AVOIDING DISCRIMINATION CLAIMS: KNOWING WHAT YOU
CAN ASK AND DOCUMENTING WHAT YOU DO IS KEY
By: Keith E. Whann
Generally speaking, discrimination laws seek to prevent discrimination
based on race, sex, religion, national origin, physical disability,
age and sexual orientation and they are most commonly thought of
in the context of a dealership’s employee policies. Often overlooked
is the fact that many of the protections afforded under both federal
and state discrimination laws extend to the dealerships’ customers
as well. Discrimination issues can affect recruitment and retention
of employees, staff morale, productivity and quality of service,
the dealership’s reputation, and its overall profitability.
Discrimination laws apply to your relationship with employees
from the time they fill out a job application throughout the term
of their employment. You cannot hire an individual at the dealership
without asking a lot of questions, but if your questions are not
worded properly or if you ask applicants in protected classes sensitive
questions, you may be setting yourself up for legal trouble. The
simple act of asking about an applicant’s age, national origin,
marital status, disability, citizenship or military status could
be evidence of discrimination, unless you have a legitimate reason
for asking it. For example, questions about age or citizenship
may be necessary to verify employment eligibility, process paychecks,
or perform a background check. Likewise, questions about job-related
military experience or training may be appropriate to determine
whether an applicant has the necessary experience to perform the
anticipated job duties, while questions about an applicant’s military
discharge or future military commitments that may require time
off from work are not.
The Americans with Disabilities Act (ADA) also prohibits pre-employment
medical inquires, including questions about specific diseases or
illnesses, the number of days the applicant was sick in the previous
year, workers’ compensation injuries or claims, mental health problems
and past drug use. You may, however, inquire about the applicant’s
total number of absences in the previous year and about current
use of illegal drugs. You may also ask questions designed to determine
whether an applicant is able to perform the functions of the job.
Once a job is offered, the ADA permits you to require medical examinations
and make medical inquiries before the applicant commences work,
if the examinations and inquiries are job-related.
The same basic principles that apply to your relationship with
job applicants and employees apply with respect to your customers.
One of the first documents completed by a potential customer, the
credit application, is the document that often creates the most
legal exposure for a motor vehicle dealership in this area. The
Fair Credit Reporting and Equal Credit Opportunity Acts are very
specific about the type of information that may be collected and
considered in connection with making credit decisions. Questions
about an applicant’s age, gender, race, color, religion or national/ethnic
origin are generally not necessary, although there may be legitimate
and permissible purposes for asking them. An applicant’s age is
relevant for determining whether he is old enough to enter into
a binding contract and the law permits creditors to consider information
such as how long a person has been retired in order to determine
how long income will continue, but not to deny or offer less credit
or to offer less favorable credit terms.
Dealerships are also generally permitted to request information
about an applicant’s income and occupation, how long he has worked,
and how much he earns, but information regarding whether the applicant
receives child support, separate maintenance or alimony payments
does not have to be disclosed unless the applicant chooses to rely
on these payments to obtain credit. The Equal Credit Opportunity
Act also prohibits discrimination based upon the fact that an applicant
receives public income, such as veteran’s benefits, welfare or
social security. The receipt of public income may not be used as
a reason to discourage an individual from applying for financing,
to refuse to finance a transaction or to finance a transaction
on terms different from those granted to other persons with similar
income, expenses, credit histories, and collateral.
Federal and state regulators and consumer attorneys alike have
also used discrimination as a basis for filing lawsuits against
motor vehicle dealerships and lenders. The focus of these lawsuits
initially was on interest rates and the loan approval process.
Recently, the focus has expanded to include dealership practices
related to the sale of services and products such as service contracts,
credit insurance and GAP and theft deterrent products. Even popular
F & I trends within the motor vehicle industry like menu selling
and the installation of starter interrupt devices have been challenged.
As the population in the United States has become more diverse,
there is increasing debate over whether motor vehicle dealerships
should take additional measures to accommodate those individuals
who do not speak or comprehend the English Language. Over the past
few years, we have noted a trend among federal and state regulators
and legislators toward increasing protections for Spanish-speaking
customers in particular. The FTC, for example, requested and received
additional funds earlier this year to implement consumer protection
programs and initiatives to benefit various consumer groups, including
Spanish-speaking consumers. Some states, such as California, have
even adopted specific state laws that mandate the use of dealership
paperwork written in Spanish.
