3065
. (a) Every franchisor shall properly fulfill every warranty
agreement made by it and adequately and fairly compensate each of its
franchisees for labor and parts used to fulfill that warranty when
the franchisee has fulfilled warranty obligations of diagnostics,
repair, and servicing and shall file a copy of its warranty
reimbursement schedule or formula with the board. The warranty
reimbursement schedule or formula shall be reasonable with respect to
the time and compensation allowed to the franchisee for the warranty
diagnostics, repair, and servicing, and all other conditions of the
obligation. The reasonableness of the warranty reimbursement schedule
or formula shall be determined by the board if a franchisee files a
protest with the board. A franchisor shall not replace, modify, or
supplement the warranty reimbursement schedule to impose a fixed
percentage or other reduction in the time and compensation allowed to
the franchisee for warranty repairs not attributable to a specific
repair. A franchisor may reduce the allowed time and compensation
applicable to a specific warranty repair only upon 15 days' prior
written notice to the franchisee. Any protest challenging a reduction
in time and compensation applicable to specific parts or labor
operations shall be filed within six months following the franchisee'
s receipt of notice of the reduction, and the franchisor shall have
the burden of establishing the reasonableness of the reduction and
adequacy and fairness of the resulting compensation.
(b) In determining the adequacy and fairness of the compensation,
the franchisee's effective labor rate charged to its various retail
customers may be considered together with other relevant criteria. If
in a protest permitted by this section filed by any franchisee the
board determines that the warranty reimbursement schedule or formula
fails to provide adequate and fair compensation or fails to conform
with the other requirements of this section, within 30 days after
receipt of the board's order, the franchisor shall correct the
failure by amending or replacing the warranty reimbursement schedule
or formula and implementing the correction as to all franchisees of
the franchisor that are located in this state.
(c) If any franchisor disallows a franchisee's claim for a
defective part, alleging that the part, in fact, is not defective,
the franchisor shall return the part alleged not to be defective to
the franchisee at the expense of the franchisor, or the franchisee
shall be reimbursed for the franchisee's cost of the part, at the
franchisor's option.
(d) (1) All claims made by franchisees pursuant to this section
shall be either approved or disapproved within 30 days after their
receipt by the franchisor. Any claim not specifically disapproved in
writing within 30 days from receipt by the franchisor shall be deemed
approved on the 30th day. All claims made by franchisees under this
section and Section 3064 for labor and parts shall be paid within 30
days after approval.
(2) A franchisor shall not disapprove a claim unless the claim is
false or fraudulent, repairs were not properly made, repairs were
inappropriate to correct a nonconformity with the written warranty
due to an improper act or omission of the franchisee, or for material
noncompliance with reasonable and nondiscriminatory documentation
and administrative claims submission requirements.
(3) When any claim is disapproved, the franchisee who submits it
shall be notified in writing of its disapproval within the required
period, and each notice shall state the specific grounds upon which
the disapproval is based. The franchisor shall provide for a
reasonable appeal process allowing the franchisee at least 30 days
after receipt of the written disapproval notice to provide additional
supporting documentation or information rebutting the disapproval.
If disapproval is based upon noncompliance with documentation or
administrative claims submission requirements, the franchisor shall
allow the franchisee at least 30 days from the date of receipt of the
notice to cure any material noncompliance. If the disapproval is
rebutted, and material noncompliance is cured before the applicable
deadline, the franchisor shall approve the claim.
(4) If the franchisee provides additional supporting documentation
or information purporting to rebut the disapproval, attempts to cure
noncompliance relating to the claim, or otherwise appeals denial of
the claim and the franchisor continues to deny the claim, the
franchisor shall provide the franchisee with a written notification
of the final denial within 30 days of completion of the appeal
process, which shall conspicuously state "Final Denial" on the first
page.
(5) Failure to approve or pay within the above specified time
limits, in individual instances for reasons beyond the reasonable
control of the franchisor, shall not constitute a violation of this
article.
(6) Within six months after either receipt of the written notice
described in paragraph (3) or (4), whichever is later, a franchisee
may file a protest with the board for determination of whether the
franchisor complied with the requirements of this subdivision. In any
protest pursuant to this subdivision, the franchisor shall have the
burden of proof.
(e) (1) Audits of franchisee warranty records may be conducted by
the franchisor on a reasonable basis for a period of nine months
after a claim is paid or credit issued. A franchisor shall not select
a franchisee for an audit, or perform an audit, in a punitive,
retaliatory, or unfairly discriminatory manner. A franchisor may
conduct no more than one random audit of a franchisee in a nine-month
period. The franchisor's notification to the franchisee of any
additional audit within a nine-month period shall be accompanied by
written disclosure of the basis for that additional audit.
(2) Previously approved claims shall not be disapproved or charged
back to the franchisee unless the claim is false or fraudulent,
repairs were not properly made, repairs were inappropriate to correct
a nonconformity with the written warranty due to an improper act or
omission of the franchisee, or for material noncompliance with
reasonable and nondiscriminatory documentation and administrative
claims submission requirements. A franchisor shall not disapprove or
chargeback a claim based upon an extrapolation from a sample of
claims, unless the sample of claims is selected randomly and the
extrapolation is performed in a reasonable and statistically valid
manner.
(3) If the franchisor disapproves of a previously approved claim
following an audit, the franchisor shall provide to the franchisee,
within 30 days after the audit, a written disapproval notice stating
the specific grounds upon which the claim is disapproved. The
franchisor shall provide a reasonable appeal process allowing the
franchisee a reasonable period of not less than 30 days after receipt
of the written disapproval notice to respond to any disapproval with
additional supporting documentation or information rebutting the
disapproval and to cure noncompliance, with the period to be
commensurate with the volume of claims under consideration. If the
franchisee rebuts any disapproval and cures any material
noncompliance relating to a claim before the applicable deadline, the
franchisor shall not chargeback the franchisee for that claim.
(4) If the franchisee provides additional supporting documentation
or information purporting to rebut the disapproval, attempts to cure
noncompliance relating to the claim, or otherwise appeals denial of
the claim and the franchisor continues to deny the claim, the
franchisor shall provide the franchisee with a written notification
of the final denial within 30 days of completion of the appeal
process, which shall conspicuously state "Final Denial" on the first
page.
(5) The franchisor shall not chargeback the franchisee until 45
days after receipt of the written notice described in paragraph (3)
or paragraph (4), whichever is later. Any chargeback to a franchisee
for warranty parts or service compensation shall be made within 90
days of receipt of that written notice. If the franchisee files a
protest pursuant to this subdivision prior to the franchisor's
chargeback for denied claims, the franchisor shall not offset or
otherwise undertake to collect the chargeback until the board issues
a final order on the protest. If the board sustains the chargeback or
the protest is dismissed, the franchisor shall have 90 days
following issuance of the final order or the dismissal to make the
chargeback, unless otherwise provided in a settlement agreement.
(6) Within six months after either receipt of the written
disapproval notice or completion of the franchisor's appeal process,
whichever is later, a franchisee may file a protest with the board
for determination of whether the franchisor complied with this
subdivision. In any protest pursuant to this subdivision, the
franchisor shall have the burden of proof.
(f) If a false claim was submitted by a franchisee with the intent
to defraud the franchisor, a longer period for audit and any
resulting chargeback may be permitted if the franchisor obtains an
order from the board.