The Auto Channel
The Largest Independent Automotive Research Resource
The Largest Independent Automotive Research Resource
Official Website of the New Car Buyer

Landmark Wage & Hour Victory for Automobile Dealers

LOS ANGELES--May 23, 2005--On May 1, 20058, 2005, the 9th Circuit Court of Appeals issued a landmark decision that establishes that automobile dealer finance and insurance managers are exempt from overtime under Section 7(i) of the federal wage and hour law (Fair Labor Standards Act). Rob Bekken, partner in the labor & employment practice of leading California law firm Musick, Peeler & Garrett LLP, represented the appeal for Haselwood Buick Pontiac Co. in Bremerton, Washington.

According to the National Automobile Dealers Association, there are 19,700 new car and truck dealerships representing over 43,000 separate franchises in the United States. If the decision had not been reversed, dealerships across the country would have been faced with multi-million dollar class-action lawsuits seeking back wages for finance and insurance managers.

Background Behind Ruling

Since dealers first became subject to the federal wage and hour law, dealers had relied on the Section 7(i) exemption from overtime. Section 7(i) provides that if (1) more than one-half of the employee's earnings are from commission and (2) the employee earns one and one-half times the minimum wage for all hours worked, the employee is exempt from overtime.

The validity of the Section 7(i) exemption was never questioned until three courts in the Northwest issued decisions holding that auto dealership finance and insurance managers were not selling retail products -- and, therefore, not entitled to the exemption.

"The district court failed to understand the reality of automobile dealership operations," explained Mr. Bekken. "Unfortunately, the district courts were misled by previous federal regulations that had been withdrawn by the Department of Labor. This is a tremendous victory for dealers across the country."

Appeal Supported by Department of Labor

On appeal, Mr. Bekken was joined by the United States Department of Labor, which stated that the decisions of the district courts were absolutely contrary to the federal wage and hour law. According to Mr. Bekken, "The National Automobile Dealers Association (NADA) deserves the credit for soliciting the Department of Labor to become involved in this case."

A Landmark Decision

R. Joseph De Briyn, Managing Partner of Musick, Peeler & Garrett, hailed the decision as a landmark one for dealers. "If the decision of the district courts had been upheld, thousands of class action lawsuits would have been filed against dealers across the country, representing millions of dollars in overtime liability. We are proud of the key role that our firm and Rob in particular played in this important case."

About Musick, Peeler & Garrett LLP

Founded in the early 1920's in Los Angeles, Musick, Peeler & Garrett has continued to grow to meet the changing legal needs of California-based companies, while still remaining committed to superior client service. As client businesses have expanded and become more geographically diverse, the firm has extended its presence throughout the state and now has six offices throughout California: in Los Angeles, San Francisco, Santa Barbara, Orange County, San Diego and Westlake Village. The firm presently has over 100 attorneys practicing in 18 major specialties, including Litigation, Labor & Employment, Insurance, Tax & ERISA, Trust & Estates, Corporate, Real Estate, and Healthcare.