Pub. 14 2015-2016 Issue 3

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 13 new jersey auto retailer W W W . N J C A R . O R G must give approval, before any repair is performed. The specific details as to whether the estimate or the approval must be given in writing or can be given orally are complicated and require careful atten- tion. Any violation of these regulations is automatically considered a violation of the Consumer Fraud Act (CFA), which means all the penalties imposed by the CFA will apply, including treble damages and at- torney’s fees. The authorization requirement is the most important part of the CFA regu- lations governing service and repairs. The regulations prohibit a service facil- ity from performing any repair without first providing an estimate and obtaining authorization from the customer. This includes diagnostic work! The general rule is that the authorization must be in writing and signed by the owner of the vehicle. Oral authorization is allowed, but only if the vehicle was dropped off after hours, was towed in, was delivered by someone other than the owner, or if the owner has signed a written waiver of their right to receive a written estimate. An oral authorization must be noted on the repair order, and must include the date and time the authorization was received, and the name of the employee who obtained the authorization, and the telephone number at which the owner was contacted. Additional provisions of the CFA regula- tions include the following: • You must provide the customer with a copy of any document he or she signs at the time they sign it. • Youmust provide the replaced parts to any customer who requests them, unless the parts are too large or heavy, or they were exchanged or required to be returned to the manufacturer (request must be made prior to repairs). • The invoice or repair order must clearly state whether any used, rebuilt, or recon- ditioned parts were used in the repair of the vehicle. • A legible copy of the invoice or repair order must be given to the owner. • If you give a guaranty or a warranty of any kind, it must be in writing, and must provide details, including the duration, covered parts, any conditions or limita- tions, and the remedy, whether repair, replacement, or refund. • Finally, a dealership must post a sign, in a conspicuous place, advising customers of their rights under the Consumer Fraud regulations (contrary to common myth, however, a Service Department is not required to post its labor rates). Service Department Wage and Hour Rules Under both federal and State law, the gen- eral rule is that all employees must be paid overtime at 1.5 times the employee’s hourly wage for all hours worked over 40 hours. Only “exempt” employees may be paid a sal- ary or hourly wage without overtime. Under federal law, however, full time “salesmen,” “partsmen,” and “mechanics” employed by an automotive retailer are exempt from overtime, provided specific conditions are met. New Jersey State law adds additional conditions and the following discussion will combine all of the requirements. Mechanics: (called “service techs” in New Jersey’s regulations): Techs must be paid on a “flat rate” or “incentive rate” basis, and must be guaranteed a contractual hourly rate of not less than the minimum wage, with overtime for hours over 40 per week. So long as the tech earns more under the flat rate or incentive rate than under this guaranteed minimum, they do not have to be paid overtime. Dealerships shouldmake sure that they have a written document, whether a formal policy, or an acknowledgment signed by each service tech, to prove that there was in fact a guaranteed alternate minimum wage in effect. Service Writers: For purposes of overtime exemption, service writers have long been considered to be the equivalent of other “salespersons” in a dealership, except that they sell services, rather than vehicles. Therefore, because automotive salespersons are exempt, so are service writers. This interpretation was called into question by the federal Department of Labor in an announcement made in 2011 stating that service advisors should not be considered salespersons but since that time, Congress has forbidden the DOL from enforcing its new interpretation, and both federal and state courts have rejected the DOL’s change in interpretation and have ruled that ser- vice writers are exempt under the federal exemption for salespersons. In New Jersey, the State imposes additional requirements. To be exempt in New Jersey, service writ- ers must meet New Jersey’s administrative exemption for commissioned salespersons. They must be paid at least 50% of their wages in commissions, and they must receive in total at least $455.00 per week. Service Department Sales and Use Tax Issues New Jersey’s sales tax applies to sales of “tangible personal property” and to services performed to repair or maintain tangible personal property. Automobiles and auto parts are tangible personal property, and therefore, the sales tax applies to both the parts and services, or “labor,” provided by a Service Department, unless there is an applicable exemption. The most common exemption is the “resale” exemption, which applies when another merchant is purchas- ing parts, and sometimes even services, which it intends to “re-sell” to an ultimate purchaser. This exemption applies to all of the parts purchased by a ServiceDepartment COMPLIANCE ISSUE  continued on page 14