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Colombo & Colombo

Colombo & Colombo Attorneys Featured at Auto Dealers Conference Hosted by the Michigan Association of Certified Public Accountants (MICPA)

September 25, 2017 – Charles LeFevre and Eric Bowden, of Colombo & Colombo, P.C., will be the featured presenters for a Spotlight session titled, “Dealership Legalese and Current Cases”, at the MICPA Automotive Dealers conference on September 26, 2017 at the Laurel Manor in Livonia, Michigan.

LeFevre and Bowden will discuss current legal issues impacting dealers throughout the state of Michigan including:

  • The status of the Tesla lawsuit and Tesla’s desire to have certain provisions of the Michigan franchise law declared unconstitutional.
  • Wage and hour laws as it relates to overtime and dealership pay plans.
  • How sales effectiveness impacts the dealer principal’s ability to transfer a dealership to a family member.
  • The interplay between FMLA and the ADA any why they create a trap that dealerships must be aware of before taking any employment actions.

Charles LeFevre has provided legal counsel to dealerships for nearly fifty years and brings a wealth of knowledge to every client. He knows the laws, the underlying reasons for the laws, and how the laws governing the auto dealership industry are interpreted. He also has a significant amount of expertise in the acquisition and sale of dealerships, entity formation, taxation and estate planning.

Eric Bowden’s expertise covers an entire range of auto dealership legal support. He counsels dealerships on how laws impact dealership’s day-to-day operations which include: advertising, consumer litigation, government regulation, manufacturer-dealership relations and wage and hour law. Eric was part of the Colombo team that secured a favorable decision from the Sixth Circuit Court of Appeals which has paved the way for Fox Hills Chrysler Jeep, Village Jeep, Jim Marsh Chrysler Jeep, and Orrin Hayes Jeep to reopen after their sales and service agreements were terminated as part of Chrysler’s bankruptcy.

Contact
Charles LeFevre email: CAL@colombopc.com
Eric Bowden email: ERB@colombopc.com
Phone: 248-645-9300

New I-9 Form

September, 2017 – The United States Citizenship and Immigration Services (“USCIS”) published its revised I-9 Form which dealers are required to use for all new hires beginning September 18, 2017.

The new form has several small revisions including: (1) updating the name from Office of Special Counsel for Immigration-Related Unfair Employment Practices to its new name of Immigrant and Employee Rights Section and (2) Removing “the end of” from the phrase “the first day of employment.” Additionally, the List of Acceptable Documents has been reorganized and now includes a Consular Report of Birth Abroad (Form FS-240) in List C.

The new form has an effective date of September 18, 2017 and an expiration date of August 31, 2019. Failure to use the updated I-9 Form could result in significant penalties if audited. Effective August 1, 2016, the fines for I-9 Form errors increased significantly, with the maximum fine increasing from $1,100 to $2,156 per violation.

To ensure there is no accidental use of the previous form, we recommend you discard/destroy your supply of the old form on September 18th. The new form can be found on the USCIS’s website at: https://www.uscis.gov/i-9.

If you have any questions regarding this or any other employment related matters, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email.

Chuck LeFevre, Chair – CAL@colombopc.com
Lawrence F. Raniszeski – LFR@colombopc.com
Michael J. O’Shaughnessy – MJO@colombopc.com
Eric R. Bowden – ERB@colombopc.com
Alycia Pallach Wesley – APW@colombopc.com
Nicholas J. Ranke – NJR@colombopc.com

Texas Court Strikes Down DOL “White Collar” Overtime Rule

Previously, on May 23, 2016, the Department of Labor (“DOL”) published a “Final Rule” which increased the minimum salary level a ‘white collar’ employee must be paid to be exempt from the overtime pay rules of the Fair Labor Standards Act (“FLSA”). Under the new rule, the minimum salary for an “executive, administrative, or professional” employee to be exempt was raised from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). A Court injunction prevented this rule from going into effect on December 1, 2016.

On August 31, 2017, the U.S. District Court, Eastern District of Texas struck down the new rule but upheld use of the salary-level test by the DOL. The Court reasoned that significant minimum salary level increase was not a reasonable interpretation of Congress’s intent under the FLSA because it made an employee’s employment overtime status depend predominately on minimum salary level, rather than the employee’s duties.
Conclusion

The above ruling occurred in the Fifth Circuit and is not binding in Michigan. However, the DOL has indicated it will modify its new rule to include a lower salary level threshold. Until this rulemaking process is completed and the courts have reviewed the new rule, our recommendation remains that dealers continue to use the salary levels they were using prior to May, 2016.

If you have any questions or concerns about this or any other employment matters, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email.

Chuck LeFevre, Chair – CAL@colombopc.com
Lawrence F. Raniszeski – LFR@colombopc.com
Michael J. O’Shaughnessy – MJO@colombopc.com
Eric R. Bowden – ERB@colombopc.com
Alycia Pallach Wesley – APW@colombopc.com
Nicholas J. Ranke – NJR@colombopc.com

New Requirements for Dealership Use of Non-GM Parts, Accessories and Vehicle Service Contracts

On August 10, 2017, General Motors (“GM”) issued a Dealer Bulletin (17-12) (“Bulletin”) to all GM Dealers regarding new requirements for the sale and service of new and used GM vehicles. The Bulletin provides harsh penalties for failure to comply with the new guidelines. This notice highlights some of the key provisions of the Bulletin.

Bulletin 17-12
Use Of Non-GM Parts & Non-GM Service Contracts

GM has delegated some responsibility to GM Dealerships regarding compliance with the National Traffic and Motor Vehicle Safety Act (“Safety Act”) when non-GM parts are used. GM has indicated that once a non-GM part is installed, it becomes the Dealer’s obligation to ensure the vehicle is in compliance with the Safety Act.

GM reiterates that non-GM parts/accessories are not covered under the GM warranty, and that installation of non-GM parts may void the New Vehicle “Bumper-to-Bumper” Warranty. Additionally, GM disallows the use of non-GM parts for any vehicles leased through GM Financial.

When a dealer sells any non-Chevrolet, Buick, GMC and Cadillac Vehicle Service Contract, the new rules require GM Dealerships to provide a customer notice that the contract is not endorsed by GM.

Required Disclosures and Potential Penalties

As part of the Bulletin, GM requires that its Dealers use the provided “DISCLOSURE OF NON-GM PRODUCTS CUSTOMER ACKNOWLEDGEMENT FORM” (click here for form) when using non-GM parts/accessories or non-GM Service Contracts. The form must be presented to the customer and signed during the sales or service process, including both retail and fleet customers. The original of the signed form must be kept in the customer file. This form cannot be modified or replaced.

GM considers any failure to have this form signed to be a material breach of Article 5.1 and/or 7.2 of the GM Dealer Sales and Service Agreement. As such, dealerships should be aware that GM will impose strict penalties for failure to provide and obtain the customer’s signature on the disclosure. This includes, but is not limited to, the following potential penalties:

  • Up to a $500 surcharge per incident/VIN;
  • Ineligibility for consideration for additional GM Dealership opportunities;
  • Suspension from various current and future sales programs (including SFE & EBE) or;
  • Termination of the Dealer Sales and Service Agreement.

Each Dealer should carefully review the new Bulletin and make sure its staff strictly complies with the guidelines. If you have any questions or concerns about the Bulletin, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email.

Chuck LeFevre, Chair – CAL@colombopc.com
Lawrence F. Raniszeski – LFR@colombopc.com
Michael J. O’Shaughnessy – MJO@colombopc.com
Eric R. Bowden – ERB@colombopc.com
Alycia Pallach Wesley – APW@colombopc.com
Nicholas J. Ranke – NJR@colombopc.com

Case Summary: Recovered Revenue and Summary Disposition

In a case involving an auto dealership client, a purchaser of a new truck flooded the engine on the date he took possession of the vehicle. The purchaser then canceled the $20,000 down payment check given to the dealership as part of the purchase. Colombo attorney Nicholas Ranke represented the dealership in a law suit filed to collect the canceled payment for breach of contract.

Mr. Ranke also represented the dealership in defending the counterclaims filed by the purchaser, who alleged fraud and breach of warranty against the dealership. Mr. Ranke successfully exposed the baseless nature of the purchaser’s counterclaims and was able to secure both a money judgment in favor of the dealership and the dismissal of all the purchaser’s counterclaims in summary fashion, without the need for a trial. Mr. Ranke was also able to secure the reimbursement of the dealership’s attorney fees from the plaintiff.

If you have any questions about this case please contact Mr. Nick Ranke by calling 248-645-9300 or by email to NJR@colombopc.com

OSHA Online Reporting Reminder

As we previously reported to you in 2015, OSHA and MIOSHA began requiring auto dealers, which were previously exempt from OSHA record keeping requirements, to begin keeping a record of occupational injuries and illnesses using OSHA Log 300.

Beginning July 1, 2017, auto dealers will now be required to begin electronically submitting information to OSHA. Dealers with 20-249 employees will be required to electronically submit information from OSHA Form 300A. Dealers with individual stores that employ 250 or more employees (the threshold number of employees is determined by store not by corporate affiliations) will be required to begin electronically submitting information from the following OSHA Forms:

  • 300 – Log of Work-Related Injuries and Illnesses
  • 300A – Summary of Work-Related Injuries and Illnesses
  • 301 – Injury and Illness Incident Report

The following is an outline of the required forms to be submitted online and the dates of submission for each of the next three years.

Table Example

Submission Year 250 or More Employees 20-249 Employees Deadline
2017 (2016 calendar year) Form 300A Form 300A July 1, 2017
2018 (2017 calendar year) Forms 300A, 300, 301 Form 300A July 1, 2018
2019 (2018 calendar year) Forms 300A, 300, 301 Form 300A March 2, 2019

 

Forms 300, 300A and 301 are attached for your reference (click here for forms) and can also be found on OSHA’s website at: https://www.osha.gov/recordkeeping/new-osha300form1-1-04-FormsOnly.pdf.

At this time, OSHA does not have its online reporting portal established; but dealers should already be compiling the information for completion of the forms, as dealers have been included in the record keeping requirements since 2015. Once the online submission information is made available by OSHA, we will convey the details to you. The electronic submission requirements do not change your obligation to complete and retain injury and illness records.

Information is available from OSHA regarding this topic at: https://www.osha.gov/injuryreporting.

If you have any questions about the foregoing or if you need guidance on what types of injuries or illnesses are recordable under OSHA, please feel free to contact a member of our Dealer Practice Group at 248-645-9300 or by email.

