GNYADA November 2014 Newsletter

GM’s Labor Rate Policy Violates New York Law

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rate calculation certain types of repairs, including parts sold at

13 Beginning January 1, 2015, employ- ers with 50 or more full-time employ- ees must offer health insurance cov- erage to at least 70 percent of their staff. In addition, the health insurance offered must meet affordability stan- dards and provide mandated mini- mum coverage. A plan is considered unaffordable if an employee’s share of the premium (for self-only cover- age) exceeds 9.5 percent of the employee’s wages. The affordability calculation applies to the lowest cost plan offered by the employer. Penalties Penalties for non-compliance (failing As part of its Service Policies and Procedures Manual, General Motors has issued “Option A Guidelines,” which focuses on reimbursement for warranty labor charges. Several of those policies are flawed and violate the New York Franchised Motor Vehicle Dealer Act. GNYADA has issued a letter requesting that GM’s process conform to New York law. The Guidelines tells dealers to: Refrain from requesting a change in their reimbursement rate during November and December; Submit their labor rate requests on a designated form; Conduct a survey of labor rates in their markets; Disclose labor rates to customers in a particular fashion; and Include maintenance and menu items in a labor rate submission. The Franchise Law includes specific requirements for seeking changes to warranty parts and warranty labor reimbursement rates. The Law trumps any contrary provisions n n n n n

to offer health insurance to at least 70% of employees) can be pretty severe – $2,000 a year ($166.67/month) times the total num- ber of full-time employees in excess of 30. If an employer offers health insurance coverage, but the coverage does not meet the minimum standard or is determined to be unaffordable, the employer penalty increases to $3,000 annually ($250/month). Penalties are not tax deductible and will be assessed if even one full-time employee receives a pre- mium subsidy to help purchase insurance through an Insurance Exchange. imposed by the manufacturer, espe- cially when they are as arbitrary as these requirements. GM’s proce- dures are contrary to the provisions of the law, and thus we consider them invalid. The law permits a dealership to seek a change in its reimbursement rate at any time , once a year. The franchisor is not authorized to prohibit applica- tions at any time of year. GM’s form (under Option A) requests information beyond what the law per- mits. For example, GM asks dealers to survey labor rates in their markets, including both franchised and inde- pendent outlets. The law places the burden for any survey on GM . A franchisor may survey only dealer- ships of the same make and in the dealership’s vicinity to determine if a dealer’s request is reasonable. Further, GM directs dealers to include all labor, including mainte- nance and menu items, while the law expressly excludes from the labor

wholesale, tires, routine maintenance, vehicle reconditioning, and battery replacement. Thus, GM’s demand violates the law. GM’s Option A procedures have caused substantial confusion among dealers in New York, in that they conflict with the New York Franchised Motor Vehicle Dealer Act. Dealers should not be discouraged from seeking reimbursement for war- ranty work at retail rates as a result of the Option A procedures. The foregoing is provided for informational purposes only and is not to be construed as legal advice.

GNYADA thanks Richard Sox, Esq., RSox@DealerLawyer.com , for the material for this item.

New Healthcare Rule in Effect in January

Avoid Penalties GNYADA’s Insurance Brokerage can help determine if your dealership is not meeting the affordability or mini- mum coverage standards through your dealership-sponsored health insurance. Call us for a review and we will provide you with an afford- ability report to help keep you in compliance. Contact Michael Conway at mconway@gnyada.com or 718.746.8100.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • November 2014 7