61-4-213. Warranty reimbursement. (1) (a) If a motor vehicle franchisor requires or permits motor vehicle franchisees to perform labor or provide parts in satisfaction of a warranty issued by the franchisor:
(i) the motor vehicle franchisor shall reimburse the motor vehicle franchisee for the labor as rendered, using the franchisor's labor time guide or the labor time guide used by the dealer for labor furnished other than pursuant to warranty, at the dealer's election, and for parts and supplies, including but not limited to engine, transmission, and other parts assemblies, as furnished, in an amount equal to the prevailing retail rate charged by the franchisee for the labor or the prevailing retail markup charged by the franchisee for the parts and supplies in circumstances in which the labor is rendered or the parts and supplies are furnished other than pursuant to warranty;
(ii) the motor vehicle franchisor shall reimburse the motor vehicle franchisee pursuant to subsection (1)(a)(i) for labor performed on and parts supplied for a motor vehicle by the franchisee in good faith and in accordance with the manufacturer's warranty and written repair requirements and procedures, notwithstanding any requirement that the franchisor accept the return of the motor vehicle or make payment to a consumer with respect to the motor vehicle pursuant to the provisions of Title 61, chapter 4, part 5; and
(iii) the motor vehicle franchisee may establish its prevailing retail labor rate or parts markup by submitting to the motor vehicle franchisor whichever of the following produces the fewer number of repair orders, all of which must be for repairs made no more than 180 days before the submission:
(A) all consecutive repair orders that include 100 sequential repair orders reflecting qualified repairs; or
(B) all repair orders closed during any period of 90 consecutive days.
(b) The submission required under subsection (1)(a)(iii) may consist of:
(i) a single set of repair orders for calculating both the franchisee's prevailing retail labor rate and its parts markup;
(ii) separate sets of repair orders, one for calculating the franchisee's prevailing retail labor rate and the other for calculating its parts markup; or
(iii) a set of repair orders for calculating only the franchisee's prevailing retail labor rate or only its prevailing retail parts markup.
(2) The motor vehicle franchisee shall calculate its prevailing retail labor rate by determining the total charges for labor from the qualified repairs submitted and then dividing that amount by the total number of hours charged for the repairs.
(3) The motor vehicle franchisee shall calculate its prevailing retail parts markup by determining the total charges for parts from the qualified repairs submitted, dividing that amount by the franchisee's total cost of the purchase of those parts including shipping and other charges, subtracting 1, and multiplying by 100 to produce a percentage.
(4) The motor vehicle franchisee shall provide written notice to the motor vehicle franchisor of its prevailing retail labor rate or prevailing retail parts markup calculated in accordance with subsection (2) or (3) if the franchisee seeks to be compensated under subsection (1).
(5) Any discounts must be allocated as indicated on the face of a repair order between parts and labor. If no allocation is indicated, they must be allocated pro rata. Manufacturer or distributor promotional reward program cash-equivalent pay methods may not be considered discounts.
(6) (a) The prevailing retail labor rate or the prevailing retail parts markup that is declared must go into effect 30 days following the motor vehicle franchisor's receipt of the notice referred to in subsection (2) unless within the 30-day period the franchisor contests the declaration by written notice of objection, received by the motor vehicle franchisee within the 30-day period, that the declared rate or markup is materially inaccurate.
(b) The objection must contain:
(i) a full explanation of any and all reasons that the declared rate is materially inaccurate;
(ii) evidence substantiating each stated reason;
(iii) a copy of all calculations used by the franchisor to demonstrate the material inaccuracy; and
(iv) a proposed adjusted retail labor rate or retail parts rate, as applicable.
(c) The motor vehicle franchisor may not submit more than one notice of objection to the motor vehicle franchisee with respect to any declared labor rate or retail parts markup, except in connection with litigation. After submitting the notice of objection, the franchisor may not add to, expand, supplement, or otherwise modify any element of the objection, including but not limited to its grounds for contesting the labor rate or parts markup, except in connection with litigation.
(d) A revision or supplement to a submission to correct or clarify the submission does not constitute a new submission for any purpose, including but not limited to that of subsection (9).
(7) In a judicial proceeding or a department proceeding involving an application or enforcement of the provisions of 61-4-203, 61-4-204, and 61-4-210(4):
(a) the issue must be limited to whether the labor rate or parts markup submitted by the motor vehicle franchisee was materially inaccurate;
(b) the motor vehicle franchisor has the burden of proof; and
(c) any resolution of the matter must be retroactive to the date 30 days following the franchisor's receipt of the franchisee's submission.
(8) A motor vehicle franchisor may not directly or indirectly:
(a) (i) require a motor vehicle franchisee to establish or alter its labor rate or parts markup by any means or methodology other than as prescribed in 61-4-204; or
(ii) except to object to or rebut a franchisee's declared retail labor rate or parts markup, itself initiate a process to establish or alter that labor rate or parts markup, including but not limited to:
(A) substituting any other purported qualified repair order sample for that submitted by a franchisee, including but not limited to the use, for purposes of establishing or reducing the franchisee's labor rate, of the franchisee's sample submitted for purposes of establishing or increasing its parts markup or the use, for purposes of establishing or reducing the franchisee's parts markup, of the franchisee's sample submitted for purposes of establishing or increasing its labor rate; or
(B) imposing an unduly burdensome or time-consuming method or requiring information that is unduly burdensome or time-consuming to provide, including but not limited to part-by-part or transaction-by-transaction calculations;
(b) recover or attempt to recover all or any portion of the franchisor's costs for compensating its dealers for warranty labor, parts, or supplies, either by reduction in the amount due or by separate charge or a surcharge to the wholesale price paid by the dealer to the franchisor for any product, including motor vehicles and parts;
(c) establish or implement a special part number for parts used in warranty work if it results in lower compensation to the franchisee than as calculated in this section;
(d) require, influence, or attempt to influence a franchisee to implement or change the prices for which it sells parts or labor in retail repairs;
(e) take or threaten to take adverse action against a franchisee who seeks to obtain compensation pursuant to this section or dissuade or discourage the franchisee from doing so, including but not limited to:
(i) creating or implementing an obstacle or process that is inconsistent with the franchisor's obligations to the franchisee under this section;
(ii) acting or failing to act, other than in good faith;
(iii) hindering, delaying, or rejecting the proper and timely payment of compensation due under this section to a franchisee;
(iv) establishing, implementing, enforcing, or applying any policy, standard, rule, program, or incentive regarding compensation due under this section other than in a uniform and consistent manner among the franchisor's franchisees in this state; or
(v) conducting or threatening to conduct any warranty repair, nonwarranty repair, or other service-related audit; or
(f) implement or continue a policy, procedure, or program to any of its franchisees for compensation that is inconsistent with this section.
