1 HB90
2 215615-3
3 By Representative Ingram
4 RFD: Commerce and Small Business
5 First Read: 11-JAN-22
Page 0 1 215615-3:n:01/03/2022:FC/ma LSA2021-2336R2
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8 SYNOPSIS: This bill would provide for the
9 determination of reasonable compensation by motor
10 vehicle manufacturers or similar entities for
11 pre-delivery and warranty service by motor vehicle
12 dealers. This bill would also authorize a motor
13 vehicle dealer to file a civil action if the dealer
14 and the manufacturer or similar entity cannot agree
15 on the reasonable compensation for the warranty
16 service.
17
18 A BILL
19 TO BE ENTITLED
20 AN ACT
21
22 Relating to motor vehicle dealers; to amend Section
23 8-20-7 of the Code of Alabama 1975, relating to warranty
24 obligations to dealers, to further specify the determination
25 of reasonable compensation by motor vehicle manufacturers or
26 similar entities for pre-delivery and warranty service by
27 motor vehicle dealers; and to authorize a motor vehicle dealer
Page 1 1 to file a civil action if the dealer and the manufacturer or
2 similar entity cannot agree on the reasonable compensation for
3 the warranty service.
4 BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
5 Section 1. Section 8-20-7 of the Code of Alabama
6 1975, is amended to read as follows:
7 "ยง8-20-7.
8 "(a) For purposes of this section, the following
9 words have the following meanings:
10 "(1) PRE-DELIVERY SERVICE. All work and services,
11 except warranty work, performed on a new motor vehicles by a
12 motor vehicle dealer at the direction of the warrantor prior
13 to the delivery of the vehicle to the first retail consumer.
14 "(2) REPAIR ORDER. An invoice, paid by a retail
15 customer, and closed as of the time of submission,
16 encompassing one or more repairs to a motor vehicle, and
17 reflecting, in the case of a parts markup submission, the cost
18 of each part and the sale price thereof, and in the case of a
19 labor rate submission, the total charges for labor and the
20 total number of hours that produced the charges, which invoice
21 may be submitted in electronic form.
22 "(3) QUALIFIED REPAIR. A repair to a motor vehicle
23 paid by a retail customer, which would have come within the
24 warrantor's new motor vehicle warranty, but for the motor
25 vehicle having exceeded the chronological or mileage limit of
26 such warranty, and which does not constitute any of the work
27 encompassed by subsection (f)(5).
Page 2 1 "(4) QUALIFIED REPAIR ORDER. A repair order which
2 encompasses, in whole or in part, a qualified repair or
3 repairs.
4 "(5) WARRANTOR. A manufacturer, distributor, or
5 wholesaler, factory branch, factory representative,
6 distributor branch, or distributor representative.
7 "(6) WARRANTY WORK. All labor, including that of a
8 diagnostic character, performed, and all parts, including
9 original or replacement parts, and components, including
10 engine, transmission, and other parts assemblies, installed by
11 motor vehicle dealers on motor vehicles which are reasonably
12 incurred by motor vehicle dealers, other than the incidental
13 expenses incurred in performing labor and installing parts on
14 motor vehicles, in fulfilling a warrantor's obligations under
15 a new motor vehicle warranty, a recall, or a certified
16 pre-owned warranty, to consumers, including, but not limited
17 to, the expense of shipping or returning defective parts to
18 the warrantor, when required by the warrantor.
19 "(a) (b) Every manufacturer, distributor, or
20 wholesaler, factory branch, factory representative,
21 distributor branch, or distributor representative warrantor
22 shall specify in writing to each of its motor vehicle dealers
23 the dealer's obligation for pre-delivery service and warranty
24 service on its products, shall compensate the motor vehicle
25 dealer for warranty the service required of the dealer by the
26 manufacturer, distributor, or wholesaler, factory branch,
27 factory representative, distributor branch, or distributor
Page 3 1 representative warrantor and shall provide the dealer the
2 schedule of compensation to be paid such dealer for parts,
3 work, and service in connection with warranty the services,
4 and the time allowance for the performance of such work and
5 service.
6 "(b) (c) In no event shall such schedule of
7 compensation fail to include reasonable compensation for
8 diagnostic work, service, labor, and parts. Time allowances
9 for the diagnosis and performance of warranty work and service
10 shall be reasonable and adequate for the work to be performed.
