ASSEMBLY APPROPRIATIONS COMMITTEE
STATEMENT TO
ASSEMBLY COMMITTEE SUBSTITUTE FOR
ASSEMBLY, No. 4380
with committee amendments
STATE OF NEW JERSEY
DATED: JUNE 19, 2025
The Assembly Appropriations Committee reports favorably and with committee amendments Assembly Bill No. 4380 ACS.
As amended and reported, the bill establishes the “Motor Vehicle Open Recall Notice and Fair Compensation Act” and revises motor vehicle franchise agreements. The bill also updates a findings and declarations section under current law. The bill is to become effective on the first day of the fourth month following enactment and apply to all motor vehicle franchise agreements in effect on or after the bill’s effective date. However, the bill is not to apply retroactively to any cause of action that arose prior to the bill’s effective date.
Standing of Certain Corporations or Associations
The bill provides that, in certain circumstances outlined in the bill, any corporation or association that is primarily owned by or comprised of motor vehicle franchisees has standing to file an administrative petition, or to bring an action before any court of competent jurisdiction, for itself or by, for, or on behalf of any motor vehicle franchisee or group of motor vehicle franchisees for any alleged violation of the “Franchise Practices Act.” However, a corporation or association is only permitted to file such petition or bring such action in certain circumstances outlined in the bill.
Motor Vehicle Commission Requirements
Under the bill, when issuing a motor vehicle registration or renewal notice, the New Jersey Motor Vehicle Commission (MVC) is also to issue an open recall notice to inform a motor vehicle owner that the National Highway Traffic Safety Administration (NHTSA) maintains a recall database through which motor vehicle owners can determine whether a motor vehicle is subject to an open recall. The open recall notice is also required to include: (1) a link to the Internet website through which a motor vehicle owner can access the NHTSA recall database; and (2) a statement indicating that each open recall may be repaired by a dealer approved by the manufacturer of the motor vehicle at no cost to the owner of the motor vehicle, except as provided under certain provisions of federal law. The bill permits the MVC to apply for any available funding to help the MVC cover the costs to effectuate the open recall notice requirements. Manufacturers operating in this State are required to assist the MVC with any application for funding under the bill. However, if the MVC is unable to acquire sufficient funding to cover the costs of implementing the open recall notice requirement, the chief administrator of the MVC is permitted to require each manufacturer that conducts business in the State to pay a fee to the MVC to cover the difference. The chief administrator of the MVC is required to determine the amount of the fee each year based on documentation of the actual costs incurred to implement the open recall notice requirement under the bill.
Compensation for Recall Costs
Under the bill, if the part or parts necessary to perform a recall service are unavailable to perform a recall service or repair on a used motor vehicle within 30 days of the franchisor issuing the first recall notice, a motor vehicle franchisor is to compensate a motor vehicle franchisee at a prorated rate of at least 1.5 percent of the value of the used motor vehicle. However, this prorated rate is only to apply to used motor vehicles that are subject to an open recall, for which a stop-sale notice or do-not-drive notice has been issued, and for which a franchisee is authorized to sell and service new motor vehicles of the same line-make. The franchisor is to compensate a franchisee at the prorated rate each month beginning 30 days after the franchisor issued the stop-sale notice or do-not-drive notice to the franchisee until the earlier of: (1) the date that the part or parts necessary to perform the recall service become available; or (2) the date that the franchisor sells, trades, or otherwise disposes of the used motor vehicle that is subject to the stop-sale notice or do-not-drive notice. For the purposes of this calculation, a used motor vehicle’s value is to be the average trade-in value as indicated in an independent third-party guide for the year, make, and model of the used motor vehicle.
Alternatively, the bill permits a franchisor to compensate its franchisees under a national recall compensation program, provided that: (1) compensation under the program is equal to or greater than the compensation provided under the prorated rate; or (2) the franchisor and the franchisee otherwise reach an agreement relating to compensation.
In addition, the bill prohibits a franchisor from
reducing, through various means outlined in the bill, the amount of
compensation otherwise owed to a franchisee because the franchisee has
submitted a claim for reimbursement pursuant to the new guidance on
compensation for recall costs.
Reimbursement for Certain Expenses
Under current law, certain requirements are triggered if a motor vehicle franchise requires or permits franchisees to perform services or provide parts in satisfaction of a warranty issued by the franchisor. This bill amends current law to extend these requirements to the satisfaction of a repair service offered and reimbursed by the franchisor (repair service), including, but not limited to, a warranty, an extended warranty, a maintenance plan, a service-related plan, or a recall.
Under the bill, labor services to be reimbursed include diagnostic work. In the case of entire engine and entire transmission assemblies and electric propulsion batteries, the bill requires the franchisor to reimburse the franchisee in the amount of 30 percent of what the franchisee would have paid the franchisor for a part if the part had not been supplied by the franchisor other than by the sale of that part to the franchisee.
The bill amends certain provisions of law concerning the process for calculating the prevailing retail price, average percentage parts markup, the retail labor time allowance, and the retail labor rate. Under the bill, a franchisee is not to request a change in the average percentage parts markup, retail labor time allowance, or retail labor rate more than twice in one calendar year.
The bill requires a franchisor to provide adequate and fair compensation to each franchisee for labor services rendered for a repair in an amount not less than the amount a retail customer pays for the same labor services with regard to labor time. A franchisee may apply to its franchisor for reimbursement for labor services according to an established average retail labor time allowance instead of the franchisor’s labor time guide for franchisor-paid repairs or service. As part of its application, a franchisee is to submit certain information to the franchisor in order to establish an average retail labor time allowance pursuant to calculations outlined in the bill. The average retail labor time allowance, once declared, is to become effective 30 days following the declaration subject to audit by the franchisor only of the sample submitted by the franchisee. Any proposed adjustment of the average labor time allowance made by the franchisor is to be based only on an audit of that sample.