(9) A motor vehicle franchisee may not submit, to establish or increase rates paid pursuant to subsections (1)(a)(iii) and (1)(b):
(a) its warranty labor rate more than once in a 12-month period; and
(b) its warranty parts markup more than once in a 12-month period.
(10) A recreational motor vehicle franchisee's warranty compensation for parts means actual wholesale cost plus a minimum 30% handling charge and any freight costs incurred to return the removed parts to the recreational motor vehicle franchisor.
(11) If a motor vehicle franchisor supplies a part or parts to a motor vehicle franchisee at no cost or at a reduced cost for use in fulfilling a warranty, the franchisor must compensate the franchisee for the franchisee's cost of the part, if any, plus an amount equal to the franchisee's prevailing retail parts markup, multiplied by the fair wholesale value of the part. The fair wholesale value of the part is the greater of:
(a) the amount the franchisee paid for the part or a substantially identical part if already owned by the franchisee;
(b) the cost of the part shown in a current or prior established price schedule of the franchisor; or
(c) the cost of a substantially identical part shown in a current or prior established price schedule of the franchisor.
(12) (a) The motor vehicle franchisor shall reimburse the motor vehicle franchisee for parts supplied and labor rendered under a warranty within 30 days after approval of a claim for reimbursement.
(b) All claims for reimbursement must be approved or disapproved within 30 days after receipt of the claim by the motor vehicle franchisor. When a claim is disapproved, the motor vehicle franchisee must be notified in writing of the grounds for the disapproval. A claim that has been approved and paid may not be charged back to the franchisee unless it can be shown that the claim was false or fraudulent, that the labor was not properly performed, or that the parts or labor were unnecessary to correct the defective condition.
(c) A manufacturer may not deny a claim or reduce the amount to be reimbursed to the dealer if the dealer has provided reasonably sufficient documentation demonstrating that the dealer performed the services in compliance with the written policies and procedures of the manufacturer known to the dealer at the time of submission of the claim.
(d) A manufacturer may not deny a claim based solely on a dealer's incidental failure to comply with a specific claim processing requirement, such as a clerical error or other administrative technicality that does not put into question the legitimacy of the claim.
(e) A franchisor may not audit a claim after the expiration of 12 months following the payment of the claim.
(13) For the purposes of this section, the following definitions apply:
(a) "Labor" means work or service performed, including that of a diagnostic character, with respect to repair of a motor vehicle.
(b) "Parts" means original or replacement parts, accessories, and components with respect to a motor vehicle, including engine, transmission, and other parts assemblies.
(c) (i) "Qualified repair" means a repair to a vehicle that:
(A) would have come within the motor vehicle franchisor's new vehicle warranty but for the vehicle having exceeded the time or mileage limit of the warranty;
(B) does not otherwise constitute warranty work; and
(C) does not constitute any of the work encompassed by subsection (13)(c)(ii).
(ii) The term does not include:
(A) routine maintenance, including but not limited to replacements of fluids, filters, batteries, bulbs, belts, nuts, bolts, or fasteners, unless provided in the course of and related to a repair;
(B) replacements of or work on tires, wheels, or elements related to either tires or wheels, including but not limited to vehicle alignments and tire or wheel rotations;
(C) repairs for which volume discounts have been negotiated with government agencies, insurers, extended warranty or service contract providers, or other third-party payors;
(D) repairs that are the subject of motor vehicle franchisor special events, promotions, or service campaigns or are otherwise subject to motor vehicle franchisor discounts;
(E) repairs of motor vehicles owned by the dealer or an employee of the dealer;
(F) installations of accessories;
(G) repairs of conditions caused by collision, road hazard, the force of the elements, vandalism, theft, or owner, operator, or third-party negligence or deliberate acts;
(H) safety or vehicle emission inspections required by law;
(I) vehicle reconditioning;
(J) parts sold at wholesale;
(K) repairs using aftermarket parts; or
(L) goodwill repairs or replacements approved and reimbursed by the motor vehicle franchisor.
(d) "Qualified repair order" means a repair order that encompasses, in whole or in part, a qualified repair or repairs.
(e) "Repair order" means an invoice paid by a retail customer and closed as of the time of submission, encompassing one or more repairs to or other work on a vehicle, and reflecting, in the case of a prevailing retail parts markup submission, the cost of each part and its sale price and, in the case of a prevailing retail labor rate submission, the labor hours allocated to each job and the sale price of the labor. The invoice may be submitted in electronic form.
(f) "Warranty" means, in addition to a new motor vehicle warranty, predelivery preparation, a recall, or a certified preowned warranty, in each case issued or administered by a motor vehicle franchisor.
History: En. Sec. 4, Ch. 283, L. 2019; amd. Sec. 17, Ch. 389, L. 2021.