thirty years, the sale of motor vehicles has been comprehensively regulated in Maryland. See Detroit Automotive Purchasing Services, Inc. v. Lee, 463 F.Supp. 954 (D.Md. 1978); Aero Motors, Inc. v. Adm'r, M.V.A., 274 Md. 567 (1975). Under the provisions of the Transportation Article, licenses are required for vehicle manufacturers, distributors, and persons operating factory branches, §15-202; for dealers, §15-302; and for salesmen, §15-402. See also COMAR 11.12.01.

In 1966, the General Assembly of Maryland enacted Chapter 515, Laws of Maryland 1966, which defined a vehicle salesman, in relevant part, as follows:

"The term 'salesman' means any person who sells or offers to sell any motor vehicle . . . or solicits or otherwise endeavors to procure in any manner the sales [sic] of a motor vehicle on behalf of a dealer or himself, if he is also a dealer, whether or not such individual is licensed or subject to the licensing requirements of this article." Former Article 66½, §2(a)(49a).

In 1968, an Opinion of this Office concluded that buying services acted "on behalf of a dealer" under this definition and, without licensure, could not do business in Maryland:

"[T]he buying service brings together the buyer and seller, and, in effect, secures a purchase for a fee paid to the buying service; to that extent, the buying service 'solicits or endeavors to procure in any manner the sale of a motor vehicle' within the above definition of salesman, and is, therefore, subject to the dealer licensing laws of this State." 53 Opinions of the Attorney General 402, 403 (1968).

Pursuant to this Opinion, the MVA advised UBS, which already had been operating in Maryland, that it must cease selling automobiles.

However, in 1969, the MVA altered its position after UBS modified the format of its purchasing certificates to reflect that its compensation comes from the buyer, albeit through the dealer. Apparently, the dealer was authorized by the buyer to take UBS's fee out of the money that the dealer received from the buyer and forward that fee to UBS, along with written confirmation by the buyer that UBS was acting as purchasing agent for the buyer and not as selling agent for the dealer. Based on this arrangement, the MVA determined that UBS was not subject to the then dealer and salesmen licensing laws of Maryland.

In 1970, the General Assembly enacted a change in the definition of vehicle salesman, broadening the definition to include one who "[i]nduces or attempts to induce" the sale of a vehicle and who "receives or expects to receive" therefor any value from either the seller or the buyer of a vehicle. Chapter 534, Laws of Maryland 1970.1

In June of 1971, as a result of this redefinition of the term "vehicle salesman", the MVA again determined that UBS could not legally operate in Maryland unless the representatives of the buying/referral service held valid salesman's licenses. However, UBS and the MVA eventually reached an accommodation under which the individual employees of UBS would be licensed as vehicle salesmen through the dealers with which UBS was associated. As licensed vehicle salesmen, the employees of the buying/referral service were regarded by the MVA to be agents and employees of the respective dealers, even though the salesmen were not located at the dealers' fixed places of business and were compensated by UBS, not the dealer.

At the present time, there are several buying/referral services operating in Maryland under this general arrangement.2

III
The DAPS Case

In 1978, the United States District Court for the District of Maryland held that the Maryland licensing provisions for vehicle salesmen were constitutional. Detroit Automotive Purchasing Services, Inc. v. Lee, 463 F.Supp. 954 (D.Md. 1978). In that case, the plaintiff organization, Detroit Automotive Purchasing Services, Inc. ("DAPS"), challenged the statute after it had unsuccessfully tried to reach an accommodation with the MVA to do business in Maryland.

The Court agreed with the MVA's position that the operations of UBS, as previously approved by the MVA, were significantly different from that of DAPS. Under the DAPS proposal, the broker through which the customer would deal would not be licensed. The Court found that the MVA had acted lawfully when it refused to permit the DAPS operation in Maryland, because the DAPS brokers, as independent contractors, would not have been affiliated with a particular dealer.

In reaching its conclusion, the Court twice noted that there can be "some question as to the legality" of even the UBS operation under its accommodation with the MVA. 463 F.Supp. at 960 and 971.