Under the bill, if a franchisor supplies, or causes to
be supplied, a part or parts for use in a repair rendered under a repair
service, at no cost or at a reduced cost, the franchisor is to compensate the
franchisee in the same manner as the franchisor compensates the franchisee for
the franchisee’s cost of the part, if any. However, in addition to the cost of
the part, the franchisor is to compensate the franchisee an amount equal to the
franchisee’s parts markup multiplied by the wholesale value of the part, which
value is to be determined by calculations outlined in the bill.
Restrictions on Reimbursement
A franchisor is prohibited under the bill from recovering its costs from a franchisee, except in certain circumstances. However, the bill preserves a franchisor’s right to increase prices for motor vehicles or parts in the normal course of business.
In addition, a motor vehicle franchisor is prohibited under the bill from charging back any claim paid for labor services and parts provided in the performance of a repair service for an incentive, bonus, sales, performance, or other program without providing written notice to the franchisee within 30 days from the audit, which written notice explains in detail the basis for each of the proposed chargebacks and the methodology by which the franchisee was selected for audit or review.
After all internal dispute resolution processes provided through the franchisor have been resolved, the franchisor is required to provide final notice to the franchisee of the final amount of the proposed chargeback. If the franchisee or its representative institutes an administrative or judicial action for a violation of the “Franchise Practices Act,” challenging the chargeback within 30 days of the receipt of the final notice, the total proposed chargeback amounts are to be stayed, without bond, until the final judgment has been rendered.
A franchisor is not permitted to deny or charge back a claim paid for labor services and parts provided in the performance of an open recall, warranty, or other service agreement or for an incentive, bonus, sales, performance, or other program unless the franchisor proves that certain conditions outlined in the bill were met. A franchisor is not permitted to deny or charge back a claim due to an administrative or scrivener’s error in the submission of the claim.
Under the bill, a motor vehicle franchisor is not to unilaterally reduce or manipulate the price of parts required for a repair service in a manner that unfairly and unilaterally allows the franchisor to reduce the level of compensation paid to franchisees for such services within 60 or fewer days preceding an announcement of a recall, any time after a recall, or after a warranty claim has arisen.
COMMITTEE AMENDMENTS:
The committee amended the bill to:
(1) define “do-not-drive notice” to mean a notification issued by a motor vehicle franchisor, or the National Highway Traffic Safety Administration, to a motor vehicle franchisee, which notice states that certain used motor vehicles in inventory are unsafe to drive and are not to be sold or leased, at either retail or wholesale, due to a recall;
(2) permit a corporation or association that is primarily owned by or comprised of franchisees to petition, or to bring an action before any court of competent jurisdiction, for itself or by, for, or on behalf of any franchisee or group of franchisees for an alleged violation of the “Franchise Practices Act,” if at least one of the corporation’s or association’s members has independent standing to sue, the interests that the petition or action seeks to protect are germane to the corporation’s or association’s purpose, and neither the claim asserted nor the relief requested requires any individual members of the corporation or association to participate in the petition or action;
(3) change the definition of “open recall” in section 5 of the bill to mean a safety-related recall that requires notification by a manufacturer pursuant to certain provisions of federal law and a repair or modification to a motor vehicle by an authorized dealer;
(4) remove the requirement for the MVC to check the NHTSA’s Internet website to determine if a motor vehicle is subject to an open recall prior to issuing a motor vehicle registration or registration renewal notice and notify a motor vehicle owner of open recalls specific to the owner’s motor vehicle;
(5) require the MVC to issue an open recall notice when issuing a registration or registration renewal notice, which open recall notice is to notify motor vehicle owners that the NHTSA maintains a recall database that allows a motor vehicle owner to determine if a motor vehicle is subject to an open recall;
(6) require the open recall notice to include a link to the Internet website through which a motor vehicle owner can access the NHTSA’s recall database, instead of a description of each open recall, and a statement indicating that each open recall can be repaired by a manufacturer-approved dealer at no cost to the motor vehicle owner, except whereas otherwise provided by certain provisions of federal law;
(7) permit, rather than require, the MVC to apply for any available funding to defray implementation costs associated with the open recall notice requirement under the bill;
(8) permit, rather than require, the Chief Administrator of the MVC to require a manufacturer fee if the MVC does not acquire sufficient funding to defray, rather than totally defray, implementation costs associated with the open recall notice requirement under the bill;
(9) provide that the MVC is not to be liable to any person for any act or omission related to the bill’s open recall notice requirement under any circumstance;
(10) clarify that the bill amends current law to expand provisions that only apply to labor services performed or parts provided in satisfaction of a warranty issued by the franchisor to labor services performed or parts provided in satisfaction of a repair service offered and reimbursed by the franchisor, including, but not limited to, a warranty, an extended warranty, a maintenance plan, a service-related plan, or a recall;
(11) remove the option for a franchisee to apply to its franchisor for labor time reimbursement according to the franchisor’s labor time guide for repairs in an amount equal to the amount a retail customer pays for the same labor services with regard to labor time, multiplied by 1.5;
(12) remove the option for a franchisee to apply to its franchisor for labor time reimbursement according to a third-party time guide;
(13) revise the calculation of the average retail labor time allowance for the purposes of determining adequate and fair compensation of a franchisee by a franchisor for the franchisee’s labor services related to a repair;
(14) update the bill’s title and synopsis; and
(15) make technical corrections.
FISCAL IMPACT:
The bill is not certified as requiring a fiscal note.