On April 2, 2018 the Supreme Court reversed the 9th Circuit Court ruling on overtime pay for automobile service advisors, stating they reject the principle that exemptions should be construed narrowly, and service advisors fit within the Fair Labor Standards Act (FLSA) exemption that applies to “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles”.
Enacted in 1938, the FLSA requires employers to pay overtime to covered employees who work more than 40 hours in a week. But the FLSA exempts some categories of employees from this requirement. Unlike the more widely known exemptions for certain executive, administrative and outside sales employees, this case was focused on an exemption specific to automobile dealership employees.
In 1978 the Department of Labor (DOL) issued an opinion letter, explaining that service advisors are exempt in most cases. However, in 2011, the DOL reversed course. It issued a rule that interpreted “salesman” to exclude service advisors. That regulation prompted the litigation of Encino Motorcars, LLC v. Navarro. Relying on the DOL’s 2011 regulation, the employees alleged that the petitioner had violated the FLSA by failing to pay them overtime.
The 9th U.S. Circuit Court of Appeals relied on the 2011 DOL regulations to hold that the plaintiffs should be paid overtime, but the Supreme Court vacated the decision in 2016, holding the regulations invalid. The 9th Circuit heard the case again and ruled, based on the law’s plain language, that service advisors are not exempt. The court noted its interpretation was supported by the principle that exemptions to the FLSA should be construed narrowly. Encino Motorcars appealed to the Supreme Court.
The Supreme Court decided that service advisors fit within the FLSA exemption. It stated that “a service advisor is obviously a salesman.”
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