Dealer Pay Plan Litigation, Salesmen Suing the Dealer

Dealer employees sue the dealer for failing to follow pay plans

The Law Office of Jonathan Rudnick LLC 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 the Conscientious Employee Protection Act, also known as CEPA. (whistle-blower lawsuits) 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 which employees can pursue against their employers. Claims based in contract, unjust enrichment, fraud, breach of contract and breach of good faith and fair dealings are all viable and real claims against a auto dealership, principal and/or dealership entity.

These claims are available when a dealership intentionally and willfully (and unintentionally) breaches their employment agreement and/or commission agreement with their employees and sales staff. Legal claims also are present when a dealership miscalculates employee commissions, whether intentional or unintentional. If there 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?
  7. Is the dealership refusing to show me key documents?
  8. Is the dealer avoiding my questions about how my pay is calculated?
  9. Why are full retail costs for repairs being added to the vehicle cost which reduces my pay?

The consumer litigation goes something like this: The salesman might have 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 addition to the cost of the car to represent dealer overhead, such as repair costs. This is disclosed and negotiated. The other items are not. It is very difficult to gain access to this information as the dealer will not answer questions or give you the true documentation.

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 Mannheim 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. This is relatively east to track per the auction documents.

Does the pay plan have pack. Is the pack more than agreed. Are there extra costs in the car cost?

Is the dealer increasing the vehicle cost in violation of the pay plan?

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. THERE IS NO DISCLOSURE AT ALL. What if the dealer principal owns the GAP company or has an interest in the GAP or aftermarket (warranty) company?

In summary, these lawsuits allege dealers are intentionally violating the written pay plans to reduce commissions paid to the employees. This is intensive consumer litigation/employment litigation.

Please review your pay plan carefully and determine what the dealer can and cannot charge. Document as best you can the pay and your questions.

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.

Jonathan Rudnick Esq is currently litigating cases in Illinois and also Washington State for employees on a class action basis: