How to Avoid Audits by Paying Your Detailers Correctly

How to Avoid Audits by Paying Your Detailers Correctly

As an dealer, you probably have some sort of relationship with detailers. Perhaps your dealership has its own detailing department, or you might contract your detailing jobs to a third party. Either way, you need to be aware that the U.S. Department of Labor (DOL) has audited dealership payrolls in increasing numbers, making sure that detailers are being paid correctly. If your dealership isn’t in compliance, you could be subject to additional auditing, lawsuits, and fines.

FLSA Compliance

Your dealership needs to be compliant with the Fair Labor Standards Act (FLSA), which governs issues concerning minimum wage and overtime. This law covers employers with at least $500,000 in gross sales and/or regularly engage in interstate commerce. This monetary threshold is low in terms of dealerships.I If you sell a vehicle to someone from another state, you’ve engaged in interstate commerce. So if you’re a dealership of any size at all, the law probably applies to you.

Risks of Detail Departments

Detailers who are employees have to be paid minimum wage as well as any overtime if they work more than 40 hours a week. In some cases, detailers can be paid a flat rate based on the FLSA’s “commission paid exemption.” This option, however, isn’t available in all states, so it’s important to make sure your detail department isn’t in violation.

Generally, detailers who are employees can be paid in one of three ways:

  • Hourly with overtime.
  • Hourly with overtime and bonus.
  • Piece rate with overtime or flat rate.


Risks of Using Outside Detailers

Dealerships are finding they’re not necessarily protected from FLSA violations because they utilize outside detailing services. In some cases, the DOL has ruled that the dealership is actually a joint employer, along with the detailing company, and is responsible if the detail company doesn’t pay its employees correctly. If you have this type of arrangement with another company, it’s best to protect yourself by having a written agreement with them to ensure they’re following the law. It can also help to keep this company at arm’s length and avoid having any say over the company’s day-to-day operations.

Proactively Avoiding Problems

All of this has led attorneys to recommend that each dealership review the way it pays its detailers to ensure no federal or state laws are being broken. Your payroll should be audited to make sure you’re complying with the law if you have a detail department. If you use an outside company for detailing work, it’s equally important to make sure their detailers are being paid correctly. Be proactive in finding and correcting any potential problems, and also keep scrupulous records. These practices can save your dealership substantial time, money, and aggravation down the road.