Modern Tire Dealer

JUN 2019

Magazine for the professional tire industry

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Page 23 of 89

M T D J u n e 2 0 1 9 22 T he U.S. Department of Labor's Wage and Hour Division may or may not be investigating automotive service shops for pay plan viola- tions at a greater rate than other retail businesses. ere is certainly evidence supporting such a bias, although all it takes is a complaint from a disgruntled employee to trigger an investigation. Either way, all findings are based on the federal Fair La- bor Standards Act (FLSA), which regulates overtime pay requirements. If you are non-compliant with FLSA provisions, the penalty can be harsh. "A $50,000 judgement to a store with 10% return on sales would take a half million in sales to recoup," says Dennis McCarron, a partner in a brokerage firm that focuses on the tire and automotive service industry. "If you have a 5% net profit, it would take a million dollars in sales to recoup." McCarron should know. Before joining Cardinal Brokers he was executive director of Dealer Strategic Planning Inc., a company that manages multiple tire dealer 20 Groups in the U.S. He also gained managerial experi- ence at Bridgestone Retail Operations LLC, where he worked for 17 years. Your dealership can be investigated or audited by the Department of Labor no matter how big or small you are. Best-One Tire Group, which jointly owns and man- ages more than 250 locations in 26 states, thought it was properly paying its employees. Aer a series of Wage and Hour Division investigations, the dealership was forced to pay more than $500,000 in back wages. As part of its settlement, Best-One agreed to write an article for Modern Tire Dealer to help other independent tire dealers learn from its misfortune. e article not only explains how the group became non-compliant, but also what was required to right the wrong. What follows is an in-depth primer on how to properly pay your employees in order to meet FLSA requirements from the Best- One Tire Group. e article, combined with additional information that has appeared in MTD, will be available as a white paper on — Bob Ulrich BEST-ONE: LEARN FROM OUR MISTAKES Any audit can blindside a business, but the complex wage and hour laws make a U.S. Department of Labor (DOL) investigation particularly daunting. Every tire dealer should evaluate their pay practices, because your pay may be competitive — but not compliant. The Best-One Tire Group recently cooperated with a DOL investigation on proper computation of overtime. e tire industry historically incentivizes employees at all levels of the business: Technicians are paid on flat rate, counter salespeople earn spiffs, and outside salespeople may be 100% commission. rough the DOL investigation, Best-One Tire learned that these incentives must be factored into overtime. For 70 years, Best-One Tire has focused on its mission of Creating Raving Fans. We value our employees and compensate them well, because they are our most important fans. ey depend on Best-One Tire for their livelihoods, and we take that responsibility very seriously. But good intentions and high compensation are not the same as compliance. A Best-One core value is "Accept the Urgency of Accountability and the Neces- sity of Change." e DOL investigation is causing us to change practices and get in compliance. It's the right thing to do, for Best-One and our employees, and for you. e wage and hour laws are not new, but our industry's lengthy history of incentive pay has clouded compliance. Aer all, if we are paying the same as everyone else has always paid, and oen their fathers and grandfathers, how can we be non-compliant? e DOL has investigated many tire dealers in the last few years, and we need to know wage and hour law. In an investigation, besides back wages, the DOL can assess liquidated damages and civil penalties. Don't assume that you are compliant because you outsource payroll; payroll companies may not be contractually responsible for compliance or fully aware of your pay structures. Tire dealers need to particularly under- stand three topics under the Fair Labor Standards Act (FLSA): 1. how to compute the regular rate for overtime; 2. how to apply the Section 7(i) over- time exemption to commissioned retail employees; and 3. how to properly classify executive, Competitive, yes. Compliant, no WAGE AND HOUR LAWS CATCH BEST-ONE BY SURPRISE W a g e a n d H o u r R e g u l a t i o n s The Best-One Tire Group jointly owns and manages more than 250 locations in 26 states.

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