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Wage and hour regulations: a quiz

November 23, 2010

The nuances of the Fair Labor Standards Act are many, and especially relevant for dealers who experiment with different types of pay plans or operate under a "one-price" mode. At some dealerships, no employees- not even the salespeople-are paid a commission, even if they work more than 40 hours a week. Under the FLSA, must a sales rep be paid timeand- a-half for exceeding a 40-hour workweek? No. Automobile salespeople are exempt from the overtime provisions of the FLSA. How they are paid is irrelevant, as long as they are paid at least the minimum wage.

The exemption from overtime extends to some other dealership employees as well. According to a publication by the NADA: "In general, service salesmen (also) fall within this overtime exemption. Specifically, employees variously described as service writers, service advisors, or assistant service managers whose primary duty is to record the condition of a vehicle and write up a report indicating the parts and mechanical work needed for restoration may qualify for the exemption provided that more than 50 percent of their sales volume is for nonwarranty work."

Parts counter employees and mechanical technicians also are exempt from the overtime provisions of the FLSA. Tales abound of dealers who, having violated the FLSA, must pay hundreds of thousands of dollars in back pay and penalties. For dealers to test their compliance, a quiz has been developed based on information taken from the U.S. Labor Department's Web site, Pencils ready!

1. Dealership general management establishes a policy that overtime will not be paid unless it is approved in advance. An accounting clerk works extra hours to complete a task. Should the clerk be paid timeand- a-half for the extra hours?

A. Yes, federal law requires it.
B. No, the clerk disobeyed a company rule.
C. Only if the work was an essential part of the job.

ANSWER: A. Under the FLSA, employees are entitled to be paid for all hours worked.

2. What is the current federal minimum wage?

A. $4.50 an hour
B. $5.00 an hour
C. $5.15 an hour
D. $6.15 an hour

ANSWER: C, $5.15 an hour.

3. How many paid holidays does the federal government require a car dealer to give each year?

A. Five
B. Seven
C. Nine
D. None

ANSWER: D, None. Holidays are a matter of agreement between employers and employees.

4. An enthusiastic car porter who doubles as the clean-up person for the service department agrees with the service director that he will accept only straight time for any hours above 40 put in during a week. Is this a legal agreement?

A. Yes, it is a valid agreement between employer and employee.
B. No, it violates federal law.
C. It is legal as long as the agreement is completely voluntary.

ANSWER: B. Employees are not permitted to waive their right to overtime pay.

5. The general manager docks his salaried dealership controller for working only 32 hours one week due to a family funeral. Is this legal?

A. Yes, an employee does not have to be paid for time not worked.
B. No, salaried employees cannot be docked for hours not worked.
C. Yes, the contoller must be paid as long as he had a good excuse.

ANSWER: B. A company cannot withhold pay from a salaried worker unless the situation is covered in a written leave policy.

6. Dealership policy is to pay employees every two weeks. An hourly employee works 60 hours in one week and 30 hours the next. How much overtime is he due?

A. 20 hours
B. 10 hours
C. None

ANSWER: A. Overtime hours cannot be averaged over multi-week periods.

7. An hourly lube technician being paid near the minimum wage is charged for dealership-required uniforms. The charge reduces the tech's average hourly pay to less than the minimum wage. Is this legal?

A. Yes.
B. No.

ANSWER: B. Employer-mandated charges cannot bring a worker's hourly wage below the minimum.

8. An accounting supervisor spends half her time supervising the accounting staff and half her time doing the same work as the staff. Is she eligible for overtime?

A. Yes, she is not considered an executive under FLSA.
B. No, she is primarily a manager.

ANSWER: A. Even though she supervises other employees, she does not qualify for the executive exemption to the overtime provisions of the FLSA. How'd you score?