In ancient Rome, one of the legal maxims was, “Ignorantia juris non excusat,” or ignorance of the law is no excuse. This rule required that citizens know the law or be punished. This same legal rule applies to auto dealers and their employees.

Firsthand Experience – A Case in Point 

In one of my cases at the Florida attorney general’s office, we were prosecuting a chain of tire stores. In Florida, a $1 tire charge was assessed to cover the environmental impact and destruction of the refuse tires. The enterprising tire chain management decided to charge $2 per tire for administering the collection of these fees. Unless specifically provided by law, businesses cannot add consumer fees directly related to the collection of fees and taxes. The chief executive officer met with our office to discuss the case. He had approved the addition of these administrative fees. The CEO argued that he was unaware he was breaking any law. He asserted that his defense was sufficient. He was wrong, and his company had to pay a severe fine for the civil violation due to numerous infractions. Moreover, he was warned he might have even faced criminal charges if he had intentionally violated the law. The moral of this tale, of course, is that merchants, citizens and dealers must know and comply with the law or endure the consequences.  Dealers have an affirmative duty to know their legal responsibilities. 

Turnover of Dealership Employees

New employees must be appropriately schooled in legal matters. This ongoing training can be a challenge for dealers. Based upon various studies, overall dealership employee turnover is around 46% annually, with the rate varying between 72% to 80% annually in sales. Some dealerships experience a complete turnover of sales staff within 18 to 24 months. This is an enormous cost to dealerships. From a compliance perspective, this means that many newly hired employees haven’t been trained regarding their dealership compliance responsibilities. To quote another Latin phrase, “respondeat superior,” another tenet of American law, dealers are responsible for the actions of their employees within the scope of their duties of employment.   

The Laws Throughout the Dealership

There are generally five departments within a dealership: general management, new- and used-vehicle sales, F&I, service and parts, and at some stores, a body shop. These departments must comply with many rules, laws and regulations. According to the NADA publication, “The Regulatory Maze,” there are 102 major laws these departments must especially address – a major challenge. The sales and F&I departments are the most likely to be prosecuted based upon turnover rates and legal risk.     

Turnover + No Training = Prosecutions and Lawsuits

While attending conferences, I see many new people who appear to be quite inexperienced based upon the questions they pose to the conference speakers. It seems to me that some of these new dealership employees would benefit from training. New hires do receive informal training from their peers, but dealers should be alert for the illicit advice that newer employees may receive. Dealers should provide ongoing and regular training regarding legal demands to combat the knowledge loss from turnover. 

Training Recommendations

There are various options for providing this training: training companies, vendors, state dealer associations, publications, conferences and in-house training. Each of these options should be considered, as they can work together. However, the primary source of this training should be in-house, led by the compliance officer. This would provide a consistent dealership message to the store’s employees. Dealers should also ask their vendors if they provide any training, as they may offer free services. All options should also be explored. There are excellent training programs, such as the Association of Finance and Insurance Professionals and Automotive Compliance Education. 

Regarding this issue, Ben Franklin would simply say, “An ounce of prevention is worth a pound of cure.”  The ounce of prevention is ongoing training. The cure would be settling an expensive lawsuit. The choice of options is obvious. 

Terry O’Loughlin is director of compliance for Reynolds and Reynolds and is admitted to the Pennsylvania and Florida bars. Before joining Reynolds, he was employed by the Florida Office of the Attorney General, where he investigated automobile dealers and financing sources. He previously was a public accountant.