Volkswagen Salespeople Claim Lost Income due to VW’s Deceptive Practices

Santa Clara, CA A dispute over whether Volkswagen is a joint employer stems from a California labor lawsuit that has dragged on since 2016. VW sales representatives in California claim the German automaker is liable for wage and hour violations and the commissions they lost over the emissions-cheating scandal that blew up in 2015.

Plaintiffs Robert Saavedra, Armando Rodriguez and Mickey Gaines, all certified VW salespeople, “are no less victims than the dealerships and consuming public, yet they alone remain uncompensated for losses suffered as a result of VW's calculated and meticulously orchestrated fraud,” they said in a second amended complaint (and reported by Law360) at the end of September 2020. "After laboring as unwitting [but essential] pawns in VW's scheme, plaintiffs were left to suffer its consequences in the form of unpaid wages, missed meal and rest breaks, and unreimbursed business expenses.”

As certified VW salespeople, the plaintiffs received additional incentive compensation directly from VW America for their sales work. To qualify for this additional compensation, specialized training and certification from Volkswagen was mandatory. Once certified and contracted with the company, VW America paid additional compensation directly to the salesperson for each vehicle they sold.

Salespeople are classified as exempt under California’s Commissioned Salesperson Exemption, which requires that at least 50 percent of total earnings come from commission. They are paid the greater of their hourly wages or commissions. But the initial lawsuits claimed that individual sales representatives experienced reduced sales, diminished inventories and lost commissions after the emissions scandal hit the headlines.

VW ordered sales to stop, which cut off sales reps’ access to commission wages, including the incentive compensation they received directly from VW for each vehicle sold. In other words, they “simply did not have sufficient cars to sell, and could not sell enough cars to earn commissions that would outpace their hourly rates.” As a result, salespeople were no longer qualified for the Commissioned Salesperson Exemption. Instead, their job description changed. According to the complaint, they were more like project managers, working on behalf of VW to facilitate its buyback of fraudulent vehicles. They were paid an hourly wage that “would never support the commissioned salesperson exemption, resulting in global misclassification and numerous wage and hour violations.”

In 2017 plaintiff Mickey Gaines claimed the Volkswagen fraud ruined caused a drop in demand for Volkswagen vehicles, which caused lower sales and loss of income for commissioned VW sales reps like himself. Gaines further claimed interference with economic relationships, fraud, breach of contract, breach of the covenant of good faith and fair dealing, and violations of the federal Racketeer Influenced and Corrupt Practices Act, or RICO.

A California federal court ruled the salespeople didn’t adequately state most claims, but Judge Charles R. Breyer for the U.S. District Court for the Northern District of California said plaintiffs could re-plead a claim that the companies actively concealed the fraud if they could show a sufficiently close causal connection to their lost pay. The Volkswagen Deceptive Practices Class Action Lawsuit is Mickey Gaines v. Volkswagen Group of America Inc., et al., Case No. 3:17-cv-01114.

In 2015 Volkswagen reported a record loss over its emissions fraud and set aside more than $18 billion to cover the cost of fines, legal claims and recalls in the United States and other countries related to diesel emissions cheating.