Minimum Wage: How Are Federal Laws Affecting Your Dealership?

Minimum Wage: How Are Federal Laws Affecting Your Dealership?

Have you ever had an sales employee complain that they should be earning overtime for working 80+ hours per week? Have you wondered about what the best response would be to those employees? Here is a knock-en dead answer that won't leave any questions, "The Supreme Court ruled on this very thing just a few years ago and determined that dealerships are exempt from the typical overtime laws."

The Fair Labor Standards Act

As with all regulations, how the federal Fair Labor Standards Act (FLSA) applies to your dealership can be confusing. No one wants to run afoul of the government for not paying your employees what they have earned, but you also want to take advantage of all eligible exemptions. In this article, we will provide an overview of your obligations, as per federal law, you have to provide for your employees when it comes to overtime pay and minimum wage.

Supreme Courts Ruling On Overtime

According to the Supreme Court in the case of Encino Motorcars, LLC vs Navarro in April of 2018, employees, such as salespeople, parts sellers, service advisors, or mechanics that are employed by an establishment that does not manufacture, make at least $500,000 in gross sales a year or who commonly engage with interstate commerce, and is primarily engaged in selling vehicles or parts for those vehicles are exempt from the overtime rules of FLSA, and thus are not entitled to be paid time and a half for each hour worked over forty hours each week. 

The case stemmed from the employees of that dealership in California suing their employer to recover overtime that they thought they were owed after the Department of Labor released regulation that covered the above-mentioned positions except sales advisors in 2011. Seven years latter SCOTUS in a 5-4 decision deemed that the law did in fact cover sales advisors and anyone integral in the selling and servicing of motor vehicles, is exempt from a fair interpretation of the law.

Interestingly, it also lifts of the burden put on employers to prove that their employees are exempt from overtime requirements by allowing for that fair interpretation of who is exempt, rather than the narrow one passed by the Department of Labor. This makes life as an employer of car dealerships and service centers easier, they would just have to prove that the employee is an important part of the business of selling or servicing a car to the ultimate owner of the vehicle.

This exemption also covers other kinds of workers who are common at many kinds of businesses, including car dealerships. Those who work as computer workers, executives, professionals, and administrative personnel are also exempt from receiving time and a half for weekly hours exceeding forty.

That said, those employees are still subject to the federal minimum wage, which at the time of this writing is $7.25 per hour, though as many states have raised their own minimum wages, employers will have to pay whichever is higher of the two.

Know Your State Labor Laws

The information provided above only applies as federal laws only. Each state has their own individual rules regarding overtime and minimum wages. Typically, state laws are very similar to federal laws but it is very important to make sure you have a firm understanding of your local laws. You can find these by contact your state’s Department of Labor for information on the laws applicable in your area. 

Review your own pay practices, and determine if you are in compliance with the Fair Labor Standards Act. If you proactively address your  minimum wage and overtime exemptions and you can help avoid compensation-related charges and litigation, saving your dealership both time and money.

Ultimately, Do Your Own Due Diligence

With this information in mind, it would be prudent to check if you qualify for these exemptions, or not, and if not, that you are paying your employees the overtime they worked, as not doing so can result in auditing from the Department of Labor, legal fees when your workers bring lawsuits against your corporation, and civil fines. Moreover, however, is the fact that you don’t want to leave money on the table, and if you do benefit from these exemptions, it would be best practice to implement them.

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Nimble Compensation is a cloud-based software solution designed specifically for car dealerships to make compensation calculations the easiest part of payroll.