Your dealership needs to be compliant with the Fair Labor Standards Act (FLSA), which governs issues concerning minimum wage and overtime. This law covers employers with at least $500,000 in gross sales and/or regularly engage in interstate commerce. This monetary threshold is low in terms of auto dealerships, and if you sell a vehicle to someone from another state, you’ve engaged in interstate commerce. So if you're a dealership of any size at all, the law probably applies to you.
Risks of detail departments
Detailers who are employees have to be paid minimum wage as well as any overtime if they work more than 40 hours a week. In some cases, detailers can be paid a flat rate based on the FLSA’s “commission paid exemption.” This option, however, isn’t available in all states, so it's important to make sure your detail department isn't in violation..
Generally, detailers who are employees can be paid in one of three ways;
- Hourly with overtime
- Hourly with overtime and bonus
- Piece rate with overtime or flat rate.
Risks of using outside detailers
Dealerships are finding that they’re not necessarily protected from FLSA violations because they utilize outside detailing services. In some cases, the DOL has ruled that the dealership is actually a joint employer, along with the detailing company, and is responsible if the detail company doesn’t pay its employees correctly. If you have this type of arrangement with another company, it’s best to protect yourself by having a written agreement with them to ensure that they’re following the law. It can also help to keep this company at arm’s length and avoid having any say over the company’s day-to-day operations.
Proactively avoiding problems
All of this has led attorney Matthew Simpson to recommend that each dealership review the way it pays its detailers to ensure that no federal or state laws are being broken. Your payroll should be audited to make sure you’re complying with the law if you have a detail department. And if you use an outside company for detailing work, it’s equally important to make sure that their detailers are being paid correctly. Be proactive in finding and correcting any potential problems, and also keep scrupulous records. These practices can save your dealership substantial time, money, and aggravation down the road.