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EXPLANATION-Matter enclosed in bold-faced brackets [thus] in this bill is not enacted
and is intended to be omitted in the law.
SECOND REGULAR SESSION
SENATE BILL NO. 1081
103RD GENERAL ASSEMBLY
INTRODUCED BY SENATOR GREGORY (21).
5617S.01I KRISTINA MARTIN, Secretary
AN ACT
To repeal section 407.828, RSMo, and to enact in lieu thereof one new section relating to
compensation made by motor vehicle franchisors to franchisees.
Be it enacted by the General Assembly of the State of Missouri, as follows:
Section A. Section 407.828, RSMo, is repealed and one new 1
section enacted in lieu thereof, to be known as section 407.828, 2
to read as follows:3
407.828. 1. Notwithstanding any provision in a 1
franchise to the contrary, each franchisor shall specify in 2
writing to each of its franchisees in this state the 3
franchisee's obligations for preparation, delivery, and 4
warranty service on its products. The franchisor shall 5
fairly and reasonably compensate the franchisee for 6
preparation, delivery, and warranty service required of the 7
franchisee by the franchisor. The franchisor shall provide 8
the franchisee with the schedule of compensation to be paid 9
to the franchisee for parts, labor, and service, and the 10
time allowance for the performance of the labor and service 11
for the franchisee's obligations for preparation, delivery, 12
and warranty and recall service. 13
2. [The schedule of compensation shall include 14
reasonable compensation for diagnostic work, as well as 15
repair service and labor for the franchisee to meet its 16
obligations for preparation, delivery, and warranty 17
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service. The schedule shall also include reasonable and 18
adequate time allowances for the diagnosis and performance 19
of preparation, delivery, and warranty service to be 20
performed in a careful and professional manner. In the 21
determination of what constitutes reasonable compensation 22
for labor and service pursuant to this section, the 23
principal factor to be given consideration shall be the 24
prevailing wage rates being charged for similar labor and 25
service by the franchisee for similar labor and service to 26
retail customers for nonwarranty labor and service. The 27
primary factor in determining reasonable compensation for 28
parts under this section shall be the amount charged by the 29
franchisee for similar parts to retail customers for 30
nonwarranty parts] (1) Fair and reasonable compensation 31
requires the franchisor to pay each franchisee no less than 32
the amount the retail customer pays for the same services 33
with regard to rate and time. Any schedule of compensation 34
previously agreed to by the franchisor and the franchisee 35
for extended warranty repairs may be used in lieu of actual 36
time expended. In the event that a schedule of compensation 37
has not been agreed to for warranty repairs, or said 38
schedule does not define time for an applicable warranty 39
repair, the franchisor's schedule of compensation shall be 40
used, multiplied by one and four-tenths. In no event shall 41
such compensation fail to include full compensation for 42
diagnostic work, as well as repair service, labor, and 43
parts. Time allowances for the diagnosis and performance of 44
warranty work and service shall be no less than what is 45
charged to retail customers for the same work to be 46
performed. The primary factor in determining reasonable 47
compensation for parts under this section shall be the 48
amount charged by the franchisee for similar parts to retail 49
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customers for nonwarranty parts. No warranty or factory 50
compensated repairs shall be excluded from this requirement, 51
including recalls or other voluntary stop-sell repairs 52
required by the franchisor. If a franchisor is required to 53
issue a recall, the franchisee shall be compensated for 54
labor time as provided in this subsection. 55
(2) Franchisors shall pay the franchisee the same 56
effective labor rate that the franchisee receives for 57
customer-pay repairs, including vehicle diagnostic times for 58
all warranty repairs. Additionally, if a technician is 59
required to communicate with a technical assistance center, 60
engineering, or some other external franchisor source in 61
order to provide a warranty repair, the franchisor shall pay 62
for the time from start of communications until the 63
communication is complete. 64
(3) The franchisee may submit a request to the 65
franchisor for warranty labor rate increases a maximum of 66
once per calendar year. Any claim made by a franchisee, 67
including claims for additional compensation in specific 68
instances of warranty or recall repairs under this section 69
shall be either approved or disapproved within twenty days 70
