Section 818.307 - Reimbursement for all parts and service required by the manufacturer or distributor; reimbursement audits(a)Manufacturers or distributors to notify dealers of their obligations.--(1) Each new vehicle manufacturer or distributor shall specify in writing to each of its new vehicle dealers licensed in this Commonwealth the dealer's obligations for predelivery preparation and warranty service on its products, shall compensate the new vehicle dealer for service required of the dealer by the manufacturer or distributor and shall provide the dealer with a schedule of compensation to be paid the dealer for parts, work and service, and the time allowance for the performance of such work and service.(2) Compensation for parts, including major assemblies used in warranty service, shall be at the dealer's retail rate. The following shall apply:(i) The dealer's retail rate for parts shall be established by the dealer's submitting to the manufacturer or distributor a declaration of the average percentage markup which shall be the lesser of the following orders which cover repairs made no more than 180 days before the submission:(A) One hundred sequential nonwarranty customer- paid service repair orders which contain parts that are used in warranty-like service or repair.(B) Ninety consecutive days of nonwarranty customer-paid service repair orders which contain parts that are used in warranty-like service or repair.(ii) The declaration under subparagraph (i) shall be presumed to be reasonable, except that a manufacturer or distributor may, not later than 60 days after submission, rebut the presumption by substantiating that the declaration is unreasonable or materially inaccurate.(iii) The retail rate shall go into effect 60 days following the declaration under subparagraph (i), unless the franchisor audits the submitted repair orders and a rebuttal under subparagraph (ii) occurs.(iv) If the declared retail rate is rebutted, the manufacturer or distributor shall propose an adjustment of the markup based on the rebuttal no later than 60 days after submission.(v) A manufacturer shall provide written support to the dealer for the rebuttal retail rate that is proposed. If the dealer does not agree with the proposed markup, the dealer may file a protest after receipt of the proposal by the manufacturer or distributor. If a protest is filed, the board shall inform the manufacturer or distributor that a protest has been filed and that a hearing will be held on the protest. In a hearing held under this subparagraph, the manufacturer or distributor shall have the burden of proving that:(A) the retail rate declared by the dealer was unreasonable or materially inaccurate; and(B) the manufacturer's or distributor's proposed adjustment of the markup is reasonable.(3) Compensation for labor used in warranty service shall be at the dealer's retail rate. The following shall apply: (i) The dealer's hourly retail rate for labor shall be established by submitting the following to the manufacturer or distributor:(A) A declaration of the average labor rate calculated by dividing the amount of the dealer's total labor sales by the number of total labor hours that generated the sales.(B) The lesser of the following orders which cover repairs made no more than 180 days before the submission: (I) One hundred sequential nonwarranty customer-paid service repair orders.(II) Ninety consecutive days of nonwarranty customer-paid service repair orders.(ii) The declaration under subparagraph (i)(A) shall be presumed to be reasonable, except that a manufacturer or distributor may, no later than 60 days after submission, rebut the presumption by substantiating that the rate is unreasonable or materially inaccurate.(iii) The average labor rate shall go into effect 60 days following the declaration under subparagraph (i)(A), unless the franchisor audits the submitted repair orders and a rebuttal under subparagraph (ii) occurs.(iv) If the declared rate is rebutted, the manufacturer or distributor shall propose an adjustment of the labor rate based on the rebuttal not later than 60 days after submission.(v) A manufacturer shall provide written support to the dealer for the rebuttal rate that is proposed. If the dealer does not agree with the proposed labor rate, the dealer may file a protest after receipt of the proposal by the manufacturer or distributor. If a protest is filed, the board shall inform the manufacturer or distributor that a protest has been filed and that a hearing will be held on the protest. In a hearing held under this subparagraph, the manufacturer or distributor shall have the burden of proving that:(A) the retail rate declared by the dealer was unreasonable or materially inaccurate; and(B) the manufacturer's or distributor's proposed adjustment of the retail rate is reasonable.(4) This subsection shall not apply to manufacturers or distributors of manufactured housing.(b) Schedule of compensation to include reasonable compensation.--[Deleted by 2013 Amendment.](b.1)Exceptions.--When calculating the retail rate customarily charged by the dealer for parts and labor under this section, the following work shall not be included: (1) Repairs for manufacturer or distributor special events, specials or promotional discounts for retail customer repairs.(2) Parts sold at wholesale.(3) Routine maintenance not covered under a retail customer warranty, such as fluids, filters and belts not provided in the course of repairs.(4) Nuts, bolts, fasteners and similar items that do not have an individual part number.(6) Vehicle reconditioning.(b.2)Compensation.--If a manufacturer or distributor furnishes a part or component to a dealer, at no cost, to use in performing repairs under a recall, campaign service or warranty repair, the manufacturer or distributor shall compensate the dealer for the part or component in the same manner as warranty parts compensation under this section by compensating the dealer the average markup on the cost for the part or component as listed in the manufacturer's or distributor's price schedule, minus the cost for the part or component.(b.3)Prohibitions and audit.-- (1) A manufacturer or distributor may not require a dealer to establish the retail rate customarily charged by the dealer for parts and labor by:(i) An unduly burdensome or time consuming method.