VW Sues In Illinois To Avoid Paying Retail Labor Rates On Warranty Work: Report

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In 2021, Illinois passed an updated Motor Vehicle Franchise Act. Similar to laws in other states, House Bill 3090 requires major automakers with franchised dealerships to pay the same labor rate for warranty work that a customer would pay after the warranty expires. The law went into effect in early 2022, and by year’s end, allegedly awarded Volkswagen more than $10 million in additional warranty fees.

This prompted the German automaker to file a lawsuit in the US District Court for the Northern District of Illinois over the action. Based on Automotive News, the filing claimed the law was unconstitutional, calling it “crony capitalism” which redistributes money with no public purpose “straight into the pockets of politically favored Illinois dealers”. The lawsuit reportedly named multiple state officials and members of the Illinois Motor Vehicle Review Board as defendants, and asked the court to overturn the statute.

Motor1.com contacted Volkswagen regarding the lawsuit. A company spokesman declined to comment.

HB 3090 passed through the Illinois House and Senate with strong bipartisan support. Based on Illinois. gov, the move also received support from several organizations including the AFL-CIO, the Chicago Labor Federation, and the Chicago Auto Trade Association. Prior to HB 3090, the Motor Vehicle Franchise Law require automakers to reimburse the cost of parts and/or uniform time standards negotiated between dealers and automakers.

Per Automotive News, this usually means the technicians at the dealership are not paid fairly for their time in warranty repairs. However, there is also no guarantee that the technician will receive full payment for warranty work. Dealer owners aren’t required to deploy it, but local unions reportedly have employment agreements to ensure that happens.

For now, it appears that VW is the only automaker seeking legal action over the HB 3090.

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