Code of Alabama
Chapter 20 - Dealings by Motor Vehicle Manufacturers, Wholesalers, etc., With Motor Vehicle Dealers.
Section 8-20-7 - Warranty Obligations to Dealers.

THIS SECTION WAS AMENDED BY ACT 2022-104 IN THE 2022 REGULAR SESSION, EFFECTIVE JUNE 1, 2022. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) For purposes of this section, the following words have the following meanings:
(1) PRE-DELIVERY SERVICE. All work and services, except warranty work, performed on a new motor vehicle by a motor vehicle dealer at the direction of the warrantor prior to the delivery of the vehicle to the first retail consumer.
(2) REPAIR ORDER. An invoice, paid by a retail customer, and closed as of the time of submission, encompassing one or more repairs to a motor vehicle, and reflecting, in the case of a parts markup submission, the cost of each part and the sale price thereof, and in the case of a labor rate submission, the total charges for labor and the total number of hours that produced the charges, which invoice may be submitted in electronic form.
(3) QUALIFIED REPAIR. A repair to a motor vehicle paid by a retail customer, which would have come within the warrantor's new motor vehicle warranty, but for the motor vehicle having exceeded the chronological or mileage limit of such warranty, and which does not constitute any of the work encompassed by subdivision (f)(5).
(4) QUALIFIED REPAIR ORDER. A repair order which encompasses, in whole or in part, a qualified repair or repairs.
(5) WARRANTOR. A manufacturer, distributor, or wholesaler, factory branch, factory representative, distributor branch, or distributor representative.
(6) WARRANTY WORK. All labor, including that of a diagnostic character, performed, and all parts, including original or replacement parts, and components, including engine, transmission, and other parts assemblies, installed by motor vehicle dealers on motor vehicles which are reasonably incurred by motor vehicle dealers, other than the incidental expenses incurred in performing labor and installing parts on motor vehicles, in fulfilling a warrantor's obligations under a new motor vehicle warranty, a recall, or a certified pre-owned warranty, to consumers, including, but not limited to, the expense of shipping or returning defective parts to the warrantor, when required by the warrantor.
(b) Every warrantor shall specify in writing to each of its motor vehicle dealers the dealer's obligation for pre-delivery service and warranty service on its products, shall compensate the motor vehicle dealer for the service required of the dealer by the warrantor, and shall provide the dealer the schedule of compensation to be paid the dealer for parts, work, and service in connection with the services, and the time allowance for the performance of such work and service.
(c) In no event shall the schedule of compensation fail to include reasonable compensation for diagnostic work, service, labor, and parts. Time allowances for the diagnosis and performance of warranty work and service shall be reasonable and adequate for the work to be performed. In no event shall such compensation of a dealer for warranty services including labor and parts, be less than the rates or prices charged by the dealer for like service to retail customers for nonwarranty service, repairs, and parts, provided that such prices and rates are not unreasonable. This subsection does not apply to compensation for parts, systems, fixtures, appliances, furnishings, accessories, and features of a motor home that are designed, used, and maintained primarily for non-vehicular residential purposes, or parts related to motorcycle repairs.
(d) It is a violation of this section for any warrantor to fail to perform any warranty obligations under the motor vehicle manufacturer's warranty, or to fail to include in written notices of factory recalls to dealers the expected date by which necessary parts and equipment will be available to dealers for the correction of such defects, or to fail to compensate any of the motor vehicle dealers for repairs effected by the recall.
(e) All claims made by new motor vehicle dealers pursuant to this section for such labor and parts shall be paid within 30 days following their approval; provided, however, that the warrantor retains the right to audit such claims and to charge back the dealer for any fraudulent claims for a period not to exceed 12 months from the date the claim was paid. All such claims shall be either approved or disapproved within 30 days after their receipt on forms and in the manner specified by the warrantor, and any claim not specifically disapproved in writing within 30 days after the receipt shall be construed to be approved and payment must follow within 30 days. A warrantor shall not disapprove claims for which the dealer has received preauthorization from the warrantor or its representative nor shall the warrantor unreasonably disapprove a claim solely based on the dealer's incidental failure to comply with a specific claim processing requirement that results only in a clerical error or administrative error; rather a claim denial must be based upon a material defect and deviation from the reasonable written claim submission requirements of the manufacturer. In the event of neglect, oversight, or mistake by the dealer, a dealer may submit an amended claim, or may submit a claim not submitted within the time required by the warrantor, for labor and parts up to 120 days from the date on which the claim was first submitted or could have been submitted.
(f)(1) For the purposes of this section, reasonable compensation shall be determined as provided in this subsection.