after the claim is submitted to the franchisor in the manner 71
and on the forms the franchisor reasonably prescribes. An 72
approved claim shall be paid within twenty days after its 73
approval. If a claim is not specifically disapproved in 74
writing or by electronic transmission within twenty days 75
after the date on which the franchisor receives it, the 76
claim shall be considered to be approved and payment shall 77
follow within twenty days. No franchisor shall require a 78
franchisee to submit a claim authorized under this section 79
sooner than thirty days after the franchisee completes the 80
preparation, delivery, warranty, or recall service 81
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authorizing the claim for preparation, delivery, or warranty 82
service. 83
(4) A franchisor or distributor shall not otherwise 84
recover its costs from franchisees within this state, 85
including an increase in the wholesale price of a vehicle or 86
surcharge imposed on a franchisee solely intended to recover 87
the cost of reimbursing a franchisee for parts and labor 88
pursuant to this section, provided a franchisor or 89
distributor shall not be prohibited from increasing prices 90
for vehicles or parts in the normal course of business. 91
3. A franchisor shall perform all warranty 92
obligations, including recall notices; include in written 93
notices of franchisor recalls to new motor vehicle owners 94
and franchisees the expected date by which necessary parts 95
and equipment will be available to franchisees for the 96
correction of the defects; and compensate any of the 97
franchisees in this state for repairs required by the 98
recall. Compensation for parts and labor for recall repairs 99
shall be determined under subsection 2 of this section. If 100
a franchisor imposes a recall or stop-sale on any new 101
vehicle in a franchisee's inventory that prevents the sale 102
of the vehicle, the franchisor shall compensate the 103
franchisee for any interest and storage until the vehicle is 104
repaired and made ready for sale. 105
4. [No franchisor shall require a franchisee to submit 106
a claim authorized under this section sooner than thirty 107
days after the franchisee completes the preparation, 108
delivery, or warranty service authorizing the claim for 109
preparation, delivery, or warranty service. All claims made 110
by a franchisee under this section shall be paid within 111
thirty days after their approval. All claims shall be 112
either approved or disapproved by the franchisor within 113
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thirty days after their receipt on a proper form generally 114
used by the franchisor and containing the usually required 115
information therein. Any claims not specifically 116
disapproved in writing within thirty days after the receipt 117
of the form shall be considered to be approved and payment 118
shall be made within fifteen days thereafter. A franchisee 119
shall not be required to maintain defective parts for more 120
than thirty days after submission of a claim. 121
5.] A franchisor shall compensate the franchisee for 122
franchisor-sponsored sales or service promotion events, 123
including but not limited to, rebates, programs, or 124
activities in accordance with established written guidelines 125
for such events, programs, or activities, which guidelines 126
shall be provided to each franchisee. 127
[6.] 5. No franchisor shall require a franchisee to 128
submit a claim authorized under subsection [5] 4 of this 129
section sooner than thirty days after the franchisee becomes 130
eligible to submit the claim. All claims made by a 131
franchisee pursuant to subsection [5] 4 of this section for 132
promotion events, including but not limited to rebates, 133
programs, or activities shall be paid within ten days after 134
their approval. All claims shall be either approved or 135
disapproved by the franchisor within thirty days after their 136
receipt on a proper form generally used by the franchisor 137
and containing the usually required information therein. 138
Any claim not specifically disapproved in writing within 139
thirty days after the receipt of this form shall be 140
considered to be approved and payment shall be made within 141
fifteen days. 142
[7.] 6. In calculating the retail rate customarily 143
charged by the franchisee for parts, service, and labor, the 144
following work shall not be included in the calculation: 145
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(1) Repairs for franchisor, manufacturer, or 146
distributor special events, specials, or promotional 147
discounts for retail customer repairs; 148
(2) Parts sold at wholesale; 149
(3) Engine assemblies and transmission assemblies; 150
(4) Routine maintenance not covered under any retail 151
customer warranty, such as fluids, filters, and belts not 152
