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Supreme Court Says Auto Dealers Don’t Need To Pay Overtime To Service Advisors

Car dealerships don’t need to pay their service advisers overtime, according to a new ruling from the US Supreme Court. The case, Encino Motorcars LLC v. Navarro, pitted the interests of auto dealers, including the defendant Mercedes-Benz dealership Encino Motorcars, against those of auto service advisors, who work on commission to help customers who need repairs, oil changes and tire rotations, according to Oyez.

Auto Service Advisors Aren’t Entitled To Overtime

For decades, auto service advisors have been treated as salespeople for the purposes of federal labor law. So-called “outside” sales people are generally considered exempt from the Fair Labor Standards Act, including the right to overtime pay for their extra hours. A narrower exemption rules out the possibility of overtime wages for many auto dealership workers.

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Encino Motorcars LLC v. Navarro

A number of employees at Encino Motorcars, a Mercedes dealership in California, thought they were getting a raw deal. And one of them, Hector Navarro, decided to file a lawsuit. In his class action, Navarro said that his employer, Encino Motorcars, was violating the Fair Labor Standards Act, by refusing to pay him and his colleagues overtime wages for the weeks they worked more than 40 hours.

A district court dismissed the suit, noting that the Fair Labor Standards Act (FLSA) contains specific exemptions for employees who “sell or service” automobiles, along with mechanics and parts salespeople. That brought the Ninth Circuit Court of Appeals into the picture, after Navarro and his co-plaintiffs appealed the lower court’s ruling.

Ninth Circuit Relies On Labor Department Guidance

Unlike the lower court, the Appeals Court sided with the workers, relying on the judicial principle of Chevron deference (named after an important court case involving the energy company Chevron), which allows courts to adopt legal interpretations proffered by governmental agencies.

The service advisors were entitled to overtime, the Appeals Court ruled, because, in 2011, the Department of Labor ruled on the issue itself, narrowing the FLSA exemption and placing service advisors squarely in the circle of workers who are entitled to overtime pay.

Supreme Court Nixes DOL Interpretation

That decision didn’t pass muster at the Supreme Court. Encino Motorcars v. Navarro has gone to the Supreme Court twice in the last 8 years. In 2016, the nation’s highest court ruled that the Labor Department’s 2011 regulation lacked explicit reasoning and thus didn’t warrant Chevron deference. The case was remanded for further consideration in the Ninth Circuit Court of Appeals.

Without Labor Department guidance to work from, the Ninth Circuit attempted to craft its own interpretation of the Fair Labor Standards Act. From this interpretation, the Court concluded once again that the auto service advisors should be paid overtime. The decision was quickly appealed by Encino Motorcars, which brings us to today and the Supreme Court’s recent opinion on the matter.

Supreme Court Delivers Final Word On Service Advisor Overtime

In a 5-4 opinion passed along party lines, Justice Clarence Thomas explained that service advisors should be considered “salesmen primarily engaged in servicing automobiles.” That falls neatly under the relevant exemption (technically, the law creates an exemption for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” at dealerships covered by the FLSA), meaning that service advisors are not entitled to overtime.

Opinion: Service Advisors Are “Salesmen” Under FLSA

“Obviously,” the Court writes, service advisors sell services to customers.The “ordinary meaning of ‘salesman,’ ” Justice Thomas says, “is someone who sells goods or services.” That’s “precisely” what service advisors do, the Justice continues.

Moreover, the Court opines, service advisors are “primarily engaged in […] servicing automobiles,” which is the language of the FLSA exemption, since the workers are “integral to the servicing process.” As the dealership noted in court documents, auto service advisors have a range of job responsibilities, from diagnosing car problems to working up repair estimates.

The point of all this work, the Supreme Court suggests, is to sell service, which makes the workers “salesmen” in the normal definition of the term.

Ginsburg, Breyer, Sotomayor, Kagan Dissent

Justice Ruth Bader Ginsburg filed a dissenting opinion in the case, arguing that, since “service advisers neither sell nor repair automobiles, they should remain outside the exemption and within the act’s coverage.” Justices Breyer, Sotomayor and Kagan joined Ginsburg’s dissent.

More than 18,000 auto dealerships across the country employ over 100,000 service providers, according to ArkansasOnline.

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