Short Cuts

Here are some recent developments that are important to your dealership.

Joint Employer Doctrine Revised

During the Obama administration, the Department of Labor issued an interpretation of the joint employment doctrine of great concern to franchised businesses and businesses that use employment staffing agencies. Under the Trump administration, this interpretation was withdrawn with a promise that a new regulation would be substituted. On April 1, 2019, the DoL proposed a new rule. The focus will be on “the potential joint employer’s exercise of control over the terms and conditions of the employee’s work.” The new proposal uses a four factor test to determine whether the purported joint employer:

  • hires or fires the employee;
  • supervises and controls the employee’s work schedules or conditions of employment;
  • determines the employee’s rate and method of payment; and
  • maintains the employee’s employment records.

The proposal focuses on the actual rather than the theoretical of the purported employment situation.

This is especially welcome news in franchise situations (particularly fast food where McDonald’s corporate was especially concerned about liability for the employees of its franchisees). It is also welcome news for businesses that use the services of staffing agencies or consultants from service providers (for example, for dealers who use specialists supplied by F&I suppliers or product consultants detailed by franchisors) because those businesses did not wish to be considered joint employers of the workers.

The proposed rule will be open for sixty days from official publication in the Federal Register after which the Department of Labor must prescribe the final rule.


EEO-1 Pay Data Requirement Reinstituted

On March 4, 2019, the federal District Court of the District of Columbia issued a decision reinstating the requirement that EEO-1 reporting include pay information by race, ethnicity, and gender. The Obama administration regulation that required that was suspended by the Trump administration Office of Management and Budget in 2017.

EEO-1 reports are due May 31, 2019. As of now, those reports will not have to include pay information. The federal district court is considering when to require pay data. According to a follow-up decision issued April 3, 2019, the EEOC has advised the court it will not have the capability to collect it before September 2019.

We will update you on any further developments.


Compliance on Voluntary Protection Plans

Over the years, we have warned dealers they should have in place a policy to protect against claims of discrimination because of pricing of voluntary protection products such as extended service agreements, maintenance plans, and GAP on financed vehicles. The CFPB is always in the background on this issue, as is the Department of Justice which also enforces equal credit laws. More seriously, several states have enacted or proposed mini-CFPB legislation. Foreseeing pressure on dealerships about the terms of sale of voluntary protection products, the National Automobile Dealers Association notified its members on April 2, 2019 of the NADA/MAD/AIADA Model Dealership Voluntary Protection Products Policy. The policy is related to and supplements the fair lending policy which we have recommended to dealers for several years. We recommend that you consider this new VPP policy.