When Downtown L.A. Motors Mercedes-Benz was sued for the way it was paying auto technicians, Chief Executive Darryl Holter wasn’t too worried. After all, he believed he paid his employees the same way every other auto dealer had been for decades – on a “piece-rate” basis that compensated workers per repair.

But a judge ruled the system violated labor laws, and in July, the California Supreme Court let the ruling stand by declining to review it. The decision not only forced the dealership to pay a $1.6 million judgment and millions more in legal fees, but has also triggered lawsuits against other auto dealers now susceptible to similar litigation.

“At no point did we ever think we would lose because we were doing what dealers had done in the entire nation,” Holter said. “Now, effectively every automobile dealer in the state is facing the possibility of having a lawsuit filed against him.”

Labor attorneys said at least a dozen Los Angeles County dealers have been sued over their auto technician payment policies since the Downtown L.A. Motors ruling. Among those hit since August have been Mercedes Benz of Long Beach; Keyes Mercedes in Van Nuys; Parkway Motorcars of Valencia; Sunrise Ford in North Hollywood; and Longo Toyota and Longo Lexus in El Monte, two of the largest dealerships in the region. Lawsuits were filed last year against Calstar Motors in Glendale and Keyes Toyota in Van Nuys, while the Downtown L.A. Motors case was still pending in appellate court.

Many dealers pay their technicians a flat rate per repair, but do not pay them additional wages for time spent between repairs, which the courts have now found violate minimum wage laws. Dealers said the result is that what had been standard practice in the industry has suddenly become illegal. Worse, the statute of limitations on these cases is four years, leaving most dealers vulnerable even if they adapted their payment schemes in the wake of the ruling.

What’s more, Holter said he is not actually paying his employees more now than they would have been under the old system, having added an hourly wage but reduced per-repair payments.

But Neal Fialkow, a Pasadena attorney who won the case against Downtown L.A. Motors and last month filed two more cases against dealers, said it ensured workers were paid fairly. He rejects the idea that his case was causing a fundamental shift in dealers’ businesses, saying many of them were already compliant and accusing dealers of exaggerating the negative impact.


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