Chuck LeFevre, Chair – CAL@colombopc.com
Lawrence F. Raniszeski – LFR@colombopc.com
Michael J. O’Shaughnessy – MJO@colombopc.com
Eric R. Bowden – ERB@colombopc.com
Alycia Pallach Wesley – APW@colombopc.com
Nicholas J. Ranke – NJR@colombopc.com

Ninth Circuit Holds Service Advisors Entitled to Overtime Compensation

In June (2016), we sent a notice regarding the Supreme Court’s decision in Navarro v. Encino Motorcars, LLC, vacating the Ninth Circuit’s ruling that service advisors are not exempt from overtime pay. The Ninth Circuit was instructed by the Supreme Court to reconsider the case without relying upon the Department of Labor’s 2011 regulation indicating service advisors are not “salesman” included in the exemption for overtime pay.

On January 9, 2017, the case was re-heard and the Ninth Circuit again held that service advisors in the Ninth Circuit states are entitled to overtime compensation and are not considered “salesman, partsman, or mechanics” under the Fair Labor Standards Act. The Ninth Circuit is the first court to break from the decades-old practice of considering service advisors as exempt under the salesman exemption.

The Ninth Circuit finding now conflicts with the other U.S. Courts and the Supreme Court will have to resolve the conflict down the road.

The effect of the Court’s decision is that service advisors continue to remain exempt from the payout of overtime in Michigan. If you would like more information on the ruling, or if you need assistance determining if your employees are exempt from overtime pay, please do not hesitate to contact a member of the Dealer Practice Group.

If you have any questions about this ruling please contact a member of our Dealer Practice Group by calling 248-645-9300 or by email:

Reminder: Increase in Michigan Minimum Wage

As a reminder, effective January 1, 2017, Michigan’s minimum wage will increase to $8.90 per hour. Employers with two or more employees who are at least sixteen years of age are required to pay this new minimum wage to their employees.

We recommend that dealers review the compensation of all employees to ensure compliance with the new wage increase for all hours worked by employees on and after January 1, 2017.

If you have any questions about the Michigan minimum wage law or would like additional information on wage and hour laws, please do not hesitate to contact a member of our Dealer Practice Group by calling 248-645-9300 or by email:

2016 Year End Legal Review

Year-end tax and financial planning has become relatively commonplace. However, far too few businesses give proper attention to a fiscal or calendar year-end legal review.

A systematic and wide ranging review of completed and prospective events concerning legal matters can prevent complications which can arise from the absence of such a review. At the close of a business year, a review of the past year’s activity is advisable to ensure that transactions were properly carried out and documented in the business records and that those planned for the next business year are properly authorized. The following are common areas requiring a thorough review.

Ownership Matters

Business records should document changes in ownership, as well as any agreements entered into which provide for the future transfers of ownership. In addition, any annual valuations of the company’s fair market value required by buy-sell/shareholder agreements or the like should be documented to ensure that such transactions are accomplished smoothly. Also, make sure that financial funding of proposed ownership changes are in place, such as life insurance policies. Foreseeable disputes among owners which may be disruptive to the operations of business, or worse, deadlock operations, should be immediately brought to the attention of the entity’s legal advisors.

Business Records

Business records should be updated to include memoranda or minutes of all meetings of the owners with voting rights and meetings of the Board of Directors, as well as evidence of proper notice for each meeting, if required. Annual elections of directors and officers should also be clearly reflected in the minutes. Review all minutes and resolutions to determine if any are missing. Review equity ownership records to ensure accuracy and ensure that all transfers were documented.

Make sure to ratify all actions of the entity that were not formerly authorized by resolution, including the following:

  • Contributions to qualified plans, such as profit sharing and 401(k) plans.
  • Borrowing resolutions (bank and shareholder/member).
  • Promissory notes for loans to or from owners and/or officers.
  • Auto leases and office leases.
  • Distributions.
  • Compensation and bonuses of owners or officers.

Review corporate filing requirements for each State where you do business to determine if any annual filing is required and when, as this may affect the qualification of the entity to do business or to file a lawsuit in that State.

Financing

All company borrowing and lending should be reviewed to ensure that related documents are properly executed and in order, especially shareholder/member/partner loans to the business. Business records should clearly indicate the financing terms, including amounts, dates, names of the parties, descriptions of any restrictions imposed by the financing and a listing of any collateral securing the financing.

Leases

All real and personal property leases entered into during the year should be fully disclosed in the business records, including the names of the parties, date of lease, length of lease term, amount of rent and description of leased property. All leases should be reviewed to determine if a renewal notice or a notice of exercise of purchase options (or notice of termination if the lease contains an automatic renewal provision) is required to be sent to a landlord and when.

Major Purchases

Substantial purchases of equipment, furniture and fixtures, computers, etc., should be properly documented by reference to the purchase price, date of purchase, description of property and purpose of purchase. Related contractual agreements (i.e., maintenance agreements, financing arrangements) should also be disclosed. Finally, verify that all acquired property is adequately covered by insurance and that company ownership is clearly documented.

Banking Activity

Business records should indicate the opening, extension or closing of bank accounts and lines of credit, including the name of the financial institution, opening or closing date, account number and authorized signatures.

Intellectual Property

Documentation should be reviewed regarding the company’s intellectual property to determine if it is properly protected. If the company owns any trademarks or copyrights, review these to determine if there are any renewal requirements. The company should also review the status of all of its assumed name filings (in some states also called trade names or fictitious names) to determine whether they need to be renewed. Domain names should also be reviewed to ensure that they are current, due to the fact that a lapse in registration of your company’s domain name could expose you to cybersquatters. A review of domain names could also include a search of domain names using any of your registered business names or tradenames to ensure that a competitor has not registered your business name as its own, resulting in online customers being directed away from your business.

Employer/Employee Relations

All employment agreements, pay plans and the like should be properly documented, including changes in employment benefit packages, and existing agreements should be reviewed to determine whether you have adequate protections in place regarding trade secrets, confidential customer information, non-competition and non-solicitation. Review records for purposes of determining proper amounts of contributions to pension or profit-sharing plans.

Employee manuals should be reviewed and updated so that company policies are current and made known to all employees. Personnel files should be reviewed to determine that all required forms have been completed, such as I-9, insurance forms, etc., and to verify that notes of reprimand or warnings have been documented properly. You should review and edit job descriptions and exempt status of your employees with legal counsel. Also, make sure that all required postings and workplace paperwork is in place. Additionally, you should review employment benefit packages to determine whether modifications are to be made and assess employer obligations under the packages.

In addition to reviewing current year activity, attention should also be focused on the upcoming year. Prospective planning should include a detailed review of the following:

Contracts

All contractual agreements currently in force should be reviewed to determine which agreements will terminate during the upcoming year, and which have extension or option provisions requiring action during the year. Also, a careful review should disclose deadlines or conditions which must be met to avoid any breach of contract.

Tax Planning

Tax professionals should be contacted prior to making major business decisions, so that the tax consequences of proposed transactions can be properly reviewed. In addition, both accounting and legal advisors should be kept abreast of any audits by taxing authorities. Finally, individual tax planning for business owners should be considered, including the effects that proposed business transactions may have on individual taxes and estate planning.

Legal Advice

Throughout the upcoming year, the company should strongly consider seeking legal and/or tax advice before engaging in any of the following:

  • Assessing and negotiating franchise agreements.
  • Creating or modifying standardized forms, such as purchase orders, that the company will use in the business.
  • Buying or selling a business.
  • Negotiating loan terms.
  • Negotiating leases of land or equipment.
  • Buying or selling real estate.
  • Negotiating agreements to license others to use patents, trademarks or other intellectual property rights that you own, or negotiating to obtain a license to use rights from someone else.
  • Negotiating other types of contracts.
  • Responding to a lawsuit that has been filed against the business.
  • Filing a lawsuit on behalf of the business.
  • Dealing with a government entity involving licensing or alleged violations of regulations.
  • Dealing with tax authorities.
  • Seeking new investors.
  • Opening offices or beginning to do business in other states.
  • Devising strategies for dealing with a business in financial trouble.
  • Making provisions to pass along your business interests to family members and minimizing taxes upon death.

If you need assistance in any of the above areas, please do not hesitate to contact a member of our Dealer Practice Group for guidance by calling 248-645-9300 or by email:

New I-9 Form

The United States Citizenship and Immigration Services (“USCIS”) published its revised I-9 Form which dealers are required to use for all new hires beginning January 22, 2017.

The new form is a “smart” form which means that it is intended to guide employers through completion of the form through various features including drop-down menus, error notices, and automatically marking fields that are not applicable depending on the information inputted by the employer.

Although the new smart form is completed online through the USCIS’s website, it is not an electronic form. A hard copy must be printed, signed and stored as previously done with the older versions of the I-9 Form. Additionally, the new smart form will also automatically generate a “QR Code” that will be used by U.S. Immigration and Customs Enforcement auditors.

The new form has an effective date of November 14, 2016 and an expiration date of August 31, 2019. Failure to use the updated I-9 Form could result in significant penalties if audited. Effective August 1, 2016, the fines for I-9 Form errors increased significantly, with the maximum fine increasing from $1,100 to $2,156 per violation. The new form can be found on the USCIS’s website at: https://www.uscis.gov/i-9.

If you have any questions regarding the new I-9 Form, please do not hesitate to contact a member of our Dealer Practice Group for guidance by calling 248-645-9300 or by email:

Social Host Liability

Office parties can present a whole “host” of liabilities for dealers, regardless of whether they are scheduled to celebrate the holidays, improve employee morale, or serve as an opportunity for employees to socialize with one another outside of the workplace.

Should a dealership employee or a guest become inebriated and later decide to drive a vehicle, he or she may end up causing an accident where injuries are sustained. As a result, the dealership could be sued. Under some circumstances, the dealership may be able to defend the lawsuit with minimal legal costs. However, there may be circumstances in which dealers will have to confront an expensive and costly lawsuit, especially if serious injuries or death are a result of the accident. Also, if a dealership employee consumes too much alcohol at an office party and begins to flirt with, touch, grope, or proposition another employee, your dealership could be forced to defend a sexual harassment claim.

