Supreme Court Finds Auto Service Advisors Exempt from Overtime Pay

Auto service advisors are overtime-exempt under the Fair Labor Standards Act. The Supreme Court’s 5-4 decision in Encino Motorcars, LLC v. Navarro clarified the scope of a 2011 regulation issued by the Department of Labor that excluded service advisors from the definition of “salesman” under 29 U.S.C. §213(b)(10)(A).

Encino Motorcars involves current and former service advisors employed by Encino Motorcars, a Mercedes-Benz dealership in California. In 2012, the service advisors sued Encino for backpay, alleging that Encino violated the FLSA by failing to pay them overtime. The District Court dismissed the complaint, finding service advisors exempt under 29 U.S.C. §213(b)(10)(A). The Ninth Circuit reversed, deferring to the Department of Labor’s 2011 rule under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The Supreme Court vacated the decision and remanded the matter back to the Ninth Circuit with instruction to ignore the DOL regulation when reconsidering the service advisors’ status. On remand, the Ninth Circuit again found the exemption inapplicable to service advisors. Encino Motorcars appealed and the Supreme Court granted certiorari.  

The FLSA exempts from overtime-pay “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.” 29 U.S.C. §213(b)(10)(A). Using the Oxford English Dictionary, Justice Clarence Thomas found that service advisors are “obviously” salesmen under an ordinary meaning analysis.

Applying the same approach, Justice Thomas also established that service advisors are “primarily engaged in . . . servicing automobiles” as the word “servicing” is used in the statute. Because the service advisors meet with customers, suggest repairs, and sell new or replacement auto parts, they are an integral part of the servicing process. Justice Thomas highlighted “[i]f you ask the average customer who services his car, the primary, and perhaps only, person he is likely to identify is his service advisor.” Justice Thomas thus concluded that to be “‘primarily engaged in . . . servicing automobiles’ must include some individuals who do not physically repair automobiles themselves but who are integrally involved in the servicing process.”

The Court therefore found service advisors exempt from the overtime-pay requirement under the FLSA because service advisors are “salesm[e]n . . . primarily engaged in . . . servicing automobiles” under an ordinary reading of the statute. The Court’s decision to reject a narrow interpretation of FLSA exemptions by stating that exemptions should not be given anything other than a “fair reading” may persuade lower courts to favorably interpret and apply FLSA exemptions with a similar broad reading.

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