During the pendency of the DAPS case, the 1978 General Assembly considered a bill (House Bill 1759) that would have established a licensing and regulatory scheme for new vehicle brokers. Similar legislation was again filed during the 1979 Session (House Bill 1145). Neither bill was enacted.3

IV
Buying/Referral Services as "Dealers"

Turning to your specific question, we first find that these buying/referral services may not be licensed as dealers.

"Dealer" is defined by §15-101(b), in relevant part, as follows:

"(1) 'Dealer' means . . . a dealer in vehicles of a type required to be registered under Title 13 of this article.

(2) 'Dealer' includes:

(i) A person who during any 12-month period sells five or more of these vehicles, the ownership of which was acquired for resale purposes; and

(ii) For the purposes of §§15-301 through 15-315, inclusive, of this title, any person who sells vehicles, whether or not that person acquired the vehicles for personal or business use, if the vehicles are displayed at a fixed location used principally for the purpose of selling vehicles on a regular basis."

The requirements for obtaining a dealer's license to deal in new vehicles include the requirement that each dealer must possess an unexpired franchise from a manufacturer [§§13-113.1 and 15-305]; that the business be conducted from a fixed location in an adequate and appropriate building with proper service facilities available [§§15-105 and 15-304]; and that the dealer post a surety bond with the MVA for the benefit of the MVA or any other person who sustains a loss as a result of a violation by the dealer, its employees, or its agents [§§15-103 and 15-308]. Sections 15-312 through 15-315 enumerate several unlawful acts, the commission of which by dealers and their employees and agents would subject them to administrative sanctions, including loss of license and possible criminal prosecutions.

Under this statutory scheme, it is evident that car buying/referral services may not be licensed as dealers because they do not hold unexpired franchises from a licensed manufacturer and do not meet the location and other applicable requirements of the Code. See Aero Motors, Inc. v. Adm'r, M.V.A., 274 Md. 567 (1975).

V
Activities of Buying/Referral Service Employees Require Licensure

We now address the question of whether the referral, for a fee, of potential customers to either a dealer or a licensed vehicle salesman falls within the definition of "vehicle salesman" for purposes of licensing regulation. We think it does.

Under §15-402 of the Transportation Article, an individual may not act as a vehicle salesman without first obtaining a license. A "vehicle salesman" is currently defined by §15-101(e)(1) as any individual who:

"(i) For a commission or other compensation, under any form of agreement or arrangement with a dealer, buys, sells, or exchanges or negotiates or attempts to negotiate a sale or exchange of an interest in a vehicle of a type required to be registered under Title 13 of this article; or

(ii) Induces or attempts to induce any other person to buy or exchange an interest in a vehicle of a type required to be registered under Title 13 of this article and receives or expects to receive a commission or other compensation from either the seller or buyer of the vehicle." (Emphasis added.)

Sections 15-401 through 15-412 set out the requirements for licensure as a vehicle salesman. Licenses are issued only to individuals [§15-403]. The application for a license must state the "address of the fixed location from which the licensed activity of the applicant will be conducted" [§15-102]. A person may not be licensed as a vehicle salesman unless the person "[i]s a licensed dealer" or "[i]s employed as a vehicle salesman by a licensed dealer" [§15-404].

Each application must include the "name and business address of the licensed dealer by whom the applicant is or will be employed" [§15-405]. Further, "[a] licensed vehicle salesman may not act as a vehicle salesman for any person other than the licensed dealer named in the salesman's license" [§15-409].

As indicated above, a vehicle salesman is defined as including one who, for or with the expectation of receiving a "commission or other compensation from either the seller or the buyer", "[i]nduces or attempts to induce" the sale of a vehicle.4 The terms "induces" and "attempts to induce" are not defined anywhere in the Transportation Article.

In construing the scope of the phrase "induces or attempts to induce", as used in the definition of "vehicle salesman", we apply the cardinal rule of statutory construction that, unless a different meaning is clearly indicated, a statutory term is to be construed in accordance with the plain and ordinary meaning of the term. Hunt v. Montgomery Co., 248 Md. 403, 414-15 (1968); Pressman v. Barnes, 209 Md. 544, 558-59 (1956).

A standard dictionary definition of "induce" is:

"To lead on; to influence; to prevail on; to move by persuasion or influence." Webster's New International Dictionary 1269 (2nd ed. 1953).