So, how do dealers avoid liability while still providing an enjoyable time for everyone? We emphasize three things that should be done to protect the dealership. First, dealers should not make employee attendance at any social event mandatory. Second, dealers should never serve alcohol to minors. Finally, dealers should prevent employees who consume alcohol at the party from operating a vehicle owned or leased by the dealership, since the dealership, as the owner of the vehicle, is liable for any injury or damage caused by the negligent acts of authorized drivers. While these three items remain important, we have also provided a list of suggestions that dealers should consider as they plan their social events:

  • If dealers wish to serve alcohol, designate “spotters” to make sure that people who have consumed too much alcohol do not leave the party alone or become “too friendly” with others at the party.
  • Reduce the risk of overindulgence by avoiding hard liquor entirely and serving only beer and wine, along with a variety of non-alcoholic beverages.
  • Do not provide free alcohol or, if doing so, limit the number of free drinks provided. Often employers will issue a reasonable number of drink tickets to each employee, depending on the length and type of event.
  • Instruct those who are catering or serving the alcohol that they must refuse to serve anyone who is visibly intoxicated.
  • Host the event at an establishment other than the dealership.
  • Restrict the time during which alcoholic beverages are served, preferably only before dinner and not during or after, and close the bar at least an hour before the party ends.
  • Arrange transportation for intoxicated employees by having designated drivers or using a transportation service.
  • Consider having a luncheon where it is less likely that employees will consume too much alcohol.
  • Make the party a family affair and include spouses and/or children.
  • Set a tone of moderation before the party by distributing interoffice memos reminding employees to be responsible, discouraging excessive drinking, and indicating what measures the dealership will take to ensure a safe event.
  • As dealers know, incidents arising at a party can have the same legal repercussions as if they occurred during normal business hours on dealership property. Therefore, dealers should send a clear message that, although the holiday party is not a required work-related activity, inappropriate conduct will not be tolerated and can give rise to discipline or termination in accordance with dealership policies.
  • Review the dealership’s general liability policies to determine whether there is insurance coverage for this type of function. If there is no coverage, consider acquiring a “special events” rider to cover the single function where alcohol will be served.

Any dealer who wishes to host a function where alcohol is served must be aware of the dealership’s potential liability for the actions of employees or other guests who become intoxicated at the function.

The preceding measures should help dealerships minimize liability from alcohol-related incidents. If you have any questions regarding social host liability, please do not hesitate to contact a member of our Dealer Practice Group for guidance by calling 248-645-9300 or by email:

Injunction Issued in White Collar Exemption Case

On November 22, 2016, a Federal Judge in Texas issued an injunction in a lawsuit filed by 21 states and various business organizations challenging the new DOL regulations relating to the “white collar exemption” (the “Rule”), temporarily halting the implementation of the Rule.

The District Court held the Rule is contrary to the statutory text of the Fair Labor Standards Act (“FLSA”) and to Congress’s intent. Although this injunction is only temporary, until further notice, dealers are not required to comply with the new Rule on December 1st.

However, the injunction only applies to the new Rule regarding the “white collar exemption”, meaning those employees qualifying as “executive”, “administrative” or “professional” as defined by the FLSA and its regulations. The injunction does not apply to other classification of employees (i.e. service technicians, salespeople, etc.) which have their own overtime exemption classification and tests to satisfy when determining whether the employee is exempt from overtime pay.

If you would like additional information, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email:

Updated FTC Used Car Buyers Guide

Effective November 10, 2016, the Federal Trade Commission (FTC) has issued its Final Rule amending the Used Car Buyers Guide. The current Buyers Guide with which dealers are familiar did not clearly provide the ability for a dealer to specify that it was selling a vehicle “AS-IS” while still disclosing the existence of a manufacturer warranty or service contract, and any attempt to modify the form was often confusing to both dealers and the customer.

The amended Buyers Guide, which is attached for your reference, includes the following changes:

      • Providing a specific box for dealers to check stating that the vehicle is being sold by the dealer “As Is,” without any warranty from the dealer itself.
      • Providing a specific section on the face of the Buyers Guide outlining “non-dealer warranties” that may be provided with the sale.
      • Providing a box that dealers can check to indicate whether a vehicle is covered by a third-party warranty and whether a service contract may be available.
      • Providing a box that dealers can check to indicate that an unexpired manufacturer’s warranty applies.
      • Adding air bags and catalytic converters to the Buyers Guide’s list of major defects that may occur in used vehicles.
      • Adding a statement that directs consumers to obtain a vehicle history report and to check for open recalls. The statement also instructs consumers to: Visit https://www.ftc.gov/usedcars for information on how to obtain a vehicle history report, and visit https://www.safercar.gov to check for open safety recalls.
      • Adding a statement, in Spanish, to the English-language Buyers Guide advising Spanish-speaking consumers to ask for the Buyers Guide in Spanish if the dealer is conducting the sale in Spanish.
      • Providing a Spanish translation of the statement that dealers may use to obtain a consumer’s acknowledgement of receipt of the Buyers Guide.

The FTC is permitting dealers to use their remaining stock of Buyers Guides for one year from November 10, 2016. However, we recommend ordering and beginning use of the new Buyers Guide form immediately, as it is a much more “dealer friendly” for those dealers that do not provide any type of dealer sponsored warranties on used vehicles. A pdf of the new Buyers Guide can be found at:

https://www.consumer.ftc.gov/articles/pdf-0083-buyers-guide.pdf

If you have any questions regarding the updated Buyer’s Guide or the FTC Used Car Rule, please do not hesitate to contact a member of our Dealer Practice Group at 248-645-9300 or by email.

David vs. Goliath: How a Small Law Firm Toppled a Giant in the 7-Year Chrysler Dealership Legal Battle

Sometimes Little Guys Slay the Big Guys.

Take, for example, Colombo & Colombo, P.C., a relatively small 111 year old law firm in Bloomfield Hills, Michigan, known for its unrivaled expertise in auto dealership law. With the right mix of audacity and clever resourcefulness, it proved that it could stand toe to toe with much bigger defense firms hired by one of the biggest auto manufacturers in the world and the U.S. Government – and win.

Background

In 2009, the Auto Task Force under the U.S. Treasury Department, entered into negotiations with Chrysler as part of a “bailout” intended to save the auto industry. The auto task force, without inside knowledge of the industry, pressured the manufacturers to reduce the number of dealerships and fast tracked the government-managed bankruptcy to do just that. Chrysler filed for bankruptcy and the U.S. Treasury lent Chrysler $6 billion to fund operations while in bankruptcy. To execute this agreement, Chrysler would use Section 363 of the U.S. bankruptcy code to clear away any impediments to its successful emergence from bankruptcy.

Using what would be found out to be an arbitrary process, Chrysler designated numerous dealerships as underperforming. These dealerships became “impediments” that were terminated from the Chrysler distribution network. The following was written in an April 30, 2009 press release issued by the U.S. Department of Treasury, “It is expected that the terminated dealers will wind down their operations over time and in an orderly manner.”

In the book Bailout: How Washington Abandoned Main Street While Rescuing Wall Street, Neil Barofsky, formerly the Special Inspector General overseeing TARP for the Obama administration, wrote, “As Treasury official’s explained, federal bankruptcy had given them a ‘unique opportunity’ to trump the tough and ‘restrictive state franchise law[s]’ that otherwise governed GM and Chrysler’s agreements with their dealers.”

In total, there were 788 Chrysler dealers that became classified as underperforming, and thus received a notice of termination. Colombo & Colombo, P.C. was the law firm of record for four of these Chrysler dealers and would be called upon to challenge Chrysler’s decision to terminate their dealership. Almost overnight, Colombo & Colombo received calls from twenty-five more Chrysler dealerships that also received termination notices and wanted Colombo & Colombo to represent them. The stakes were extremely high. These were Save-the-Company cases.

David Meets Goliath

During the first meeting with the Arbitrator, two attorneys from Colombo & Colombo sat across the table from thirteen attorneys representing Chrysler – including attorneys from Chrysler’s in-house staff as well as attorneys from some of the largest law firms in New York and Detroit. The Colombo & Colombo attorneys were up against law firms with an endless supply of attorneys hired by a global automotive icon whose “business partner” was the U.S. Government. This was a classic case of David vs. Goliath.

Building the Cases

Chrysler dealerships faced a unique challenge in this arbitration process. The filings and communications from Chrysler did not state the specific criteria by which the termination of an individual dealership was based. This, along with a set of other factors, made it very difficult to develop a legal strategy when preparing for arbitration.

One of the first things requested was the criteria Chrysler used to designate a dealership as underperforming. In response, Chrysler’s defense team came up with metrics that were clearly retrofit to make their case. They showed metrics upon metrics trying to make a convincing argument that the selection of underperforming dealerships was done in an objective manner. Time and time again, Chrysler tried to show objective evidence and the Colombo & Colombo attorneys would turn around and use the same evidence against Chrysler.

It became obvious that the selection of underperforming dealerships was an arbitrary act. These dealerships were not poor performers. Many were award winning dealers, some in business for decades. Some were designated as a “Five Star Dealer”, Chrysler’s most prestigious status given to dealers that meet every high expectation set by Chrysler.

When the strategy of showing metrics did not work, Chrysler’s legal team pivoted to a strategy of providing huge amounts of data anytime something was asked for. This strategy was aimed at bleeding the dealers out of their limited financial resources by requiring the Colombo & Colombo attorneys to sift through mountains of paperwork – running up their legal fees. Having the foresight to see this coming, the Colombo & Colombo attorneys were prepared for this and it did not work in Chrysler’s favor either.

In fact, throughout the entire process the Colombo & Colombo attorneys were able to predict Chrysler’s next move and have their clients ready for it.

David Slays Goliath

Colombo & Colombo attorneys won favorable outcomes for twenty-eight of the twenty-nine Chrysler dealers they represented: Three dealers re-opened and were brought back into the Chrysler distribution network, twenty-five dealers agreed to accept higher than expected buy-outs that were negotiated by Colombo & Colombo attorneys and only one dealership was terminated.

After the arbitration hearings, Chrysler unsuccessfully appealed the verdicts all the way up to the Supreme Court of the United States, where the case was denied a hearing.

If you would like additional information, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email:

New Online Reporting Requirements for OSHA

October 21, 2016 – OSHA’s new online reporting rule becomes effective on January 1, 2017, but the reporting requirements are to be phased in over 2 years. The new rule requires that certain employers electronically submit injury and illness data that they are already required to record on their onsite OSHA Injury and Illness forms. OSHA has indicated that some of the data will be posted to the OSHA website.

Although automobile dealers are still required to record and post injury and illness data on site at the dealership, as for car dealership with less than 250 employees at a single establishment, the online reporting requirements do not apply.

