Fair Labor Standards Act Enforcement

In this federal election year, you will hear political rallying cries like “income inequality”, “income unfairness”, and “damage to the middle class”.  President Obama has made these themes in his speeches to support his party’s efforts in the upcoming Congressional elections.  He has also proposed legislative changes to requirements for overtime pay under the Fair Labor Standards Act, and debate over those changes is likely to continue for some time.  Of more importance to dealers, however, are the efforts under his administration to enforce the FLSA’s requirements.

The U.S. Labor Department has stepped up enforcement of the FLSA. Dealers are receiving notices of compliance audits.  If a Department of Labor auditor visits you, how will your dealership fare?

Here are the matters about which you should be concerned on FLSA compliance.

  • If you claim certain employees are “exempt” from FLSA requirements under the general exemptions – Executive, Administrative, Professional, Computer Employee, Outside Sales, or Highly Compensated – does each exempt employee meet the tests? Checklists to determine whether an employee is exempt are available at the U.S. Department of Labor website, www.dol.gov. Exemptions of some – like heads of major departments of your dealership – are clear.  But there are always dealership employees where the answer is not so clear.  In the event of any questions, review the roles of those employees.
  • For employees meeting special exemptions for car dealers – salespeople, mechanics, and “partsmen” – are they truly exempt? Not every employee of the affected departments is exempt.  Employees selling vehicle are, but sales department employees like greeters likely are not.  Technicians who turn wrenches are, but what about those who work in your quick lube area or painters in your body shop?  A parts counter person is probably exempt, but what about parts drivers? Do the employees for whom you claim the special car dealer exemptions meet the tests?
  • Are non-exempt employees paid one and one half times the regular rate of pay for hours worked over 40 hours in the workweek? 
  • Are non-exempt emplo32012606yees paid at least minimum wage for all hours worked?
  • Are the employees who meet the special car dealer exemptions paid at least minimum wage for all hours worked? This is especially important in slow months for salespeople paid on commission. Each month, your payroll department should do a calculation on any salesperson who does not clearly exceed the minimum wage.  Those doing the calculations should know all amounts paid to salespeople – do not forget spiffs – and total earnings should be divided by the hours worked.
  • Do individuals classified as independent contractors meet the tests set by the IRS? If not, they are employees. The Department of Labor has been especially vigorous in this area.  Are these people truly independent contractors, or are they instead employees who must earn minimum wage and premium overtime where appropriate?
  • Are deductions from employees’ wages made properly under applicable federal and state laws?
  • Is the dealership complying with record keeping requirements? Records of hours worked by employees are especially critical.  How can the office calculate minimum wage requirements and premium overtime rights if it does not maintain records of hours worked?