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Overtime regulations in auto dealerships present a significant challenge due to the diverse and unique array of employees within the organization. Dealerships employ a variety of workers, including salespeople, service technicians, administrative staff, finance officers, and managerial personnel, each with distinct roles, responsibilities, and compensation structures.
Salespeople often work on commission, which complicates the calculation of their overtime pay. Service technicians may be paid based on flat-rate hours rather than a standard hourly wage, adding another layer of complexity. Additionally, some employees may be classified as exempt or non-exempt under the Fair Labor Standards Act (FLSA), which affects their eligibility for overtime.
The fluctuating work hours typical in a dealership environment further complicate compliance with overtime laws. Navigating these regulations requires careful consideration of federal, state, and local labor laws, meticulous record-keeping, and often, the implementation of sophisticated payroll systems to ensure fair and legal compensation practices.
The United States federal wage and hour laws, covered under the Fair Labor Standards Act (FLSA), are complex when determining who is exempt or non-exempt from overtime. Then if you have a state (that’s you, California) with more stringent laws, it goes from complex to a landmine.
Please keep in mind that this post is not legal advice, but merely an overview of some of the issues that govern this difficult compliance issue. Especially due to the differing State laws governing overtime, always… always check with your dealership’s attorney before making related policy decisions.
You can’t slap a manager’s label on Employees and call them exempt. Some of the more common requirements for an Employee to be called a Manager are:
Customarily and regularly directs the work of at least two or more Employees
Customarily and regularly exercises discretionary power
Has the authority to hire and fire Employees
Exempt Employees must spend more than 50 percent of their time performing the above listed duties
And they must earn a monthly wage equal to at least two times the state minimum wage for full-time employment
The FLSA requires employers to pay non-exempt Employees 1.5 times their base pay for any time worked above the 40-hour limit. (Again, check with your lawyer regarding your State's regulations and laws.)
Here’s a situation where this gets tricky, and you may want to contact a labor lawyer:
A Warranty Clerk is paid $20 an hour with a bonus based on a percentage of claims under 30 days. If the clerk works more than 40 hours in a week, how does the bonus play into the overtime calculation?
Under FLSA (your state or country may differ), Salesmen, Parts People, and Technicians employed by automobile Dealerships are exempt from the overtime pay provisions.
The above is just a small excerpt for a more detailed DealersEdge Guide – Accounting Guide for Dealership Controllers and General Managers. In fact it is just a small part of the Chapter devoted to Maximizing Profits. Just one of many related issues explored in this chapter alone.
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