Similarly, a leading legal dictionary defines "induce" to mean:

"To bring on or about, to affect, [to] cause, to influence to an act or course of conduct, [to] lead by persuasion or reasoning, [to] incite by motives, [to] prevail on." Black's Law Dictionary 697 (rev. 5th ed. 1979).5

See also Burlington Industries, Inc. v. Exxon Corporation, 379 F.Supp. 754, 757 (D. Md. 1974):

"'Inducement', . . . while requiring active or affirmative steps to be taken . . . , otherwise is as broad in scope as the range of actions by which one may cause, urge, encourage or aid another to [act]."6

The word "attempt", in turn, is defined as follows:

"In statutes and in cases other than criminal prosecutions[,] an 'attempt' ordinarily means an intent combined with an act falling short of the thing intended. It may be described as an endeavor to do an act, carried beyond mere preparation, but short of execution." Black's Law Dictionary 116 (rev. 5th ed. 1979).

Thus, even if "induces" is given a restrictive meaning, i.e., the action taken must actually accomplish the goal (here, a car sale), the phrase "attempts to induce" is significantly more expansive and does not require that the buying/referral service's actions actually cause an auto sale. It is sufficient if their actions are designed to do so. We believe that, in this case, they are.

In our view, the action of referring a potential customer to a specific dealer or dealers at which the customer is told to expect some special service or benefit (e.g., a lower purchase price) that is available to the customer solely by reason of the referral, and, presumably, not available through other dealers, serves "to influence", "to aid", "to bring about", or "to affect", if not even encourage, the transaction in question: the sale of a vehicle by that dealer to that customer.7 Moreover, established and respected organizations such as UBS and AAA, by serving as intermediaries and making referrals to selected dealers, implicitly lend their own good will and prestige to the referrals, and, indeed, to the referent dealers themselves.8

As indicated by this Office in 1968, while addressing the then narrower definition of "salesman":9

"[T]he buying service brings together the buyer and seller, and, in effect, secures a purchase for a fee paid to the buying service; to that extent, the buying service 'solicits or endeavors to procure . . . the sale of a motor vehicle'." 53 Opinions of the Attorney General 402, 403 (1968).10

Since that Opinion was issued, the statutory definition has been broadened to cover one who, among other things, merely "induces or attempts to induce" the sale of a vehicle. If, under the prior, narrower definition of "salesman", the "bring[ing] together [of a] buyer and seller" was, "in effect, secur[ing] a purchase", then certainly the same actions, under the present, broader definition, constitute an "inducement".11

In sum, we believe that the activities of car buying/referral services, by referring customers to associated dealers with the expectation of receiving a commission or other compensation on the sale of a vehicle, fall within the definition of "vehicle salesman". Consequently, those employees who make the referrals are prohibited from engaging in these activities unless properly licensed as vehicle salesmen. For these reasons, we must conclude that the AAA proposal, pursuant to which AAA employees would not themselves be licensed as vehicle salesmen, is not countenanced by the statutory scheme and may not be permitted by the MVA.12

VI
Eligibility of Buying/Referral Service Employees for Licensure

The question then is whether UBS or other car buying/referral services can comply with the statute by having their employees licensed as "vehicle salesmen". We think not.

It is clear that the State's interest in protecting the consuming public from fraud and deception in the sale of automobiles justifies the present, comprehensive, licensing system. Detroit Automotive Purchasing Services v. Lee, 463 F.Supp. at 964 n. 5, and at 968. See also Aero Motors, Inc. v. Adm'r, M.V.A., 274 Md. 567, 579-80 (1975) (upholding the licensing requirement that new motor vehicle dealers must possess an unexpired franchise from a manufacturer). Although a licensed vehicle salesman is essentially dealing in, or selling, motor vehicles, he or she is relieved of the several licensing requirements imposed on dealers because the salesman is required to be an employee of a licensed dealer. The dealer is legally responsible for the conduct of its employee-salesmen. See §15-109 and §§15-312 through 15-315.