(2) The markup customarily charged by the dealer for parts or its labor rate may be established at the election of the dealer by the dealer submitting to the warrantor, either by electronic transmission or tangible delivery, all consecutive repair orders that include 100 sequential repair orders reflecting qualified repairs, or all repair orders closed during any period of 90 consecutive days, whichever produces the fewer number of repair orders, covering repairs made no more than 180 days before the submission and declaring the parts markup or labor rate.
(3) The dealer shall calculate its labor rate by determining the total charges for labor from the qualified repairs submitted and dividing that amount by the total number of hours that produced the charges. The dealer shall calculate its parts markup by determining the total charges for parts from the qualified repairs submitted, dividing that amount by its total cost of the purchase of the parts, subtracting one from that amount, and multiplying by 100 to produce a percentage.
(4) A motor vehicle dealer seeking to establish or modify its warranty reimbursement labor rate, parts markup, or both, not more frequently than once per 12-month period, shall submit to the warrantor one of the following:
a. A single set of repair orders for purposes of calculating both its labor rate and parts markup.
b. A set of repair orders for purposes of calculating only its labor rate or for purposes of calculating only its parts markup.
(5) In calculating the rate customarily charged by the dealer for parts and labor for purposes of this subsection, the following shall not be included in the calculation of the rate:
a. Repairs that are the subject of manufacturer or distributor discounts, such as special events, specials, promotions, coupons, or service campaigns.
b. Repairs of motor vehicles owned by the dealer.
c. Routine maintenance, including, but not limited to, replacements of fluids, filters, batteries, bulbs, belts, nuts, bolts, or fasteners, unless provided in the course of, and related to, an otherwise qualified repair.
d. Installations of accessories.
e. Replacements of or work on tires, wheels, including alignments, wheel or tire rotations, or replacements of brake drums, rotors, shoes, or pads.
f. Vehicle reconditioning.
g. Safety or emission inspections required by law.
h. Repairs for which volume discounts have been negotiated with government agencies.
i. Body shop repairs, including repairs covered by insurance, for conditions caused by collision, road hazard, the force of the elements, vandalism, theft, or the negligence or deliberate act of the owner, operator, or a third party.
j. Parts that do not have individual part numbers.
k. Warrantor approved and reimbursed goodwill repairs or reimbursements.
l. Window replacement, window etching, window tint, protective film, or other masking products.
(6) a. The submitted parts markup or labor rate shall go into effect 45 days after the warrantor's receipt of its submission, unless, within that period, the warrantor reasonably substantiates that the submission is materially incomplete, materially inaccurate, or is materially unreasonable and provides a full explanation of any reasons that the submitted markup or rate is materially incomplete, materially inaccurate, or materially unreasonable, evidence validating each reason, a copy of all calculations used by the warrantor demonstrating any material inaccuracy, and a proposed adjusted markup or rate provided that the dealer's submission is materially accurate based upon the qualified repair orders submitted by the dealer. In that event, the warrantor may submit only one rebuttal to the dealer, and may not thereafter add to, expand, supplement, or otherwise modify any element thereof, including, but not limited to, the warrantor's grounds for contesting the parts markup or labor rate, unless the warrantor did not possess the information at the time of its rebuttal, or if the information is used for the purpose of rebutting the dealer's response to the warrantor's rebuttal.
b. If a warrantor determines from any set of repair orders submitted under this subsection that the labor rate or parts markup calculated under this subsection is substantially higher or lower than the rate currently on record with the warrantor for labor or parts, or both, the warrantor, in accordance with this subsection, may request additional repair orders for a period of 60 days prior to or 60 days subsequent to the time period for which the repair orders were submitted for purposes of an alteration, and shall have 45 days from receiving the additional repair orders to rebut the presumption that the dealer's proposed markup and labor rates are reasonable.
(7) If the dealer and the warrantor do not agree on the parts markup or labor rate, the dealer may file an action in a court having jurisdiction in this state within 120 days of receiving the warrantor's written rejection of the dealer's proposed parts markup or labor rate. In that action, the warrantor shall have the burden of proving by a preponderance of the evidence that the dealer's submitted parts markup or labor rate, or both, was materially incomplete, materially inaccurate, or materially unreasonable. Upon a court decision in favor of the dealer finding that the labor or parts rate shall be more than proposed by the warrantor, any increase in the dealer's parts markup or labor rate arising from the proceeding shall be effective retroactively to the date 45 days following the warrantor's receipt of the original submission to the dealer or to the warrantor.
(8) In the determination of what constitutes materially unreasonable compensation under this section, relevant factors include, but are not limited to, the prevailing wage rates paid by similarly situated dealers in the state.