provided in the course of repairs; 153
(5) Nuts, bolts, fasteners, and similar items that do 154
not have an individual part number; 155
(6) Tires; and 156
(7) Vehicle reconditioning. 157
[8.] 7. If a franchisor, manufacturer, importer, or 158
distributor furnishes a part or component to a franchisee, 159
at no cost, to use in performing repairs under a recall, 160
campaign service action, or warranty repair, the franchisor 161
shall compensate the franchisee for the part or component in 162
the same manner as warranty parts compensation under this 163
section by compensating the franchisee at the average markup 164
on the cost for the part or component as listed in the price 165
schedule of the franchisor, manufacturer, importer, or 166
distributor, less the cost for the part or component. This 167
subsection shall not apply to entire engine assemblies, 168
propulsion engine assemblies, including electric vehicle 169
batteries, or entire transmission assemblies. 170
[9.] 8. A franchisor shall not require a franchisee to 171
establish the retail rate customarily charged by the 172
franchisee for parts, service, or labor by an unduly 173
burdensome or time-consuming method or by requiring 174
information that is unduly burdensome or time consuming to 175
provide, including, but not limited to, part-by-part or 176
transaction-by-transaction calculations. A franchisee shall 177
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not request a franchisor to approve a different labor rate 178
or parts rate more than [twice in one] once per calendar 179
year. 180
[10.] 9. If a franchisee submits any claim under this 181
section to a franchisor that is incomplete, inaccurate, or 182
lacking any information usually required by the franchisor, 183
then the franchisor shall promptly notify the franchisee, 184
and the time limit to submit the claim shall be extended for 185
a reasonable length of time, not less than five business 186
days following notice by the franchisor to the franchisee, 187
for the franchisee to provide the complete, accurate, or 188
lacking information to the franchisor. 189
[11.] 10. (1) A franchisor may only audit warranty, 190
sales, or incentive claims and charge-back to the franchisee 191
unsubstantiated claims for a period of twelve months 192
following payment, subject to all of the provisions of this 193
section. Furthermore, if the franchisor has good cause to 194
believe that a franchisee has submitted fraudulent claims, 195
then the franchisor may only audit suspected fraudulent 196
warranty, sales, or incentive claims and charge-back to the 197
franchisee fraudulent claims for a period of two years 198
following payment, subject to all provisions of this section. 199
(2) A franchisor shall not require documentation for 200
warranty, sales, or incentive claims more than twelve months 201
after the claim was paid. 202
(3) Prior to requiring any charge-back, reimbursement, 203
or credit against a future transaction arising out of an 204
audit, the franchisor shall submit written notice to the 205
franchisee along with a copy of its audit and the detailed 206
reason for each intended charge-back, reimbursement, or 207
credit. 208
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[12.] 11. A franchisee may file a complaint with the 209
administrative hearing commission pursuant to section 210
407.822 within sixty days after receipt of any written 211
notice by a franchisor of any adverse decision on any claim 212
for reimbursement submitted pursuant to this section, 213
including, but not limited to, specific claims for 214
reimbursement in individual warranty repair transactions, 215
and requests for an increase in labor or parts rate. If a 216
complaint is filed within the sixty days, then the denial or 217
reduction of reimbursement, denial of a request for an 218
increase in labor or parts rate, charge-back, or other 219
determination by a franchisor which is adverse to a 220
franchisee shall be stayed pending a hearing and 221
determination of the matter under section 407.822. The 222
franchisor shall file an answer to the complaint within 223
thirty days after service of the complaint. If, following a 224
hearing which shall be held within sixty days following 225
service of the franchisor's answer, the administrative 226
hearing commission determines that a franchisor has violated 227
any requirements of this section, then the denial or 228
reduction of reimbursement, denial of a request for an 229
increase in labor or parts rate, or charge-back shall be 230
void and the franchisor shall, within fifteen days of the 231
commission's order, fairly compensate the franchisee as 232
required by the provisions of this section. Section 407.835 233
shall apply to proceedings pursuant to this section. 234
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