For those car dealerships with more than 250 employees at a single location, they must electronically submit their 2016 reporting information on or before July 1, 2017 and their 2017 information on or before July 1, 2018; thereafter, the deadline will be March 2nd of every successive year.

In addition to the online reporting requirements, beginning November 1, 2016[1], the new rule prohibits discouragement of reporting injury or illness by employees and requires employers to keep employees informed of their right to report in a retaliation free environment and to maintain reasonable procedures for reporting injuries and illnesses in a way that is undeterred by the employer.

If you would like additional information, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email:

Colombo & Colombo Attorneys Featured at Auto Dealers Conference Hosted by Michigan Association of Certified Public Accountants

Attorneys Charles LeFevre and Eric Bowden, Partners at Colombo & Colombo, P.C., presented at a conference for the Michigan Association of Certified Public Accountants at the Suburban Collection Showplace on September 23, 2016. This presentation provided insight into recent activity of the Consumer Financial Protection Bureau and its impact on the automotive dealership industry.

In addition, they discussed the changes in federal wage law applicable to dealerships, manufacturer’s measurement of dealership sales performance and how dealerships are responding to safety recalls.

Charles LeFevre has provided legal counsel to dealerships for nearly fifty (50) years and brings a wealth of knowledge to every client. He knows the laws, the underlying reasons for the laws, and how the laws governing the auto dealership industry are interpreted. He also has a significant amount of expertise in the acquisition and sale of dealerships, entity formation, taxation and estate planning.

Eric Bowden’s expertise covers an entire range of auto dealership legal support. He counsels dealerships on how laws impact dealership’s day-to-day operations which include: advertising, consumer litigation, government regulation, manufacturer-dealership relations and wage and hour law. Eric was part of the Colombo & Colombo team that secured a favorable decision from the Sixth Circuit Court of Appeals which has paved the way for Fox Hills Chrysler Jeep in Plymouth to reopen with Village Chrysler Jeep in Royal Oak and Jim Marsh Chrysler Jeep in Nevada set to restart operations by end of the year which is more than six years after their sales and service agreements were terminated as part of Chrysler’s bankruptcy.

Contact Charles LeFevre or Eric Bowden
Phone: 248-645-9300
Email: CandC@colombopc.com

Guidance Regarding Compliance with the Department of Labor’s New Overtime Rule Effective December 1, 2016

Click here to view the entire article.

As dealers are aware through communications from multiple sources, earlier this year the Department of Labor finalized its Regulations updating and implementing exemptions from minimum wage and overtime pay for executive, administrative and professional employees (“White Collar Workers”). Since all employees are entitled to be paid the minimum wage, this Notice will not address that topic. Rather, it will only address guidance on what dealers need to do to comply with the new Overtime Requirements Rule prior to its effective date of December 1, 2016.

OVERVIEW OF THE NEW RULE

The Final Rule focuses primarily on updating the salary and compensation levels needed for White Collar Workers to be exempt. Specifically, the Final Rule:

1. Sets the new standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest region of the country, which is $913.00 per week or $47,476.00 annually (an increase from the current $455.00 per week or $23,660.00 annually). For those dealers who pay employees biweekly, the required amount is $1,826.00 per pay period; for those dealers who pay semi-monthly it is $1,978.00 per pay period; and for those dealers who pay monthly, the new salary level is $3,956.00 per month.

2. Sets the total annual compensation requirement for highly compensated employees to $134,004.00 (previously $100,000.00). These employees must also receive at least $913.00 per week.

3. Establishes a mechanism by which the salary and compensation levels above will be automatically updated every three (3) years to maintain the levels of the above percentiles, commencing on January 1, 2020.

4. Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new standard salary level ($91.30 per week). This requirement must be met quarterly.

5. Permits a “CATCH-UP” payment at the end of each quarter to ensure compliance.

MYTHS ABOUT THE NEW OVERTIME RULE

Based on our conversations with some of our clients, there are some apparent misunderstandings as to the effect of this Rule on dealership employees.

MYTH NO. 1: The Rule changes how I must pay salespersons, partsmen and mechanics.

NOT TRUE. The new Rule only affects white collar salaried workers. It does not change the other overtime exemptions dealerships have long claimed such as those for salespeople, service writers, partsmen and mechanics/technicians. It also does not change the dealer’s ability to claim the overtime exemption for those employees who receive more than half (½) their earnings through commission and are paid at least one and a half (1½) times the minimum wage (commonly known as the Retail Commission Exemption).

The Rule also does not affect the Business Owners Exemption which provides that an employee that owns at least a bonafide twenty percent (20%) equity interest in a business is exempt from overtime requirements provided he/she is actively engaged in the management of the business.

MYTH NO. 2: Employees who receive a salary are automatically exempt.

NOT TRUE. Salaried status and exempt status are SEPARATE concepts. Paying an employee a salary does not mean the employee is automatically exempt. The employee must still meet the duties test described below and also receive a salary of at least $913.00 per week.

MYTH NO. 3: Supervisors and managers are automatically exempt.

NOT TRUE. An employee’s job title is irrelevant in terms of complying with the overtime rule. The fact that an employee is a manager or supervisor does not mean the dealer can automatically claim an exemption for that employee. As with salaried personnel, the supervisor/manager must still meet the duties test and be paid at least $913.00 per week in salary.

MYTH NO. 4: Outside salespersons must be paid in compliance with the new Rule.

NOT TRUE. An exempt outside salesperson must be customarily and regularly engaged away from the dealership and have a primary duty of making sales or obtaining orders or contracts. There are no salary or fee requirements for exempt outside sales employees.

MYTH NO. 5: The Rule only applies to full time employees.

NOT TRUE. Whether an employee is full-time or part-time, the standard salary level to qualify for the exemption is $913.00 per week. The salary level may not be prorated for part-time employees. However, dealers may prorate the required salary if an employee works less than the full week of his/her first and/or last week of employment.

MYTH NO. 6: Paying an employee $913.00 per week in salary satisfies the exemption.

NOT TRUE. While payment of $913.00 per week is one (1) part of the equation, standing alone, it does not satisfy the exemption. Dealers must also “guarantee” that the employee will receive that amount weekly and the employee must meet the duties test outlined below.

MYTH NO. 7: Dealers will have to change the job descriptions of White Collar employees to comply with the new Rule.

NOT TRUE. The revised Rule does not make any changes to the duties tests under which dealers have been operating since the Rule was last amended in 2004. Salaried workers who are guaranteed and earn at least $913.00 a week will be exempt from overtime pay if they meet the appropriate test for the two (2) classifications most common at dealerships: Executive and Administrative.

Executive Exemption. To qualify for executive employee exemption, all the following tests must be met…

Click here to view the entire article.

Federal Agencies Adjust Civil Penalty Amounts

Effective as of August 1, 2016, the maximum penalty for violations of some of the major laws enforced by the Federal Trade Commission has increased from $16,000 to $40,000. The violations to which these penalties apply include those regulations under the FTC Act addressing unfair or deceptive acts or practices. Adjustments will be made each January to account for inflation.

If you would like additional information, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email:

Mandatory Updates to Fair Labor Standards Act Minimum Wage Poster

The Fair Labor Standards Act (FLSA) Minimum Wage Poster issued by the United States Department of Labor has been updated. Effective August 1, 2016, those employers subject to the FLSA must begin using the revised poster.

The updates include:

      • Civil penalties for noncompliance.
      • Sections regarding employee classifications (independent contractors v. employees.)
      • Sections regarding break time for nursing mothers.

The updated poster is available on the Department of Labor’s website at: https://www.dol.gov/whd/regs/compliance/posters/flsa.htm

If you would like additional information, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email:

Department of Labor Persuader Rule’s July 1, 2016 Effective Date Blocked by Federal Court

As you may recall from a previous notice, the Department of Labor (“DOL”) issued the new Persuader Final Rule on March 24, 2016, which required increased reporting of an employer’s expenses connected to labor relations consultant services. The new rule required increased reporting for “direct” and “indirect” consultant services, which, according to many employers and business groups, unfairly infringed on free speech and on a business’s attorney-client privilege.

On June 27, 2016, a Federal judge in Texas issued a nationwide preliminary injunction preventing the Department of Labor from implementing the rule on July 1, 2016. The judge stated that a nationwide injunction was appropriate pending the outcome of a lawsuit filed by the National Association of Manufacturers and other business groups claiming that the new Persuader Final Rule infringed on free speech and the attorney-client privilege in seeking advice from counsel on labor relations.

Dealerships are not required to comply with the increased reporting requirements that were set to be implemented July 1, 2016 unless and until a final order is entered by the district court in Texas or by an appellate court.

If you have any questions about the DOL’s Final Persuader Rule, the current reporting rules, or if you would like additional information, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email.

Charles A. LeFevre, Chair – CAL@colombopc.com
Lawrence F. Raniszeski – LFR@colombopc.com
Michael J. O’Shaughnessy – MJO@colombopc.com
Eric R. Bowden – ERB@colombopc.com
Alycia Pallach Wesley – APW@colombopc.com
Coriann Gastol – CG@colombopc.com

United States Supreme Court Vacates Ninth Circuit’s Ruling That Service Advisors Are Not Exempt From Overtime Pay

On June 20, 2016, in the case of Navarro v. Encino Motorcars, LLC, the U.S. Supreme Court issued an opinion vacating the Ninth Circuit’s decision from March 24, 2015 which held that service advisors are not exempt from overtime pay.

The Supreme Court determined that the Ninth Circuit had given too much weight to the Department of Labor’s (“DOL”) 2011 regulation indicating that service advisors are not “salesman” included in the exemption from overtime pay. Instead, the Supreme Court remanded the case to the Ninth Circuit for reconsideration of the issue consistent with the Fair Labor Standards Act and the decades-old practice of considering service advisors as exempt under the salesman exemption.

In the underlying Ninth Circuit case, five current and former service advisors, who received commission for services they sold, brought suit against the dealership alleging that the dealership should have paid them overtime wages required by the Fair Labor Standards Act. The Ninth Circuit relied on a 2011 DOL regulation and found that service advisors did not fall within the definition of “salesman, partsman or mechanic.”

However, this new Supreme Court ruling requires the Ninth Circuit to interpret the statute taking into account the dealerships’ decades-long reliance on the exemption and not consider the DOL’s 2011 regulation. The effect of the Court’s decision is that service advisors continue to remain exempt from the payout of overtime in Michigan.

