§1262. Warranty; compensation; audits of dealer records

            A.(1) For the purpose of this Section, the following terms have the meanings ascribed to them:

            (a) "Manufacturer, distributor, wholesaler, factory branch, or distributor branch's warranty" means and includes a new motor vehicle warranty, a recall, or a certified pre-owned warranty of a manufacturer, distributor, wholesaler, factory branch, or distributor branch to repair or replace a defect in a vehicle or part.

            (b) "Parts" means parts and components of a motor vehicle, including engine, transmission, other parts assemblies, and manufacturer replacement parts.

            (c) "Qualifying repair" means a repair to a vehicle included within the manufacturer, distributor, wholesaler, factory branch, or distributor branch's original new motor vehicle warranty, except that the vehicle on which the repair was performed exceeds the chronological or mileage limit of the warranty, and the repair does not otherwise constitute warranty work and does not include any of the work described in Paragraph (8) of this Subsection.

            (d) "Qualifying repair order" means a repair order that encompasses, in whole or in part, a qualifying repair or repairs.

            (e) "Repair order" means an invoice paid by a retail customer and closed at the time of submission, which encompasses one or more repairs to or other work on a vehicle, and reflecting, in the case of a parts mark-up submission, the cost of each part and its sale price, and in the case of a labor rate submission, the labor hours charged to each job and the sale price of such labor.

            (f) "Warranty work" means work, including diagnostic labor, performed by a dealer in order to fulfill the obligations of a manufacturer, distributor, wholesaler, factory branch, or distributor branch warranty. "Warranty work" shall also include work arranged to be performed by a dealer if such work is authorized by the manufacturer, distributor, wholesaler, factory branch, or distributor branch in order to fulfill the obligations of a manufacturer, distributor, wholesaler, factory branch, or distributor branch warranty.

            (2) It shall be a violation of this Chapter for a manufacturer, a distributor, a wholesaler, distributor branch, or factory branch to fail to adequately and fairly compensate its dealers for labor, parts, and other expenses incurred by such dealer to perform warranty work and the delivery and preparation obligations imposed on the dealer by a manufacturer, distributor, wholesaler, factory branch, or distributor branch.

            (3) In no event shall any manufacturer, distributor, wholesaler, factory branch, or distributor branch pay a dealer for warranty work less than the rates charged by the dealer to the retail customer of the dealer for non-warranty qualifying repairs. Time allowances for the performance of warranty work shall be reasonable and adequate in relation to the nature and scope of the work for a qualified technician of ordinary skill to perform the work.

            (4)(a) Subject to the provisions of Subparagraph (b) of this Paragraph, the parts mark-up or labor rate customarily charged by the dealer may be established or modified at the election of the dealer by formally submitting in writing, to the representative or pre-designated representative of the manufacturer, distributor, wholesaler, factory branch, or distributor branch, by electronic transmission or tangible delivery, either of the following:

            (i) All consecutive repair orders that include one hundred sequential qualifying repair orders.

            (ii) All repair orders closed during any period of ninety consecutive days.

            (b) A dealer submitting repair orders pursuant to Subparagraph (a) of this Paragraph shall submit the option that produces the fewer number of repair orders, which includes repairs made no more than one hundred eighty days before the submission.

            (5) The dealer shall calculate the labor rate by determining the total charges for labor from the qualifying repairs submitted and dividing that amount by the total number of hours that produced the total charges. The dealer shall calculate the parts mark-up by determining the total charges for parts from the qualifying repairs submitted, dividing that amount by the total cost of the purchase of such parts, subtracting one from that amount, and multiplying by one hundred to produce a percentage.

            (6) A dealer seeking to establish or modify the warranty labor rate or parts mark-up shall submit to the manufacturer, distributor, wholesaler, factory branch, or distributor branch either of the following:

            (a) A single set of repair orders for the purpose of calculating both the labor rate and parts mark-up.

            (b) A single set of repair orders for the purpose of calculating only the labor rate or parts mark-up.

            (7) A dealer may not submit to establish or modify its parts mark-up, labor rate, or both, more than once in a twelve-month period.

            (8) In calculating the labor rate or parts mark-up, the following shall not be included:

            (a) Repairs subject to manufacturer, distributor, wholesaler, factory branch, or distributor branch's discounts, such as special events, special promotions, coupons, or service campaigns.

            (b) Parts sold at wholesale.

            (c) Repairs of vehicles owned by the dealer or an employee.

