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Volkswagen sues State of Illinois over warranty reimbursement in the franchise law

Automaker says warranty reimbursement doesn’t increase technicians’ pay and alleges that the law doesn’t compel or incentivize dealers to increase compensation

Chicago—Volkswagen Group of America (VWGoA) filed a lawsuit last month in the U.S. District Court for the Northern District of Illinois against the Illinois Secretary of State, the Illinois Attorney General, and members of the Illinois Motor Vehicle Review Board, challenging the constitutionality of the recent warranty reimbursement amendment to the Illinois Motor Vehicle Franchise Act.

Referring to the Warranty Reimbursement amendment as the “Multiplier Act,” it allegedly “requires motor vehicle manufacturers to compensate dealers for time that the dealers never actually spend performing warranty work,” ie, at 1.5%.

VWGoA describes the law as “crony capitalism at work: redistributive legislation that takes hundreds of millions of dollars from some (but not all) motor vehicle manufacturers and, for no public purpose, deposits that money directly into the pockets of politically favored Illinois dealers.”

VWGoA claims the law, as reported by the Chicago Automotive Trade Association, is unconstitutional under the Commerce Clause of the United States Constitution, the Special Legislation Clause of the Illinois Constitution, and the Takings, Due Process, and Equal Protection Clauses of both the US and Illinois Constitutions.

The lawsuit challenges the foundation and current relevancy of the Illinois Motor Vehicle Franchise Act, which was initially passed in 1979. The complaint states: “Today, the new motor vehicle market looks very different. Competition among manufacturers is widespread and dynamic, fueled by generational changes in consumer preferences, transformative innovations in electric vehicle technology, and the rise of new entrants (such as Tesla) that are not subject to the statutory restraints that confine legacy manufacturers … [yet] the Motor Vehicle Franchise Act persists, providing Illinois dealers — some of the state’s most remunerative businesses — with greater statutory benefits and protections than virtually any other interest group in any industry, while imposing an array of unusual constraints on manufacturers.”

One claim made by VWGoA is that when Gov. Pritzker signed the “Multiplier Act,” he announced in a press release that the purpose of the Act was to increase technicians pay, but VWGoA alleges that the law neither ensures higher pay for technicians nor compels or incentivizes dealers to increase employee compensation. However, the requirements of the new law were incorporated into the wage provisions of the current 701 contract. Non-union dealers customarily match the 701 contract’s wage provisions in order to stay competitive in such a tight labor market — especially for techs.

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