Legal aspects of your financial operations

The Motor Vehicles Dealers Act (MVDA) isn’t the only regulation Canadian automotive companies must follow. The rules governing the automotive industry’s financial operations are varied and complex. Each transaction must comply with federal and provincial laws.

The complexities of federal and provincial compliance

Overlap between federal, provincial and territorial laws is varied. For instance, while dealer fees are generally legal in Canada, Ontario dealerships registered with the Ontario Motor Vehicles Industry Council (OMVIC) must follow the all-in-price advertising law, excluding only harmonized sales tax and the total licensing cost from the sticker price.

Under Ontario Regulation 333/08, anyone selling, leasing or trading vehicles in Ontario must register with OMVIC before conducting transactions. Those without registration — known as curbsiders — face steep fines. Similarly, dealers and salespersons selling personal use vehicles in British Columbia must be licensed by the Vehicle Sales Authority of B.C.

Transactions are subject to consumer protection laws

There are many consumer protection regulations to consider other than those in the MDVA. For instance, under the federal Competition Act, forcing financing could be considered tied selling, which is generally prohibited by law. However, automotive businesses must meet certain conditions, such as considerably lessening market competition.

Even if this practice is legal, they may find it difficult to collect payments in full and on time. In most cases, the next step is to contact the customer. While many prefer nonintrusive communication when paying off debts, there are no comprehensive laws on the matter. That said, considerate action reflects on the brand better.

Sometimes, processes associated with financial operations have little to do with the movement of money. Messages that are commercial in nature are subject to Canada’s Anti-Spam Legislation. Staff must obtain consent, have an identification mechanism and provide an unsubscribe option to be compliant.

Laws affecting the financial obligations of employment

Since many automotive industry workers are salespeople, typical federal and provincial minimum wage laws do not always apply. However, commissions earned in one pay period can’t be used to offset earnings in another. If a worker earns $5,000 in incentives one month and just $500 the next, the second month’s paycheck must increase to meet minimum wage.

Notably, commission-based employees are entitled to most of the same protections and benefits as their noncommission counterparts. For instance, they must receive annual vacation pay. However, under the Employment Standards Act (ESA), those who sell or lease recreational vehicles are excluded from statutory holiday provisions. Others are only excluded if their employer pays 4.4 per cent of their gross earnings every pay period in place of paid holidays.

The most important legal aspect of payroll involves classification. Those misclassifying staff as independent contractors will face scrutiny from the Canada Revenue Agency. It will correct the underreported tax amount for the Canada Pension Plan and Employment Insurance with interest. Also, it will charge penalties.

Avoid legal complications with detailed financial records

Noncompliance can be costly. While the average person doesn’t have thousands of dollars to spend on legal battles, Canada’s consumer protection laws are robust. When individuals report a dealership to the Canada Revenue Agency or their provincial Consumer Affairs office, legal penalties, fines and even jail time are possible outcomes.

Detailed financial records are not only vital for transparency — they can help brands avoid legal complications. They should track the purpose, location, and recipient of all monetary transactions to streamline compliance reporting and appeals processes. This way, they can minimize losses in case of legal battles or regulatory scrutiny.

Tips on aligning accounting practices with legal standards

Implementing accounting practices that align with Canada’s legal standards is relatively straightforward. A dedicated staff member — or a team, depending on the firm’s size — should be in charge of following all relevant federal, provincial and territorial regulations as they evolve to minimize gaps.

Hiring and payroll should undergo routine audits to ensure everyone is classified correctly and commissions-based workers are receiving the benefits they are entitled to by law. While this process will likely create additional administrative work, business leaders can consider it an investment in regulatory action prevention.

Complying with the legal aspects of financial operations

Following federal, provincial and territorial laws for everything from vehicle sales to commission management is complex. However, a high-quality team can make even the most convoluted compliance measures relatively straightforward.

Devin Partida is the editor-in-chief of ReHack.com and a freelance writer. Devin covers business technology, Fintech and auto tech.

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