As we move towards the end of 2012, most dealers continue to experience increased sales and improved profitability.  Unfortunately, good times often engender complacency.  When times are tough, dealers scrutinize operations, seeking to reduce expenses and streamline operations.  Below are ten commonsense suggestions for dealers to avoid potentially significant losses.

1. Watch out for employee fraud. As profitability improves, scams tend to increase.  A dishonest employee has an easier time stealing when dealers are profitable.  Check your financial controls and consult with your accountants to ensure that you have systems and processes in place that will discourage and detect employee fraud.  Recent headlines demonstrate that even large, successful dealers can be the victims of fraudulent schemes, often by longtime trusted employees.
2. Stay vigilant on privacy issues.  Take a walk around your dealership.  Are deal jackets in plain view on unattended employees’ desks?  Are files containing sensitive information being locked up at the end of the day? Are your privacy notices kept up to date?  Failure to comply with privacy laws has been the source of increased fines on dealers by the regulators.
3. Stay on top of titling issues.  Make sure title work is submitted timely.  PennDOT continues to identify and fine dealers who are submitting late title work.
4. Respond to manufacturer correspondence alleging deficiencies.  There has been increased activity by manufacturers against dealers who are not compliant with the manufacturer’s requirements in matters such as minimum sales requirements, customer service measurements, and facilities, to name a few.  Some issues are not the dealer’s fault.  For instance, sales deficiency is often related to an inability to acquire sufficient product to meet minimum requirements.  Don’t simply throw these letters in the trash.  Respond to them as you receive them.  Ask the manufacturer for its assistance where appropriate, or provide an explanation as to why certain conditions are occurring.
5. Stay compliant with labor and wage and hour laws.  There has been increased activity by the Department of Labor in the area of exempt and non-exempt employees.  Make sure that you are aware of the appropriate classifications.  Also, make sure that your social media policies do not run afoul of the National Labor Relations Act.  There have been a number of recent actions against dealers by the National Labor Relations Board for overly expansive social media policies which supposedly “chill” employees’ right to organize.
6. Train employees on harassment issues.  While issues related to sexual, ethnic, and racial discrimination have been with us for decades, many dealers continue to fail to implement appropriate programs and training to avoid these situations, and if they arise, to deal with them and minimize any impact on the dealership.
7. Keep all of your licenses and dealer agreements up to date.  Various state agencies have routinely audited dealerships to ensure that their licensure is up to date.  This includes the Board of Vehicles confirming ownership, appropriate use of fictitious names, and current licensure of salesmen.  The Department of Banking also routinely audits dealerships.  Similarly, to the extent you are changing ownership or officers in a dealership, the manufacturers should be informed and, in some cases, their consent must be secured.
8. Regularly review deal jackets.  Either self-audit deal jackets or have a third party (such as PAA Services) do so.  To the extent there are issues, it is better to identify and correct them before the Department of Banking or the Bureau of Consumer Protection finds them during an audit or investigation.
9. Keep copies of all contracts on file and calendar any automatic renewals.  Many dealers are unaware of the fine print in some of their service and supply contracts.  For instance, it is not uncommon for a uniform contract to have a three- or five-year term with an automatic renewal of like length.  To the extent possible, eliminate any auto renewal provisions or simply have the contracts run month-to-month once the initial term is completed.  Also, note on an electronic calendar the “notice to cancel/non-renew” due date, which is three to six months before the automatic renewal provision would take effect.  You should also keep copies of contracts on hand so that if questions arise the contracts are readily accessible.
10. Check your advertising for compliance with regulatory requirements.  While print advertising has decreased, the Bureau of Consumer Protection continues to cite and fine dealers for noncompliant advertising.

 The Automotive Dealership Law group of McNees Wallace & Nurick LLC assists dealers with the host of legal challenges found in today’s highly regulated business environment. From buys and sells to franchise terminations; from environmental to employee relations; from consumer complaints to problems with PennDOT; from formation of a new dealership to successor planning; from taxes to tags. For almost 25 years the McNees Automotive Dealership Law group has provided effective representation and assistance to Pennsylvania dealerships.

© 2012 McNees Wallace & Nurick LLC

Auto Notes is presented with the understanding that the publisher does not render specific legal, accounting or other professional service to the reader. Due to the rapidly changing nature of the law, information contained in this publication may become outdated. Anyone using this material must always research original sources of authority and update this information to ensure accuracy and applicability to specific legal matters. In no event will the authors, the reviewers or the publisher be liable for any damage, whether direct, indirect or consequential, claimed to result from the use of this material.