The California Optometric Association (COA) and national optical companies ended their historic stand-off and agreed on legislation that provides a route for optometrists to co-locate with companies that dispense eyeglasses and contact lenses in California. AB 684 passed the legislature on September 11, 2015 and allows optometrists to engage in leasing arrangements under certain conditions, with national optical companies, registered dispensing opticians (RDOs) and vision plans. It also transfers oversight of RDOs from the Medical Board of California to the Board of Optometry. If the Governor signs the bill as expected by October 11, 2015, the legislation will be effective on January 1, 2016.

Significantly, the compromise legislation was based on a bill drafted by the COA, whose representatives solicited input from stakeholders to reach a workable compromise. The Governor’s office facilitated the final bill through a series of meetings with industry, trade associations, and government organization representatives to ensure that the legal issues resulting from People v. Cole[1] would be finally resolved.

Under the legislation, an optical company, vision plan or RDO will be able to lease space on its premises to an optometrist if their leasing agreement establishes specified conditions designed to protect the optometrist’s practice from commercial interference. Those protections include, among other things, minimum one year lease terms, good faith termination provisions, and the optometrist’s control over staff, scheduling, records, fees and access to the optometrist’s office space.

The bill will permit an optical company or an RDO to own, operate and provide products and services to a vision plan, so long as the vision plan does not employ optometrists. Those vision plans that currently engage in these acts and employ optometrists have until January 1, 2019 to end their employment arrangements so long as they meet specified benchmarks during the three year transition period.

Other parts of the bill restrict certain types of advertising by co-located RDOs and optometrists and require RDOs to post consumer notices describing the spectacle and contact release rules promulgated by the Federal Trade Commission. The bill clarifies the rights of vision plans to advertise network providers and their locations and of optometrists to advertise their locations in reference to other occupants, including RDOs.

Memberships, proprietary interests, co-ownership, or any profit-sharing arrangements between optometrists and opticians continue to be prohibited, unless otherwise permitted under the legislation. The bill narrows the precluded arrangements, however, to stock ownership, interlocking directors, trusteeship, mortgage, or trust deed.

The Board of Optometry’s jurisdiction will be expanded to include the licensing and oversight of RDOs, spectacle and contact lens dispensers and nonresident contact lens sellers. An RDO will be appointed to the board by the Governor, taking the place of an existing optometrist’s board position. The board will have the authority to inspect optometrist and RDO co-located premises and require the submission of leases. Optometrists in settings with RDOs will need to report their business relationships to the board. Finally, the legislation will establish a five person subcommittee that includes two RDOs, two public members and an additional board member. The subcommittee is charged with making recommendations to the full board about the regulation of dispensing opticians.

The bill shows compromise by all parties in a situation where a solution was badly needed. The Attorney General’s broad interpretation of People v. Cole affected practically every vision plan associated with a company that sells optical goods to the public or manufactures optical goods. The Attorney General’s enforcement of the laws under that broad interpretation would have resulted in further, prolonged litigation with an industry that has been litigating the repealed and amended laws off and on since at least 1956.

The legislation affects the following Sections of the Business and Professions Code:

Section 655 (repealed and replaced); Sections amended:   2546.2, 2546.9, 2550.1, 2554, 2556, 2567, 3010.5, 3011, 3013 Sections added:  2556.1, 2556.2, 3020, 3021, 3023