Hendrick Group sued over commissions

February 12, 2018 12:00 AM

Thirty-three former salespeople at Rick Hendrick Chevrolet Naples in Florida are suing Hendrick Automotive Group, alleging the nation's sixth-largest dealership group took actions that deliberately reduced their commissions.

The group added "fictitious or wildly inflated" costs to the sales associates' deals, thereby manipulating the gross margins so as to pay smaller commissions, said allegations in an amended complaint filed Feb. 5 in 20th Judicial Circuit in Collier County, Fla., which includes Naples.

The lawsuit, which seeks to be certified as a class action, said the damages for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, civil conspiracy and unpaid wages exceed $75,000.

The plaintiffs' lawyer, Ben Yormak, told Automotive News a payout could be "well in excess" of $75,000.

"We would be seeking dollar-for-dollar what each sales associate lost," said Yormak, president of Yormak Employment and Disability Law in Bonita Springs, Fla. "That means Hendrick and the dealership have to produce records that substantiate the payments that should have been made to each sales associate."

If a judge certifies the lawsuit as a class action, 250 Hendrick sales associates in Florida could be included in it and thousands more if it includes all 102 Hendrick dealerships, Yormak said.

Hendrick Automotive Group, of Charlotte, N.C., owned by Rick Hendrick, moved to dismiss the initial lawsuit. But at a hearing last month, a judge allowed Yormak to file an amended complaint instead.

A Hendrick spokesman said last week that the company does not comment on pending litigation, but he added that Hendrick's lawyers believe the case is without merit and should be dismissed.

Hendrick has 20 days to respond to the amended suit. The spokesman said lawyers are working on that response.

How much?

A lawsuit by former salespeople alleges a Hendrick Automotive dealership inflated vehicle-preparation costs so as to reduce commissions paid. Here is what the suit says the dealership charged per vehicle for select actions.
Service	Charge
Wash, vacuum car	$600-700
Tint windows	$500-600
Add nitrogen to tires*	$299
*The lawsuit says the nitrogen machine was broken at the time.
Source: Court documents

The lawsuit's allegations are "fairly straightforward," Yormak said. "The dealership is playing fast and loose with the gross-profit numbers."

The lawsuit said the plaintiffs were to be paid 25 percent of the gross profit on new cars sold and 30 percent on used cars in a straight commission pay plan. The dealership guaranteed minimum payment of $200 per sale. Gross profit is "the difference between the sale price of the vehicle and the price the dealership pays to get the vehicle on the lot," the lawsuit said.

But the dealership, "on the direction of Hendrick," consistently used "deceptive and deceitful" practices to charge "wildly inflated" costs against the profit margins, the lawsuit said. This was done to avoid paying the higher percentage commissions, instead paying just the $200 guaranteed minimum, the lawsuit said.

Those costs included cleaning, detailing, adding equipment or parts and other services, all at "marked up prices designed to reduce the sales commissions" to the mandatory minimum, the lawsuit alleges.

When the plaintiffs questioned dealership leadership about their pay, managers "refused to provide the plaintiffs an accounting of their deals," the lawsuit states.

Something's wrong

Rick Hendrick Chevrolet Naples was once Bob Taylor Chevrolet. Hendrick Automotive Group bought it in October 2015.

Plaintiff Jack Lefevre, 72, worked for Taylor since 1977. He stayed on with Hendrick, but he said his commissions did not match what he had been promised.

Likewise, plaintiff Brett Trekell, 47, told Automotive News that Hendrick owes "tens of thousands" of dollars in commissions to him and thousands to his colleagues.

Trekell started at Rick Hendrick Chevrolet Naples in October 2015 as a sales associate and floor manager, training new sales staff. Before that, he worked at five dealerships in a 25-year career in sales and management jobs. He now is a sales associate at Airport Kia, in Naples, Fla.

By early 2016, he and others started noticing something wasn't right with their pay.

"One of the salesman sold three Chevy Tahoes at $65,000 each, yet he got paid $200 on each," said Trekell. A typical commission on such a vehicle should be at least $700, he said. The salesman asked him, "Why don't I have any gross on these?" he recalled.

Shop bills

Trekell and the others soon learned why: Exorbitant shop bills from the service department were being charged against the gross profit margins, he said. For example, the dealership charged $600 to $700 to wash and vacuum a car and $500 to $600 to tint the windows, he said. Such services, which should be a fraction of those figures, had shrunk the gross margins.

The service department also charged $299 per new or used car to put nitrogen in every tire to stabilize tire pressure, said Trekell. There was just one problem: "The nitrogen machine had not worked for a year and a half," said Trekell.

In June, Trekell said, the dealership replaced the nitrogen machine.

Meanwhile, to make up for the lower commissions, managers offered volume bonuses, said Trekell, paying $500 for 15 cars sold and $1,000 for 20 cars sold per month. But the store rotated so many salespeople that it was nearly impossible to work enough to hit the targets, he said.

The draw

Trekell and Lefevre were terminated on June 29. In fact, all the plaintiffs had either resigned or were terminated by that date, said Yormak.

Trekell was given no explanation for his termination, he said. Lefevre was told he owed Hendrick about $8,000 in back draws. A back draw results when a dealership pays an employee before they make any sales. If the employee fails to make sufficient sales to cover that advance, he or she must pay back the difference to the dealership.

But because Hendrick made "almost every deal a minimum deal, the salesmen are never able to cover the monthly draw," said Lefevre.

Yormak is confident the case will proceed to class action, saying, "We feel all the prerequisites are there to be certified as class action. We feel this is exactly what goes on at every dealership because every dealership is Hendrick-controlled."

No further court dates have been set, said a court clerk in Collier County, Fla.

Yormak said when Hendrick is forced to reveal its accounting, "You will see that all the allegations are true. How much does it cost to detail a car? $30? I mean, c'mon," Yormak said.

"We just want what's fair. These sales associates signed a contract expecting to be paid by what was in those terms and not to be deceived by their employers."