A. Each manufacturer shall specify in its franchise agreement, or in a separate written agreement, with each of its dealers licensed in this state, the dealer’s obligation to perform warranty work or service on the manufacturer’s products.

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B. Each manufacturer shall provide each of its dealers with a schedule of compensation to be paid to the dealer for recall or warranty repairs, work or service, including parts, labor and diagnostic work, required of the dealer by the manufacturer in connection with the manufacturer’s products. The schedule of compensation for a recall or warranty repair shall not be less than the rates charged by the dealer for similar service to retail customers for nonwarranty service and repairs.

C. The rates charged by the dealer for nonwarranty service or work for parts means the price paid by the dealer for those parts, including all shipping and other charges, increased by the franchisee’s average percentage markup. A dealer shall establish and declare the dealer’s average percentage markup by submitting to the manufacturer one hundred sequential customer-paid service repair orders or ninety days of customer-paid service repair orders, whichever is less, covering repairs made no more than one hundred eighty days before the submission. A change in a dealer’s established average percentage markup takes effect thirty days following the submission. A manufacturer shall not require a dealer to establish average percentage markup by another methodology. A manufacturer shall not require information that is unduly burdensome or time-consuming to provide, including part-by-part or transaction-by-transaction calculations.

D. A manufacturer shall compensate a dealer for labor and diagnostic work for recall or warranty repairs at the rates charged by the dealer to its retail customers for such work. A dealer shall establish and declare the dealer’s average customer pay labor rate by submitting to the manufacturer the lesser of one hundred sequential customer-paid service repair orders or ninety days of customer-paid service repair orders covering repairs made no more than one hundred eighty days before the submission.

E. If a manufacturer can demonstrate that the rates under Subsection C or D of this section were incorrectly calculated by a dealer or unreasonably exceed those of all other franchised motor vehicle dealers in the same relevant market area offering the same or a competitive motor vehicle line, the manufacturer is not required to honor the rate increase proposed by the dealer. If the manufacturer is not required to honor the rate increase proposed by the dealer, the dealer is entitled to resubmit a new proposed rate for labor and diagnostic work.

F. A dealer shall not be granted an increase in the average percentage markup or labor and diagnostic work rate more than twice in one calendar year.

G. All recall or warranty claims for parts and labor made by dealers under this section shall be submitted to the manufacturer within one year of the date the work was performed. All claims submitted must be paid by the manufacturer within thirty days following receipt, provided that the claim has been approved by the manufacturer. The manufacturer has the right to audit claims and to charge the dealer for any unsubstantiated, incorrect or false claims for a period of six months following payment. However, the manufacturer may audit and charge the dealer for any fraudulent claims during any period for which an action for fraud may be commenced under applicable state law.

H. All claims submitted by dealers on the forms and in the manner specified by the manufacturer shall be either approved or disapproved within thirty days following their receipt. The manufacturer shall notify the dealer in writing of any disapproved claim and shall set forth the reasons why the claim was not approved. Any claim not specifically disapproved in writing within thirty days following receipt is approved, and the manufacturer is required to pay that claim within thirty days of receipt of the claim.

I. A manufacturer may not recover its costs for compensating its dealers licensed in this state for a recall or warranty claim either by reduction in the amount due to the dealer or by separate charge, surcharge or other imposition.

J. A manufacturer, distributor or representative shall not deny a claim by a dealer for performing a covered warranty repair or required recall, do not drive order or stop sale order repair on a motor vehicle if the dealer discovered the need for the repair during the course of a separate repair request by the customer; provided that the dealer provides the required documentation, which shall not be unreasonably burdensome, demonstrating the need for the repair.

K. The provisions of this section shall not apply to recreational travel trailers or to parts of systems, fixtures, appliances, furnishings, accessories and features of motor homes.