In the second case, resolved in July, Majestic Dealership Services Inc. treated workers who were in fact employees as independent contractors and failed to pay them overtime.
Tillman Coffey, a partner at Atlanta law firm Fisher Phillips, said Journal of Fixed Transactions that dealers can take steps to avoid such problems, especially those that arise when a seller goes bankrupt or has no assets.
It’s increasingly common for stores with high turnover fixed operations support staff to turn to outside contractors, he says. “Over the years I’ve seen a number of these relationships that are quite informal,” he says.
A crucial starting point is a comprehensive written contract “with a company that looks like a business, has workers’ compensation and other insurance, is registered with the state, and has a system of formal pay”.

“You want an outside vendor that appears to be a legitimate company,” Coffey says.
The contract should define the nature of the relationship between the dealer and the seller, require the outside company to provide proof that it has all necessary licenses, and require itemized invoices. The seller should agree to indemnify the dealer for claims arising from its services, including claims for unpaid or underpaid wages, he adds.
To avoid the appearance of a joint employer, dealerships should be careful not to get too involved in the management and supervision of supplier employees, Coffey says. Although dealers have the right to give instructions, such as determining how many vehicles will be detailed on a daily basis, they should not inspect vehicles or tell seller staff how to do their job.
“Make sure there’s a clear line for an objective person to say it’s really an independent contractor,” he says.
Coffey recommends contracting with companies that provide service to multiple dealerships. “You don’t want to have a captive seller,” he warns.

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