§ 51-07-29 — Warranty work compensation

1. a. A motor vehicle manufacturer or distributor shall reasonably compensate its
dealers for labor and parts provided by the dealer in connection with the following
manufacturer or distributor sponsored, issued, or required items:
(1) Predelivery preparation.
(2) Installation of accessories or components required by the manufacturer or
distributor to be installed before the sale of a vehicle to a consumer.
(3) Diagnostic work.
(4) Maintenance programs.
(5) Extended warranty.
(6) Certified preowned warranty.
(7) Service contracts.
(8) Parts exchange programs.
(9) Recall, goodwill, and warranty work performed by the dealer.
b. Reasonable compensation for labor for the services identified in subdivision a
may not be less than the average retail rate charged by the dealer as provided
under subsection 5 multiplied by the time guide used by the dealer for
nonwarranty customer-paid service repair orders. To establish a time guide, a
dealer shall provide written notice to the manufacturer or distributor with the name
of the time guide the dealer uses. The manufacturer or distributor may not require
the dealer to provide any other information to establish the time guide the dealer
uses. If no time guide exists for a warranty repair, compensation for warranty
labor must equal the dealer's average retail rate multiplied by the time spent to
complete the repair, and may not be less than the time charged to a retail
customer for the same or similar work provided. A dealer shall use time

allowances for the diagnosis and performance of work and service which are
reasonable and adequate for a qualified technician to perform the work or
services. Reasonable compensation for parts for the services identified in
subdivision a may not be less than the average retail rate customarily charged by
the dealer for these parts as provided under subsection 4.
2. A dealer shall submit a claim for reimbursement for services within ninety days from
the completion of the services identified in subdivision a of subsection 1. A motor
vehicle manufacturer or distributor shall pay a dealer on a claim made by a dealer
under this section within thirty days of the approval of the claim. The manufacturer or
distributor shall either approve or disapprove a claim within thirty days after the claim
is submitted to the manufacturer or distributor. The manufacturer or distributor may
prescribe the manner in which and the forms on which the dealer must present the
claim. A claim not specifically disapproved in writing within thirty days after the
manufacturer or distributor receives the claim must be construed to be approved and
the manufacturer or distributor shall pay the claim within thirty days. If a manufacturer
or distributor disapproves a claim in writing within thirty days, the manufacturer or
distributor shall contemporaneously provide the dealer with a detailed written
explanation of the reason the claim was disapproved. The dealer has thirty days from
the receipt of the disapproval to resubmit a corrected claim.
3. A motor vehicle manufacturer or distributor shall fully compensate its motor vehicle
dealers licensed in this state for parts and labor specified in this section. Failure to fully
compensate includes a reduction in the amount due under this section to the dealer or
imposing a separate charge, surcharge, or other imposition by which the motor vehicle
manufacturer or distributor seeks to recover the costs of complying with this section
from the dealer.
4. The retail rate customarily charged by the dealer for parts is established by the dealer
submitting to the manufacturer or distributor one hundred sequential nonwarranty
customer-paid service repair orders that contain warranty-like parts or ninety
consecutive days of nonwarranty customer-paid service repair orders that contain
warranty-like parts, whichever is less, covering repairs made no more than one
hundred eighty days before the submission and declaring the average percentage
markup.
5. The retail rate customarily charged by the dealer for labor must be established using
the same process as provided under subsection 4 and declaring the average labor
rate. The average labor rate must be determined by dividing the amount of the dealer's
total labor sales by the number of total hours that generated those sales. If a labor rate
and parts markup rate are simultaneously declared by the dealer, the dealer may use
the same repair orders to complete each calculation as provided under subsection 4.
6. In calculating the retail rate customarily charged by the dealer for parts and labor as
provided in subsections 4 and 5, the following work may not be included in the
calculation:
a. Repairs for manufacturer or distributor special events, specials, or promotional
discounts for retail customer repairs;
b. Parts sold at wholesale;
c. Parts or labor used in manufacturer or distributor sponsored programs that
restrict the pricing for repairs;
d. Routine maintenance not covered under any retail customer warranty, including
fluids, filters, and belts not provided in the course of repairs;
e. Nuts, bolts, fasteners, and similar items that do not have an individual part
number;
f. Replacement or work on tires, including wheel or tire rotations or balancing, or
replacements of brakes, including brake drums, rotors, shoes, or pads;
g. Vehicle reconditioning;
h. Alignments, unless necessary as part of a mechanical repair;
i. Batteries, other than electric vehicle or hybrid vehicle propulsion batteries;
j. Repairs of a motor vehicle owned by the dealer or an employee of the dealer;

