Warranty responsibility.

(1)(a) A licensee shall timely compensate a motor vehicle dealer who performs work to maintain or repair a licensee’s product under a warranty or maintenance plan, extended warranty, certified pre-owned warranty, or a service contract, issued by the licensee or its common entity, unless issued by a common entity that is not a manufacturer; to fulfill a licensee’s delivery or preparation procedures; or to repair a motor vehicle as a result of a licensee’s or common entity’s recall, campaign service, authorized goodwill, directive, or bulletin.

(b) As used in this section, the terms “compensate” and “compensation” shall include all labor and parts included in the work as provided in this section. The term “labor” shall include time spent by employees for diagnosis and repair of a vehicle. The term “parts” shall include replacement parts and accessories. The term “retail customer repair” means work, including parts and labor, performed by a dealer which does not come within the provisions of a licensee’s or its common entity’s warranty, extended warranty, certified pre-owned warranty, service contract, or maintenance plan, and excludes parts and labor described in paragraphs (3)(b) and (4)(c).

(c) Compensation not paid to a motor vehicle dealer within 30 days after receipt of a claim is not timely. A licensee shall not establish or implement a term, policy, or procedure different from those described in this section for any motor vehicle dealer to obtain compensation under this section, and shall not pay a motor vehicle dealer less than amounts due pursuant to this section.

(2) A licensee shall not take or threaten to take adverse action against a motor vehicle dealer who seeks to obtain compensation pursuant to this section. As used in this subsection, the term “adverse action” includes, without limitation, acting or failing to act, other than in good faith; creating or implementing an obstacle or process that is inconsistent with the licensee’s obligations to the dealer under this section; hindering, delaying, or rejecting the proper and timely payment of compensation due under this section to a dealer; establishing, implementing, enforcing, or applying any policy, standard, rule, program, or incentive regarding compensation due under this section other than in a uniform and nondisparate manner among the licensee’s dealers in this state; conducting or threatening to conduct any warranty, retail customer repair, or other service-related audit more frequently than once each calendar year; or denying, reducing, or charging back a warranty claim because of a dealer’s failure to comply with all of the licensee’s requirements for describing or processing a claim.

(3)(a) A licensee shall compensate a motor vehicle dealer for parts used in any work described in subsection (1). The compensation may be an agreed percentage markup over the licensee’s dealer cost, but if an agreement is not reached within 30 days after a dealer’s written request, compensation for the parts is the greater of:

1. The dealer’s arithmetical mean percentage markup over dealer cost for all parts charged by the dealer in 50 consecutive retail customer repairs made by the dealer within a 3-month period before the dealer’s written request for a change in reimbursement pursuant to this section, or all of the retail customer repair orders over that 3-month period if there are fewer than 50 retail customer repair orders in that period. The motor vehicle dealer shall give the licensee 10 days’ written notice that it intends to make a written request to the licensee for a warranty parts reimbursement increase and permit the licensee, within that 10-day period, to select the initial retail customer repair for the consecutive repair orders that will be attached to the written request used for the markup computation, provided that if the licensee fails to provide a timely selection, the dealer may make that selection. No repair order shall be excluded from the markup computation because it contains both warranty, extended warranty, certified pre-owned warranty, maintenance, recall, campaign service, or authorized goodwill work and a retail customer repair. However, only the retail customer repair portion of the repair order shall be included in the computation, and the parts described in paragraph (b) shall be excluded from the computation;

2. The licensee’s highest suggested retail or list price for the parts; or

3. An amount equal to the dealer’s markup over dealer cost that results in the same gross profit percentage for parts used in work done under subsection (1) as the dealer receives for parts used in the customer retail repairs, as evidenced by the average of said dealer’s gross profit percentage in the dealer’s financial statements for the 2 months preceding the dealer’s request.

If a licensee reduces the suggested retail or list price for any replacement part or accessory, it also shall reduce, by at least the same percentage, the cost to the dealer for the part or accessory. The dealer’s markup or gross profit percentage shall be uniformly applied to all of the licensee’s parts used by the dealer in performing work covered by subsection (1).

