Section 407.828

Title XXVI TRADE AND COMMERCE

Chapter 407

Effective - 28 Aug 2010, 3 histories, see footnote   (history) 

  407.828.  Franchisor's duties to franchisee — schedule of compensation — claims payment — retail rate calculation — audit authority. — 1.  Notwithstanding any provision in a franchise to the contrary, each franchisor shall specify in writing to each of its franchisees in this state the franchisee's obligations for preparation, delivery, and warranty service on its products.  The franchisor shall fairly and reasonably compensate the franchisee for preparation, delivery, and warranty service required of the franchisee by the franchisor.  The franchisor shall provide the franchisee with the schedule of compensation to be paid to the franchisee for parts, labor, and service, and the time allowance for the performance of the labor and service for the franchisee's obligations for preparation, delivery, and warranty service.

  2.  The schedule of compensation shall include reasonable compensation for diagnostic work, as well as repair service and labor for the franchisee to meet its obligations for preparation, delivery, and warranty service.  The schedule shall also include reasonable and adequate time allowances for the diagnosis and performance of preparation, delivery, and warranty service to be performed in a careful and professional manner.  In the determination of what constitutes reasonable compensation for labor and service pursuant to this section, the principal factor to be given consideration shall be the prevailing wage rates being charged for similar labor and service by franchisees in the market in which the franchisee is doing business, and in no event shall the compensation of a franchisee for labor and service be less than the rates charged by the franchisee for similar labor and service to retail customers for nonwarranty labor and service, provided that such rates are reasonable.  The primary factor in determining a fair and reasonable compensation for parts under this section shall be the prevailing amount charged for similar parts by other same line-make franchisees in the market in which the franchisee is doing business and the fair and reasonable compensation for parts shall not be less than the amount charged by the franchisee for similar parts to retail customers for nonwarranty parts, provided that such rates are reasonable.  If another same line-make franchisee is not available within the market, then the prevailing amount charged for similar parts by other franchisees in the market shall be used as the primary factor.

  3.  A franchisor shall perform all warranty obligations, including recall notices; include in written notices of franchisor recalls to new motor vehicle owners and franchisees the expected date by which necessary parts and equipment will be available to franchisees for the correction of the defects; and reasonably compensate any of the franchisees in this state for repairs required by the recall.  Reasonable compensation for parts, labor, and service shall be determined under subsection 2 of this section.

  4.  No franchisor shall require a franchisee to submit a claim authorized under this section sooner than thirty days after the franchisee completes the preparation, delivery, or warranty service authorizing the claim for preparation, delivery, or warranty service.  All claims made by a franchisee under this section shall be paid within thirty days after their approval.  All claims shall be either approved or disapproved by the franchisor within thirty days after their receipt on a proper form generally used by the franchisor and containing the usually required information therein.  Any claims not specifically disapproved in writing within thirty days after the receipt of the form shall be considered to be approved and payment shall be made within fifteen days thereafter.  A franchisee shall not be required to maintain defective parts for more than thirty days after submission of a claim.

  5.  A franchisor shall compensate the franchisee for franchisor-sponsored sales or service promotion events, including but not limited to, rebates, programs, or activities in accordance with established written guidelines for such events, programs, or activities, which guidelines shall be provided to each franchisee.

  6.  No franchisor shall require a franchisee to submit a claim authorized under subsection 5 of this section sooner than thirty days after the franchisee becomes eligible to submit the claim.  All claims made by a franchisee pursuant to subsection 5 of this section for promotion events, including but not limited to rebates, programs, or activities shall be paid within ten days after their approval.  All claims shall be either approved or disapproved by the franchisor within thirty days after their receipt on a proper form generally used by the franchisor and containing the usually required information therein.  Any claim not specifically disapproved in writing within thirty days after the receipt of this form shall be considered to be approved and payment shall be made within ten days.

  7.  In calculating the retail rate customarily charged by the franchisee for parts, service, and labor, the following work shall not be included in the calculation:

  (1)  Repairs for franchisor, manufacturer, or distributor special events, specials, or promotional discounts for retail customer repairs;

  (2)  Parts sold at wholesale;

  (3)  Engine assemblies and transmission assemblies;

  (4)  Routine maintenance not covered under any retail customer warranty, such as fluids, filters, and belts not provided in the course of repairs;

  (5)  Nuts, bolts, fasteners, and similar items that do not have an individual part number;

  (6)  Tires; and

  (7)  Vehicle reconditioning.

  8.  If a franchisor, manufacturer, importer, or distributor furnishes a part or component to a franchisee, at no cost, to use in performing repairs under a recall, campaign service action, or warranty repair, the franchisor shall compensate the franchisee for the part or component in the same manner as warranty parts compensation under this section by compensating the franchisee at the average markup on the cost for the part or component as listed in the price schedule of the franchisor, manufacturer, importer, or distributor, less the cost for the part or component.

  9.  A franchisor shall not require a franchisee to establish the retail rate customarily charged by the franchisee for parts, service, or labor by an unduly burdensome or time-consuming method or by requiring information that is unduly burdensome or time consuming to provide, including, but not limited to, part-by-part or transaction-by-transaction calculations.  A franchisee shall not request a franchisor to approve a different labor rate or parts rate more than twice in one calendar year.

  10.  If a franchisee submits any claim under this section to a franchisor that is incomplete, inaccurate, or lacking any information usually required by the franchisor, then the franchisor shall promptly notify the franchisee, and the time limit to submit the claim shall be extended for a reasonable length of time, not less than five business days following notice by the franchisor to the franchisee, for the franchisee to provide the complete, accurate, or lacking information to the franchisor.

  11.  (1)  A franchisor may only audit warranty, sales, or incentive claims and charge-back to the franchisee unsubstantiated claims for a period of twelve months following payment, subject to all of the provisions of this section.  Furthermore, if the franchisor has good cause to believe that a franchisee has submitted fraudulent claims, then the franchisor may only audit suspected fraudulent warranty, sales, or incentive claims and charge-back to the franchisee fraudulent claims for a period of two years following payment, subject to all provisions of this section.

  (2)  A franchisor shall not require documentation for warranty, sales, or incentive claims more than twelve months after the claim was paid.

  (3)  Prior to requiring any charge-back, reimbursement, or credit against a future transaction arising out of an audit, the franchisor shall submit written notice to the franchisee along with a copy of its audit and the detailed reason for each intended charge-back, reimbursement, or credit.  A franchisee may file a complaint with the administrative hearing commission within thirty days after receipt of any such written notice challenging such action.  If a complaint is filed within the thirty days, then the charge-back, reimbursement, or credit shall be stayed pending a hearing and determination of the matter under section 407.822^*.  If the administrative hearing commission determines that any portion of the charge-back, reimbursement, or credit is improper, then that portion of the charge-back, reimbursement, or credit shall be void and not allowed.

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(L. 2001 H.B. 575, A.L. 2010 H.B. 2198)

*Section number "408.822" appears in original rolls.