Supreme Court to Decide Whether Car Dealership "Service Advisors" Are Exempt From Overtime

Author: Michael Cardman, XpertHR Legal Editor

January 19, 2016

The US Supreme Court has agreed to hear a case that will determine whether auto dealership "service advisors," who are responsible for evaluating vehicles and suggesting repairs to their owners, qualify for an exemption from the overtime requirements of the Fair Labor Standards Act (FLSA).

Last year, the 9th Circuit Court of Appeals ruled in Navarro v. Encino Motorcars, LLC that service advisors are not eligible for an FLSA exemption for (in the gendered language of its day) a "salesman, partsman or mechanic primarily engaged in selling or servicing automobiles."

A regulation from the US Department of Labor limits this exemption strictly to salesmen who sell cars, full stop, and partsmen and mechanics who service cars (but not salesmen who service cars).

The dealership conceded that its service advisors did not fit within the parameters of this regulation. But, it argued that the court should not defer to the regulation because the statute was ambiguous and could be interpreted to cover salesmen who service cars.

The 9th Circuit rejected this argument. It said the statute also could be interpreted to define a salesman as an employee who sells cars; a partsman as an employee who requisitions, stocks, and dispenses parts; and a mechanic as an employee who performs mechanical work on cars. "Service advisors do none of those things; they sell services for cars. They do not sell cars; they do not stock parts; and they do not perform mechanical work on cars."

The dealership appealed to the Supreme Court, arguing that the Navarro ruling:

• Conflicts with rulings from the 4th and 5th Circuits;
• "Badly misconstrue[s]" the statute because "a service advisor is integral to the process of servicing vehicles at a dealership, and is the paradigmatic 'salesman'"; and
• Will upend "decades of settled precedent" by which 18,000 franchised car dealerships have treated an estimated 45,000 service advisors as exempt, basing compensation packages primarily on sales commissions rather than hourly wages.

The plaintiffs, in turn, responded that:

• There is not in fact a split in the circuits because the 4th and 5th Circuit rulings cited by the dealership predate the DOL's regulation, which was issued in 2011;
• The 9th Circuit was correct in deferring to the DOL's regulation because the original statute was ambiguous; and
• Any decision would have limited effect because most service advisors also could be exempt from overtime pay under an FLSA exemption for commissioned salespersons.

Navarro is the second FLSA case the Supreme Court has agreed to hear this term, following the Tyson Foods, Inc. v. Bouaphakeo case, which centers on the use of statistics to assess damages for a class instead of deciding damages individually for each employee.