2023 Utah Code › Title 13 - Commerce and Trade › Chapter 14 - New Automobile Franchise Act › Part 2 - Franchises in General › Section 204 - Franchisor's obligations related to service -- Franchisor audits -- Time limits.

Effective 5/3/2023
13-14-204.
Franchisor's obligations related to service -- Franchisor audits -- Time limits.
(1) Each franchisor shall specify in writing to each of the franchisor's franchisees licensed as a new motor vehicle dealer in this state:
(a) the franchisee's obligations for new motor vehicle preparation, delivery, warranty service, and recalls on the franchisor's products;
(b) the schedule of compensation to be paid to the franchisee for parts, work, and service; and
(c) the time allowance for the performance of work and service.
(2)
(a) The schedule of compensation described in Subsection (1) shall include reasonable compensation for diagnostic work, as well as repair service, parts, and labor.
(b) Time allowances described in Subsection (1) for the diagnosis and performance of warranty work and service shall be reasonable and adequate for the work to be performed.
(3)
(a) As used in this Subsection (3):
(i) "Qualified repair" means a repair to a motor vehicle that:
(A) would have come within the franchisor's new motor vehicle warranty but for such motor vehicle having exceeded the time or mileage limits of such warranty; and
(B) does not otherwise constitute warranty work.
(ii) "Qualified repair" does not include:
(A) routine maintenance, including without limitation the replacement of fluids, filters, non-electric vehicle batteries, bulbs, belts, brake pads, rotors, nuts, bolts, or fasteners;
(B) a replacement of or work on tires, wheels, or elements related to either, including without limitation wheel alignments and tire or wheel rotations;
(C) a repair for a government agency, an insurer, or an extended warranty or service contract provider;
(D) a repair that is the subject of a franchisor special event, promotion, or service campaign, or otherwise is subject to a franchisor discount;
(E) a repair of a motor vehicle owned by the franchisee or an employee of the franchisee;
(F) an installation of an accessory;
(G) a safety or vehicle emission inspection required by law;
(H) motor vehicle reconditioning;
(I) a part sold at wholesale;
(J) a repair or replacement with or to an aftermarket part;
(K) a franchisor-approved goodwill or policy repair or replacement; or
(L) a repair performed on a motor vehicle of a line-make other than that for which the franchisee is franchised by the franchisor.
(b)
(i) Reasonable compensation of the franchisee for parts and service in warranty or recall repair work may not be less than the rates charged by the franchisee for like parts and service to retail customers.
(ii) In the case of a recreational vehicle franchisee, reimbursement for parts used in the performance of warranty repairs, including those parts separately warranted directly to the consumer by a recreational vehicle parts supplier, may not be less than the franchisee's cost plus 20%.
(iii) For purposes of Subsection (3)(b)(ii), the term "cost" shall be that same price paid by a franchisee to a franchisor or supplier for the part when the part is purchased for a nonwarranty repair.
(c) A franchisee seeking to establish or modify the franchisee's retail labor rate, retail parts markup, or both, shall submit in writing or electronically to the franchisee's franchisor at the location and materially in the format theretofore specified by the franchisor in writing to the franchisee whichever of the following produces the fewer number of repair orders, all of which must be for repairs made no more than 180 days before such submission:
(i) all consecutive repair orders that include 100 sequential repair orders reflecting qualified repairs; or
(ii) all repair orders reflecting qualified repairs closed during any period of 90 consecutive days.
(d) A franchisee shall calculate the franchisee's:
(i) retail labor rate by determining the total charges for labor in the qualified repairs submitted and dividing that amount by the total number of hours in the qualified repairs that generated such charges; and
(ii) retail parts markup by determining the total charges for parts in the qualified repairs submitted, dividing such amount by the franchisee's total cost of the purchase of such parts, subtracting one, and multiplying by 100 to produce a percentage.
