Employer docking pay for damaged vehicle

Your friend should seek the advice of an attorney regarding the contract he signed. There could be legal challenges to the validity of the contract based on the fact that your friend may not have understood what he was signing (the meaning of the contract, his rights, etc.). In fact, he shouldn't have signed anything before consulting an attorney in the first place.

Also, whether he can held responsible for the damage is also questionable. Usually, the dealership would have liability coverage for incidents such as this. Your friend needs to find out exactly what kind of liability coverage the dealership has.