Pub. 15 2016-2017 Issue 2

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 I S S U E N O . 3 , 2 0 1 6 16 new jersey auto retailer Compliance Developments Every Dealer Principal and GM Should Know BY PATRICK COX, ESQ. T here have been some significant develop- ments on the compliance front, with some longstanding questions finally answered, and some new questions arising that will have to be monitored carefully until they are definitively answered. Wage and Hour: Service Advisors One long-standing issueon thewage andhour front has finallybeenput to rest by the U.S. Supreme Court. The Department of Labor (DOL) issued an “Advisory Opinion” five years ago regarding the overtime status of service writers, which contradicted the DOL’s prior position (and standard industrypractice for decades). OnJune 20th theU.S. Supreme Court issued a decision which puts to rest open questions regarding the overtime status of “service advisors.” Service writers are exempt from overtime under Section 13(b)(10) of the Fair Labor Standards Act, provided that the exemption’s standards are met. They must be “primarily engaged” (over 50% of their activity) in the sale of service and repair services, and be employed by a business primarily engaged in the sale of automobiles, trucks, farm equipment, and trailers. Another major development in the wage and hour area this year involves the minimum salary prerequisite for overtime exemption. Discussions regarding overtime must start with the presumption that all workers are entitled to overtime for hours worked beyond 40 per week, unless an exemption applies. The major exemptions are the executive exemption, the administrative exemption, the professional exemption, and the exemption for skilled computer employees. In the case of all these exemptions, the employee must receive a minimum salary in order to be exempt from overtime. For a very long time, this minimumwas $455 per week. Earlier this year, the DOL issued a revision to the regulations that adjusted this figure for years of inflation. The new minimum salary for exempt employees is now essentially doubled, to $917 per week. In another minor change to the exemption rules, this $917 does not have to be straight salary; up to 10%of the total can come in the formof non-discretionary bonuses, commissions, or incentives. Recalls; Costs and Liabilities The recall epidemic has raised numerous questions for the retail auto- motive industry. It has been estimated that approximately 50 million vehicles are under recall. Because so many of the recalls involve the same component, Takata airbags, production of replacements cannot meet demand and many vehicles will have to wait months for a fix. This leaves consumers anddealerships in a precarious situation.What is the dealership’s obligation if a used vehicle they are selling is under recall? How does the dealership best avoid exposure to any liability? The rules are clear when it comes to new vehicles. Under the federal Motor Vehicle Safety Act, new vehicles subject to a safety recall may not be soldbefore thedefect is remedied. However, there is no legal pro- hibition against selling used vehicles that are subject to an open recall. Although the lawallows it,manymanufacturers are telling their deal- ers not to sell franchise brand used vehicles that are under recall. Does themanufacturer have the authority to do this? Andwhowill bear the