If you would like more information on the ruling, or if you need assistance determining if your employees are exempt from overtime pay, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email.

Charles A. LeFevre, Chair – CAL@colombopc.com
Lawrence F. Raniszeski – LFR@colombopc.com
Michael J. O’Shaughnessy – MJO@colombopc.com
Eric R. Bowden – ERB@colombopc.com
Alycia Pallach Wesley – APW@colombopc.com
Coriann Gastol – CG@colombopc.com

New Department of Labor Persuader Rule Requires Additional Labor Consultant Reporting Effective April 25, 2016

On March 24, 2016, the Department of Labor (“DOL”) issued the new Persuader Final Rule, which requires increased reporting of an employer’s expenses connected to labor relations consultant services. The Persuader Final Rule is an attempt to increase the reporting required under the Labor Management Reporting and Disclosure Act of 1959 (“LMRDA”), which requires employers and consultants to report expenditures on labor relations consultant services. The reporting is intended to give employees information regarding a labor consultant’s role in providing information to employees regarding union representation.

The LMRDA specifically requires reporting information on compensation to labor relations consultants for “direct” and “indirect” consultant services. Under the LMRDA, “direct” persuader activities involve labor consultants speaking directly to employees, and “indirect” persuader activities involve consultants scripting what employers and managers say to workers. “Indirect” activities include planning, directing or coordinating supervisors’ communication, providing persuader materials, conducting seminars for supervisors or other employer representatives, and developing or implementing personnel policies or actions.

The LMRDA also provides an exemption to the reporting requirement whereby reporting is not required if the labor consultant merely provides “advice,” defined as “recommendations regarding a decision or course of conduct.” Until now, the DOL’s guidance on the exemption has defined “advice” to include “indirect persuasion,” thereby exempting all consultant activity unless they had direct contact with employees.

Under the DOL’s new guidelines set forth in the Persuader Final Rule, the “advice” exemption is more narrowly defined. Reporting is now required when consultants directly persuade employees AND when consultants plan or coordinate manager persuasion, provide materials and coordinate seminars, and develop or implement personnel policies. According to the Department of Labor, the purpose of the Persuader Final Rule more accurately reflects the LMRDA’s purposes of requiring disclosure, eliminates a “reporting gap,” and requires reporting of direct and indirect persuasion activity.

The Persuader Final Rule is effective on April 25, 2016 and will be applicable to arrangements, agreements, and payments (including reimbursed expenses) made on or after July 1, 2016. The DOL Office of Labor-Management Standards also revised the reporting Form LM-10 (Employer Report) and Form LM-20 (Agreement and Activities Report) and their respective instructions to reflect the changes. Form LM-10 must be filed within 90 days after the end of the employer’s fiscal year, and Form LM-20 must be filed within 30 days after entering into a reportable agreement, except for reports covering union avoidance seminars, which are due 30 days after the conclusion of the seminar. Forms will be available online and are to be filed electronically at www.olms.dol.gov.

It should be noted that certain business groups have filed suit in an Arkansas federal court challenging this new rule as infringing on the attorney-client privilege and seeking to temporarily block the rule during the pendency of the case. However, until a contrary decision is made, dealers who hire a labor relations consultant should determine annually whether the consultant is or will be engaging in persuader activities on their behalf. If so, starting with the first fiscal year after July 1, 2016, the dealership will be obligated to file the LM-10 and LM-20 reports electronically with the DOL.

If you have any questions about about the DOL’s Final Persuader Rule or would like additional information, please do not hesitate to contact a member of our Dealer Practice Group for guidance at 248-645-9300 or by email:

Charles A. LeFevre, Chair – CAL@colombopc.com
Lawrence F. Raniszeski – LFR@colombopc.com
Michael J. O’Shaughnessy – MJO@colombopc.com
Eric R. Bowden – ERB@colombopc.com
Alycia Pallach Wesley – APW@colombopc.com
Coriann Gastol – CG@colombopc.com

IRS Alerts Payroll and HR Professionals to Phishing Scheme Involving W-2s

March 3, 2016 – The Internal Revenue Service today issued an alert to payroll and human resources professionals to beware of an emerging phishing email scheme that purports to be from company executives and requests personal information on employees.

The IRS has learned this scheme – part of the surge in phishing emails seen this year – already has claimed several victims as payroll and human resources offices mistakenly email payroll data including Forms W-2 that contain Social Security numbers and other personally identifiable information to cybercriminals posing as company executives.

“This is a new twist on an old scheme using the cover of the tax season and W-2 filings to try tricking people into sharing personal data. Now the criminals are focusing their schemes on company payroll departments,” said IRS Commissioner John Koskinen. “If your CEO appears to be emailing you for a list of company employees, check it out before you respond. Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.”

IRS Criminal Investigation already is reviewing several cases in which people have been tricked into sharing SSNs with what turned out to be cybercriminals. Criminals using personal information stolen elsewhere seek to monetize data, including by filing fraudulent tax returns for refunds.

This phishing variation is known as a “spoofing” email. It will contain, for example, the actual name of the company chief executive officer. In this variation, the “CEO” sends an email to a company payroll office employee and requests a list of employees and information including SSNs.

The following are some of the details contained in the e-mails:

Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.

Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary) as at 2/2/2016.

I want you to send me the list of W-2 copy of employees wage and tax statement for 2015, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me asap.

The IRS recently renewed a wider consumer alert for e-mail schemes after seeing an approximate 400 percent surge in phishing and malware incidents so far this tax season and other reports of scams targeting others in a wider tax community.

The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. E-mails can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.

The IRS, state tax agencies and tax industry are engaged in a public awareness campaign – Taxes. Security. Together. – to encourage everyone to do more to protect personal, financial and tax data.

See IRS.gov/taxessecuritytogether or Publication 4524 for additional steps you can take to protect yourself.

If you have any questions about this phishing scheme, please do not hesitate to contact a member of our Dealer Practice Group for guidance at 248-645-9300 or by email:

Charles A. LeFevre, Chair – CAL@colombopc.com
Lawrence F. Raniszeski – LFR@colombopc.com
Michael J. O’Shaughnessy – MJO@colombopc.com
Eric R. Bowden – ERB@colombopc.com
Alycia Pallach Wesley – APW@colombopc.com
Coriann Gastol – CG@colombopc.com

Sincerely,

Colombo & Colombo, P.C.
Attorneys & Counselors at Law
Phone: 248-645-9300
Web: www.colombopc.com

Minimum Wage Increase as of January 1, 2016

As of January 1, 2016, the minimum hourly wage rate will increase to $8.50. All employees must receive at least the minimum wage for all hours worked. It is recommended that dealers review the compensation of all employees, hourly and those exempt from overtime, to ensure compliance with the new wage increase for all hours worked by employees on and after January 1, 2016. According to Michigan’s minimum wage law, the minimum wage increases are as follows:

      • Beginning January 1, 2016, $8.50
      • Beginning January 1, 2017, $8.90
      • Beginning January 1, 2018, $9.25

Commission-Based Employees

Commission-based employees, which may include salespeople, are still entitled to receive the minimum wage. It is suggested that dealers advance certain sums, or “draws,” to these employees weekly and then settle with the employees as to their commissions on a regular biweekly or monthly basis. Dealers should be sure that either weekly draws are sufficient to meet minimum wage or that the dealer makes up the difference at the end of the “washout” period when an employee’s commissions are less than the minimum wage.

Overtime

Notwithstanding the minimum wage increase, the overtime rate is still 1-1/2 times an employee’s regular rate. Certain classes of employees are exempt from the overtime pay rate, but for most hourly employees of dealerships, the overtime rate applies. So, hours worked in excess of 40 hours per week should be paid at a rate of 1-1/2 times the hourly rate at which the employee is employed.

Violations

It is important for dealers to keep a record of the hours worked by each employee and statements of all wages paid. Requiring employees to clock in and out each day is the best way to ensure that the dealer has records of the hours worked. Always keep records of hours worked and wages paid, and always provide statements of hours and wages to your employees on a weekly, bi-weekly, or monthly basis. Violation of the new minimum wage laws can result in fines, payment of wages due, liquidated damages, attorney’s fees, and the time and burden of defending a civil lawsuit under the Fair Labor Standards Act. However, minimum wage violations are among the easiest to avoid by keeping track of the hours worked by the salespeople and staff.

If you have any questions about the Michigan minimum wage law or would like additional information, please do not hesitate to contact a member of our Dealer Practice Group for guidance at 248-645-9300 or by email at CandC@colombopc.com.

OSHA Posting Requirements

December, 2015 – As we previously alerted you, automobile dealerships, although previously exempt, became subject to OSHA’s record keeping and reporting requirements in 2015, which require dealerships to record all serious occupational injuries and illnesses using OSHA Form 300 (Log of Work Related Injuries and Illnesses) and OSHA Form 301 (Injury and Illness Incident Report).

Effective February 1, 2016, dealers must also comply with OSHA’s posting requirement, completing and posting their 2015 annual summary form (OSHA form 300A) by February 1st and keeping it posted in a conspicuous place where notices to employees are customarily posted until April 30th of each year. Even if a dealer has no recordable injury or illness, the form 300A must still be completed and posted reflecting zeroes on the appropriate lines.

The OSHA 300A form cannot be signed by human resource managers or other executives, but rather must be certified and signed by an owner or officer of the company. Dealers should maintain these records and forms for at least 5 years from the year in which the injuries/illnesses occurred and they must be provided upon request for inspection by an OSHA investigator.

In the event that an employee may not see the posting, such as a new employee hired after April 30, 2016 or for employees that may not report to the dealership on a regular basis, you should provide that employee with a copy of the OSHA 300A form. We recommend that you include a copy in your new hire packet for new employees.

A summary of the forms mentioned above and assistance with completing them can be found on OSHA’s website at: www.osha.gov/recordkeeping/RKforms.html. We have also attached copies of the current forms 300, 300A, and 301 to this Notice for your convenience. Click here for forms.

Finally, please note that as a result of the recently enacted Bipartisan Budget Act of 2015, OSHA’s civil penalties will be increased in 2016. The Act permits the fines to be increased for a “catch up adjustment,” catching the fines up based upon the change in the Consumer Price Index since the last time OSHA fines were increased in 1990.

If you have any questions regarding OSHA recordkeeping or reporting requirements or any other regulatory compliance matters, please do not hesitate to contact a member of our Dealer Practice Group for guidance at 248-645-9300 or by email at CandC@colombopc.com.

