April 2018 – Service Advisors are Exempt from Overtime Under Fair Labor Standards Act
U.S. Supreme Court Decides That Service Advisors at Car Dealerships Are Exempt From Overtime Under the Fair Labor Standards Act, 29 U.S.C. §213(b)(10(A
On Monday, April 2, 2018, the U.S. Supreme Court issued a 5-4 decision in Encino Motorcars, LLC v. Navarro holding that under §213(b)(10)(A) of the Fair Labor Standards Act (“FLSA”), service advisors at automobile dealerships are salesmen and thus exempt from overtime requirements under the FLSA.
The Fair Labor Standards Act, 29 U.S.C. §213(b)(10)(A) provides an exemption from overtime pay requirements for “any salesmen, partsman or mechanic” who is primarily engaged in selling and servicing automobiles.” Service advisors first sued in 2011 claiming that the exemption does not apply to them.
Service advisors were generally regarded as exempt under §213(b)(10)(A) for over thirty years. Then in 2011, under the Obama administration, the Department of Labor issued a new regulation stating that services advisors were non-exempt employees and that §213(b)(10)(A) did not apply to them. The U.S. Circuit of Appeals for the 9th Circuit upheld the regulation and found that service advisors were entitled to overtime. In 2016, the Supreme Court reversed the 9th Circuit decision, finding that the Department of Labor’s new regulation was not entitled to deference, because the DOL did not sufficiently explain why it changed positions in 2011. On remand the 9th Circuit came to the same conclusion again and the case was again appealed to the Supreme Court.
The service advisors argued that they were not covered by the clear language of the statute because they were not salesmen. The issue before the Supreme Court was whether service advisors are salesmen primarily engaged in servicing automobiles. In construing the statute, Justice Thomas wrote in the majority opinion that the ordinary meaning of salesmen is someone who sells goods or services and that was exactly what service advisors do. Service advisors sell customers services for their automobiles and are integral to the servicing process.
The majority opinion rejected the principle that exemptions to the FLSA should be narrowly construed or interpreted. This rejection is extremely significant and will have an impact on the interpretation and construction of other exemptions under the FLSA in the future.
This decision resolved the question of service advisors’ exemption from the FLSA overtime requirements and provides automobile dealerships specific support for treating service advisors as exempt employees.
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~Dorothy F. Green, Esquire
Florida Bar Board Certified in Labor and Employment Law
For questions regarding the above article or other employment matters, contact Dorothy “Dottie” Green at 407-481-5810 or email@example.com.