The Final Chapter

by James A. Castleman, Esq.

This is my last regular Legal Perspective column. I have been writing monthly articles for New England Automotive Report, and before that for Damage Report, almost continuously since 1982. It has been a long journey, and I hope that I can adjust to a life of not having a monthly deadline hanging over my head.

I am not retiring, but the nature of my law practice has changed significantly over the past several years, and I am less involved with the collision repair industry than I used to be and more involved with other clients. And, quite frankly, it sometimes is a chore to come up with what appears to be a new topic every 30 days. On the other hand, I am still here, willing to give advice regarding issues that affect the industry, and, if pushed, I still might be willing to contribute an article here and there on a particular new or challenging issue.

It was suggested to me that I look back over the past many decades and use this opportunity to write about the topics that I think are most important to members of the collision repair industry, and that is what I am going to do; however, that being said, in my opinion, there is really only one major topic that matters the most: the labor rate!

There certainly are a lot of other topics that are important as well, but many of them would be only afterthoughts if collision repair shops could charge and collect a fair labor rate for their services. Are insurers looking for a discount on repair parts prices, or do they seem to take excessive depreciation on wear items, or are they claiming that certain procedures are already included in a particular repair allowance? While important, all of these issues would take a back seat if repairers were able to get paid a decent labor rate. Do insurers not want to pay a markup on sublet work, not want to pay your storage rate or want to pay only on a dollars times hours basis for paint and materials? Again, if repairers were able to get paid a fair labor rate for their services, then all of these issues would still be important, but much less so than they are now.

As I have often recounted, the very first question that was posed to me at the first Board of Directors meeting of a collision repair association that I attended was: What can we do about the labor rate? The association at the time was the Massachusetts Auto Body Shop Owners Association (MABSOA), the meeting took place in January of 1976. I had been a lawyer for about one month, and my boss had just picked up MABSOA as a client but did not want to personally attend their Directors’ meetings. So, as the new kid on the block, I was the one chosen to spend monthly night time meetings in smoke-filled, closely packed rooms with a bunch of mostly old-time tin knockers drinking Seagram’s VO and soda. I had no idea what the labor rate question meant at the time or how important it was to the industry, but I made the effort to talk to various members of the association to find out and tried my best to research laws that might show me some answers.

Over the years, MABSOA grew in membership, subsequently became MABA and eventually merged with two other industry associations to become AASP/MA. Meanwhile, cars became increasingly more complicated to repair, members of the industry became more sophisticated and better educated, and computers and microchips became an integral part of the collision repair business. But over those years, the question that I continued to get the most was: What can we do about the labor rate? That continues to be the case, and I have continued to talk to members of the industry about the issue and continued to research laws that might shed light on the answer.

So, what can you do about the labor rate?

First and foremost, set what YOU believe that you need to get for a labor rate, and charge that rate. I know that this is not easy to do, and that insurers – that pay for the great bulk of collision repairs throughout the United States and perhaps the world – are going to do everything in their power to avoid paying your rate if it is higher than a particular insurer is regularly paying. But if you think the labor rate that insurers are paying is going to increase just because you wish that it would, then you are living in a fantasy world. The labor rate that insurers will pay is probably not going to increase until enough repair shops set their own labor rate, insist on getting paid that rate and tell their customers up front that they will be looking to them to pay any difference their insurer refuses to pay.

Repair shops legally cannot agree with one another to charge a particular rate. But individual repair shops can choose what they want to charge and can determine what other shops in the area are charging so that they can be competitive and set their rate accordingly. Further, there are consultants that can look at your business and help you determine what you need to get for a labor rate in order to make a reasonable profit. There are also surveys that can tell you what other shops are charging – and what they are actually getting paid. And in today’s world, there also may be online resources that can help you determine what a reasonable labor rate for your shop and your location might be.

No matter what insurers tell you, there is nothing preventing you from charging what you want to get paid and balance-billing your customers for what their insurers won’t pay. And despite the ridiculous Notice recently issued by the Division of Standards – as the result of apparently bogus information supplied to the Division by a couple of insurers – there is NOTHING illegal about suggesting to your customers that they try to get reimbursed from their insurers for whatever those additional amounts are. You also can develop and inform your customers of strategies that you believe may be effective in convincing their insurers to reimburse them, provide your customers with suggested language to use when making a demand to their insurer and otherwise provide assistance in their efforts as you see fit.

Please understand that you need to let your customers know in advance what your charges are, that their insurer may not be willing to pay your labor rate, that the customer will be responsible for the amount that the insurer will not pay and that although they should try to get reimbursed the additional amount from their insurer, there is no guarantee that their insurer will pay it. But if you can educate your customers as to what it truly takes to properly repair their cars and that you have the ability to properly make those repairs, but that you need to get paid a decent labor rate in order to remain in business, then hopefully your customers will agree to your terms.