While all states do not have laws mandating the use of dealership
paperwork written in a language other than English, dealerships
are responsible under state unfair and deceptive acts and practices
(UDAP) statutes for making sure that consumers understand the transaction.
A Florida Court of Appeals recently weighed in on the subject.
In Martinez v. Rick Case Cars, Inc., the Court held that a Florida
dealership’s failure to provide a Spanish version of the Buyer's
Guide when the sale was conducted in Spanish was a violation of
the FTC’s Used Car Rule and, as a result, violated Florida’s UDAP
Statute. It went on to state that the failure to provide the Spanish-language
Buyer’s Guide contributed to the consumer not receiving the necessary
terms of the contract and his subsequent financial loss.
Most UDAP statutes likewise prohibit a dealership from knowingly
taking advantage of the inability of a consumer to protect his
interests, which goes beyond just the issue of language barriers.
National heritage, age, illiteracy and mental and physical disabilities
can all have an impact on how a dealership conducts a transaction.
Dealerships frequently take steps to protect themselves by employing
an individual who is bi-lingual or encouraging a customer to bring
a family member or friend to assist him with the transaction. To
avoid problems across the board, dealerships should use a Delivery
Confirmation form whereby the customer confirms that he understands
the transaction and has had the opportunity to review all of the
paperwork and ask any questions he has about it. If a customer
brings someone to the dealership to assist him to understand the
transaction, or even if a representative of the dealership is the
one that acts as the customer’s interpreter, the dealership should
document the fact that an interpreter was present by using a separate
Interpreter Confirmation form. For dealers who serve a large population
of individuals whose native language is Spanish, having a Delivery
Confirmation form translated to Spanish can go a long way to help
protect the dealership from potential claims.
Discriminatory practices are not always easy to detect. In addition
to developing appropriate sales paperwork, dealers should take
steps to develop a written policy prohibiting discriminatory conduct,
make sure it is disseminated to all employees and review it at
least annually at employee meetings. After a policy has been developed,
employees should be trained on the types of conduct considered
to be discriminatory. Training employees may prevent discrimination
from occurring in the first place and certainly can strengthen
an employer’s defense should a discrimination claim be brought.
Not only that, the United States Court of Appeals for the Seventh
Circuit held in Mathis v. Phillips Chevrolet, Inc., that an employer’s
failure to train employees about discrimination laws increases
the employer’s susceptibility to punitive damages.
In Mathis, a 59-year-old man with 24 years experience in car sales
applied for a job at a dealership. When refused an interview, he
sued the dealership for age discrimination. The dealership’s general
manager admitted that he often noted applicants’ ages on their
applications and he preferred to hire young applicants, he further
stated that he did not know it was illegal to discriminate on the
basis of age. The jury found that the dealership willfully violated
the Age Discrimination in Employment Act and the Court awarded
the applicant $50,000 in compensatory damages and an additional
$50,000 in punitive damages because the dealership should have
known that discrimination laws exist and failed to train its supervisors
about those laws.
While legal and regulatory exposure arising from discrimination-based
claims may exist in the motor vehicle industry, they do not have
to be an issue in your dealership. Prevent legal claims from being
brought against your dealership by making sure that all of the
questions you ask a job applicant are related to his ability to
perform the job for which he is applying and that questions asked
of your credit applicants are related to their creditworthiness.
Consider including equal employment and credit opportunity statements
in your employment and credit applications indicating that the
dealership does not discriminate against applicants based on membership
in a protected class. You should also institute and maintain comprehensive
discrimination policies and offer regular training to all managers
and employees. Lastly, as with any topic that impacts the sale
of a motor vehicle, your paperwork may make the difference. Take
the opportunity to revise and update it accordingly, paying special
attention to your Delivery Confirmation form and other paperwork
designed to confirm the customer’s understanding of the entire
transaction. The easiest way to handle some problems is to prevent
them from happening in the first place.
The information contained herein has been provided
by Keith E. Whann and Deanna L. Stockamp of the Law Firm Whann & Associates,
LLC and is for general information purposes only. You should contact
professional counsel regarding specific application of the information.
|
