Review your repair orders now to avoid litigation later

Mechanic2

By Michael G. Charapp
Charapp & Weiss LLP

 

Chances are that you include fees to your service customers in addition to parts and labor charges.  It has been nearly two decades since there was a major challenge to a fee added to repair orders. There, the national chain Jiffy Lube was charging an “environmental fee” or an “environmental service fee” for each oil change. Jiffy Lube was a defendant in several lawsuits charging that the fee was not disclosed before services were completed. The plaintiffs also contended that the label of the fee suggested it was a governmental and/or a regulatory charge when that was not the case. The lawsuits charged that while customers believed the fees were connected with the governmental obligations to dispose of used oil and filters, the stores sold the used oil to recyclers and the charges were simply “profit enhancers”.  The Jiffy Lube class action, like many do, ended by settlement with a $5.00 coupon for each class member and attorneys’ fees of $2.75 million.

Don’t wait to review the fees on your ROs until you are challenged. Analyze them now, and be sure that you can justify them.

Here are tips to avoid claims resulting from service department fees:

  • Before imposing any fee on a repair order, carefully consider whether state law or local ordinances may regulate the practice. Dealers are used to searching out state laws that apply to them, but with vehicle repairs, many localities have regulated the practices of repair shops. Dealers should be as mindful of local regulations as they are of state legislation.
  • To avoid the claim that customers are not made aware of the fees of the service department, consider disclosing the applicability of fees in the service lane, on night drop tickets, on estimates, and on repair orders.
  • Avoid phrases that suggest that the fees are reimbursement for governmental charges.  “Environmental fee,” the source of the Jiffy Lube litigation, is a hot button.  Steer clear of phrases similar to existing government charges such as “recycling fees.”
  • Don’t use phrases suggesting the fee is going to a third party. For example, a phrase such as “hauler documentation fee” could be construed to suggest the fee is going to another business.
  • Taking the time to explain who benefits from the fee would strengthen a dealer’s protection against a claim in the event of a challenge.  An explanation in a brochure, on the service ticket, or posted in the drop-off area that a fee is added to compensate the dealer for materials or services not otherwise paid for in the parts and labor charges would be especially helpful.
  • Use of multiple fees can lead to claims that consumers believe that the fees have different “destinations,” rather than all of them going to the dealership.  If a dealer uses multiple fees, special care should be taken to explain the difference in the fees, and that they benefit the dealer.
  • Take care to ensure that a fee accurately describes some item (such as materials) generally provided without other payment, service for which compensation is not otherwise received, or general expenses not otherwise reimbursed.  Part of the complaint about the Jiffy Lube “environmental fee” appears to be that it was charged to customers even though the company actually was compensated for selling used oil and filters to recyclers.
  • Develop an explanation for each fee added to an RO. Train each service advisor and other service employee with customer contact how to handle questions about fees.