            (d) Routine maintenance, including but not limited to replacements of fluids, filters, batteries, bulbs, belts, nuts, bolts, or fasteners.

            (e) Installations of accessories.

            (f) Replacement of or work on tires or wheels, including alignments, wheel or tire rotations, or replacements of brake drums, rotors, shoes, or pads.

            (g) Vehicle reconditioning.

            (h) Safety or emission inspections required by law.

            (i) Repairs for which volume discounts have been negotiated with government agencies, insurers, or service contract providers.

            (j) Parts that do not have individual part numbers.

            (k) Manufacturer, distributor, wholesaler, factory branch, or distributor branch's approved and reimbursed goodwill repairs or reimbursements.

            (l) Windshield replacements, window etchings, window tints, protective films, or other masking products.

            (m) Body shop repairs of conditions caused by collision, road hazard, the force of the elements, vandalism, theft, or owner, operator, or third-party negligence or deliberate act.

            (9)(a) The submitted parts mark-up or labor rate shall be presumed accurate, and shall go into effect forty-five days after the manufacturer, distributor, wholesaler, factory branch, or distributor branch receives the submission unless, within the forty-five-day period, the manufacturer, distributor, wholesaler, factory branch, or distributor branch rebuts the presumption.

            (b) If the manufacturer, distributor, wholesaler, factory branch, or distributor branch determines from any set of qualifying repair orders submitted by the dealer that the parts mark-up, labor rate, or both, calculated in accordance with the provisions of this Subsection, is substantially higher or lower than the rate currently on record with the manufacturer, distributor, wholesaler, factory branch, or distributor branch for labor, parts, or if applicable, both, the manufacturer, distributor, wholesaler, factory branch, or distributor branch may request in writing, within forty-five days of receipt of the submitted parts mark-up or labor rate, additional repair orders for a period of either thirty days prior to or thirty days subsequent to the time for which the repair orders were submitted for purposes of establishing or modifying a rate. The manufacturer, distributor, wholesaler, factory branch, or distributor branch shall have forty-five days from receiving the additional repair orders to rebut the presumption in accordance with the provisions of this Paragraph, provided that any rebuttal utilizing the additional repair orders shall conform to the requirements of Paragraphs (4), (5), and (8) of this Subsection.

            (c) The manufacturer, distributor, wholesaler, factory branch, or distributor branch may rebut the presumption by doing all of the following:

            (i) Reasonably substantiating that the submission is materially inaccurate and by providing a full explanation of any and all reasons.

            (ii) Producing evidence validating each reason.

            (iii) Producing a copy of all calculations used to demonstrate any material inaccuracies.

            (iv) Producing a proposed adjusted parts mark-up, labor rate, or if applicable, both, based upon the qualified repair orders submitted by the dealer.

            (10) Subject to the provisions of Paragraph (9) of this Subsection, the manufacturer, distributor, wholesaler, factory branch, or distributor branch shall not submit more than one rebuttal to the dealer and shall not add to, expand, supplement, or otherwise modify any element, including but not limited to any grounds for contesting the parts mark-up or labor rate, except upon the discovery of relevant information that was not known or could not have been known at the time of issuing the rebuttal.

            (11) If the dealer and the manufacturer, distributor, wholesaler, factory branch, or distributor branch do not agree on the parts mark-up or labor rate, the dealer may file a protest with the Louisiana Motor Vehicle Commission within sixty days of receiving the manufacturer's rejection and proposal. The commission shall notify the manufacturer, distributor, wholesaler, factory branch, or distributor branch and schedule a hearing. The manufacturer, distributor, wholesaler, factory branch, or distributor branch shall have the burden of proving by a preponderance of the evidence that the dealer's submitted parts mark-up or labor rate was materially inaccurate as described in Paragraph (9) of this Subsection. If the Louisiana Motor Vehicle Commission decides in favor of the dealer, any increase in the dealer's parts mark-up or labor rate shall be effective, retroactively, forty-five days following the manufacturer, distributor, wholesaler, factory branch, or distributor branch's receipt of the original submission.

            (12) If a manufacturer, distributor, wholesaler, factory branch, or distributor branch furnishes a part to a dealer, at either no cost or a reduced cost, to use in performing warranty work, the manufacturer, distributor, wholesaler, factory branch, or distributor branch shall compensate the dealer for the part in the same manner as warranty parts compensation under this Section by compensating the dealer on the basis of the dealer's mark-up on the cost for the part as listed in the manufacturer, distributor, wholesaler, factory branch, or distributor branch's price schedule, minus the cost for the part.