Department of Labor Issues New Family Medical Leave Act Forms

June, 2015 – Over the Memorial Day weekend, the Department of Labor published new FMLA forms that were to be used beginning June 1, 2015.

There are no major changes to the forms aside from the update to the certification forms that health care providers should not provide information about genetics or genetic services to employers. Still, the new forms should be used immediately and can be found at the Department of Labor website: http://www.dol.gov/whd/fmla/.

The following forms have been updated:

      • WH-380-E Certification of Health Care Provider for Employee’s Serious Health Condition
      • WH-380-F Certification of Health Care Provider for Family Member’s Serious Health Condition
      • WH-381 Notice of Eligibility and Rights & Responsibilities
      • WH-382 Designation Notice
      • WH-384 Certification of Qualifying Exigency for Military Family Leave
      • WH-385 Certification for Serious Injury or Illness of Covered Service member — for Military Family Leave
      • WH-385-V Certification for Serious Injury or Illness of a Veteran for Military Caregiver Leave

If you would like additional information about the updates or your dealership’s responsibilities regarding these forms, please do not hesitate to contact our office by calling 248-645-9300

Wage Garnishment Reform Provides Long-Awaited Relief to Employers

On April 23, 2015, Governor Snyder signed into law two House bills, set to take effect on September 30, 2015, which will reform Michigan’s cumbersome and risky wage garnishment procedure.

Under the current law, dealers bear the majority of the burden to properly garnish an employee’s wages, and the creditor is only required to pay the dealer $6.00 for their administration of the garnishment. The current law also allows the creditor to mail the garnishment forms to the local dealership, rather than the dealer’s registered agent, which often results in mishandling of the garnishment forms by staff who are unfamiliar with garnishment rules. Garnishments must also be renewed every six months, which creates increased opportunities for mishandling or noncompliance by the dealer’s staff. Finally, a dealer’s failure to properly comply with a garnishment allows the creditor to obtain a judgment against the dealer for the full amount of the employee’s debt.

The new law will provide long-awaited relief to dealers through the following changes:

      • Creditors will have to pay $35.00 to the dealer for the handling of the garnishment.
      • Garnishments will remain in effect until the judgment is satisfied and will not be renewed every 6 months, reducing the opportunity for administrative error.
      • Garnishments will have to be properly served on the dealer in compliance with the Michigan Court Rules regarding service to ensure that the dealer receives proper notice of the garnishment.
      • Dealers will have increased opportunities to cure any mishandling of a garnishment, including prior to a request by the creditor for default, after a request but prior to the entry of default, and even after the entry of default by requesting to have it set aside.

The new law ensures that the responsibility for the debt of the employee remains with the employee and doesn’t unnecessarily burden the dealer. Dealers will now be more fairly compensated for administering garnishments and will have greater protection from judgments against them based on minor administrative errors.

Until September 30, 2015, dealers must continue to comply with the existing garnishment statute and rules. To learn more about the changes to the garnishment law and the dealership’s responsibilities, please do not hesitate to contact our office by calling 248-645-9300 or by email at CandC@colombopc.com

U.S. Supreme Court Protects Pregnant Employee’s Right to Accommodation

In a March 25, 2015 decision, the United States Supreme Court evaluated the United Parcel Service’s (UPS) failure to accommodate a pregnant driver with a light duty position due to the lifting restriction imposed by the driver’s doctor. UPS required its drivers to lift up to 70 pounds, but the driver in this case was restricted to 20 pounds due to her pregnancy. Instead of accommodating the driver with a light-duty position, as UPS had done with other employees with similar lifting restrictions, UPS told the employee that she could not work while pregnant.

Overruling the Fourth Circuit Court of Appeals, the Supreme Court found that the employee had presented sufficient evidence to support a finding of discrimination on the basis of her pregnancy in violation of the Civil Rights Act of 1964 and the Pregnancy Discrimination Act of 1978 (“PDA”). The PDA states that a pregnant employee shall be treated the same “as other persons not so affected but similar in their ability or inability to work.” UPS took the position that it did not have to accommodate a pregnant employee similar to other non-pregnant employees where it had a neutral policy of only accommodating employees with certain restrictions: on-the-job injuries, ADA covered disabilities, and loss of DOT Certifications.

The Court found that, although UPS’s policy was non-discriminatory on its face, the policy had the effect of discriminating against pregnant employees. UPS’s policy and history of accommodating other employees with similar lifting restrictions resulted in discrimination against pregnant employees, exclusively. Although the Court declined to find that pregnant employees are always entitled to accommodation, it did find that pregnant employees should be treated the same as other employees “similar in their ability or inability to work,” absent a legitimate non-discriminatory reason for denying accommodation.

Federal Court Dismisses Case Against Michigan Dealer Brought by EEOC

April, 2015 – Attorney Michael J. O’Shaughnessy was successful in getting an EEOC case dismissed against a dealer located in Michigan. The EEOC filed suit on behalf of an applicant for the dealership’s failure to hire the individual based on his religious affiliation. The case was hotly contested and the EEOC wouldn’t budge, rejecting a settlement offer that required publication. After a number of depositions of dealership personnel and a 3rd party, the EEOC decided that they had had enough and dismissed the case in Federal Court.

To learn more about the approach taken in this case, please contact Michael J. O’Shaughnessy by calling 248-645-9300, or email him at MJO@colombopc.com

Dealership Withholding on Disability Benefits

April, 2015 – Under the Internal Revenue Code, Section 105, Short and Long Term Disability benefits (“Sick Pay”) may be included in the gross income of an employee, which requires the dealership to withhold applicable taxes. Sick pay is generally subject to FICA tax (social security and Medicare taxes) in proportion to the amount of the premium for such coverage that is paid by the dealership. Any portion of the sick pay paid to the employee that is attributable to the employee’s own contribution to the sick pay plan is not subject to withholding.

However, any sick pay benefits paid to an employee that exceed the applicable wage base when combined with the employee’s gross income are not subject to social security withholding. For 2015, any sick pay benefits that exceed $118,500 per year when combined with the employee’s wages previously paid during that year, are not subject to social security withholding. This wage base limit does not apply to Medicare taxes.

Sick pay generally includes any amount paid under a plan because of an employee’s temporary absence from work due to injury, sickness, or disability and does not include disability retirement benefits or worker’s compensation. A dealership must withhold and timely deposit FICA taxes in the same manner as the withholding and deposit of taxes on regular wages, regardless of whether such benefits are paid directly by the dealership or by an insurance company that services the sick pay plan.

Ninth Circuit Takes Minority View That Service Advisors Are Entitled To Overtime

On March 24, 2015, in Navarro v. Encino Motorcars, LLC, the Ninth Circuit Court of Appeals ruled that “service advisors” are not exempt from the Fair Labor Standards Act (FLSA) overtime requirements under section 213(b)(10)(A). While Ninth Circuit rulings are not binding in Michigan, this ruling increases the potential that this issue may be taken up by the U.S. Supreme Court as there is now a split between the Circuit Courts of Appeal.

The FLSA provides that an employer shall pay an employee who works longer than 40 hours in a workweek overtime in the amount of one and one-half times the regular rate of pay. However, the FLSA exempts “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.”

The Fourth and Fifth Circuits, the Montana Supreme Court, and certain U.S. District Courts, including the Eastern District of Michigan, have found that service advisors are exempt from the FLSA overtime pay requirement. These courts reasoned that service advisors are included in the exemption where their duties and pay structure are functionally similar to that of a salesman, partsman, or mechanic.
The Ninth Circuit recognized the above rulings, but disagreed, relying on a narrow interpretation of the Department of Labor’s definitions of “salesman,” “partsman,” and “mechanic.”

As mentioned above, the Ninth Circuit’s recent ruling is not binding in Michigan. It is also important to note that this ruling did not address that many service advisors will fall under another exemption from the FLSA’s overtime requirement: the exemption for commissioned employees. That Section 213(b)(7)(i) exemption provides that an employee is exempt from overtime pay so long as:

(1) The employee is employed by a retail or services establishment, and

(2) The employee’s regular rate of pay exceeds one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked, and

(3) More than half the employee’s total earnings in a representative period must consist of commissions.

While the Circuits are split on whether “service advisors” are exempt under section 213(b)(10)(A), the current rule in Michigan is that service advisors are exempt, and further, that they may be exempt under 213(b)(7)(i). The Circuit split further means that the issue may soon be decided by the U.S. Supreme Court.

If you need assistance determining if your employees are exempt from the FLSA overtime requirement under the current rules, please do not hesitate to contact a member of the Dealer Practice Group by calling 248-645-9300.

New Rule Expands Definition of “Spouse” Under the FMLA

On February 25, 2015, the Department of Labor issued a Final Rule revising the definition of “spouse” under the Family and Medical Leave Act (“FMLA”). The new definition will take effect on March 27, 2015.

The FMLA covers employers with 50 or more employees and provides eligible employees with 12 weeks of job-protected leave for an employee’s serious health condition or birth or adoption of a child. It also provides the employee the same 12-week leave to care for a spouse, child or parent with a serious health condition. The FMLA traditionally defined the term “spouse” as “a husband or wife as defined or recognized under state law for purposes of marriage, including common law marriage in states where it is recognized,” specifically looking to the employee’s state of residence to determine eligibility.

The Defense of Marriage Act of 1996 (“DOMA”) limited the definition of “spouse” to include only opposite-sex marriages. However, on June 26, 2013, the Supreme Court in United States v. Windsor found the DOMA limitation unconstitutional. The Department of Labor followed suit and began modifying its restrictions on its definition of “spouse,” culminating in this Final Rule issued February 25, 2015. The new definition also incorporates a “place of celebration” rule, including marriages entered into outside of the employee’s state of residence.

Effective March 27, 2015, the FMLA definition of the term “spouse” for purposes of FMLA spousal leave includes common-law and same-sex marriages if recognized in the state where such marriage was entered into, regardless of the employee’s state of residence. The definition also includes same-sex and common law marriages validly entered into outside of the United States, so long as such marriage could have been entered into in at least one state.

If your FMLA policy contains a definition of spouse, you should amend the policy to ensure the definition complies with the changes. If you require assistance drafting or amending your policy or determining qualified leave under the new rule, please do not hesitate to contact a member of our Dealer Practice Group for guidance at 248-645-9300.

Downsized Auto Dealers Could Reopen Under Appeals Court Ruling

January, 2015 – This article was published in Crain’s Detroit Business. Click here to read the full article.