In Detroit Automotive Purchasing Services v. Lee, 463 F.Supp. at 958 and 961, the Court concluded:

"[O]ne who acts as a 'broker' for a car purchase and thereby 'induces or attempts to induce' a car sale in return for a fee qualifies as a new vehicle broker under this statutory scheme and is required to obtain a license.

By extending the definition of vehicle salesman to embrace the so-called vehicle broker, the General Assembly implicitly acknowledged the fact that the vehicle broker acts as much, if not more, to the benefit of dealers as buyers, and that, as an agent facilitating car sales, he should be subject to the same qualifications as traditional salesmen. Accordingly, it required the vehicle broker to align himself to one licensed dealer, as it requires the traditional salesman." (Emphasis added.)

In statutorily defining the role of such "traditional [vehicle] salesmen", the salesman licensing provisions of Title 15 (§§15-404, 15-405, and 15-409) repeatedly refer to and qualify the salesman-dealer relationship by using the words "employed" and "employment".13 Again, we look to the basic rule of construction that a statute should be construed according to the ordinary and natural import of its language, unless a different meaning is clearly indicated by the context of the law. Hunt v. Montgomery Co., 248 Md. 403, 414-15 (1968); Pressman v. Barnes, 209 Md. 544, 558-59 (1956). In this regard, we believe that the General Assembly used the words "employed" and "employment" in their ordinary sense to describe the conventional relationship of a master and servant and, accordingly, intended that the rules for determining the existence of the relation of an employer and employee under Title 15 be the same as the common law rules for determining the master-servant relation. See, e.g., Thompson v. Paul C. Thompson & Sons, 258 Md. 391, 394 (1970); Anderson Nursing Homes, Inc. v. Walker, 232 Md. 442, 444 (1963); Marine v. Service Trucking Co., Inc., 225 Md. 315, 318-19 (1961). See also People v. Grier, 128 P.2d 207, 210 (Cal. L.A. Co. App. Dep't Super. Ct. 1942) ("The word 'servant' is generally synonymous with the word 'employee'"); Tennessee Valley Appliances, Inc. v. Rowden, 146 S.W.2d 845, 848 (Tenn. Ct. App. 1940) ("The words 'employer' and 'employee' are synonymous with the words 'master' and 'servant'").

Among the criteria for determining whether a master-servant relation exists are the selection and engagement of the employee; the payment of wages; the power to discharge; the power to control the employee's performance and manner of doing the work; and the extent to which the work is a part of the regular business of the employer. Anderson Nursing Homes v. Walker, 232 Md. at 444-45; Keitz v. National Paving Co., 214 Md. 479, 491 (1957); Sun Cab Co. v. Powell, 196 Md. 572, 578 (1951). Of these criteria, the most decisive test is the right to control and direct the employee in the performance and manner of doing the work. Thompson v. Paul C. Thompson & Sons, 258 Md. at 395. See also Marine v. Service Trucking Co., 225 Md. at 319; Keitz v. National Paving Co., 214 Md. at 491. See also L.M.T. Steel Products, Inc. v. Peirson, 47 Md. App. 633, 635-38 (1981).

In this regard, we have been advised that UBS and the various other buying/referral services already operating in Maryland, not the dealers with which they are associated, select and hire the individuals to be licensed, pay the employees' compensation, retain the power to discharge the employees, and, most importantly, control the employees' performance and manner of doing their work. Apparently, the individuals who are licensed as vehicle salesmen operate out of the buying/referral services' places of business and not at the dealers' own locations. Thus, in some instances, it is conceivable that the dealer may not even personally know the buying service employee who is nominally one of the dealer's licensed salesmen. Moreover, we are advised that UBS, not the participating dealers, assumes the Workmen's Compensation obligations for these licensed salesmen. If, however, these licensees are in fact employees of the dealers, then the dealers, not UBS, would be legally responsible for the licensees' Workmen's Compensation.14

As the Court stated in Detroit Automotive Purchasing Services v. Lee, the statutory scheme regulating the licensing of dealers and vehicle salesmen clearly contemplates that it is the dealer who should have the right and obligation to control and direct its salespersons in the performance and manner of doing their work:

"[The] licensed dealer, clearly identified as a result of the licensing requirements for vehicle salesman, is himself lawfully and professionally responsible for the conduct of the employee-salesmen. Under §15-109, the licensed dealer can, in some circumstances, lose his own license because of the misconduct of his employee. Thus, the dealer's interest in preserving the investment in a business dependent upon retaining a dealer's license serves as an incentive to monitor the practice of the employee-salesman. In this way, dealer supervision of salesmen augments the regulation of vehicle salesmen through formal MVA adjudication of customer complaints and the imposition of sanctions directly upon the salesman, either by revoking or suspending the salesman's license." 463 F.Supp. at 957-58 (footnote omitted).

