Legal Blog

Car Dealerships and Sales Consultants: What Payments Are Considered Wages?

Recently, the Department of Labor advised that car dealerships may count direct payments from automobile manufacturers to their employees toward the dealership’s minimum wage obligation to the employee. This is true even if the employee was performing work solely on behalf of the dealership. The DOL considered a situation where a group of automobile dealerships employed sales consultants. These sales consultants received payments directly from manufacturers as part of incentive programs meant to encourage selling certain vehicles or meeting specific sales goals. The amounts paid to the sales consultants pursuant to the incentive program were in addition to compensation paid directly by the dealership. The DOL reasoned that third-party payments, like these, may be considered wages, but it depends on the agreement between the parties.

The immediate impact of this is that it could help car dealerships meet their minimum wage obligations. However, the payments will also have to be factored into the employee’s regular rate to calculate their overtime rate. Car dealerships should consider whether they currently have explicit agreements with their salesforce that define payments from third-parties, or whether their relationships could be construed that way. In addition, this assumes that these individuals are classified as non-exempt, which may not be the proper categorization in many instances. Car dealerships should consider whether these individuals are properly classified as non-exempt employees. After a 2018 Supreme Court case, the exemption that would typically cover salesmen in the auto industry was greatly expanded. Any salesman “primary engaged” in selling cars, who is employed by a “nonmanufacturing establishment primarily engaged” in selling cars would be exempt and negate the dealerships obligations to pay minimum wage and overtime altogether.

Look for more changes on the horizon as this administration heads into the final months of this term. An audit of how you’re classifying your employees and whether, under current law and guidance, it’s still proper may save your business significant time and money in the long time.


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