Car Sales Incentives Count Toward Minimum Wage, According to DOL Letter

In a series of opinion letters released Thursday, the U.S. Department of Labor announced that car dealerships may use incentive payments from automakers to help meet their obligation to pay salespeople minimum wage. The opinion letters come in response to inquiries from several car dealerships regarding direct incentive payments from manufacturers to salespersons if the dealer and its employees agree to count third-party payments as wages.

Likening these third-party payments to tips, the Department of Labor stated that such incentive payments may count towards the minimum wage as long as it is understood to be part of the employment agreement. This agreement can be express or implied by the facts; the greater the employer’s role in facilitating these payments, communicating the terms to employees, and working with incentive program sponsors, the more likely that such an agreement may be implied. The better practice, however, is to leave little to chance and incorporate the inclusion of these incentive payments into the minimum wage in a signed agreement between the salesperson and dealership. Failing to do so could expose an employer to a claim that the employee did not agree to count the incentives, which could result not just in a minimum wage violation, but overtime issues as well as the incentives would then have to be included in the overtime calculation.

Car dealerships should be mindful of state wage and hour laws, which often are inconsistent with federal laws, and that USDOL’s opinion letters are not binding on state DOL’s. If you have any questions or would like to discuss best practices in complying with state wage and hour laws, please contact John R. Vreeland, Esq., Partner & Chair of the Wage and Hour Compliance Practice Group via email here, or call 973.533.0777.