Personnel lawsuits have become big business for plaintiffs’ attorneys—and a costly hazard for automotive dealers. From wrongful termination to discrimination claims, litigation can quickly escalate, especially when federal agencies like the EEOC become involved. For dealers, the best defense is proactive hiring and tracking systems.
Now is the time to conduct a self-audit of your dealership’s employment practices. Here’s what you should review to stay ahead of potential personnel claims. The team at Charapp & Weiss, is happy to answer any questions you may have.
1. Tighten Up Your Hiring Process
Bad hires are the most common trigger for employment-related lawsuits. Reduce your risk by strengthening your vetting process.
- Check references and previous employment. Even if a prior employer only confirms dates of employment, that can reveal gaps or inconsistencies worth probing.
- Use liability waivers. Have applicants sign a release so former employers can speak freely.
- Run background checks. Don’t just rely on state licensing checks. For non-licensed positions—like cashiers or BDC agents—backgrounds and driving records matter, too.
2. Update and Enforce Employee Documents
Laws change fast. Have you recently reviewed your:
- Employment application packets?
- New hire onboarding materials?
- Employee handbook?
Furthermore, up-to-date forms mean nothing if they’re incomplete. Implement a checklist system to ensure all documentation is signed and filed before anyone is added to the payroll.
3. Audit Sales Licenses Annually
In states like Virginia, your sales, F&I, and management staff must be licensed to legally negotiate with customers. If an unlicensed employee makes a sale, the deal could be invalid. Do a yearly license check to avoid surprises during a state audit.
4. Train Managers on Your Policies
Your employee handbook is only effective if your senior team knows it—and follows it. Train hiring managers, department heads, and HR personnel on your policies regarding discipline, performance evaluations, and terminations.
5. Document Everything, Especially Discipline
Too many employment cases involve personnel files that show no sign of issues until after the lawsuit is filed. If you have a conversation about poor performance, put it in writing. Keep:
- Counseling notes
- Written warnings
- Records of performance reviews
Inconsistencies between claimed behavior and the file’s contents will always favor the plaintiff.
6. Handle Terminations Thoughtfully
Terminations are a legal flashpoint. Avoid casual or impulsive firings. Instead:
- Conduct a final review of performance records
- Be consistent with how similar violations were handled
- Always have a witness present
- Record the reason for termination in the employee’s file
You don’t need to give a legal brief, but a clear, concise explanation can make all the difference later.
7. Always Continue Recruiting
Desperation leads to bad hires. Avoid scrambling by keeping a pool of potential candidates. Have managers hand out recruitment cards or brochures. Maintain a list of prospects ready to step in when a position opens.
8. Maintain Complete and Accurate Personnel Files
Personnel files protect your dealership—but only if they’re complete. Missing or outdated documentation is worse than no documentation at all. Your file should include:
- Signed employment documents
- Licenses and certifications
- Training records
- Disciplinary and performance updates
- Exit paperwork for terminated employees
- Records for applicants who weren’t hired
The Bottom Line
If you haven’t reviewed your dealership’s employment practices in the last year, it’s time. A few hours of preventive auditing now could save your dealership hundreds of hours—and thousands of dollars—in litigation later.
Charapp & Weiss is here to help clients build strong compliance programs and avoid becoming targets for aggressive plaintiff litigation. While this article is for informational purposes only, it should prompt a close review of your current practices with legal counsel.