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By: Brad Adler and Tim Holdsworth
For over forty years, courts have almost universally found that auto dealership service advisors were exempt from the FLSA’s overtime requirements under the salesman exemption contained in Section 13(b)(10)(A) of the statute. In contrast, over the same period, the U.S. Department of Labor (“DOL”) waffled on the issue. Most recently, in 2011, the DOL explained that their regulatory definitions for the exemption were not meant to cover service advisors.
Of course, the Ninth Circuit Court of Appeals never seems to shy away from surprises or from departing from the position of other courts, including in 2015 when facing the service advisors exemption issue. In Navarro v. Encino Motorcars, LLC, the Ninth Circuit bucked the judicial trend on the service advisor issue and found that service advisors were not exempt from overtime under the salesman exemption.
The Ninth Circuit found that the salesman exemption is ambiguous and the DOL’s regulation was reasonable because FLSA exemptions should be construed narrowly. Therefore, the Ninth Circuit found that the service advisors were not covered by the salesman exemption and subject to overtime requirements. The good news for auto dealerships (at least hopefully) is that the Supreme Court has recently granted cert in the Navarro case, signaling its intent to answer the currently unclear question of whether service advisors are exempt from the overtime requirements of the Fair Labor Standards Act (“FLSA”).
We should expect a decision on this issue from the Supreme Court by mid-year. Please contact us if you have any questions or need advice about how you presently pay service advisors, how you could pay service advisors if the exemption is lost, or any other issues discussed above.