§ 56:10-15 — Reimbursement for services or parts under warranty or law.

New Jersey § 56:10-15

• Jurisdiction: New Jersey
• Title 56: TRADE NAMES, TRADE-MARKS AND UNFAIR TRADE PRACTICES

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3. If any motor vehicle franchise shall require or permit motor vehicle franchisees to perform labor services or provide parts in satisfaction of a repair service offered and reimbursed by the motor vehicle franchisor, including, but not limited to, a warranty, an extended warranty, a maintenance plan, a service-related plan, or a recall: a. the motor vehicle franchisor shall reimburse each motor vehicle franchisee for such labor services, including diagnostic work, as are rendered and for such parts as are supplied, in an amount equal to the prevailing retail price calculated pursuant to subsections d., e., and j. of this section. The average retail labor rate, average retail labor time allowance, and parts markup, as declared by the motor vehicle franchisee, shall become effective 30 days following the declaration subject to audit by the motor vehicle franchisor only of the sample submitted by the motor vehicle franchisee. Any proposed adjustment of the average retail labor rate, the average retail labor time allowance, or the parts markup made by the motor vehicle franchisor shall be based only on an audit of that sample; b. the motor vehicle franchisor shall not by agreement, by restrictions upon reimbursement, or otherwise restrict the nature and extent of labor services to be rendered or parts to be provided so that such restriction prevents the motor vehicle franchisee from satisfying the warranty by rendering labor services in a good and workmanlike manner and providing parts that are required in accordance with generally accepted standards. Any such restriction shall constitute a prohibited practice hereunder; c. the motor vehicle franchisor shall reimburse the motor vehicle franchisee pursuant to subsection a. of this section, without deduction, for labor services performed on, and parts supplied for, a motor vehicle by the motor vehicle franchisee in good faith and in accordance with generally accepted standards, notwithstanding any requirement that the motor vehicle franchisor accept the return of the motor vehicle or make payment to a consumer with respect to the motor vehicle pursuant to the provisions of P.L.1988, c.123 (C.56:12-29 et seq.); d. for the purposes of this section, the "prevailing retail price" charged by: (1) a motor vehicle franchisee for parts means the price paid by the motor vehicle franchisee for those parts, including all shipping and other charges, multiplied by the sum of 1.0 and the franchisee's average percentage parts markup over the price paid by the motor vehicle franchisee for parts purchased by the motor vehicle franchisee from the motor vehicle franchisor and sold at retail. The motor vehicle franchisee may establish average percentage parts markup under this section by submitting to the motor vehicle franchisor 100 sequential customer paid service repair orders or 90 days of customer paid service repair orders, whichever is less, covering repairs made no more than 180 days before the submission, and declaring the average percentage parts markup. The average percentage parts markup so declared shall go into effect 30 days following the declaration subject to audit by the motor vehicle franchisor only of the sample submitted by the motor vehicle franchisee. Any proposed adjustment of the average parts markup by the motor vehicle franchisor shall be based only on an audit of that sample. A motor vehicle franchisee shall not request a change in the average percentage parts markup more than twice in one calendar year; and (2) a recreational motor vehicle franchisee for parts means actual wholesale cost, plus a minimum 30 percent handling charge and any freight costs incurred to return the removed parts to the motor vehicle franchisor; e. (1) if a motor vehicle franchisor supplies, or causes to be supplied, a part or parts for use in a repair rendered under a warranty, an extended warranty, a maintenance plan, a service-related plan, a recall, or other work that is also offered and reimbursed by the motor vehicle franchisor, at no cost or at a reduced cost for use in performing the repair work, the franchisor shall compensate the motor vehicle franchisee in the same manner as the motor vehicle franchisor compensates the motor vehicle franchisee under this section by paying the motor vehicle franchisee for the franchisee’s cost of the part, if any, plus an amount equal to the franchisee’s parts markup multiplied by the wholesale value of the part. The wholesale value of the part shall be the greater of: (a) the amount the motor vehicle franchisee paid for the part or a substantially identical part; (b) the cost of the part in a current or prior established price schedule issued by the motor vehicle franchisor or issued by a third party that has previously supplied the part to the motor vehicle franchisee; (c) the cost of a substantially identical part in a current or prior established price schedule issued by the motor vehicle franchisor or by a third party; or (d) the reasonable wholesale price for the part. (2) The requirements of this section shall not apply to electric propulsion batteries, entire engine assemblies, and entire transmission assemblies. In the case of those parts, the motor vehicle franchisor shall reimburse the motor vehicle franchisee in the amount of 30 