(e)
(i) A retail labor rate or retail parts markup described in Subsection (3)(c) is effective 30 days after the franchisee submits the notice described in Subsection (3)(c), unless, within 30 days after receiving the franchisee's submission, the franchisor delivers to the franchisee:
(A) a written objection to the material accuracy of the retail labor rate or retail parts markup; or
(B) a written request for supplemental repair orders pursuant to Subsection (3)(e)(ii).
(ii)
(A) If a franchisor determines from the franchisee's set of repair orders submitted pursuant to Subsections (3)(c) and (d) that the franchisee's submission for a retail labor rate or retail parts markup is substantially higher than the franchisee's current warranty rate, the franchisor may request, in writing, within 30 days after the franchisor's receipt of the notice described in Subsection (3)(c), all repair orders closed within the period of 30 days immediately preceding, or 30 days immediately following, the set of repair orders submitted by the franchisee.
(B) All time periods under this section shall be suspended until the franchisee submits the supplemental repair orders described in Subsection (3)(e)(ii)(A).
(iii) If a franchisor requests supplemental repair orders described in Subsection (3)(e)(ii), the franchisor may, within 30 days after receiving the supplemental repair orders, calculate a proposed adjusted retail labor rate or retail parts markup, as applicable, based upon any set of the qualified repair orders submitted by the franchisee, if the franchisor:
(A) uses the same requirements applicable to the franchisee's submission described in Subsection (3)(c);
(B) uses the formula to calculate the retail labor rate or retail parts markup described in Subsection (3)(d); and
(C) omits all charges in the repair orders described in Subsection (3)(a)(ii).
(f) A franchisee may not seek to establish or modify the franchisee's:
(i) retail labor rate more frequently than once in a 12-month period; and
(ii) retail parts markup more frequently than once in a 12-month period.
(g) An approved adjusted retail labor rate or retail parts markup shall be effective on the later of 30 days after a franchisor receives:
(i) a submission described in Subsection (3)(c); or
(ii) supplemental repair orders described in Subsection (3)(e)(ii).
(h) A franchisor shall begin compensating the franchisee according to the effective retail labor rate and retail parts markup rate no later than 15 days after the effective date of the rate or rates.
(4) A franchisor may not fail to:
(a) perform any warranty obligation;
(b) include in written notices of franchisor's 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; or
(c) in accordance with Subsections (2) and (3), compensate a franchisee for all diagnostic work, labor, and parts the franchisor requires to perform a recall repair.
(5) If a franchisor disallows a franchisee's claim for a defective part, alleging that the part is not defective, the franchisor at the franchisor's option shall:
(a) return the part to the franchisee at the franchisor's expense; or
(b) pay the franchisee the cost of the part.
(6)
(a) A claim made by a franchisee pursuant to this section for diagnostic work, labor, or parts shall be paid within 30 days after the claim's approval.
(b) The franchisor shall approve or disapprove a claim within 30 days after receipt of the claim on a form generally used by the franchisor and containing the generally required information. Any claim not specifically disapproved of in writing within 30 days after the receipt of the form is considered to be approved and payment shall be made within 30 days.
(7) A franchisor may conduct warranty service audits and recall repair audits of the franchisor's franchisee records on a reasonable basis.
(8) A franchisor may deny a franchisee's claim for warranty compensation or recall repair compensation only if:
(a) the franchisee's claim is based on a nonwarranty repair or a nonrecall repair;
(b) the franchisee lacks material documentation for the claim;
(c) the franchisee fails to comply materially with specific substantive terms and conditions of the franchisor's warranty compensation program or recall repair compensation program; or
(d) the franchisor has a bona fide belief based on competent evidence that the franchisee's claim is intentionally false, fraudulent, or misrepresented.
(9)
(a) Any charge back for a warranty part or service compensation, recall repair compensation, or service incentive is only enforceable for the six-month period immediately following the day on which the franchisor makes the payment compensating the franchisee for the warranty part or service, recall repair, or service incentive.
