Dealers often bemoan California's legal climate. Two of their biggest legal headaches there: Labor-law challenges and class actions.
The two combined in a case that is changing dealership pay plans across the state. In 2013, the California Court of Appeal ruled in favor of technicians in a class action against Downtown L.A. Motors.
"The court decided that, retroactively, no one had been paying technicians correctly under the law, and all dealers became vulnerable," said Aaron Jacoby, a partner at the law firm Arent Fox in Los Angeles. The statute of limitations allows plaintiffs to go back four years, "so dealers are getting sued up and down the state."
Jacoby estimated the technican pay challenges could cost California dealerships $200 million to $300 million.
After the 2013 ruling, the California New Car Dealers Association did a series of seminars and sent materials to its dealers to alert them of the vulnerability of traditional flat-rate pay plans for technicians.
"What does that have to do with buying, servicing and selling cars?" said Brian Maas, president of the association. "Nothing. But the California dealers are facing this."
After the decision, many dealership groups operating in the state, including some of the nation's biggest, reworked their pay plans for technicians. The new approach for some is to pay techs an hourly wage, plus a flat-rate component smaller than what it would be under a traditional flat-rate plan. The idea is to reduce the risk of lawsuits and still pay techs what they were making before, dealers said.
Dave Conant, CEO of Conant Auto Retail Group in Newport Beach, Calif., was one of the many dealers who revised technician pay plans as the ruling's impact spread through the state.
Beyond the immediate effect on wages, Conant said, the case exemplified a problem in the state: "It's a constant chipping away at us and trying to find anything they can to sue over."