            (13) A manufacturer, distributor, wholesaler, factory branch, or distributor branch may not require a dealer to establish the parts mark-up or labor rate customarily charged by the dealer for parts 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.

            (14) All claims made by the dealer for compensation under this Subsection shall be paid within thirty days after approval and shall be approved or disapproved within thirty days after receipt. When any claim is disapproved, the dealer shall be notified in writing of the grounds for disapproval.

            (15) The obligations in this Subsection as they relate to recreational products may be modified by contract.

            B.(1) Notwithstanding the terms of any franchise agreement, warranty, and sales incentive, audits of dealer records may be conducted by the manufacturer, distributor, distributor branch, or factory branch. Any audit for warranty parts or service compensation shall be for the twelve-month period immediately following the date of the payment of the claim by the manufacturer or distributor. However, a dealer shall not be held liable by virtue of an audit for failure to retain parts for a period in excess of six months. Any audit for sales incentives, service incentives, rebates, or other forms of incentive compensation shall only be for the twelve-month period immediately following the date of the final payment to the dealer under a promotion, event, program, or activity. In no event shall the manufacturer, distributor, distributor branch, or factory branch fail to allow the dealer to make corrections to the sales data in less than one hundred twenty days from the program period. Additionally, no penalty other than amounts advanced on a vehicle reported incorrectly shall be due in connection with the audit. With respect to vehicles sold during the time period subject to the audit, but submitted incorrectly to the manufacturer, distributor, or wholesale distributor branch or factory branch, the dealer shall be charged back for the amount reported incorrectly and credited with the amount due, if anything, on the actual sale date.

            (2) No claim which has been approved and paid may be charged back to the dealer unless it can be shown that one or all of the following applies:

            (a) The claim was false or fraudulent.

            (b) The repairs were not properly made.

            (c) The repairs were unnecessary to correct the defective condition under generally accepted standards of workmanship.

            (d) The dealer failed to reasonably substantiate the repair in accordance with reasonable written requirements of the manufacturer or distributor, if the dealer was notified of the requirements prior to the time the claim arose and if the requirements were in effect at the time the claim arose.

            (3) A manufacturer or distributor shall not deny a claim solely based on a dealer's incidental failure to comply with a specific claim processing requirement, or a clerical error, or other administrative technicality.

            (4)(a) A dealer shall not be charged back on a claim when a dealer performs a repair covered by the manufacturer's or distributor's warranty, and the dealer reasonably demonstrates that the repair resolved the condition which the customer presented for resolution, and the dealer documents what has been repaired and the process utilized to accomplish the repair.

            (b) The provisions of Subparagraph (a) of this Paragraph shall not apply to recreational products dealers.

            (5) Limitations on warranty parts or service compensation, sales incentive audits, rebates, or other forms of incentive compensation, chargebacks for warranty parts or service compensation, and service incentives and chargebacks for sales compensation only shall not be effective in the case of intentionally false or fraudulent claims.

            (6) It shall be deemed an unfair act pursuant to this Chapter to audit a dealer more frequently than two sales-related and two service-related audits in a twelve-month period. Nothing in this Subsection shall limit a manufacturer's or distributor's ability to perform routine claim reviews in the normal course of business.

            (7) No claim may be rejected as late if it has been submitted within sixty days of the date the repair order was written.

            (8) The dealer shall not be charged back for any rebate paid to a consumer pursuant to a manufacturer's rebate program, provided the dealer acted in good faith when relying on the consumer's qualifying information and otherwise complied with the program guidelines and documentation requirements. A manufacturer's rebate program shall include but not be limited to a rebate program that targets college graduates, military personnel, first-time buyers, owner loyalty, family relationships, and any other similar program.

            C. The provisions of this Section shall not apply to a dealer, manufacturer, distributor, wholesaler, distributor branch, or factory branch of marine products, motorcycles or all-terrain vehicles, or recreational vehicles, or any officer, agent, or other representative thereof.

            Acts 2005, No. 500, §1, eff. July 12, 2005; Acts 2008, No. 233, §1; Acts 2009, No. 403, §1, eff. July 7, 2009; Acts 2010, No. 1036, §1; Acts 2011, No. 89, §1; Acts 2012, No. 326, §1; Acts 2013, No. 61, §1; Acts 2021, No. 76, §1.