Local dealerships Livonia Chrysler Jeep Inc., Fox Hills Chrysler Jeep and Village Chrysler Jeep could reopen more than five years after a Chrysler Group LLC decision to close them, after the dealers gained a key victory at a federal appeals court.

The 6th U.S. Circuit Court of Appeals has found that a federal law creating the arbitration process where those dealers prevailed trumps state laws that would allow nearby competitors to legally challenge their return. The court also found that the dealers had not proven their letters of intent to return to the network were not the “customary and usual” letters to dealers from Chrysler.

At issue is a federal arbitration process in 2010 where dealers could challenge Chrysler’s decision to terminate 789 dealers as part of bankruptcy reorganization, reducing its dealer count to about 2,400. Some 32 dealers, including five in Michigan, won reinstatement following arbitration hearings, but lawsuits followed over what that victory actually meant.

“Our understanding is the dealers (in the appeal) will all be able, if they can satisfy the conditions in their letters of intent (from Chrysler), to go back and be part of what’s now the Fiat Chrysler Automobiles dealership body,” said Eric Bowden, principal at Bloomfield Hills-based Colombo & Colombo PC, who represented Fox Hills in Plymouth, Village in Royal Oak and Jim Marsh Chrysler Jeep in Las Vegas.

NLRB Allows Employee Use of Employer Email for Section 7 Activity

January, 2015 – On December 11, 2014, the National Labor Relations Board (“NLRB”) overruled its previous 2007 decision that allowed employers to limit their employees’ use of the employer’s email system solely to business purposes. The recent ruling now recognizes employees’ rights to communicate with other employees through employer-provided email, during non-working time, regarding Section 7 rights such as self-organization and other terms and conditions of employment. The NLRB determined that the employer’s property rights over the equipment servicing email systems do not override the individual employee’s right to communicate in the workplace about the terms and conditions of their employment.

Section 7 of the National Labor Relations Act allows employees the right to communicate with one another, at the job site, regarding self-organization. At issue in this case was whether the employees’ use of the employer’s email system was a permissible method of communication for such Section 7 activities where the employer had a policy in its employee handbook that specifically prohibited use of the employer’s email system for anything other than business purposes. The court found the handbook policy to be overbroad and in violation of Section 7 of the National Labor Relations Act where the importance and common usage of email as a means of employee communication has dramatically increased since the NLRB’s previous 2007 ruling.

This recent ruling limited its discussion to email communication during non-working time and also does not require that an employer provide business email to employees if it doesn’t already. This ruling also left little room for uniform and consistently enforced restrictions on employee email usage in limited special circumstances.

This case dramatically alters the way the NLRB will evaluate email policies. Therefore, dealers should review their email policies to confirm whether they restrict personal use during non-working time. If they do, the NLRB will likely find that such policies violate the law.

New OSHA Record Keeping and Reporting Requirements

December, 2014 – As of January 1, 2015, auto dealers in Michigan are required to comply with the new Occupational Safety and Health Administration (OSHA) record keeping and reporting requirements, which were adopted by the State of Michigan. Although some motor vehicle dealers remain exempt from the new reporting requirements, such as motorcycle and recreational vehicle dealers, all automobile dealers must comply.

In addition to reporting all work-related fatalities to MIOSHA within 8 hours of the occurrence, dealers are now required to report all work-related in-patient hospitalizations, as well as amputations and losses of an eye, to MIOSHA within 24 hours of the event by calling (800) 858-0397 or locally at (517) 322-1831. Automobile dealers are also required to comply with the OSHA record keeping requirements, recording all serious occupational injuries and illnesses using OSHA Form 300 (Log of Work Related Injuries and Illnesses) and OSHA Form 301 (Injury and Illness Incident Report) and maintaining these forms for at least 5 years from the year in which the injuries/illnesses occurred. A summary of the forms and assistance with completing them can be found at: https://www.osha.gov/recordkeeping/new-osha300form1-1-04.pdf. Additionally, dealers should immediately notify their workers compensation insurance carriers of any work-related injuries or fatalities.

Unemployment Benefits Allowed for Terminated Employees with Medical Marihuana Card

December, 2014 – In a recent ruling, the Michigan Court of Appeals combined three cases where the Michigan Compensation Appellate Commission (“MCAC”) disqualified terminated employees’ entitlement to unemployment benefits. The employees were licensed medical marihuana card holders and failed to pass employer-issued drug tests while on the job. The employees did not ingest the marihuana while on the job or work under the influence of marihuana, but only failed to pass a drug test issued by the employer. The employers terminated the employees for failure to pass an employer-issued drug test. Thereafter, the MCAC denied the employees unemployment benefits reasoning that the employees had been terminated for misconduct.

The Michigan Medical Marihuana Act (“MMMA”) protects employees who use medical marihuana by prohibiting criminal action and civil penalties for the licensed use of medical marihuana. The question for the Court involved whether the employees’ loss of benefits was a “penalty” imposed by the MCAC in violation of the MMMA. The Court found that the MCAC acted in contravention of the MMMA protections by disqualifying the terminated employees from unemployment benefits. The employees were otherwise entitled to benefits and used medical marihuana in compliance with the MMMA. The only reason the employees were disqualified from benefits was for their use of medical marihuana. Therefore, the Court found that the employees’ disqualification amounted to a penalty for their otherwise legal use of medical marihuana. The MMMA protects employees from such penalties and the Court found that the employees were entitled to unemployment benefits.

Please note that this Court did not find the employer’s termination of the employee unlawful. It only held that employees could not be denied unemployment benefits under these circumstances.

FMLA Compliance Investigations

December, 2014 – The U.S. Department of Labor recently announced a new initiative in which it would emphasize compliance investigations in the form of on-site visits to ensure compliance with the FMLA. These investigations usually will take place without notice and will not necessarily be in response to an employee complaint. They may or may not be a part of a general audit/investigation of other areas within the responsibility of the DOL such as minimum wage, overtime or pension/401k compliance. If you have 50 or more employees, you must comply with FMLA guidelines.

According to the DOL, it will focus on those areas of a business where FMLA leaves are most likely to be more frequent. In these areas, according to the DOL, there is a greater-chance that the employer has not complied with FMLA notice and/or certification requirements. DOL has also found that front-line managers in these areas tend NOT TO be familiar with the FMLA and its obligations.

Employee interviews will become standard practice in on-site visits so the DOL can confirm that managers and individuals in the leave process are familiar with your FMLA policy – it will seek to double-check your leave procedures by requiring multiple individuals to attest to them. Managers will be expected to walk a DOL investigator through an employee’s leave request, where various FMLA touch points will be tested.

Outlined below are some suggestions for conducting a self-audit to prepare for a possible FMLA investigation:

      • CONDUCT A THOROUGH REVIEW OF YOUR FMLA POLICY – The DOL will review an employer’s policy and all its forms to ensure that the March, 2013 regulations are incorporated into these documents and that the policy is up to date. It will also check to see if your policy contains the necessary language.
      • ADHERE TO THE EMPLOYER POSTING REQUIREMENTS – Make sure you have the most recent DOL FMLA Poster posted ”prominently” where it can be viewed by employees and applicants. The current Poster contains a February, 2013 date on the bottom right corner. If you don’t have that one, go to the DOL website at www.dol.gov and print one.
      • ENSURE YOUR FMLA FORMS ARE LEGALLY COMPLIANT – Examine all your existing forms to determine whether they comply with FMLA regulations. Again, your forms must incorporate the 2013 regulatory changes. Since technical violations can be costly, ensure that your forms (Notice of Eligibility, Designation Notice, Certification Forms, etc.) are up to date.
      • PREPARE LEGALLY COMPLIANT FMLA CORRESPONDENCE – In addition to the forms, be sure to put in place and review compliant correspondence regarding certification, recertification, failure to provide certification, return to work, fitness for duty certification, etc. These letters will also be reviewed by the DOL. At a recent seminar conducted at the DADA, we distributed several examples of correspondence to be used for FMLA purposes.
      • CONDUCT AN AUDIT OF YOUR FMLA PRACTICES & PROCEDURE – What procedures are used by department managers when an employee reports an absence? Do the procedures ensure that all leave requests (FMLA or non-FMLA) reach the appropriate person – i.e., H.R. of Office Manager in a timely manner (IMMEDIATELY!)? Are the correct questions being asked? Are you complying with the health certification regulations? Are you properly designating FMLA leave and providing timely notice? Are you following the regulations’ guidelines for seeking fitness-for-duty certifications? If you don’t have answers to these questions, you need to get them before a DOL auditor appears at your door.
      • CONDUCT A THOROUGH REVIEW OF YOUR FMLA POLICY – The DOL will review an employer’s policy and all its forms to ensure that the March, 2013 regulations are incorporated into these documents and that the policy is up to date. It will also check to see if your policy contains the necessary language.
      • ADHERE TO THE EMPLOYER POSTING REQUIREMENTS – Make sure you have the most recent DOL FMLA Poster posted ”prominently” where it can be viewed by employees and applicants. The current Poster contains a February, 2013 date on the bottom right corner. If you don’t have that one, go to the DOL website at www.dol.gov and print one.
      • ENSURE YOUR FMLA FORMS ARE LEGALLY COMPLIANT – Examine all your existing forms to determine whether they comply with FMLA regulations. Again, your forms must incorporate the 2013 regulatory changes. Since technical violations can be costly, ensure that your forms (Notice of Eligibility, Designation Notice, Certification Forms, etc.) are up to date.
      • PREPARE LEGALLY COMPLIANT FMLA CORRESPONDENCE – In addition to the forms, be sure to put in place and review compliant correspondence regarding certification, recertification, failure to provide certification, return to work, fitness for duty certification, etc. These letters will also be reviewed by the DOL. At a recent seminar conducted at the DADA, we distributed several examples of correspondence to be used for FMLA purposes.
      • CONDUCT AN AUDIT OF YOUR FMLA PRACTICES & PROCEDURE – What procedures are used by department managers when an employee reports an absence? Do the procedures ensure that all leave requests (FMLA or non-FMLA) reach the appropriate person – i.e., H.R. of Office Manager in a timely manner (IMMEDIATELY!)? Are the correct questions being asked? Are you complying with the health certification regulations? Are you properly designating FMLA leave and providing timely notice? Are you following the regulations’ guidelines for seeking fitness-for-duty certifications? If you don’t have answers to these questions, you need to get them before a DOL auditor appears at your door.
      • CLEAN UP YOUR RECORDKEEPING NOW – Are you maintaining the data the DOL will be looking for and is it accurate? Have you ensured that any records/documents regarding health, including certification forms are kept separate from the employee’s personnel file?
      • TRAIN YOUR EMPLOYEES – The DOL firmly believes that department managers DO NOT KNOW their employer’s FMLA policy and leave procedures so we recommend you get a handle on this before they create a liability for you. There are too many cases where a company paid money because a manager said something foolish about FMLA, did not properly handle an absence or did not follow the FMLA regulations. Train them now to avoid or at least minimize that risk.