(b) In calculating the compensation to be paid for parts by the arithmetical mean percentage markup over dealer cost method in paragraph (a), parts discounted by a dealer for repairs made in group, fleet, insurance, or other third-party payor service work; parts used in repairs of government agencies’ repairs for which volume discounts have been negotiated; parts used in special events, specials, or promotional discounts for retail customer repairs; parts sold at wholesale; parts used for internal repairs; engine assemblies and transmission assemblies; parts used in retail customer repairs for routine maintenance, such as fluids, filters and belts; nuts, bolts, fasteners, and similar items that do not have an individual part number; and tires shall be excluded in determining the percentage markup over dealer cost.

(c) If a licensee furnishes a part or component to a motor vehicle dealer at no cost to use in performing repairs under a recall, campaign service action, or warranty repair, the licensee shall compensate the dealer for the part or component in the same manner as warranty parts compensation under this subsection, less the dealer cost for the part or component as listed in the licensee’s price schedule.

(d) A licensee shall not establish or implement a special part or component number for parts used in predelivery, dealer preparation, warranty, extended warranty, certified pre-owned warranty, recall, campaign service, authorized goodwill, or maintenance-only applications if that results in lower compensation to the dealer than as calculated in this subsection.

(4)(a) A licensee shall compensate a motor vehicle dealer for labor performed in connection with work described in subsection (1) as calculated in this subsection.

(b) Compensation paid by a licensee to a motor vehicle dealer may be an agreed hourly labor rate. If, however, an agreement is not reached within 30 days after the dealer’s written request, the dealer may choose to be paid the greater of:

1. The dealer’s hourly labor rate for retail customer repairs, determined by dividing the amount of the dealer’s total labor sales for retail customer repairs by the number of total labor hours that generated those sales for the month preceding the request, excluding the work in paragraph (c); or

2. An amount equal to the dealer’s markup over dealer cost that results in the same gross profit percentage for labor hours performed in work covered by subsection (1) as the dealer receives for labor performed in its customer retail repairs, as evidenced by the average of said dealer’s gross profit percentage in the dealer’s financial statements provided to the licensee for the 2 months preceding the dealer’s written request, if the dealer provides in the written request the arithmetical mean of the hourly wage paid to all of its technicians during that preceding month. The arithmetical mean shall be the dealer cost used in that calculation.

After an hourly labor rate is agreed or determined, the licensee shall uniformly apply and pay that hourly labor rate for all labor used by the dealer in performing work under subsection (1). However, a licensee shall not pay an hourly labor rate less than the hourly rate it was paying to the dealer for work done under subsection (1) on January 2, 2008. A licensee shall not eliminate flat-rate times from or establish an unreasonable flat-rate time in its warranty repair manual, warranty time guide, or any other similarly named document. A licensee shall establish reasonable flat-rate labor times in its warranty repair manuals and warranty time guides for newly introduced model motor vehicles which are at least consistent with its existing documents. As used in this subsection, the terms “retail customer repair” and “similar work” are not limited to a repair to the same model vehicle or model year, but include prior repairs that resemble but are not identical to the repair for which the dealer is making a claim for compensation.

(c) In determining the hourly labor rate calculated under subparagraph (b)1., a dealer’s labor charges for internal vehicle repairs; vehicle reconditioning; repairs performed for group, fleet, insurance, or other third-party payors; discounted repairs of motor vehicles for government agencies; labor used in special events, specials, or express service; and promotional discounts shall not be included as retail customer repairs and shall be excluded from such calculations.

(5) A licensee shall not review, change, or fail to pay a motor vehicle dealer for parts or labor determined under this section unless the dealer has requested a change, or the action is pursuant to the licensee’s written, predetermined schedule for increasing parts or labor compensation that is not contrary to any provision of this section. A dealer may make written requests for changes in compensation for parts or labor performed under this section not more than semiannually. The dealer shall attach supporting documentation to each written request. Any increase in parts or labor reimbursement determined thereafter to be owed to the dealer shall be paid pursuant to this section retroactively for all claims filed by a dealer 15 days after the date of the licensee’s receipt of the dealer’s written request.

(6) A licensee shall not recover or attempt to recover, directly or indirectly, any of its costs for compensating a motor vehicle dealer under this section.

(7) A licensee shall not require, influence, or attempt to influence a motor vehicle dealer to implement or change the prices for which it sells parts or labor in retail customer repairs. A licensee shall not implement or continue a policy, procedure, or program to any of its dealers in this state for compensation under this section which is inconsistent with this section.

(8) If a court determines with finality that any provision of this section is void or unenforceable, the remaining provisions shall not be affected but shall remain in effect.