Car Dealerships and California Labor Law: Get a Signed Contract

San Dimas, CA "I know something about California Labor Law," says Ray, a former sales manager for a Toyota dealership. "My general manager figured that by eliminating my position they could save money - and he hasn't even given me my final paycheck, which is against the California labor code."

Adding insult to injury, Ray says his GM talked him out of a good job at the Toyota dealership to work at the Nissan store, even though it meant driving 110 miles each day to work. And he was given a verbal promise that no changes would be made - his job was secure.

"In my position as the general sales manager, I was in charge of the volume of sales and Nissan would gratify the dealership by their volume," explains Ray. "I would be paid a Nissan factory incentive and I achieved every imaginable sales goal possible - no question they owed me.

"This past September, after working there for eight months, I got to work at 8:00 am and my GM told me that we needed to sell nine new cars that day. At 5:30 pm he called me into his office and said he was making changes and had to let me go. Of course I asked him why; I hit every sales goal. 'At least give me vacation pay,' I said. But he said I hadn't been there a year so I wasn't entitled to anything.

"What about severance pay? 'I don't know what severance pay is,' he replied. I explained it to him and he said I should call him back the next day. He wanted me to sign some forms but I refused, then he handed me my final draw against my commissions. 'When we close the month I will figure out how much money you have coming,' was his parting remark.

"'And don't forget to take care of the Nissan factory incentive,' I said. No answer. I called the next day about the severance pay. 'I talked to my partners and you are getting nothing,' he said. 'What about my vacation pay and bonus?' Nothing. I didn't even get a final check. They are supposed to give you a monthly statement regarding how much in commissions and incentives you are owed, but I didn't get a dime. I did get a check for $24.95 - a reimbursement for balloons I bought for a store promotion.

"As well, the GM favored a girl that he wanted to make manager. I guess that is sexual discrimination but I'm not trying to sue them; I just want my final pay check, including bonuses, vacation pay and a small amount of severance pay. And all that traveling time? He didn't even pay for my gas.

"I think this dealership breaks labor laws constantly. Salesmen put in an eight-hour shift and never get time for lunch. If they don't make enough commission based on minimum wage, the company has to top it, but that's a whole other story. Anyway, by the will of God, I got another job. I don't burn people like these guys."

Unfortunately, Ray can forget about severance pay. California does not require employers to give severance pay unless you and your employer have a signed employment contract, your employer has an employee policy handbook, or your union has rules or a collective bargaining agreement that state otherwise. A verbal agreement may not be sufficient. But Ray is entitled to receive his final check??"withholding his check is a California labor law violation.

As for vacation pay, Ray should speak with a wage and hour attorney. According to California Department of Industrial Relations (DLSE), the Nissan store isn't violating the California labor code??"vacation pay doesn't have to be paid for the first year:

DLSE's enforcement policy does not preclude an employer from providing a specific period of time at the beginning of the employment relationship during which an employee does not earn any vacation benefits. This could apply to a probationary or introductory period, and can even apply to the whole first year of employment.
Such a provision in a vacation plan will only be recognized, however, if it is not a subterfuge (phony reason) and in fact, no vacation is implicitly earned or accrued during that first year or other period. For example, a plan with the following provisions would be an obvious subterfuge and not recognized as valid:

- Year 1: No vacation
- Year 2: 4 weeks vacation
- Year 3: 2 weeks vacation

The DLSE also states that under California law, "…if the employee has not used all of his or her earned and accrued vacation, the employer must pay the employee at his or her final rate of pay for all of his or her earned and accrued and unused vacation days. Because paid vacation benefits are considered wages, such pay must be included in the employee's final paycheck.

Lesson learned: try to get a signed contract from your employer - don't rely on verbal agreements, no matter how great your new boss seems to be.