California Auto Dealer – Buy/Sell Basics, PAGA Update and More

February 2024

My recent workshop at the NADA Show 2024 examined some of the many financial considerations when buying or selling a dealership based on my decades of experience as a corporate transactional attorney. Equally important is what you need to know when hiring an attorney to handle your buy/sell. Here are a few tips.

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The Department of Justice issued a new policy in late 2023 known as the FCPA Corporate Enforcement Policy. If you buy a dealership that has engaged in corporate crimes subject to federal jurisdiction, you as a buyer can be held criminally liable. Here’s what you need to know.

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Effective January 1, 2024, the attorney general, district attorney, city attorney, and county counsel (and all their assistants) are authorized to recover wages and PAGA penalties from employers in California. The purpose of AB 594, which is the implementing legislation, is to make clear to local prosecutors that they do have authority to bring actions to enforce the Labor Code which contains many criminal penalties in addition to civil penalties. This bill was a response to the U.S. Supreme Court agreeing to review the Viking River Cruises case and the massive backlog of cases caused by the Supreme Court’s opinion that employers could limit enforcement of PAGA if the action filed was subject to an arbitration provision. The purpose is to eliminate the unfair competition created by employers who choose to evade the law.

Labor Code Section 182 provides that arbitration agreements will have no effect on public prosecutor actions. In other words, your arbitration agreement will do you no good if one of these agencies commences an action against you. The best thing you can do is comply with the wage and hour laws. Use a payroll calculator designed for your dealership by an attorney qualified in this field and have them train your employees how to use it and respond promptly if you get any kind of notice from a public prosecutor. Acting in good faith goes a long way with prosecutors. If you can show a violation does not exist, that the law is ambiguous, or that a violation was unintentional and has been remedied, it can go a long way to eliminating or reducing penalties as long as you act quickly.

Criminal behavior is on the rise in the workplace. So, how do you as an owner protect your investment in legal compliance?

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If anyone is searching for a new General Manager, let me know if you are looking for someone who is good with sales, good with employees, plug and play, and has experience with BMW, Honda, Toyota, Hyundai and Genesis.

Erin K. Tenner is a partner with Gray·Duffy, LLP and has been legal counsel representing auto dealers in buying and selling auto dealerships for more than 30 years. She can be reached at 818-907-4071 or [email protected].

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These articles are necessarily general in nature and do not substitute for legal advice with respect to any particular matter. Readers should consult with an attorney before taking any action affecting their interests.

California Auto Dealer is a registered trademark of Erin K. Tenner. The content of this newsletter may not be duplicated without permission. If you know someone who would like to receive this newsletter, have them email: [email protected]

Please Note: This article is necessarily general in nature and is not a substitute for legal advice with respect to any particular case. Readers should consult with an attorney before taking any action affecting their interests.