Attorneys representing current and former salespersons have recently filed lawsuits seeking class certification against several dealer groups. The lawsuits focus on calculation of salesperson commissions, alleged failure to pay minimum wage and neglecting to pay employees who were entitled to separate rest period pay.
Salesperson Commission Lawsuits
Two recently filed lawsuits claim that there are dealerships that are not paying their salespersons a percentage of actual gross profit and that are not following the written compensation plans for those employees. One recently filed class-action complaint in North Carolina alleges that a dealer group failed to pay commissions to its sales team on dealer documentary fees. The lawsuit further claims that the fees are essentially pure-profit for the dealership and that salespersons should be receiving a commission on those fees. The lawyers assert that commissions should also be paid on other items such as destination fees, lot fees, administrative fees or any other markup fee that is essentially profit for the dealer.
Similarly, a very large privately held dealer group has been sued in Florida over the issue of salesperson commissions. In that action, which also seeks class certification, the dealer group allegedly charged excessive markups on such items as car washing, window tinting and nitrogen for tires for the alleged purpose of reducing sales commissions down to the minimum $200 guarantee amount.
The dealers steadfastly deny liability in both actions.
Salesperson Must Be Paid Minimum Wage
Multiple class actions suits have also been filed against other dealerships alleging that salespersons were not paid at least minimum wage for every pay period. In one of the actions, the dealer paid a set amount plus commissions each week. The lawsuit claims that there are instances when the guarantees were insufficient to equal at least minimum wage. One of these actions recently resulted in a settlement of over $3 million, with over $1 million going to the Plaintiff attorneys.
California Employees Must Be Paid for Rest Periods
A California appellate court ruled last year that employees paid on a commission basis must be separately compensated for legally required rest periods. Although the decision did not specifically involve dealerships, the decision has impacted salesperson commission pay in California. Actions have been filed against dealerships as a result of the adverse court ruling. California dealers need to account for compensation for its commissioned employees (including salespersons, finance managers and service advisors) as they are entitled to be compensated for rest periods.
Periodic Review of Pay Plans Necessary
It is imperative that dealers routinely review employee pay plans and adjust the plans when necessary due to changing business practices or legal landscape. Questions concerning pay plans should be directed to your human resources advisor or dealer lawyer.