11 In the determination of what constitutes reasonable
12 compensation under this section, the principal factors to be
13 given consideration shall be the prevailing wage rates being
14 paid by the dealer, in the community in which the dealer is
15 doing business, and in In no event shall such compensation of
16 a dealer for warranty services including labor and parts, be
17 less than the rates or prices charged by such dealer for like
18 service to retail customers for nonwarranty service, repairs,
19 and parts, provided that such prices and rates are not
20 unreasonable. This subsection does not apply to compensation
21 for parts, systems, fixtures, appliances, furnishings,
22 accessories, and features of a motor home that are designed,
23 used, and maintained primarily for non-vehicular residential
24 purposes, or parts related to motorcycle repairs.
25 "(c) (d) It is a violation of this section for any
26 manufacturer, distributor, or wholesaler, factory branch,
27 factory representative, distributor branch, or distributor
Page 4 1 representative warrantor to fail to perform any warranty
2 obligations under the motor vehicle manufacturer's warranty,
3 or to fail to include in written notices of factory recalls to
4 dealers the expected date by which necessary parts and
5 equipment will be available to dealers for the correction of
6 such defects, or to fail to compensate any of the motor
7 vehicle dealers for repairs effected by such recall.
8 "(d) (e) All claims made by new motor vehicle
9 dealers pursuant to this section for such labor and parts
10 shall be paid within 30 days following their approval;
11 provided, however, that the manufacturer warrantor retains the
12 right to audit such claims and to charge back the dealer for
13 any fraudulent claims for a period not to exceed 12 months
14 from the date the claim was paid. All such claims shall be
15 either approved or disapproved within 30 days after their
16 receipt on forms and in the manner specified by the
17 manufacturer warrantor, and any claim not specifically
18 disapproved in writing within 30 days after the receipt shall
19 be construed to be approved and payment must follow within 30
20 days. A manufacturer warrantor shall not disapprove claims for
21 which the dealer has received preauthorization from the
22 manufacturer warrantor or its representative nor shall the
23 manufacturer warrantor unreasonably disapprove a claim solely
24 based on the dealer's incidental failure to comply with a
25 specific claim processing requirement that results only in a
26 clerical error or administrative error; rather a claim denial
27 must be based upon a material defect and deviation from the
Page 5 1 reasonable written claim submission requirements of the
2 manufacturer. In the event of neglect, oversight, or mistake
3 by the dealer, a dealer may submit an amended claim, or may
4 submit a claim not submitted within the time required by the
5 manufacturer warrantor, for labor and parts up to 120 days
6 from the date on which such claim was first submitted or could
7 have been submitted.
8 "(f)(1) For the purposes of this section, reasonable
9 compensation shall be determined as provided in this
10 subsection.
11 "(2) The markup customarily charged by the dealer
12 for parts or its labor rate may be established at the election
13 of the dealer by the dealer submitting to the warrantor,
14 either by electronic transmission or tangible delivery, all
15 consecutive repair orders that include 100 sequential repair
16 orders reflecting qualified repairs, or all repair orders
17 closed during any period of 90 consecutive days, whichever
18 produces the fewer number of repair orders, covering repairs
19 made no more than 180 days before the submission and declaring
20 the parts markup or labor rate.
21 "(3) The dealer shall calculate its labor rate by
22 determining the total charges for labor from the qualified
23 repairs submitted and dividing that amount by the total number
24 of hours that produced the charges. The dealer shall calculate
25 its parts markup by determining the total charges for parts
26 from the qualified repairs submitted, dividing that amount by
27 its total cost of the purchase of the parts, subtracting one
Page 6 1 from that amount, and multiplying by 100 to produce a
2 percentage.
3 "(4) A motor vehicle dealer seeking to establish or
4 modify its warranty reimbursement labor rate, parts markup, or
5 both, not more frequently than once per 12-month period, shall
6 submit to the warrantor one of the following:
7 "a. A single set of repair orders for purposes of
8 calculating both its labor rate and parts markup.
9 "b. A set of repair orders for purposes of
10 calculating only its labor rate or for purposes of calculating
11 only its parts markup.
