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FMG Law Blog Line

Service Advisors Once Again Exempt From Overtime

Posted on: April 3rd, 2018

By: Brad Adler & Michael Hill

After years of back and forth in the lowers courts, the Supreme Court has ruled that service advisors at auto dealerships are exempt employees under the Fair Labor Standards Act (“FLSA”).  It’s the rare case that goes to the Supreme Court twice.  But after taking the scenic route through the federal court system, the Supreme Court’s Encino Motorcars, LLC v. Navarro decision finally has arrived and brought much-needed clarity to auto dealerships across the country.

As we have written in several previous blogs, the confusion began in 2011, when the U.S. Department of Labor (“DOL”) suddenly (and without explanation) reversed its decades-old position that service advisors were exempt from the FLSA.  The text of the statute at issue provides that “salesman . . . primarily engaged in selling or servicing automobiles” at covered dealerships are exempt.  Since the 1970s, courts and even the DOL itself took the position that a service advisor was such a “salesman.”  In 2011, however, the DOL threw a monkey wrench under the hood by issuing a new rule that “salesman” under the statute no longer would include a service advisor.

This ruling from the Supreme Court, however, applies a straightforward interpretation of the statute’s language and holds that a service advisor is a “salesman . . . primarily engaged in . . . servicing automobiles.”  According to Justice Clarence Thomas, who authored the majority’s opinion, “servicing automobiles” includes more than just working underneath the hood of a car.  “Servicing” is a concept broad enough to encompass meeting with customers, listening to their concerns, suggesting or recommending certain repairs and maintenance, selling new accessories or replacement parts, following up with customers as services are performed, and explaining the repairs and maintenance work to customers when they come to pick up their vehicles.

The Encino Motorcars decision also brought back a special souvenir for employers in other industries.  In reversing the Ninth Circuit’s decision, the Supreme Court expressly rejected the oft-quoted principle that exemptions to the FLSA “should be construed narrowly.”  It now is the Supreme Court’s view that, because the FLSA does not actually say its exemptions should be interpreted narrowly, “there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation.”  As there are over two dozen exemptions just to the overtime-pay requirement of the FLSA, Encino Motorcars may provide some ammunition for employers fighting exemption disputes in the future.

For questions about this case or how it may impact your business, or other questions or advice regarding wage and hour laws, please contact [email protected] or [email protected].

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