Can a Shop Pay a Tow Company a Referral Fee?

Important legal notice: This article is provided for general informational purposes only and is not legal advice. Laws and regulations governing towing, automotive repair, referrals, commissions, incentives, consumer disclosures and related business practices vary significantly by state and locality and may change over time. Some jurisdictions may restrict or prohibit referral payments between repair facilities and towing companies, including arrangements that might otherwise appear transparent or voluntary. Nothing in this article should be interpreted as a statement that any particular referral arrangement is lawful in your jurisdiction. Towing companies, repair facilities and other participants are responsible for determining and complying with all laws, regulations, licensing requirements and contractual obligations applicable to them. Consult qualified legal counsel regarding your specific circumstances.

Referral relationships between repair facilities and towing companies are nothing new. But whether a shop may compensate a towing company for a referral isn't a question with a single nationwide answer.

The rules can depend on the state or locality, the type of tow, how the customer selected the destination, the nature of the payment, applicable towing and automotive-repair regulations, and contracts the parties have with motor clubs, insurers, networks or other organizations.

In some jurisdictions, certain referral payments may be restricted or prohibited altogether.

The short answer

There is no universal rule that makes a towing referral payment permissible simply because it is disclosed, documented or associated with a retail tow.

Where referral arrangements are legally permitted, factors such as customer choice, transparency, documentation and contractual restrictions can be important. Those practices should not, however, be viewed as a substitute for determining whether the payment itself is permitted under applicable law.

Before taking part in any paid referral program, both the towing company and repair facility should independently determine whether the arrangement is permitted where they operate.

Important considerations for referral arrangements

Where this type of referral arrangement is permitted, several practices may help create a more transparent relationship.

1. Preserve customer choice

Customers should be free to decide where their vehicles are taken.

A towing operator may be able to provide information about available repair facilities, but customers should not be misled into believing that they are required to select a particular destination when they are not.

Additional restrictions may apply to police-rotation, nonconsensual, impound, insurer-directed, motor-club or other third-party-dispatched tows. The rules governing these situations vary by jurisdiction and program.

2. Document payments

Where referral compensation is permitted, payments should be handled through normal business processes rather than informal payments to individual drivers or employees.

Company-level records can provide documentation of which referrals qualified, what was paid and why.

Documentation and transparency do not, by themselves, make a referral payment lawful. They are simply prudent business practices where the underlying arrangement is permitted.

3. Review your contracts

Legal requirements are only part of the picture.

Motor clubs, insurers, roadside-assistance networks, fleet programs and other organizations may impose their own requirements concerning destinations, steering, incentives, compensation or conflicts of interest.

Operators should review the agreements applicable to each type of work they perform.

An arrangement that is unrelated to a particular dispatch or network may be treated differently from one involving a customer or tow originating through that network. The applicable contract determines the operator's obligations.

How the Pep Boys Tow Referral Program is structured

The Pep Boys Tow Referral Program has been designed around customer choice, company-level payments, documentation and separation from third-party-paid roadside work.

Under the program, qualifying bonuses are funded by Pep Boys and administered by Dolooma. Payments are made to enrolled towing companies rather than directly to individual drivers or store personnel, and qualifying referrals are logged and verified.

The program is intended for eligible retail towing situations in which the customer is responsible for the tow and agrees to the destination. Tows dispatched or paid for through motor clubs, insurers or other roadside-assistance programs are excluded from referral-bonus eligibility under program rules.

Where offered, the program's published referral bonus currently begins at $20 per qualifying completed referral and may increase based on volume. Referral compensation does not increase the customer's towing charge under the program.

Every Pep Boys location is listed online.

Program availability and eligibility may vary by jurisdiction. A referral's satisfaction of program requirements does not mean that a referral payment is permitted under applicable law. Enrolled towing companies remain responsible for determining whether they may legally accept referral compensation in the jurisdiction where they operate and for complying with their own contractual obligations. Dolooma and Pep Boys may restrict or exclude referral-bonus eligibility where required by applicable law, regulation, contract or program policy.

Questions to ask before entering a referral arrangement

Before accepting or offering a referral payment, consider questions such as:

• Is this type of referral compensation permitted under applicable state and local law?
• Are there special towing, automotive-repair, anti-steering or consumer-disclosure rules that apply?
• Is the customer free to select the destination?
• Is the payment made to and documented by the towing company rather than paid informally to an individual driver?
• Does the arrangement affect what the customer pays?
• Did a motor club, insurer, roadside network, police agency, property owner or another third party originate or pay for the tow?
• Do any contracts applicable to the tow restrict referrals, incentives, secondary compensation or destination recommendations?
• Are additional disclosures or customer acknowledgments required?

The bottom line

Referral arrangements can raise legal, regulatory and contractual issues that differ substantially from one jurisdiction and towing situation to another.

Good documentation, customer choice and transparent business practices are important, but they should not be treated as a legal safe harbor.

Before offering or accepting referral compensation, businesses should determine whether the arrangement is permitted under applicable law and consistent with their contractual obligations.

Nothing in this article or in the description of the Pep Boys Tow Referral Program constitutes legal advice, a representation that referral compensation is lawful in any particular jurisdiction, or a guarantee of eligibility for payment. Participants are responsible for their own legal and regulatory compliance.