(ii) Requiring information that is unduly burdensome or time consuming to provide, including part-by-part or transaction-by-transaction calculations.(2) A dealer may not declare an average percentage markup or average labor rate more than once in one calendar year.(3) A manufacturer or distributor may perform annual audits to verify that a dealer's effective rates have not decreased. If a dealer's effective rates have decreased, a manufacturer or distributor may reduce the warranty reimbursement rate prospectively.(b.4) Recovery.-- (1)(i) A manufacturer or distributor may not recover its costs from a dealer within this Commonwealth that does not apply to the manufacturer or distributor for retail rate reimbursement for parts and labor, including an increase in the wholesale price of a vehicle or surcharge imposed on a dealer intended to recover the cost of reimbursing a dealer for parts and labor under this section.(ii) A manufacturer or distributor may increase the price for a vehicle or part in the normal course of business.(2) A dealer may elect to revert to the nonretail rate reimbursement for parts and labor once in a calendar year to avoid a manufacturer or distributor surcharge.(c) Deleted by 2011, July 7, P.L. 285, No. 65, § 2, effective in 60 days [Sept. 6, 2011].(d) Indemnification required.--Notwithstanding the terms of any franchise agreement, it shall be a violation for any new vehicle manufacturer to fail to indemnify its franchised dealers against any judgment for damages or settlement approved in writing by the manufacturer, including, but not limited to, court costs and reasonable attorneys' fees of the new vehicle dealer, arising out of complaints, claims or lawsuits including, but not limited to, strict liability, negligence, misrepresentation, express or implied warranty or rescission of the sale as defined in 13 Pa.C.S. § 2608 (relating to revocation of acceptance in whole or in part) to the extent that the judgment or settlement relates solely to the alleged defective or negligent manufacture, assembly or design of new vehicles, parts or accessories or other functions by the manufacturer or distributor beyond the control of the dealer.(e) Warranty reimbursement and incentive or reimbursement program approval and audits.--(1) Any warranty, recall, service contract or any other required service parts or labor reimbursement claim or incentive or reimbursement program claim filed by the dealer with the manufacturer or distributor in the manner and on forms the manufacturer or distributor reasonably prescribes which is not specifically disapproved in writing or by electronic transmission 30 days after receipt by the manufacturer or distributor is considered approved and payment to the dealer must follow within 30 days.(1.1) Where the automobile, motorcycle or truck manufacturer or distributor disapproves any claim, the manufacturer or distributor shall describe in writing or by electronic transmission what reasonable corrective action the dealer must perform to receive payment for the claim, or the claim shall be deemed approved within 30 days of the original disapproval and payment to the dealer shall be made within 30 days of the deemed approval. The automobile, motorcycle or truck manufacturer or distributor shall not deny a claim or reduce the amount to be reimbursed if the dealer has reasonably substantiated the claim in accordance with reasonable written requirements of the manufacturer or distributor, provided that the dealer has been notified of the requirements prior to the time the claim arose and the requirements were in effect at the time the claim arose.(2) The manufacturer or distributor shall be permitted to audit claims within a nine-month period from the date the claim was paid or credit issued by the manufacturer or distributor and to charge back any false or unsubstantiated claims. If there is evidence of fraud, this subsection does not limit the right of the manufacturer or distributor to audit for longer periods and charge back for any fraudulent claim, subject to the limitations period under 42 Pa.C.S. (relating to judiciary and judicial procedure).(3)(i) After the completion of any internal appeal process pursuant to the manufacturer's or distributor's policy manual, but no less than 30 days prior to a manufacturer or distributor charging back a new vehicle dealer for any claims which the manufacturer or distributor alleges are false or unsubstantiated, the manufacturer or distributor shall notify the new vehicle dealer in writing of all of the following: (A) The amount of and basis for each claim the manufacturer or distributor seeks to charge back.(B) The total amount to be charged back.(ii) During the 30-day time period under subparagraph (i), a new vehicle dealer may file with the board a protest of the charge-backs as provided for under section 306 . When such a protest is filed, the board shall inform the manufacturer or distributor that a timely protest has been filed and that the manufacturer or distributor shall not charge back the new vehicle dealer:(A) until the board has held a hearing; or(B) if the board has determined that there is good cause for not permitting the charge-back of such new vehicle dealer.(f) Applicability.--This section shall also apply to each medium-duty and heavy-duty truck component and engine manufacturer or distributor that provides integral parts of vehicles, provides major components by selling directly to dealers or who enters into a contract with a medium-duty and heavy-duty truck dealer which authorizes the dealer to perform warranty or other services on the products produced or distributed.(g)Applicability.--This section shall not apply to recreational vehicle warrantors or dealers.Amended and Renumbered by P.L. TBD 2018 No. 134, § 9, eff. 10/24/2019.Amended by P.L. 675 2013 No. 84, § 1, eff. 12/31/2013.1983, Dec. 22, P.L. 306, No. 84, §8 [ 63 P.S. § 818.8], effective Jan. 1, 1984. Renumbered as § 9 [63 P.S. § 818.9] and amended 1996 , April 19, P.L. 104, No. 27, § 7, effective in 60 days. Amended 2000, Oct. 18, P.L. 577, No. 75, § 4, effective in 60 days; 2011, July 7, P.L. 285, No. 65, § 2, effective in 60 days [Sept. 6, 2011].