Also, your ability to charge and collect a higher labor rate may be affected by the nature of your particular business. As an example, do you perform specialty work? Historically, businesses that specialize in certain repairs, perhaps for repairs to particular high-end vehicles, have been able to get paid more when they sell their services in a way that makes their customers and their customers’ insurers understand that they are worth being paid more.

This originally was brought to my attention many years ago by a shop that only repaired Corvettes and had built a reputation for doing so. They did not care what an insurer was paying. Their customer was the car owner, and these particular car owners took great pride in their vehicles and were willing to pay more out of their own pocket to make sure that repairs to their cars were being performed by a reputable business that knew what it was doing.

I have seen this occur for other high-end vehicles as well – including once seeing an insurance industry lawyer willing to pay extra dollars out of his own pocket for repairs to his Volvo. The attorney knew from his experience representing insurers that certain repair shops were less than reputable, he knew the excellent reputation of the shop that he chose to make repairs, and he was willing to pay a few dollars more to make sure that repairs were properly made to his vehicle.

Over the years, I have also seen several shops who have taken the bull by the horns and learned and invested in specialized repair technologies ahead of other shops. The making of aluminum repairs sticks in my mind as a prime example. When the ability to make proper aluminum repairs was in the hands of only a few shops in the state, those shops were able to set – and get paid – a significantly greater labor rate for those repairs. Are you a certified Tesla repair shop or one of a few shops able to perform repairs on other specialized vehicles? If so, there may be only a limited number of you able to properly make those repairs, and you can factor that into the labor rate that you set.

Here is another tip, and I know of situations in which it has worked: If you are a large and reputable repair shop in an area in which few qualified shops exist, or if you own multiple repair shops that do high volume work, then you may be in a position to negotiate with some insurers for a higher labor rate. Collision repair shops rely on insurers to pay for most repairs. On the other hand, insurers need to make sure that there are enough shops out there willing to repair their customers’ cars that will accept the labor rate that they are willing to pay, and they are sometimes willing to make concessions to ensure that their customers are serviced.

Referral repair shops are contractually required to accept whatever their referring insurer is willing to pay for a labor rate. But even if you are a referral repair shop, if your volume of business for a particular insurer is high enough, you may have leverage in negotiating a higher labor rate. Caveat: I have learned that insurers might not want word to get out that they are paying you a higher rate, so sometimes they will refuse to pay a higher rate, instead giving you concessions as to other items that they will agree to pay for; however, if you are knowledgeable and handle it right, the result to your bottom line can be pretty much the same as a higher labor rate.

In thinking about the labor rate issue, please keep in mind that, if the vast majority of repair shops are willing to accept whatever insurers are willing to pay for a labor rate, then no insurer is going to voluntarily pay a higher rate. Enough shops need to recognize this reality and be willing to do something about it.

Finally, if you want to get paid a higher labor rate, then it is critical that you do everything in your power to support the passage by the Massachusetts legislature of the AASP/MA-sponsored labor reimbursement rate bill. If enacted, this bill will require insurers to pay a fair and reasonable collision repair reimbursement rate, tied to the consumer price index. It is a no-brainer for repair shops and will require insurers to pay a minimum reasonable labor rate geared to inflation.

Here is something that you need to recognize: No matter how much money insurers inject into opposition to this bill, the reality is that state senators and representatives get elected by getting the most votes for office in their district. If they know that enough of their constituents care about and want a piece of legislation to pass, and if they want to keep their jobs, then most of them will vote accordingly. Do not turn your nose up at this concept. When asked by AASP/MA to contact your senator or representative, please do so! When asked to contribute to the cause, please do so! When asked to have your friends, relatives and staff contact their senators and representatives, please do so!

Do not just accept the proposition that insurers in Massachusetts are too powerful to beat. There is tremendous power in the vote of the individual, and you need to harness that power if you want your business to thrive.


It may be an appropriate metaphor to say that it has been a great ride – and it has. But I have decided to forgo writing monthly articles for New England Automotive Report at this point and am sticking with that decision. I greatly appreciate the support that I have received from all of the New England Automotive Report staff that I have dealt with over the years and from all of the readers that I have heard from as well. I hope that you have found my articles to be informative and that some of them have been useful to you in the operation of your business or have been helpful to your customers when dealing with their insurers.

Meanwhile, I also hope that a great many of you actually heed my advice and find the strength and ability to take action to do what is necessary to answer, on your own, the question:
What can we do about the labor rate?

Want more? Check out the June 2023 issue of New England Automotive Report!