ADA Work from Home Accommodation Request

November, 2014 – As our fifth installment in the Employment Law Series, we are making dealers aware of a recent decision issued by the Sixth Circuit Court of Appeals involving an employee’s request to work from home as a proposed reasonable accommodation under the Americans with Disabilities Act (the “ADA”).

In EEOC v Ford Motor Company, the employee, a buyer for Ford Motor Company, suffered from irritable bowel syndrome and requested that the employer permit her to work from home as an accommodation for her condition. The employer denied her request, concluding that her presence in the office was an essential function of her job because of the employer’s emphasis placed on teamwork and in-person team problem-solving. The district court initially dismissed the employee’s claim finding that her proposal to work from home was not reasonable. The Sixth Circuit, however, found to the contrary and held that because much of the employee’s work duties could be performed over the telephone or through video conference and where the employer had permitted other employees to work from home, the employee’s ADA failure-to-accommodate claim was viable and remanded it to the district court for further proceedings.

In light of this decision, dealers may receive more requests to work from home from those employees whose jobs do not require a physical presence in the work place. If you receive a work-from-home accommodation request and are unsure of your obligations to the employee making the request, please contact a member of our Dealer Practice Group for guidance.

Michigan’s Minimum Wage Set to Increase Sept. 1, 2014

Beginning September 1, 2014, the Michigan minimum hourly wage rate will increase to $8.15. All employees subject to Michigan’s minimum wage law must receive at least the minimum wage for all hours worked. Michigan’s minimum wage is set to increase as follows:

1. Beginning September 1, 2014, $8.15;
2. Beginning January 1, 2016, $8.50;
3. Beginning January 1, 2017, $8.90; and
4. Beginning January 1, 2018, $9.25.

Violations of the Michigan minimum wage law may be easily avoided. If you have any questions regarding compliance or how Michigan’s minimum wage law affects your current business, please do not hesitate to contact our office by calling 248-645-9300, or email us at CandC@colombopc.com

Benefits of a Waiver of Subrogation in Real Estate Agreements

August, 2014 – The inclusion of a mutual waiver of subrogation in a commercial lease can be of significant benefit to both the landlord and the tenant. Subrogation refers to the right of one person to step into the shoes of another with reference to a claim or right. In the context of a lease, it means that insurance companies have the right to step into the shoes of the party being compensated with insurance proceeds and sue the party whom the compensated party could have sued, i.e. the one that caused the damage.

Essentially, if a tenant negligently causes a fire in a rented building and the landlord files a claim with its insurance company and is compensated for the damages, the insurance company can then directly sue the tenant for damages. This generally is not what the parties had intended or contemplated when they negotiated their lease agreement. It can also work in reverse, where a landlord’s negligence could cause damage to a tenant’s personal property and the tenant’s insurance company could then turn around and sue the landlord. In either situation, the insurance company is the one that is really benefiting by receiving the premium payments from the insured and then by suing the negligent party for the damages. Additionally, there could be a trickle-down effect to the landlord if a tenant is sued by an insurance company, where the tenant could be so financially burdened by a resulting money judgment that the tenant might not be able to meet its rent obligations under the lease – coming full circle against the landlord. Hence, the need for a waiver of subrogation provision in a commercial lease.

In order to fully implement a waiver of subrogation, it not only must be included in the written lease agreement between the parties, but the parties must also confirm that their insurers will permit the parties to waive their insurer’s rights in this context. If it is permitted, then each party should request confirmation in writing from the other that the insurer has consented to and included the waiver of subrogation language in their insurance policy.

Bonus Plans and Overtime Pay for Non-Exempt Employees

July, 2014 – As our fourth installment in the Employment Law Series, we would like to make you aware of an issue involving bonus plans and the calculation of overtime pay rates for non-exempt employees.

If you pay your non-exempt employees a bonus, you may be required to factor in those bonus payments when determining the amount of overtime to pay to those employees. The Fair Labor Standards Act (FLSA) requires that all remuneration for employment paid to or on behalf of an employee be included in the employee’s regular rate of pay unless the type of remuneration is specifically excluded under Section 7(e) of the FLSA.

If a bonus is “discretionary”, it will be excluded from the regular rate of pay. However, most employers’ bonuses are considered “non-discretionary”, which is a bonus that is required to be paid based on certain criteria set forth in a contract or pay plan. Unlike a discretionary bonus, this bonus is paid on a routine basis (i.e. monthly or quarterly) and is usually a set amount or percentage set forth in the agreement.

An example of a non-discretionary bonus would be a payment to an internet sales employee of “$250 for 30% lead to shown appointments ratio”. It is non-discretionary because the employee must be paid if he or she achieves the 30% ratio objective. If you pay your non-exempt employees a bonus which is not discretionary, like the example listed above, you must include that bonus payment in the calculation of the employee’s regular rate of pay when determining the amount of overtime to pay to the employee.

No Retroactive Application of the Franchise Law Amendments

On June 10, 2014, the Michigan Supreme Court in the case of LaFontaine Saline, Inc. d/b/a LaFontaine Chrysler Jeep Dodge Ram vs. Chrysler Group, LLC ruled that the 2010 amendment to the Motor Vehicle Dealers Act (MVDA) did not apply retroactively. Originally, the MVDA restricted a manufacturer’s right to establish a dealership within 6 miles of an existing dealer of the same line of vehicles. In 2010, the state legislature amended the MVDA and expanded the restricted area to a 9 mile radius.

On February 2, 2010, Chrysler and IHS Automotive Group, LLC (IHS) signed a Letter of Intent (LOI) indicating that Chrysler and IHS intended to establish a new dealership. LaFontaine Saline, Inc. received notice of the LOI that the proposed dealership was to be located less than 9 miles from LaFontaine Saline and would sell the same line of vehicles as LaFontaine Saline. LaFontaine Saline, Inc. brought an action for declaratory relief against Chrysler and IHS to prohibit them from establishing a dealership less than 9 miles away. However, the amendment to the MVDA expanding the restricted radius to 9 miles did not take effect until August 4, 2010, six months after the LOI was signed.

The Court found that the 2010 amendment to the MVDA did not apply retroactively and, therefore, did not restrict Chrysler and IHS from establishing a dealership less than 9 miles away. The Court reasoned that the 2010 amendment did not indicate any intent to apply to Sales and Service Agreements signed prior to the amendment’s effective date. Furthermore, retroactively applying the 9-mile restriction to older Sales and Service Agreements would undermine the rights and restrictions in Sales and Service Agreements signed prior to August 4, 2010.

The Importance of a Single Document

May, 2014 – The Michigan Motor Vehicle Sales Finance Act (MMVSFA) contains an important provision that many dealerships either are not aware of or choose to ignore. More specifically, the MMVSFA requires that the retail installment sales contract contain all agreements between the Buyer and Seller related to the installment sale of the vehicle being sold. This is often referred to as the “Single Document Rule”. This means that if a dealership would like to require that all disputes between a Buyer and Dealership relating to the financing of the vehicle be arbitrated, then the actual arbitration agreement must be contained in the retail installment sales contact. This means that a separate arbitration agreement, whether contained on a purchase order or other a separate document, would not satisfy the requirement of the MMVSFA and would not be enforceable. In other words, the Arbitration Agreement would not be worth the paper it is printed on. If it is the dealership’s intent to require buyers to arbitrate claims regarding financing for the vehicle, dealerships must make sure that the arbitration provision is contained in the installment sale contract.

U.S. Supreme Court: Severance Payments Taxable

On March 25, 2014, the United States Supreme Court issued an opinion (United States v. Quality Stores, Inc.) holding that severance payments made to involuntarily terminated employees are taxable under the Federal Insurance Contributions Act (FICA). In United States v Quality Stores, Inc., the employer reported severance payments as wages and withheld and paid FICA taxes. The employer then requested a refund from the IRS on the basis that the severance payments were not wages. The IRS did not process the employer’s claim and a suit was filed. On appeal to the U.S. Supreme Court, the Court held that severance payments made to involuntarily terminated employees, which are based upon seniority and time served, fit into the definition of “wages” under FICA and were thus taxable.

Accordingly, employers now need to ensure they are treating severance payments to terminated employees as wages, necessitating the withholding and payment of the appropriate FICA taxes. Further, although the Quality Stores case limited its holding to severance paid to involuntarily terminated employees, it is very likely that severance paid upon an employee’s voluntary termination will also be treated as taxable wages under FICA.

Form 8300 Cash Reporting Customer Notification

January, 2014 – As part of the IRS cash reporting rule, a written statement must be provided by the dealership to each person who has been identified on a Form 8300 on or before the January 31st following the calendar year for which the Form 8300 was filed. Therefore, for transactions that were reported to the IRS for 2013, it is necessary to inform any customer of the Form 8300 filing on or before January 31, 2014. This notification should include the name and address of the dealership and the amount of cash that was reported on the Form 8300.

Remember, the law requires written notification. Merely informing the customer at the time of the sale that you will be filing the Form 8300 is not sufficient. If you sent the customer the notice letter at the time of the transaction, you do not need to send a notice at this time.

While you are in the process of preparing the letters to customers, this is an ideal time to perform a self-audit of your dealership to determine compliance with the IRS cash reporting rule. In the past, the IRS has assessed dealerships a $25,000.00 willful non-filing fine for each unreported transaction.

Please also note that the IRS revised and updated Form 8300 in 2012. Please make sure that you are using the current version of the 8300 form, which is attached hereto. The IRS also provides an on-line form at http://www.irs.gov/pub/irs-pdf/f8300.pdf which can be filled in and printed for filing.

Previous Auto Dealer Notices can be found at www.michigandealerlaw.com.

If you have any questions regarding your cash reporting customer notifications, please do not hesitate to contact our office by calling 248-645-9300, or click here to submit an inquiry.

Colombo & Colombo, P.C. Dealer Practice Group:

Charles A. LeFevre (Chair)
Lawrence F. Raniszeski
Michael J. O’Shaughnessy
Eric R. Bowden
Alycia Pallach Wesley


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