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Supreme Court Says Automobile Service Advisors Exempt From FLSA Overtime Requirements

    Client Alerts
  • April 09, 2018

Last Monday in a 5-4 decision, the U.S. Supreme Court held that automotive service advisors fall within the Fair Labor Standards Act’s statutory overtime exemption applicable to car salespersons and mechanics. This decision follows a number of conflicting opinions on this issue produced by the U.S. Department of Labor and federal courts.

Service advisors meet with customers who bring their vehicles in for repairs. They provide estimates, schedule maintenance work, and provide customer relations services. Section 13(b)(10)(A) of the FLSA exempts automobile salespersons, mechanics, and partsmen from the law’s overtime requirements. In 2011, DOL changed its long-standing position that this statutory exemption also applies to service advisors. The change required affected employers to either start paying overtime or to convert the advisors to commissioned employees to take advantage of a different exemption.

In Encino Motorcars, LLC v. Navarro, the Ninth Circuit Court of Appeals upheld this DOL interpretation. The Supreme Court initially vacated and remanded this decision on the basis that the 2011 DOL interpretation violated federal rulemaking procedures. The Ninth Circuit then reheard the matter and reached the same decision based on the Section 13(b)(10)(A) language, concluding that service advisors are not salespersons, mechanics, or partsmen.

On appeal, the Supreme Court majority disagreed, effectively reinstating the prior interpretation. The court held that service advisors sell automobile repair services and therefore qualify as salespersons. They also service automobiles, which means more than actually physically repairing vehicles. Finally, the majority engaged in a grammatical analysis of the statutory exemption in order to conclude that Congress intended a broader reading that includes service advisors.

For dealerships and repair operations, this decision reflects a more modern view of the vehicle maintenance process. It recognizes that service advisors are an integral part of the work performed under current industry practices. Unless state law requires overtime payments, this decision will give employers the option of adopting a pay plan for service advisors that does not include overtime.

On a broader note, this decision indicates that the Supreme Court may be willing to take a more expansive interpretation of FLSA overtime exemptions than has traditionally been the case. If applied to other professions, this could result in a judicial modernization of exemptions to match current workplace functions.