• • COUNTERFEIT AIRBAGS -- SAFETY ADVISORY
• • HEALTH CARE REFORM
• • NADA LEGAL AND REGULATORY AFFAIRS - DOUG GREENHAUS
• • IADA FEATURED SERVICE
• • REMINDER OF IADA WEBSITE

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October 25th
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November 1st
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October 24th
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October 31st
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IADA Executive Committee Meeting
November 7th 
IADA Offices Springfield

Board of Directors Meeting
November 15th-16th
Chicago, IL

The National Highway Traffic Safety Administration (NHTSA) recently announced that vehicles that have been involved in crashes that required their airbags to be replaced within the past 3 years may have had counterfeit airbags installed.  Counterfeit airbags have been installed in only a small percentage of vehicles.  Vehicles that have their original airbags or that that had their airbags replaced more than 3 years ago are not affected.  Vehicles that had airbags replaced by a franchised new vehicle dealer within the last 3 years are also unaffected.  Vehicles that had their airbags replaced within the last 3 years by someone other than a new vehicle dealer MAY be affected.

Because the counterfeit airbag safety advisory is NOT a recall, affected customers will bear the cost of replacing a counterfeit airbag. You are not required to inspect a customer’s airbags or to replace counterfeit airbags. However, if you remove a counterfeit airbag and the customer is unwilling to pay for a genuine replacement airbag, Illinois and federal law prohibit you from reinstalling the counterfeit airbag.  If you return a vehicle that does not have a functioning airbag to a customer, IADA recommends that you have the customer sign an Airbag Disclosure Form (available at www.illinoisdealers.com).

Additional information, including a list of vehicle makes and models for which counterfeit airbags are available and manufacturer contact information, can be found on NHTSA’s website at: http://www.nhtsa.gov/About+NHTSA/Press+Releases/2012/Safety+Advisory:+NHTSA+Alerting+Consumers+to+Dangers+of+Counterfeit+Air+Bags. Dealer guidance is also available on NADA’s website at www.nada.org.

If you have any questions about counterfeit airbags, please contact IADA Legal at (217) 753-0220.

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Please keep in mind that Health Care Reform Requirements begin soon. Health care costs must be reported on 2012 W-2 forms. Beginning with the 2012 tax year (W-2’s typically provided in January 2013), Health Care Reform requires employers to report the cost of employer-sponsored health care coverage on their employees’ W-2 forms. The IRS has emphasized that the W-2 reporting obligation is for informational purposes at this time.

Most employees will be required to report the cost of employer sponsored health care coverage beginning in 2012. The amount is reported in Box 12 of Form W-2; using code DD. Small employers, those who filed fewer than 250 Form W-2’s for the previous year, are exempt from the new reporting requirement until further notice.

Your first step is to contact your payroll administrator. Many third party payroll vendors have already updated their systems in order to accommodate the new reporting. It’s important to ask what information they will need from you.

Summary of Benefits and Coverage of your next open enrollment begins on or after September 23, 2012. Health Care Reform requires employers/plan sponsors to distribute a Summary of Benefits and Coverage (SBC) and make available a Glossary of common terms to provide high level descriptions of group health coverage.

Employers/Plan sponsors must begin distributing the SBC to participants and beneficiaries eligible to enroll in group health coverage through an open enrollment period. This requirement starts on the first day of the first open enrollment period that begins on or after September 23, 2012.

If your plan is:

• State plan or JPA – contact your plan coordinator

• Insured plan – Obtain a copy of the SBC from your insurance company, as they are required to provide the SBC to your participants.

• Self funded – Check with your Third Party Administrator to see if they will assist in completing an SBC. If that is not an option, you will need to complete an SBC including the required information for each plan option. You can find a completed template from the Department of Labor website.

