Auto Dealership Employees

The Treatment of Automobile Dealership Employees Under the Fair Labor Standards Act


Given the calls received by our FLSA Lawyers, there is considerable confusion about the applicability of the Fair Labor Standards Act (“FLSA”) to automobile dealerships and their employees. Many of these calls involve unpaid overtime and minimum wage claims against automobile dealerships. The following provides basic information concerning the application of the FLSA’s wage and hour requirements to automobile dealership employees.

FLSA Coverage Requirements for Automobile Dealerships

There are two types of coverage for automobile dealerships and their employees under the FLSA. First, “enterprise coverage” under the FLSA applies to all employees of new or used automobile dealerships which have at least $500,000 per year in gross sales. If “enterprise coverage” exists, then FLSA is available to all employees, subject to the exemptions for certain positions provided by the FLSA.

Second, individual coverage applies to any employee whose work regularly involves in commerce between states (that is, “interstate commerce”), even if the employer’s annual sales are less than $500,000, again subject to the FLSA’s exemptions for certain positions.

FLSA Exemptions For Certain Positions at Automobile Dealerships

Most basic hourly positions at automobile dealerships are covered by the FLSA – subject to certain exemptions. The automobile dealer specific exemption cited most frequently applies to sales and parts personnel, mechanics and service writers. This provision provides an exemption only from the overtime pay requirements under the FLSA.

For purposes of this exemption, salesmen are defined as employees who spend more than fifty percent of their spent making sales or obtaining orders or contracts for the sale of automobiles. Incidental duties, such as making deliveries or performing collections, is included within the definition. Partsmen are defined as employees who spend over fifty percent of their time requisitioning, as well as stocking and dispensing automobile parts. Mechanics are defined as employees that spend over fifty percent of their time performing mechanical repairs or work to automobiles. Non-mechanical repairs or work such as washing, cleaning, painting, polishing, tire changing, installing seat covers, lubricating or dispatching are not considered “mechanical repairs” for purposes of this definition.

It should be emphasized that this exemption only applies to the overtime pay requirements under the FLSA; it does not excuse an automobile dealership from paying employees the minimum wage for each hour worked.

Other Potentially Applicable Exemptions

The FLSA also has an exemption from the overtime pay requirements for certain commission employees of a retail or service establishment. For this exemption to apply, three requirements must be met: (1) The employee must be employed by a retail or service establishment; (2) The employee’s regular rate of pay must exceed one and one half times the applicable minimum wage; and (3) more than half of the employee’s total earnings in a representative period must consist of commissions on goods and services.

The FLSA also provides exemptions from both the minimum wage and overtime pay requirements for certain employees who are paid more than a specific minimum salary and are employed in certain “white collar” occupations, such as executives, administrative, professionals, computer professionals and outside salespersons.

If you work for an automobile dealership, and have any questions about whether or not your job is covered under the FLSA or any other wage and hour issues, you should contact a Colorado labor and employment lawyer at Baird Quinn LLC. You may go to the following link for contact information and additional information about our FLSA employment lawyers. Contact Us