percent of what the motor vehicle franchisee would have paid the motor vehicle franchisor for the part if the part had not been supplied by the franchisor other than by the sale of that part to the motor vehicle franchisee; f. the motor vehicle franchisor shall reimburse the motor vehicle franchisee for parts supplied and labor services rendered under a warranty, an extended warranty, a maintenance plan, or a service-related plan offered by the motor vehicle franchisor within 30 days after approval of a claim for reimbursement. All claims for reimbursement shall be approved or disapproved within 30 days after receipt of the claim by the motor vehicle franchisor. When a claim is disapproved, the motor vehicle franchisee shall be notified in writing of the grounds for the disapproval. No claim that has been approved and paid shall be charged back to the motor vehicle franchisee unless it can be shown that the claim was false or fraudulent, that the labor services were not properly performed, that the parts or labor services were unnecessary to correct the defective condition, or that the motor vehicle franchisee failed to reasonably substantiate the claim in accordance with reasonable written requirements of the motor vehicle franchisor, provided that the motor vehicle franchisee had been notified of the requirements prior to the time the claim arose and the requirements were in effect at the time the claim arose. A motor vehicle franchisor shall not audit a claim after the expiration of 12 months following the payment of the claim unless the motor vehicle franchisor has reasonable grounds to believe that the claim was fraudulent; g. the obligations imposed on motor vehicle franchisors by this section shall apply to any parent, subsidiary, affiliate, or agent of the motor vehicle franchisor, any person under common ownership or control, any employee of the motor vehicle franchisor, and any person holding one percent or more of the shares of any class of securities or other ownership interest in the motor vehicle franchisor, if a warranty or service or repair plan is issued by that person instead of or in addition to one issued by the motor vehicle franchisor; h. the provisions of this section shall also apply to motor vehicle franchisor-administered service and repair plans: (1) if the motor vehicle franchisee offers for sale only the motor vehicle franchisor administered service or repair plan; or (2) if the motor vehicle franchisee is paid its prevailing retail price for all service or repair plans that the motor vehicle franchisee offers for sale to purchasers of new motor vehicles; (3) for the first 36,000 miles of coverage under the motor vehicle franchisor administered service or repair plan, if the warranty offered by the motor vehicle franchisor on the motor vehicle provides coverage for less than 36,000 miles; or (4) for motor vehicles covered by a motor vehicle franchisor administered service or repair plan, if the motor vehicle franchisee does not offer for sale the motor vehicle franchisor administered service or repair plan. With respect to motor vehicle franchisor administered service or repair plans covering only routine maintenance service, this section applies only to those plans sold to customers on or after the effective date of P.L.1999, c.45; i. a motor vehicle franchisor shall make payment to a motor vehicle franchisee pursuant to incentive, bonus, sales, performance, or other programs within 30 days after receipt of a claim from the motor vehicle franchisee. When a claim is disapproved, the motor vehicle franchisee shall be notified in writing of the grounds for disapproval. No claim shall be disapproved unless it can be shown that the claim was false or fraudulent or that the motor vehicle franchisee failed to reasonably substantiate the claim in accordance with reasonable written requirements of the motor vehicle franchisor, provided that the motor vehicle franchisee had been notified of the requirements prior to the time the claim arose and the requirements were in effect at the time the claim arose. A motor vehicle franchisor shall not audit a claim after the expiration of 12 months following the payment of the claim; j. (1) a calculation of the retail rate customarily charged by the dealer for parts markup shall not include the following: (a) discounts for retail customer repairs or special or promotional events offered by a manufacturer, manufacturer branch, distributor, or distributor branch; (b) parts sold or repairs performed at wholesale; (c) routine maintenance, including, but not limited to, the replacement of brakes, bulbs, fluids, filters, batteries, and belts that are not provided in the course of or related to a repair; (d) items that do not have individual part numbers, including, but not limited to, nuts, bolts, and fasteners; (e) vehicle reconditioning; (f) accessories; (g) repairs of conditions caused by a collision, a road hazard, natural forces, vandalism, theft, or negligent or deliberate damage by an owner, operator, or third party; (h) parts sold or repairs performed for insurance carriers; (i) vehicle emission inspections required by law; (j) manufacturer-approved goodwill or policy repairs or replacements; (k) repairs for a government agency or a service contract provider employed as an agent of a government agency; (l) repairs with aftermarket parts when calculating a retail parts rate, not when calculating a retail labor rate; (m) repairs on aftermarket parts; (n) replacement of tires or work on