Furthermore:

"The pertinent restriction which requires a licensed broker to be 'employed' by a licensed dealer and act as a vehicle salesman for only him, §15-409(b), can be rationally justified as facilitating the informal supervision of vehicle brokers by licensed dealers. . . . [T]he one-dealer-one-salesman rule conceivably functions to avoid confusion among dealers concerning who will have the legal responsibility for supervising the conduct of a salesman on a given transaction." 463 F.Supp. at 969 n. 9.

There is little evidence that dealers, in their arrangements with UBS and similar car buying/referral services, exercise the necessary supervision of and control over "their" licensed vehicle salesmen; such salesmen, in fact, are supervised and controlled by the car buying/referral service.

In light of the above, we conclude that the master-servant relationship actually exists between the buying/referral service and the individual licensees, not between the dealers and the licensees. This is contrary to the statutory scheme regulating the licensing of dealers and vehicle salesmen.15

VII
Conclusion

In summary, it is our opinion that the statutory licensing scheme does not permit the operation of car buying/referral services in the manner described above. The licensing scheme makes it lawful only for licensed dealers and their licensed salesmen to participate in vehicle sales in Maryland. Furthermore, the General Assembly has long required that, as a condition on which a salesman's license may be granted, the salesman must be an employee of the dealer, not some other entity. The mere alignment of buying/referral service staff members as vehicle salesmen with a dealer does not satisfy this employment requirement.

Accordingly, until the General Assembly acts to modify current licensing requirements, it is our opinion that the Motor Vehicle Administration should not authorize the operation of any new car buying/referral services. As to the buying/referral services already operating in Maryland with MVA approval, we recognize that, given the 1971 accommodation with UBS and the long-standing reliance on that accommodation by these various services, it would be inequitable to require them to immediately cease doing business without at least some opportunity to seek legislative relief.16 We suggest, therefore, that services presently operating with MVA approval under the 1971 accommodation be allowed to continue in operation until the current salesman licenses of their employees expire on April 30, 1983.

Stephen H. Sachs, Attorney General
Linda H. Lamone, Assistant Attorney General
Avery Aisenstark
Principal Counsel,
Opinions and Advice

1 Codified as Article 66½, §1-210(a), this legislation defined a "vehicle salesman" as any person who:

"1. Is employed as a salesman by a dealer or who, under any form of contract, agreement or arrangement with a dealer, for commission, money, profit or other thing of value, sells, exchanges, buys, or offers for sale, negotiates or attempts to negotiate, a sale or exchange of an interest in a vehicle required to be registered under subtitle 3; or

2. Induces or attempts to induce any person to buy or exchange an interest in a vehicle required to be registered under subtitle 3, and who receives or expects to receive a commission, money, brokerage fee, profit or any other thing of value from, either the seller or purchaser of said vehicle." (Emphasis added.)

2 Of course, to the extent that this accommodation might sanction unlawful conduct, the State is not bound to honor it.

3 House Bill 1759 was characterized in the DAPS case as a "less restrictive regulation of vehicle brokers", that is, less restrictive than the ongoing UBS accommodation. 463 F.Supp. at 967 n. 6, and at 969. Inasmuch as that proposed legislation would have permitted a totally different method of operation from that of UBS, we cannot draw from its rejection any clear inferences about what the General Assembly understood or intended with regard to the continued legality of the method of operation then, and now, conducted by UBS.