(b) Except as provided in Subsection (9)(e), all charge backs levied by a franchisor for sales compensation or sales incentives arising out of the sale or lease of a motor vehicle sold or leased by a franchisee shall be compensable only if written notice of the charge back is received by the franchisee within six months immediately following the sooner of:
(i) the day on which the franchisee reports the sale to the franchisor; or
(ii) the day on which the franchisor makes the payment for the sales compensation or sales incentive to the franchisee.
(c)
(i) Upon an audit, the franchisor shall provide the franchisee automated or written notice explaining the amount of and reason for a charge back.
(ii) A franchisee may respond in writing within 30 days after the notice under Subsection (9)(c)(i) to:
(A) explain a deficiency; or
(B) provide materials or information to correct and cure compliance with a provision that is a basis for a charge back.
(d) A charge back:
(i) may not be based on a nonmaterial error that is clerical in nature; and
(ii)
(A) shall be based on one or more specific instances of material noncompliance with the franchisor's warranty compensation program, sales incentive program, recall repair program, or recall compensation program; and
(B) may not be extrapolated from a sampling of warranty claims, recall repair claims, or sales incentive claims.
(e) The time limitations of this Subsection (9) do not preclude charge backs for any fraudulent claim that was previously paid.
(10)
(a) If within 30 days after the day on which a franchisor issues an initial notice of recall a part or remedy is not reasonably available to perform the recall repair on a used motor vehicle, each calendar month thereafter the franchisor shall pay the franchisee an amount equal to at least 1.35% of the value of the used motor vehicle, if:
(i) the franchisee holding the used motor vehicle for sale is authorized to sell and service a new vehicle of the same line-make;
(ii) after May 7, 2018, the franchisor issues a stop-sale or do-not-drive order on the used motor vehicle; and
(iii)
(A) the used motor vehicle is in the franchisee's inventory at the time the franchisor issued the order described in Subsection (10)(a)(ii); or
(B) after the franchisor issues the order described in Subsection (10)(a)(ii), the franchisee takes the used motor vehicle into the franchisee's inventory at the termination of the consumer lease for the vehicle, as a consumer trade-in accompanying the purchase of a new vehicle from the franchisee, or for any other reason in the ordinary course of business.
(b) A franchisor shall pay the compensation described in Subsection (10)(a):
(i) beginning:
(A) 30 days after the day on which the franchisee receives the stop-sale or do-not-drive order; or
(B) if a franchisee obtains the used motor vehicle more than 30 days after the day on which the franchisee receives the stop-sale or do-not-drive order, the day on which the franchisee obtains the used motor vehicle; and
(ii) ending the earlier of the day on which:
(A) the franchisor makes the recall part or remedy available for order and prompt shipment to the franchisee; or
(B) the franchisee sells, trades, or otherwise disposes of the used motor vehicle.
(c) A franchisor shall prorate the first and last payment for a used motor vehicle to a franchisee under this Subsection (10).
(d) A franchisor may direct the manner in which a franchisee demonstrates the inventory status of an affected used motor vehicle to determine eligibility under this Subsection (10), if the manner is not unduly burdensome.
(11)
(a) A franchisee that offsets recall repair compensation received from a franchisor under this section against recall repair compensation the franchisee receives under a state or federal recall repair compensation remedy may pursue any other available remedy against the franchisor.
(b) As an alternative to providing recall repair compensation under this section, a franchisor may compensate a franchisee for a recall repair:
(i) under a national recall repair compensation program, if the compensation is equal to or greater than the compensation provided under this section; or
(ii) as the franchisor and franchisee otherwise agree, if the compensation is equal to or greater than the compensation provided under this section.
(c) Nothing in this section requires a franchisor to provide compensation to a franchisee that exceeds the value of the used motor vehicle affected by a recall.
(12) During an audit under this section, a franchisor may not request a document from the franchisee that originated from the franchisor or a subsidiary of the franchisor, unless the document required additional information from the customer.
Amended by Chapter 240, 2023 General Session