On September 11, 2025, New Jersey Gov. Phil Murphy signed into law the Motor Vehicle Open Recall Notice and Fair Compensation Act (S.3309). The New Jersey governor’s most recent action follows votes by both houses of the New Jersey Legislature on June 30, 2025, to amend the state’s Franchise Practices Act. Although a number of other states have sought in recent years to regulate the labor rate manufacturers must pay dealers for performing warranty repairs—and some states have even sought to regulate the time allowances for those repairs—New Jersey’s new law is unique in permitting dealers to claim an “average retail labor time allowance.” This will impose a different statutory process on manufacturers than other states presently do when the New Jersey law takes effect on April 1, 2026.

Virtually every state in the United States—including New Jersey—has adopted statutory requirements that permit new car dealers to seek compensation from manufacturers for warranty repairs at the dealer’s “average retail labor rate.” This rate is typically calculated using a selected sample of sequential repair orders from actual customer pay, non-warranty repairs the dealer has recently performed, excluding certain routine minor service activities (such as oil changes). This average retail labor rate is then multiplied against the time allowance for a particular repair contained in the OEM’s flat rate time guide, and the manufacturer reimburses a dealer this amount in connection with a particular warranty repair.

The statutory amendments now signed into law will give New Jersey dealers the option to receive not only their “average retail labor rate,” but also to be reimbursed for warranty repairs using an “average retail labor time allowance.” This time allowance is established by a dealer submitting 100 sequential customer paid service repair orders or 90 days of customer paid service repair orders, whichever is less, to the manufacturer, covering repairs made no more than 180 days before the submission. The number of hours billed in those repair orders is divided by the number of hours permitted by the manufacturer for the repairs under the manufacturer’s labor time guide, with the resulting quotient used as the “average retail labor time allowance.” 

This new time allowance will serve as an additional multiplier for all warranty repairs performed by the dealer, with the warranty labor compensation now being calculated as: (1) the dealer’s “average retail labor rate,” as calculated under the state statute, multiplied by (2) the number of hours provided for the repair that is performed in the manufacturer time guide, multiplied by (3) the “average retail labor time allowance.” The legislation, which passed the New Jersey Legislature with strong labor support, provides that “[u]pon payment of a claim for labor services under this section by the motor vehicle franchisor...the motor vehicle franchisee shall compensate its factory-certified flat rate technicians performing work on a warranty” or warranty-like work, but is silent as to the amount of the increased reimbursement, if any, that must be passed on to technicians.