tires, including wheel alignments or tire rotations; or (o) repairs of motor vehicles owned by the franchisee or an employee of a franchisee at the time of the repair; (2) a calculation of the retail labor time allowance customarily charged by the dealer for customer paid repairs shall not include the following: (a) discounts for retail customer repairs or special or promotional events offered by a manufacturer, manufacturer branch, distributor, or distributor branch; (b) parts sold or repairs performed at wholesale; (c) routine maintenance, including, but not limited to, the replacement of brakes, bulbs, fluids, filters, batteries, and belts that are not provided in the course of or related to a repair; (d) items that do not have individual part numbers, including, but not limited to, nuts, bolts, and fasteners; (e) vehicle reconditioning; (f) accessories; (g) repairs of conditions caused by a collision, a road hazard, natural forces, vandalism, theft, or negligent or deliberate damage by an owner, operator, or third party; (h) parts sold or repairs performed for insurance carriers; (i) vehicle emission inspections required by law; (j) manufacturer-approved goodwill or policy repairs or replacements; (k) repairs for a government agency or a service contract provider employed as an agent of a government agency; (l) repairs with aftermarket parts when calculating a retail parts rate, not when calculating a retail labor rate; (m) repairs on aftermarket parts; (n) replacement of tires or work on tires, including wheel alignments or tire rotations; or (o) repairs of motor vehicles owned by the franchisee or an employee of a franchisee at the time of the repair; and (3) a calculation of the retail labor rate customarily charged by the dealer for customer paid repairs shall not include the following: (a) discounts for retail customer repairs or special or promotional events offered by a manufacturer, manufacturer branch, distributor, or distributor branch; (b) parts sold or repairs performed at wholesale; (c) routine maintenance, including, but not limited to, the replacement of brakes, bulbs, fluids, filters, batteries, and belts that are not provided in the course of or related to a repair; (d) items that do not have individual part numbers, including, but not limited to, nuts, bolts, and fasteners; (e) vehicle reconditioning; (f) accessories; (g) repairs of conditions caused by a collision, a road hazard, natural forces, vandalism, theft, or negligent or deliberate damage by an owner, operator, or third party; (h) parts sold or repairs performed for insurance carriers; (i) vehicle emission inspections required by law; (j) manufacturer-approved goodwill or policy repairs or replacements; (k) repairs for a government agency or a service contract provider employed as an agent of a government agency; (l) repairs with aftermarket parts when calculating a retail parts rate but not when calculating a retail labor rate; (m) repairs on aftermarket parts; (n) replacement of tires or work on tires, including wheel alignments or tire rotations; or (o) repairs of motor vehicles owned by the franchisee or an employee of the franchisee at the time of the repair; k. (1) a motor vehicle franchisor shall not: (a) impose unreasonable handling procedures or unreasonable handling charges upon its motor vehicle franchisees for return or disposal of any part, including electric propulsion batteries, dangerous or unexploded air bag units, or seat belt tensioners; (b) penalize or charge a motor vehicle franchisee for the return of a defective electric propulsion battery that is returned to the motor vehicle franchisor within 60 days of its removal from a vehicle under warranty service, extended warranty service, a maintenance plan, a service-related plan, a recall, or other work that is also offered and reimbursed by the motor vehicle franchisor; or (c) charge a dealer more for a late return than the wholesale price charged to the dealer for the electric propulsion battery. (2) A franchisor shall compensate a franchisee for labor time to package and return ship an electric propulsion battery and shall supply the franchisee with appropriate packaging to facilitate the return; l. for the purposes of this section, the prevailing retail price for labor shall be the average hourly labor rate charged to retail customers. A motor vehicle franchisee may establish its average labor rate under this section by submitting to the motor vehicle franchisor 100 sequential customer paid service repair orders or 90 days of customer paid service repair orders, whichever is less, covering customer paid repairs made no more than 180 days before the submission. The average retail labor rate shall be calculated by multiplying the total labor charges in the sample by 1.0 and dividing that amount by the total number of labor hours in the sample. The average retail labor rate so declared shall go into effect 30 days following the declaration subject to audit by the motor vehicle franchisor only of the sample submitted by the motor vehicle franchisee. Any proposed adjustment of the average retail labor rate made by the motor vehicle franchisor shall be based solely on an audit of that sample; m. a motor vehicle franchisor shall provide adequate and fair compensation to each motor vehicle franchisee for labor services rendered for a repair in an amount not less than the amount a retail customer pays for the same labor services with regard to labor time. A motor vehicle franchisee may apply to its motor vehicle