June 2016 SDADA Column

Do Americans know how lucky they really are? They have Uncle Sam to protect them from themselves.

The Federal Trade Commission has proposed a survey of consumers regarding their experiences trading in, buying and financing vehicles at dealerships. The commission will conduct 40 interviews with consumers that are 90 minutes in length.

In 2015, there were over 38 million used vehicle transactions and over 17 million new vehicle transactions in our country. The FTC will conduct 40 interviews and will then have a complete understanding of the automotive market in America!

This survey is a repeat of the one the FTC conducted five years ago. That survey found no systemic problems with the auto-retailing sector. Processes have certainly gone to hell since that survey!

I know I can be a bit cynical but perhaps we should survey health care patients, attorney clients, insurance company customers, mobile phone customers, etc. Is there no room for improvement in any of these transactions? Some would suggest that market forces and competition would be very good at improving and streamlining the processes.

At some point, perhaps consumers must be responsible for their own choices. There are many options in  the marketplace. Consumers have control over where they buy. That can (and should) be the ultimate regulator!

A Peek Behind the CFPB Curtain

This "must see" video (http://goo.gl/Mcu0qe) takes a somewhat humorous look at the shenanigans going on with the CFPB in their attempt to regulate and punish those involved in auto finance lending. This is your government at work!

Supreme Court Issues Pro-Dealer Opinion in Service Writer Overtime Case 

The Supreme Court issued an opinion in Encino Motorcars v. Navarro, vacating a 2015 Ninth Circuit Court of Appeals decision that had held that dealership “service writers” are not covered by the federal “salesmen” exemption from overtime pay. In doing so, the Supreme Court expressly rejected a 2011 U.S. Department of Labor (DOL) interpretative regulation that service writers/advisors are not "salesmen" exempt from overtime. In particular, the Court faulted DOL for failing to give adequate weight to dealerships’ reliance interests during the rulemaking process, and for failing to provide a “reasoned explanation” for the abrupt change of policy. The Supreme Court’s decision requires the Ninth Circuit to reconsider its prior decision consistent with the language of the Fair Labor Standards Act (FLSA) without giving “controlling weight” to the DOL’s 2011 regulation.

In March 2015, the federal Ninth Circuit Court of Appeals ruled that service writers are not exempt from overtime as “salesmen.” That decision was based on the Ninth Circuit’s conclusion that preamble language found in a 2011 DOL rulemaking constituted an interpretation of the FLSA entitled to legal deference. Together with the state dealer associations covered by the Ninth Circuit, NADA filed an amicus brief in support of a certiorari petition with the U.S. Supreme Court. The Supreme Court granted “cert” in January and heard oral argument in April. Former Solicitor-General Paul Clement expertly (and successfully) argued on behalf of the petitioner with NADA’s amicus brief being cited several times during the argument and in the Opinion itself.

Overtime FAQ for Dealers

As I mentioned in this space last month, the U.S. Department of Labor (DOL) issued a rule that dramatically increases the salary and compensation levels that must be met in order for "white collar" dealership employees to be exempt from overtime. NADA has issued a new FAQ publication on the white collar rule's impacts on dealerships and their employees.

OSHA Issues New Injury and Illness Electronic Reporting Mandate 

Starting in 2017, certain dealerships must begin submitting employee workplace injury and illness records to the Occupational Safety and Health Administration (OSHA). All dealerships must maintain reasonable procedures by which employees can report work related injuries and illnesses promptly and accurately. The new reporting rule builds on existing mandates requiring dealerships with 10 or more employees to accurately record and post employee workplace injury and illness using OSHA Forms. In the future, these forms must be made available to OSHA and state labor inspectors upon request. Car dealerships with fewer than 250 employees at a single "establishment" are not required to submit forms to OSHA.

April 2016 SDADA Column

Are you paying your service adviser overtime pay? If you don't know, it may be a good time to check.

The U.S. Supreme Court is checking. They took up that question last week (April 20) in the case of five dealership service advisers who sought overtime pay for their 55-hour workweeks. The ruling could have big implications us and how we pay our service advisers.

We have always assumed service advisers fall into the same category as dealership salespeople, mechanics and parts department workers, who are exempted from overtime pay requirements under the Fair Labor Standards Act. Many of our service advisers are paid commission.

But (surprise, surprise) the Obama administration has challenged that assumption. A California district court disagreed with the administration. But the 9th Circuit reversed that decision, breaking with previous appeals court decisions dating to the 1980s and paving the way for the Supreme Court to settle the dispute.

I have a non-lawyer, non-regulator, simple man's question: If the service writers are on commission, how do you determine what time and a half is? Is it based on minimum wage or some kind of combination?

About that current vacancy on the court - yes, that could affect the outcome in this case. It raises the prospect of a 4-4 tie, which would keep things as they are. The good news for South Dakota dealers (for now): The 9th Circuit's ruling would apply only in its nine-state Western jurisdiction.

We can expect to hear a ruling this summer.

