88R24432 DIO-F     By: Geren H.B. No. 4078     Substitute the following for H.B. No. 4078:     By:  Canales C.S.H.B. No. 4078       A BILL TO BE ENTITLED   AN ACT   relating to motor vehicle franchised dealers and the reimbursement   of motor vehicle franchised dealers by manufacturers and   distributors for warranty, recall, and preparation and delivery   work.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 2301.003, Occupations Code, is amended   by adding Subsection (c) to read as follows:          (c)  A manufacturer or distributor may not compel a dealer to   comply, take an adverse action, or initiate an action or proceeding   in response to a dealer not participating in a manufacturer or   distributor program or initiating an action or proceeding,   including an action or proceeding to which the manufacturer or   distributor is a party, to enforce a right or remedy available to   the dealer under law or by agreement.          SECTION 2.  Subchapter I, Chapter 2301, Occupations Code, is   amended to read as follows:   SUBCHAPTER I.  WARRANTIES AND RECALLS:  REIMBURSEMENT OF DEALER          Sec. 2301.4001.  DEFINITIONS. In this subchapter:                (1)  "Goodwill repair" means a repair made by a seller   for no charge that the seller is not obligated to make.                (2)  "Part" includes:                      (A)  any component, electric vehicle battery,   engine, equipment, fixture, good, part assembly, software, or   transmission for a motor vehicle; and                      (B)  a replacement for a part listed in Paragraph   (A).                (3)  "Routine maintenance" includes replacement of a   belt, bolt, brake pad, bulb, fastener, filter, fluid, internal   combustion engine vehicle battery, nut, or rotor, unless the belt,   bolt, brake pad, bulb, fastener, filter, fluid, internal combustion   engine vehicle battery, nut, or rotor is provided by the   manufacturer or distributor in the course of a repair with an   assigned part number.          Sec. 2301.401.  WARRANTY, RECALL, PREPARATION, AND DELIVERY   REQUIREMENTS.  (a)  On request, a manufacturer or distributor shall   provide to the department a copy of the current requirements the   manufacturer or distributor imposes on its dealers with respect to   the dealer's:                (1)  duties under the manufacturer's or distributor's   warranty and under a manufacturer's or distributor's recall; and                (2)  vehicle preparation and delivery obligations.          (b)  Warranty, recall, or preparation and delivery   requirements placed on a dealer by a manufacturer or distributor   are not enforceable unless the requirements are reasonable.          Sec. 2301.402.  RATE OF COMPENSATION.  (a)  A manufacturer or   distributor shall fairly and adequately compensate its dealers for   warranty, recall, and preparation and delivery work.          (b)  A manufacturer or distributor may not pay or reimburse a   dealer an amount of money for warranty or recall work that is less   than the amount the dealer charges a retail customer for similar   nonwarranty work.          (c)  In computing the amount of money a dealer charges a   retail customer under Subsection (b) for labor, the manufacturer or   distributor shall use the formula, of the following formulas, that   produces the fewest number of repair orders [the greater of]:                (1)  the average labor rate charged during the   preceding six months by the dealer on 100 sequential nonwarranty   repair orders paid by retail customers, exclusive of:                      (A)  routine maintenance;                      (B)  tire, wheel, or wheel alignment;                      (C)  discounts to state agencies, insurers, or   warranty or service contract providers;                      (D)  state inspections;                      (E)  goodwill repairs;                      (F)  accessory installation;                      (G)  a manufacturer's or distributor's promotion   or service campaign; or                      (H)  repairs to a vehicle owned by the dealer, an   affiliate of the dealer, or an employee of either the dealer or   affiliate; or                (2)  the average labor rate charged for 90 consecutive   days during the preceding six months by the dealer for nonwarranty   repairs paid by retail customers, exclusive of:                      (A)  routine maintenance;                      (B)  tire, wheel, or wheel alignment;                      (C)  discounts to state agencies, insurers, or   warranty or service contract providers;                      (D)  state inspections;                      (E)  goodwill repairs;                      (F)  accessory installation;                      (G)  a manufacturer's or distributor's promotion   or service campaign; or                      (H)  repairs to a vehicle owned by the dealer, an   affiliate of the dealer, or an employee of either the dealer or   affiliate.          (d)  The average labor rate under Subsection (c) is   determined by dividing the total charges for labor submitted by the   total number of hours charged for the repairs.          (e)  In computing the amount of money a dealer charges a   retail customer under Subsection (b) for parts, the manufacturer or   distributor shall use the formula, of the following formulas, that   produces the fewest number of repair orders:                (1)  the average parts markup charged during the   preceding six months by the dealer on 100 sequential nonwarranty   repair orders paid by retail customers, exclusive of:                      (A)  routine maintenance;                      (B)  tire, wheel, or wheel alignment;                      (C)  discounts to state agencies, insurers, or   warranty or service contract providers;                      (D)  state inspections;                      (E)  goodwill repairs;                      (F)  accessory installation;                      (G)  a manufacturer's or distributor's promotion   or service campaign; or                      (H)  repairs to a vehicle owned by the dealer, an   affiliate of the dealer, or an employee of either the dealer or   affiliate; or                (2)  the average parts markup charged for 90   consecutive days during the preceding six months by the dealer for   nonwarranty repairs paid by retail customers, exclusive of:                      (A)  routine maintenance;                      (B)  tire, wheel, or wheel alignment;                      (C)  discounts to state agencies, insurers, or   warranty or service contract providers;                      (D)  state inspections;                      (E)  goodwill repairs;                      (F)  accessory installation;                      (G)  a manufacturer's or distributor's promotion   or service campaign; or                      (H)  repairs to a vehicle owned by the dealer, an   affiliate of the dealer, or an employee of either the dealer or   affiliate.          (f)  The average parts markup for Subsection (e) is   determined by dividing the total charges for parts submitted by the   total cost of the parts for which charges are submitted.          (g)  If a manufacturer or distributor supplies a part to a   dealer at no cost or at a reduced cost for use in a warranty or   recall repair, the manufacturer or distributor shall compensate the   dealer for the dealer's cost for the part, if any, plus an amount   equal to the dealer's prevailing retail parts markup, multiplied by   the fair wholesale value of the part.          (h)  For purposes of Subsection (g), the fair wholesale value   of a part is the greater of:                (1)  the amount the dealer paid for the part or a   substantially identical part if presently owned by the dealer;                (2)  the cost of the part as shown in a current or   previously established price schedule of the manufacturer or   distributor; or                (3)  the cost of a substantially identical part shown   in a current or previously established price schedule of the   manufacturer or distributor.          (i)  A manufacturer or distributor shall compensate a dealer   in accordance with this subchapter if the dealer assists in or   performs an over-the-air or remote installation, change, repair,   update, or amendment to any part, system, accessory, or function.          Sec. 2301.403.  ADJUSTMENT OF RATE FOR WARRANTY WORK [LABOR   RATE].  (a)  A dealer may request an adjustment in the dealer's   warranty work [labor] rate.  The request must be sent to the   manufacturer or distributor by certified mail, return receipt   requested, and must state the requested labor or parts rate and   include information reasonably necessary to enable the   manufacturer or distributor to adequately evaluate the request as   provided by this subchapter.          (b)  Not later than the 60th day after the date of receipt of   a request under this section, the manufacturer or distributor shall   provide written notice to the requesting dealer of the approval,   reduction, claimed material inaccuracy, or disapproval of the   request.  If the manufacturer or distributor fails to respond   before the 60th day after the date the request is received, the   submitted rate shall take effect on the 60th day after the date the   manufacturer or distributor receives the request. If the request   is disapproved, reduced, or claimed to be materially inaccurate,   the manufacturer or distributor shall state the reasons for the   disapproval, reduction, or claimed material inaccuracy. The stated   reasons for disapproval, reduction, or claimed material inaccuracy   of the requested labor rate or parts markup must contain:                (1)  an explanation of the reasons the request is   disapproved, reduced, or claimed to be materially inaccurate;                (2)  evidence that substantiates each stated reason;                (3)  if a material inaccuracy is alleged, a copy of the   calculations used by the manufacturer or distributor demonstrating   a material inaccuracy; and                (4)  a proposed adjusted labor or parts rate, as   applicable.          (c)  A requesting dealer may file a protest with the board if   the manufacturer or distributor[:                [(1)]  disapproves or reduces a dealer's request or   claims the request is materially inaccurate[; or                [(2)  fails to respond within the time required by this   section].          (d)  After a protest is filed, the board may uphold the   manufacturer's or distributor's decision only if the manufacturer   or distributor proves by a preponderance of the evidence that the   disapproval, reduction, or claimed material inaccuracy of the   request [or failure to respond] was reasonable.          (e)  If the board does not determine that the disapproval,   reduction, or claimed material inaccuracy of the request [or   failure to respond] was reasonable, the board shall order the   requested rate into effect as of the 60th day after the receipt of   the request by the manufacturer or distributor.          (f)  Except by agreement of the parties, a warranty labor   rate or warranty parts rate established under this subchapter may   not be adjusted more often than once a year.          Sec. 2301.404.  TIME FOR PAYMENT. (a)  A manufacturer or   distributor shall pay a dealer's claim for reimbursement for   warranty work, recall work, or dealer preparation and delivery work   not later than the 30th day after the date of approval of the claim.          (b)  A claim that is not disapproved before the 31st day   after the date of receipt is considered approved.          (c)  If a claim is disapproved, the manufacturer or   distributor shall provide the dealer written notice explaining [of]   the reasons for the disapproval.          (d)  A controversy regarding the payment of a claim under   this subchapter or compliance with the provisions of this   subchapter shall be resolved in accordance with Subchapter Q.          Sec. 2301.405.  CHARGE BACK TO DEALER.  (a)  A manufacturer   or distributor may not charge back to a dealer money paid by the   manufacturer or distributor to satisfy a claim approved and paid   under this chapter [subchapter] unless the manufacturer or   distributor shows that:                (1)  the claim was false or fraudulent;                (2)  repair work was not properly performed or was   unnecessary to correct a defective condition; or                (3)  the dealer who made the claim failed to   substantiate the claim as provided by the manufacturer's or   distributor's requirements that were enforceable under Section   2301.401 at the time the claim was filed.          (b)  A manufacturer or distributor may not audit a claim   filed under this chapter [subchapter] after the first anniversary   of the date the claim is submitted unless the manufacturer or   distributor has reasonable grounds to suspect that the claim was   fraudulent.          Sec. 2301.406.  PROHIBITED REQUIREMENTS FOR PAYMENT.  (a) A   manufacturer or distributor may not require, as a prerequisite to   the payment of a claim for reimbursement, that a dealer file a   statement of actual time spent in performance of labor, unless   actual time is the basis for reimbursement.          (b)  A manufacturer or distributor may not recover or attempt   to recover any portion of the compensation due to a dealer for   warranty, recall, or preparation and delivery work by reducing the   amount due by a separate charge, surcharge, like charge, other   charge, supplemental charge, or reduction in return reserve   allowance to the wholesale price paid by the dealer to the   manufacturer or distributor for any product, including motor   vehicles and parts.  This subsection does not prohibit a   manufacturer or distributor from increasing prices for a vehicle or   part in the normal course of business.           (c)  A manufacturer or distributor may not establish or   implement a special part number for a part used in warranty, recall,   or preparation and delivery work if the result is lower   compensation to the dealer than as calculated under Section   2301.402.          SECTION 3.  The changes in law made by this Act apply only to   warranty, recall, or preparation and delivery work under Subchapter   I, Chapter 2301, Occupations Code, as amended by this Act,   commenced on or after the effective date of this Act. Warranty,   recall, or preparation and delivery work commenced before the   effective date of this Act is governed by the law in effect on the   date the work was commenced, and the former law is continued in   effect for that purpose.          SECTION 4.  This Act takes effect September 1, 2023.