4 Obviously, the gratuitous referral of a potential customer to a licensed dealer or vehicle salesman, i.e., a referral without receipt of or expectation of receiving compensation from either the buyer or seller, does not fall within this definition and would not require licensure. For discussions of what constitutes compensation for a referral in similar contexts, see, e.g., 52 Opinions of the Attorney General 215 (1967) (payment of fee for influencing procurement of insurance: consideration requirement is met even if it merely compensates expenses); Opinion No. 79-039 (July 12, 1979) (unpublished) (payment of referral fee falls within statutory reference, in law regulating real estate brokers and salesmen, to "compensation . . . for the rendering of any service . . . forbidden to be rendered . . . by other than licensees"); Opinion No. 78-057 (May 8, 1978) (unpublished) (licensure not required under home improvement statute where no consideration passes for referral).

5 Numerous courts have consistently adopted and applied these or substantially similar definitions in varying contexts. See, e.g., LaPage v. U.S., 146 F.2d 536 (8th Cir. 1945) (inducing transportation of women in commerce for immoral purposes); Commonwealth v. Mason, 112 A.2d 174 (Pa. 1955) (inducing holders of securities to exchange or sell them).

6 Accord Fromberg, Inc. v. Thornhill, 315 F.2d 407 (5th Cir. 1963); Aluminum Extrusion Co. v. Soule Steel Co., 260 F.Supp. 221 (C.D. Cal. 1966).

7 It is this referral to a specific dealer or dealers, coupled with the receipt of a commission on the sale of a vehicle by the dealer, that sharply distinguishes the activities of car buying/referral services from the mere sale of automotive and other consumer reporting type magazines to the public.

8 Cf. 49 Opinions of the Attorney General 263 (1964) (credit card company's program of offering to finance payment of insurance premiums unlawfully influences the procurement of insurance).

9 See Part II of this Opinion.

10 Nothing in the subsequent history of this matter, including the MVA's accommodation with UBS, suggests that this Opinion's characterization of referral service activities is not as valid today as it was in 1968.

11 Other statutes, using broad language not unlike that used by §15-101(e) to define "vehicle salesman", have been similarly construed. See, e.g., Real Estate Comm'n v. Phares, 268 Md. 344, 348 (1973); Ritterspusch v. Lithographic Plate Service, Inc., 208 Md. 592, 600 (1956); 49 Opinions of the Attorney General 263 (1964); Opinion No. 79-039 (July 12, 1979) (unpublished); Opinion No. 77-041 (March 23, 1977) (unpublished).

12 For purposes of the current licensing laws, as broadened in 1970, it is immaterial whether the buying/referral services act as agents of the buyer or of the seller. These services, which contract with dealers to sell vehicles to buyers at a prenegotiated price, are clearly intermediaries in vehicle sales transactions and receive payment for their services. Under §15-101(e), any entity or person inducing vehicle sales for compensation, whether from the seller or the buyer, is a vehicle salesman and must be licensed.

13 For example, §15-404 provides that a person may not be licensed unless the person "is employed as a vehicle salesman by a licensed dealer"; that "each application for a license shall contain or be accompanied by the written statement of the licensed dealer by whom the applicant is or will be employed, certifying that the applicant has been accepted by the licensed dealer for employment as a vehicle salesman"; and that the dealer must "immediately . . . notify the administration of any termination of employment of the salesman".

14 Section 1-102 of the Transportation Article provides:

"(a) In this section, 'employer' has the same meaning as under the State Workmen's Compensation Laws.

(b) Before any license or permit is issued under this article to an employer to engage in an activity in which the employer may employ any individual, the employer shall file with the issuing authority:

(1) A certificate of compliance with the State Workmen's Compensation Laws; or

(2) A workmen's compensation insurance policy or binder number."

15 It may even have been that, for reasons such as this, the Court in the DAPS case, as noted in Part III of this Opinion, suggested "some question as to the legality" of the MVA-UBS accommodation. That issue, while not then before the Court, is of course now before us.

16 We recognize that our conclusion affects the operation of a type of business that may well be beneficial to consumers. We suggest that, if the General Assembly believes these buying services should be permitted to operate, it should adopt legislation expressly providing for the same and, in that legislation, clearly specify the terms and conditions under which buying/referral services would be authorized to conduct business. See, e.g., the proposals contained in House Bill 1759 (1978) and House Bill 1145 (1979).