12 "(5) In calculating the rate customarily charged by
13 the dealer for parts and labor for purposes of this
14 subsection, the following shall not be included in the
15 calculation of the rate:
16 "a. Repairs which are the subject of manufacturer or
17 distributor discounts, such as special events, specials,
18 promotions, coupons, or service campaigns.
19 "b. Repairs of motor vehicles owned by the dealer.
20 "c. Routine maintenance, including, but not limited
21 to, replacements of fluids, filters, batteries, bulbs, belts,
22 nuts, bolts, or fasteners, unless provided in the course of,
23 and related to, an otherwise qualified repair.
24 "d. Installations of accessories.
25 "e. Replacements of or work on tires, wheels,
26 including alignments, wheel or tire rotations, or replacements
27 of brake drums, rotors, shoes, or pads.
Page 7 1 "f. Vehicle reconditioning.
2 "g. Safety or emission inspections required by law.
3 "h. Repairs for which volume discounts have been
4 negotiated with government agencies.
5 "i. Body shop repairs, including repairs covered by
6 insurance, for conditions caused by collision, road hazard,
7 the force of the elements, vandalism, theft, or the negligence
8 or deliberate act of the owner, operator, or a third party.
9 "j. Parts that do not have individual part numbers.
10 "k. Warrantor approved and reimbursed goodwill
11 repairs or reimbursements.
12 "l. Window replacement, window etching, window tint,
13 protective film, or other masking products.
14 "(6) a. The submitted parts markup or labor rate
15 shall go into effect 45 days after the warrantor's receipt of
16 its submission, unless, within that period, the warrantor
17 reasonably substantiates that the submission is materially
18 incomplete, materially inaccurate, or is materially
19 unreasonable and provides a full explanation of any reasons
20 that the submitted markup or rate is materially incomplete,
21 materially inaccurate, or materially unreasonable, evidence
22 validating each reason, a copy of all calculations used by it
23 demonstrating any material inaccuracy, and a proposed adjusted
24 markup or rate provided that the dealer's submission is
25 materially accurate based upon the qualified repair orders
26 submitted by the dealer. In that event, the warrantor may
27 submit only one rebuttal to the dealer, and may not thereafter
Page 8 1 add to, expand, supplement, or otherwise modify any element
2 thereof, including, but not limited to, its grounds for
3 contesting the parts markup or labor rate, unless the
4 warrantor did not possess the information at the time of its
5 rebuttal, or if the information is used for the purpose of
6 rebutting the dealer's response to the warrantor's rebuttal.
7 "b. If a warrantor determines from any set of repair
8 orders submitted under this subsection that the labor rate or
9 parts markup calculated under this subsection is substantially
10 higher or lower than the rate currently on record with the
11 warrantor for labor or parts, or both, the warrantor, in
12 accordance with this subsection, may request additional repair
13 orders for a period of 60 days prior to or 60 days subsequent
14 to the time period for which the repair orders were submitted
15 for purposes of an alteration, and shall have 45 days from
16 receiving the additional repair orders to rebut the
17 presumption that the dealer's proposed markup and labor rates
18 are reasonable.
19 "(7) If the dealer and the warrantor do not agree on
20 the parts markup or labor rate, then the dealer may file an
21 action in a court having jurisdiction in this state within 120
22 days of receiving the warrantor's written rejection of the
23 dealer's proposed parts markup or labor rate. In that action,
24 the warrantor shall have the burden of proving by a
25 preponderance of the evidence that the dealer's submitted
26 parts markup or labor rate, or both, was materially
27 incomplete, materially inaccurate, or was materially
Page 9 1 unreasonable. Upon a court decision in favor of the dealer
2 finding that the labor or parts rate shall be more than
3 proposed by the warrantor, any increase in the dealer's parts
4 markup or labor rate arising from the proceeding shall be
5 effective retroactively to the date 45 days following the
6 warrantor's receipt of the original submission to the dealer
7 or to the warrantor.
8 "(8) In the determination of what constitutes
9 materially unreasonable compensation under this section,
10 relevant factors include, but are not limited to, the
11 prevailing wage rates paid by similarly situated dealers in
12 the state."
13 Section 2. This act shall become effective on the
14 first day of the third month following its passage and
15 approval by the Governor, or its otherwise becoming law.
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