In late April, the U.S. Department of Labor announced revisions to the Fair Labor Standards Act, which could impact dealership employees’ overtime. On today’s episode of Inside Automotive, Tillman Coffey, Partner of Fisher Phillips, walks dealers through what they need to know.
Key Takeaways
1. The changes to the Fair Labor Standards Act involve increasing the salary threshold for white-collar exemptions, not introducing a new overtime rule. The salary basis for exemption will rise from $684 per week to $844 per week on July 1st, 2024, and to $1126 per week on January 1st, 2025. This means more employees will potentially be eligible for overtime unless their salaries are increased to meet the new thresholds.
2. Despite initial concerns, this rule change will not affect most dealership employees. Only those in white-collar exempt positions (such as general managers, department heads, and certain administrative roles) need to be reviewed. Positions such as counterpersons, advisors, and salespeople on commission will remain unaffected by these changes.
3. Misclassifying employees can lead to significant legal and financial consequences. Dealerships must ensure job titles match the actual duties performed by the employee rather than relying on titles alone to claim exemptions. Misclassified employees could be entitled to back pay for overtime, and the lack of time records can result in the courts accepting the employees’ estimations of hours worked, often to the employer’s detriment. This underscores the importance of accurate employee classification and the potential risks of non-compliance.
4. Additionally, misclassifying employees can lead to costly legal battles, including back pay and potentially substantial attorney’s fees. The example provided discussed a case where the back pay was $6,000, but the attorney’s fees amounted to $150,000, which the court found reasonable. Thus, the financial risk is not just in back pay but also in the legal costs that can accumulate.
5. Dealerships are advised to audit their employee classifications and ensure compliance with the new salary thresholds ahead of the rule changes. This proactive approach, which includes training managers on proper timekeeping practices and the importance of accurate records, not only mitigates the risk of legal trouble but also saves significant money. By ensuring compliance now, dealerships can protect their financial stability and reputation in the future. Consider consulting with legal experts like Fisher Phillips to conduct these audits and navigate the complexities of the Fair Labor Standards Act.
"One of the things that we're recommending with this rule is that you take this opportunity to audit your compliance overall because it's bringing a lot of attention to the rule." – Tillman Coffey.
