Dealer Pay Plan Litigation

Carton and Rudnick litigates cases against car dealerships for violating the agreements with their own employees. 

Automobile dealerships litigating with their employees is becoming more common.  There have always been existing employment claims which are well-known to both attorneys and litigants.  These claims are discrimination, wrongful termination and Conscientious Employee Protection Act also known as CEPA.  These legal theories have been formally entrenched in New Jersey Common Law and New Jersey Statutory Law.  Dealership employees, salespersons and management, have the same rights as any other employees under these statutes.
These are not the only claims for which employees can bring against their employers.  Claims based in contract, unjust enrichment, fraud, breach of contract and breach of good faith and fair dealings are all viable claims against a dealership, principal and/or dealership entity.  These claims are available when a dealership intentionally and willfully breaches their employment agreement and/or commission agreement with their employees.  Claims also are present when a dealership miscalculates employee commissions, whether intentional or unintentional.  If it is an intentional misstatement of employee commissions, there would be a claim for punitive damages.  If you are a dealership employee, you should ask your employer the following questions:
 
1.    How does the dealership establish the cost of the vehicle?
2.    Can I see proof of the dealership costs by viewing the back screens?
3.    Are there any added costs in addition to pack?
4.    Does the dealership adjust the reserve account without any basis?
5.    Please provide me proof of all charge backs which might reduce the gross commissionable proceeds.
6.    Why is my pay substantially less than what I have already calculated?

The litigation goes something like this: the salesman has a written agreement with a dealership for a percentage of the profits on the front end of the deal, i.e., selling price over invoice.  This is usually 20%-25%.  The issue is how the cost of the car is calculated and EXTRA costs that are added on top of the original cost of the car.  These might be called dent, bruise or any number of things, most of which are never disclosed to the salesman.  The reason they are not disclosed is because the salesman would get mad if they knew they were paying for damage to lot cars when they know that the dealer has insurance for this or they are fixed at not cost by the dealer or on-site help.  The dealer discloses a PACK, which is a disclosed add to the cost of the car to represent dealer overhead.  This is disclosed and negotiated.  The other items are not. 

Another non-disclosure is the dealer adding, for no reason, cost to the acquisition of the vehicle, usually the auction price.  As an example, the dealer wholesale manager gets a car at Manhein for $5,000, but when the car is sold by the salesman the dealer calculated the commissions at a cost of $7,500 or so, rather than the $5,000 acquisition cost.  This also happens to trade-in vehicles, when the dealer increases the cost of the vehicle to reduce the commissions for the salesman and the finance manager.

The car dealers also do this with the aftermarkets such as GAP and etch.  As an example, the acquisition cost might be $45 but the commission is based on a product price of $100 or higher.  NO DISCLOSURE AT ALL.

In summary, these lawsuits allege dealers are intentionally violating the written pay plans to reduce commissions paid to the employees.

If you think your employer is violating your written pay plan or you don't have a pay plan and the dealer is acting improperly we provide free, confidential consultations.