k. Installation of accessories;
l. Repairs to or with aftermarket parts; and
m. Repairs performed on motor vehicles of a line make other than that for which the
dealer is franchised by the motor vehicle manufacturer.
7. a. The average of the parts markup rates and labor rate calculated under
subsections 4 through 6 is presumed to be fair and reasonable and must go into
effect thirty days following the manufacturer's receipt of the submission subject to
the manufacturer or distributor's ability to contest the rate as provided in this
subsection. The motor vehicle manufacturer or distributor may not issue more
than one notice to the dealer contesting any declared labor rate or parts markup,
and may not add to, expand, supplement, or otherwise modify any reason for
contesting the declared rate or parts markup. A manufacturer or distributor may
contest the material accuracy of the rate calculated under this section by
providing a written objection to the dealer within thirty days after receiving the
dealer's submission, and shall:
(1) Provide the dealer with a copy of all calculations used by the motor vehicle
manufacturer or distributor to make the determination of the dealer's labor
rate or parts markup, a written explanation of the basis for any inaccuracy
alleged by the motor vehicle manufacturer or distributor, and evidence
substantiating any written explanation.
(2) Provide a proposed adjustment of the dealer's labor rate or parts markup
based solely upon the information provided by paragraph 1.
(3) Commence paying the dealer at the proposed adjusted labor rate or parts
markup determined by the motor vehicle manufacturer or distributor as
provided in this section. This section applies to all proposed adjusted labor
rates or parts markups, even if the motor vehicle manufacturer's or
distributor's determination of the labor rate or parts markup is different from
the labor rate or parts markup provided in the dealer's submission.
b. If a motor vehicle manufacturer or distributor fails to comply with the requirements
of subdivision a within thirty days of receipt of submission, the submission is
approved.
c. If a dealer agrees with the conclusions of the motor vehicle manufacturer or
distributor and any corresponding adjustment to the labor rate or parts markup
contained within the written objection, no further action is required. The new
adjusted rate is effective thirty days after the dealer's submission is received by
the manufacturer or distributor.
d. If a motor vehicle manufacturer or distributor provides a written objection that
complies with the requirements under subdivision a, and the dealer does not
agree with the proposed adjusted labor rate or parts markup contained within the
written objection, or if the dealer disputes the motor vehicle manufacturer or
distributor complied with the provisions of subdivision a, the dealer may bring an
action in a court of competent jurisdiction. In such proceeding:
(1) The motor vehicle manufacturer or distributor has the burden of proof by a
preponderance of the evidence, and must show:
(a) The manufacturer or distributor complied with subdivision a;
(b) The dealer's submitted labor rate or parts markup was materially
inaccurate; and
(c) The manufacturer's or distributor's proposed adjustment to the
dealer's submitted labor rate or parts markup was materially accurate.
(2) If the dealer prevails in the action, the dealer's labor rate or parts markup is
retroactive to the date thirty days following the motor vehicle manufacturer's
or distributor's receipt of the submission, and the dealer shall recover all
expenses in bringing and maintaining the action, including reasonable
attorney fees. If a court finds the motor vehicle manufacturer or distributor
willfully violated this section, the dealer is entitled to recover three times the
amount of the retroactive labor rate or parts markup.

8. In establishing a rate under this section, the dealer's labor rate or parts markup must
be calculated using the method prescribed in subsections 4 though 6.
9. A dealer, manufacturer, or distributor may demand that the average parts markup or
average labor rate be calculated using the process provided under subsections 4
and 5; however, the demand for the average parts markup may not be made within
twelve months of the last parts markup declaration and the demand for the average
labor rate may not be made within twelve months of the last labor rate declaration. If a
parts markup or labor rate is demanded by the dealer or manufacturer or distributor,
the dealer shall determine the repair orders to be included in the calculation under
subsections 4 and 5.
10. a. If a motor vehicle manufacturer or distributor furnishes, or causes to be furnished,
a part to a dealer at no cost or at a reduced cost for use in performing the
services identified in subdivision a of subsection 1, the motor vehicle
manufacturer or distributor shall compensate the dealer in the same manner as
parts compensation under this section by paying the dealer for the dealer's cost
of the part, if any, plus an amount equal to the dealer's parts markup, multiplied
by the wholesale value of the part. The wholesale value of the part must be the
greater of:
(1) The amount the dealer paid for the part or a substantially identical part if
already owned by the dealer;
(2) The cost of the part shown in a current, or prior, motor vehicle
manufacturer's, distributor's, or furnishing party's established price schedule;
and
(3) The cost of a substantially identical part shown in a current, or prior, motor
vehicle manufacturer's, distributor's, or furnishing party's established price
schedule.
b. A motor vehicle manufacturer or distributor may not establish or implement a
special part number for any part used in the services identified in subdivision a of
subsection 1 if it results in lower compensation to the dealer than as calculated
under this section.
11. A motor vehicle manufacturer or distributor may not:
a. Require or influence or attempt to influence a dealer to implement or change the
prices for which it sells parts or labor in retail repairs.
b. 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
unless otherwise agreed by the dealer and the manufacturer or distributor.
c. Take, or threaten to take, adverse action against a dealer that seeks to obtain
compensation under this section, including:
(1) Creating or implementing an obstacle or process that is inconsistent with the
motor vehicle manufacturer's obligations to the dealer under this chapter;
(2) Acting in bad faith; or
(3) Hindering, delaying, or rejecting the proper and timely payment of
compensation due to a dealer under this section, provided nothing in this
paragraph may restrict or impair audits or chargebacks conducted in
accordance with section 51-07-02.4.
12. This section applies to all manufacturers and distributors as defined by section
51-07-00.1, and any other person that supplies a component or part installed on a new
motor vehicle for which the warranty of the component or part is warrantied by another
person that is not the manufacturer.