NADA 100

Next year, NADA celebrates its 100th anniversary with various events, including the NADA 100 convention in New Orleans.

The NADA story began when 30 dealers traveled to the nation’s capital in 1917 to persuade Congress not to impose a luxury tax on cars. They successfully argued that the automobile is a necessity of American life, not a luxury. From that group effort, NADA was born.

Since then, NADA has experienced many major milestones. And so have its dealers.

Each dealer’s story is an integral part of the NADA story, especially since so many generations of dealers have been steadfast NADA members. These stories range from store openings and mergers to dealers meeting with their members of Congress on Capitol Hill.

To learn more about these important dealer milestones, NADA has launched the “Share Your Story” contest. Dealers can submit photos, videos, newspaper clippings, print and digital ads, their own dealership histories or other memorabilia. If you participate in NADA’s “Tell Us Your Story” contest, you have a chance to win one of two an all-expense paid trips to the 2017 NADA 100 show in New Orleans. Ten runners up each will win VISA gifts cards worth $100.

One trait best describes NADA, its dealers and the franchised business system: the ability to adapt. Whether it’s dealing with economic curveballs or learning the latest digital technology, being adaptable has allowed this association and its members to thrive during the past 100 years. And it continues to propel us toward the future.

Looking back, it’s interesting to see just how much NADA has changed—and adapted—over the years.

South Dakota has several dealerships with a rich history. I hope they will consider partaking in this great event!!

October 2012 SDADA Column

You may recall that I told of my visit to the General Motors Renaissance Center headquarters back in August as a member of NADA's Task Force on Facility Image Programs and Multi-Tier Pricing in the space. One of the results of that meeting was a commitment by General Motors to consult with small and rural dealers on the EBE program.

Mark Reuss commented that he wanted to help dealers "do what they COULD do" on a timeline that “worked for them”. I specifically asked if that meant some flexibility going forward. I did not get a straight answer on that question.

So shortly after I returned from Detroit, I called my GM Regional manager and asked him to schedule a visit to my store. I got a call back a few weeks later from my Zone Manager who scheduled a visit to my store in mid-October.

The Zone Manager came to visit my store recently. After introductions, he lusted over my desk for a couple of minutes (more on that later). I found him to be a very pleasant gentleman and we had a very cordial conversation as we learned a bit more about each other.

Eventually, the discussion turned to my facility and the EBE program. I gave him a bit of my background with the EBE program told him of the exceptions that I had asked for.

The short story here is that he had no authority, had no discretion, had no flexibility and was no help in getting relief from the EBE program. I could revisit all my discussion points that I visited with him about (they can be found here and here and here). But the bottom line is that it was a waste of time for both of us.

The irony of whole visit was the fact that he was smitten by my desk. When we discussed "customer touch points" and the fact that the EBE program disallowed the customer from seeing the desk in my office, he was stumped. After he thought about, he realized that the office was a customer touch point and there was no way that a customer could see the desk if my office was in compliance with EBE standards.

He took photos and is going to go through the motions of submitting (again) my requests but we both know that it is an exercise in futility. The requests go to the same group that rejected them before.

So I am much more skeptical about our visit to Detroit now. I feel like the whole notion about GM placing people in the field was more of an appeasement than an actual effort to help RCC dealers.

I will reiterate a point that I made after the Detroit trip: the NADA task force must hold GM accountable for the commitments they made.

I am not done with this. Stay tuned for developments...

NADA Issues Dealer Guidance on Counterfeit Air Bags

The National Highway Traffic Safety Administration (NHTSA) announced in early October a consumer advisory on counterfeit air bags.

Federal investigators have determined that thousands of counterfeit bags have been bought and installed in U.S. motor vehicles over the past three years.

NHTSA also has determined that in the event of a frontal collision, these counterfeit bags are unlikely to deploy properly or may deploy in a manner that can harm vehicle occupants. See below for an NADA dealer Q&A document.

Vehicles with counterfeit air bags installed are believed to constitute less than 0.1% of the total in-use fleet. Nonetheless, dealers should be prepared to respond to inquiries from the public on this matter.

NHTSA is urging concerned owners to start by visiting www.safercar.gov/Air+Bags to determine if they are at risk.

In addition to the NADA guidance, dealers should expect to receive communications directly from the auto manufacturers they represent, addressing how to detect and manage counterfeit air bags.

It's important to note that unlike a safety recall campaign, customers should expect to pay to have their air bags diagnosed, and if necessary, replaced.

Service Advisors Overtime Exemption Extended Through March

Congressional legislation to prevent a government shutdown includes an extension of a federal overtime exemption for service advisors through March.

Since the late 1970s, the U.S. Department of Labor (DOL) has held that the frontline employee-salespersons in the service department remain exempt from federal time-and-a-half pay requirements. In 2011, DOL attempted to reverse this policy. Congress intervened and temporarily stopped the Department from enforcing the change.

The Congressional ban was included in a funding measure that was set to expire at the end of September. Under the new continuing resolution that extends government spending through March 2013, DOL is prevented from enacting the new policy for service salespeople.