Source: American Fidelity Assurance Company, Health Care Reform hotline 1-877-302-5073

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Congressional legislation, signed into law to prevent a government shutdown, includes an extension of a federal overtime exemption for service advisors through March 2013. As part of the Department of Labor Appropriations Act of 2012, the department is ordered not to reverse its long-standing position that “service writers, service advisors, service managers, and service salesmen” are exempt from overtime as “salesmen” under Section 13(b)(10) of the FLSA. 29 USC §213(b) (10).

This past year, NADA assisted several dealers involved in wage and hour audits by letting overly-aggressive federal inspectors know of the law’s existence. To be sure, it’s hard to stay on top of the many federal, state, and local rules dealerships must comply with…even when paid to administer and enforce them. Moral of the story: Dealerships (and their counsel) should never hesitate to contact NADA when faced with compliance investigations, inspections, or audits involving federal matters. Yes, we advocate and educate, but we also happily assist when we can. And, as with all dealership compliance matters, the NADC community benefits when we avoid bad outcomes bred from ignorance or a lack of experience.

So why was the language needed in the first place? A history lesson:

Until 1966: Section 13(a)(19) of the FLSA, which exempts from overtime all employees of retail and service establishments primarily engaged in selling automobiles, and truck and farm implements, is repealed and replaced with the narrower Section 13(b)(10) overtime exemption for any “salesman, partsman, or mechanic” employed by a dealership.

1967: Two new DOL Wage and Hour Division (Division) Administrator Opinions essentially state that service managers,
service writers, service advisors, or service salesmen not themselves primarily engaged in the work of a salesman, partsman, or mechanic would not qualify for exemption under Section 13(b)(10).

1970: Reflecting its 1967 Opinions, the Division promulgates 29 CFR §779.372(c)(4):
Employees variously described as service manager, service writer, service advisor, or service salesman who are not themselves primarily engaged in the work of a salesman, partsman, or mechanic as described above are not exempt under section 13(b)(10). This is true despite the fact that such an employee’s principal function may be diagnosing the mechanical condition of vehicles brought in for repair, writing up work orders for repairs authorized by the customers, assigning the work to various employees and directing and checking on the work of mechanics.

1973: Brennan v. Deel Motors, Inc., 475 F.2d 452 (5th Cir. 1973) upholds a district court finding that dealership service writers are exempt as Section 13(b)(10) salesmen, contrary to 29 CFR §779.372(c)(4). Ignoring Deel, the Division issues two new Opinion letters suggesting that service writers are not exempt under Section 13(b)(10).

1974: Congress amends Section 13(b)(10), but makes no attempt to reverse Deel.

1975-1977: The following decisions all follow Deel: Dept. of Labor v. North Brothers Ford, No. 40344 (E.D.Mich. Apr 17, 1975), Brennan v. Import Volkswagen, Inc., No. W-4982 (D.Kan. Oct. 21, 1975), Dunlop v. North Bros. Ford, Inc., 529 F.2d 524 (6th Cir. 1976), Yenny v. Cass County Motors, No. 76-0-294 (D.Neb. Feb. 8, 1977).

1978: A new Administrator Opinion concludes that employees described as “service writers, service advisors, service managers, or service salesmen” qualify as “salesmen,” and are exempt from overtime provided the majority (over 50%) of their sales in dollar volume is for non-warranty work. It follows the case law, effectively reversing prior Administrator Opinions and 29 CFR §779.372(c)(4). The DOL’s Wage and Hour Field Operations Handbook (FOH) is revised to reflect the new Administrator Opinion.

1987: FOH 24L04(k) is amended, restating the 1978 Opinion letter and citing two of the appellate and two of the district court cases noted above. Affirming that the exemption will no longer be denied for such employees, it notes that 29 CFR §779.372(c)(4) will be revised to that effect “as soon as is practicable.”

1988-2004: Additional decisions following Deel include Dayton v. Coral Oldsmobile, Inc., 684 F. Supp. 290 (S.D.Fla.1988), Clark & Day v. Palmen Motors, No. 98 C-0548 (E.D.Wisc. 1999), Walton v. Greenbrier Ford, 370 F3rd 446 (4th Cir. 2004).

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