On January 1, minimum wage climbed from $12.50 an hour to $13.25 an hour for companies with 15 or more employees in the state of Maryland. It’s set to continue to rise every year until it reaches $15 an hour by 2025. Maryland is one of 23 states to increase its minimum wage in 2023. Smaller employers will see a slightly smaller increase in what they need to pay employees. The current $12.20 per hour minimum wage for employers with 14 or fewer employees will increase to $12.80.
In 2019, state lawmakers overrode Gov. Larry Hogan’s veto of the bill that will increase the state’s minimum wage to $15 by 2025.
While it was an independent store rather than a franchised operation, at least one dealer learned a valuable lesson in tracking these changes and proper employee compensation documentation back in 2021. According to this article, in Coady v. Nationwide Motor Sales Corp., three former sales managers filed suit on behalf of themselves and 150 other current and former employees for unpaid commissions resulting in alleged state and federal minimum wage and wage payment violations in excess of $5 million. The employees claimed that the dealership assessed undisclosed “packing costs,” “wholesale costs,” “promotional” costs, and “service reductions” to vehicle sales in order to artificially deflate profits and reduce employee commissions. They additionally contended that their pay plans did not adequately explain that base wages would be treated as an advance or draw against future commissions, that unspecified chargebacks were assessed against commissions, and that the dealership made improper deductions from their final pay.
The risks associated with using commission pay plans that do not accurately and clearly explain how commissions are calculated cannot be overstated. While chargebacks, packs, and other costs are routine in the dealership industry, the failure to disclose these assigned costs and commission calculation process provides employees with the opportunity to make the dubious claim that they were unaware of them. A thorough pay plan disclosing exactly how commissions are calculated greatly reduces the risk employees will raise these claims in the first place.
There are three documents that dealers should regularly review and update for compliance: the employee handbook, commission pay plans, and arbitration agreements. If your dealership hasn’t updated these documents in the last year, you should consider consulting with legal counsel to make sure your documents are compliant and enforceable.
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