Warranty agreements; claims; compensation of dealers.

(1) Every manufacturer, distributor, wholesaler, factory branch or division, distributor branch or division, or wholesale branch or division shall provide a fair and reasonable warranty agreement on any new equipment which it sells and shall fairly compensate each of its dealers for labor and parts used in fulfilling such warranty agreements.

(2)(a) Each claim for payment under such warranty agreements made by a dealer for such labor and parts shall be paid within 30 days following its approval. Each such claim shall be either approved or disapproved within 30 days after its receipt. When any such claim is disapproved, the dealer who submitted it shall be notified in writing of such disapproval within such period, and such notice shall state the specific grounds upon which the disapproval is based.

(b) Any special handling of claims required of the dealer by the manufacturer, distributor, wholesaler, factory branch or division, distributor branch or division, or wholesale branch or division, which handling is not uniformly required of all dealers of that make, may be enforced only after 30 days’ notice in writing to the dealer and upon good and sufficient reason.

(3)(a) The minimum lawful basis for compensating a dealer for warranty work, as provided for in this section, shall be calculated for labor in accordance with the reasonable and customary amount of time required to complete such work, expressed in hours and fractions of hours multiplied by the dealer’s established hourly retail labor rate. Prior to filing a claim for reimbursement for warranty work, the dealer must notify the applicable manufacturer, distributor, or wholesaler of his or her hourly retail labor rate.

(b) The minimum lawful basis for compensation to the dealer for parts used in fulfilling such warranty work shall be at the dealer’s costs for such parts, including all freight and handling charges applicable to such parts, plus 15 percent of the sum of such costs and charges to reimburse the dealer’s reasonable cost of doing business and providing such warranty service on behalf of the manufacturer.

(4) It shall be unlawful to deny, delay payment for, or restrict a claim by a dealer for warranty service or parts, incentives, hold-backs, or other amounts owed to a dealer unless the denial, delay, or restriction is the direct result of a material defect in the claim that affects its validity.

(5) A manufacturer, distributor, or wholesaler may audit warranty claims submitted by its dealers only for a period of up to 1 year following payment of such claims and may charge back to its dealers only those amounts based upon paid claims shown by the audit to be invalid. However, this limitation shall not apply in any case of fraudulent claims.

(6) Any audit of a dealer by or on behalf of a manufacturer, distributor, or wholesaler for sales incentives, service incentives, rebates, or other forms of incentive compensation shall be completed not later than 12 months after the date of termination of such incentive compensation program. However, this limitation shall not apply in any case of fraudulent claims.