franchisor to be reimbursed for labor time according to, at the motor vehicle franchisee’s discretion, an established average retail labor time allowance, in lieu of the motor vehicle franchisor’s labor time guide for franchisor-paid repairs or service, by submitting to the motor vehicle franchisor the multiplier established by taking the number of hours billed in 100 sequential customer paid service repair orders or 90 days of customer paid service repair orders, whichever is less, covering repairs made no more than 180 days before the submission, and dividing that by the number of hours permitted by the motor vehicle franchisor for any such repairs under the motor vehicle franchisor’s labor time guide for franchisor-paid repairs or service. The resulting quotient shall be applied to the motor vehicle franchisor’s labor time guide to establish the motor vehicle franchisee’s average retail labor time allowance. The average retail labor time allowance so declared shall go into effect 30 days following the declaration subject to audit by the motor vehicle franchisor only of the sample submitted by the motor vehicle franchisee. Any proposed adjustment of the average labor time allowance made by the motor vehicle franchisor shall be based only on an audit of that sample. Upon payment of a claim for labor services under this section by the motor vehicle franchisor to the motor vehicle franchisee, the motor vehicle franchisee shall compensate its factory-certified flat rate technicians performing work on a warranty, an extended warranty, a maintenance plan, a service-related plan, a recall, or other work that is also offered and reimbursed by the motor vehicle franchisor; n. a motor vehicle franchisee shall not request a change in the average percentage parts markup, labor time allowance, or retail labor rate more than twice in one calendar year; o. a motor vehicle franchisor shall not recover its costs, except as provided in this section, from a motor vehicle franchisee within this State, including, but not limited to, an increase in the wholesale price of a vehicle or a surcharge imposed on a motor vehicle franchisee solely, which increase is intended to recover the cost of reimbursing a motor vehicle franchisee for parts and service pursuant to this section. However, a motor vehicle franchisor shall not be prohibited from increasing prices for vehicles or parts in the normal course of business; p. a motor vehicle franchisor shall not charge back any claim paid for labor services and parts provided in the performance of a warranty, an extended warranty, a maintenance plan, a service-related plan, a recall, or other work that is also offered and reimbursed by the motor vehicle franchisor for an incentive, bonus, sales, performance, or other program without providing written notice to the motor vehicle franchisee within 30 days from the audit, which explains in detail the basis for each of the proposed chargebacks and the methodology by which the franchisee was selected for audit or review. After all internal dispute resolution processes provided through the motor vehicle franchisor have been resolved, the motor vehicle franchisor shall provide final notice to the motor vehicle franchisee of the final amount of the proposed chargeback. If the motor vehicle franchisee or its representative institutes an administrative or judicial action for a violation of the “Franchise Practices Act,” P.L.1971, c.356 (C.56:10-1 et seq.), challenging the chargeback within 30 days of the receipt of the final notice, the total proposed chargeback amounts shall be stayed, without bond, until the final judgment has been rendered in the action. A motor vehicle franchisor shall not deny or charge back a claim paid for labor services and parts provided in the performance of an open recall, warranty, or other service agreement or for an incentive, bonus, sales, performance, or other program unless the motor vehicle franchisor satisfies its burden of proof that the motor vehicle franchisee did not make a good faith effort to comply with the reasonable written procedures of the motor vehicle franchisor, that the motor vehicle franchisee did not actually perform the work, or that the claim was materially false or fraudulent. A motor vehicle franchisor shall not deny or charge back a claim due to an administrative or scrivener’s error in the submission of the claim; and q. a motor vehicle franchisor shall not unilaterally reduce or otherwise manipulate the price of parts required for a warranty, an extended warranty, a maintenance plan, a service-related plan, a recall, or other work that is also offered and reimbursed by the motor vehicle franchisor in a manner that unfairly and unilaterally allows the motor vehicle franchisor to reduce the level of compensation paid to motor vehicle franchisees, including changes to price within 60 or fewer days preceding an announcement of a recall, any time after a recall, or after a warranty claim has arisen. A motor vehicle franchisor shall not manipulate the price of parts required for warranty or open recall services by creating a new or additional part number for the same part used in warranty or recall repair in a manner that unfairly and unilaterally allows the motor vehicle franchisor to reduce the level of compensation paid to motor vehicle franchisees for warranty and open recall services that the motor vehicle franchisees provide to consumers. L.1977, c.84, s.3; amended 1991, c.459, s.7; 1999, c.45, s.3; 2011, c.66, s.5; 2025, c.140, s.7.