United States: Supreme Court Gives Dealerships The Green Light: Service Advisors Are Exempt From FLSA Overtime Requirements

The Supreme Court today handed auto dealerships—especially those on the west coast—a long-awaited 5-4 victory by holding that service advisors are exempt from the Fair Labor Standards Act's overtime-pay requirement because they are "salesm[en]...primarily engaged in... servicing automobiles." The ruling returns the law to the place it had been for decades prior to a stunning and controversial 2011 agency decision that upended what had been standard practice at many dealerships.

The Supreme Court's ruling today brings finality to a legal battle that had contained more twists and turns than a Formula One race track, including two separate trips to the Supreme Court by a dealership represented by attorneys from the Fisher Phillips Automotive Dealership Practice Group (Encino Motorcars, LLC v. Navarro).

Start Your Engines: The Long Race To The Supreme Court

For several years, an interpretative tug-of-war took place between courts across the country and the U.S. Department of Labor (USDOL) regarding whether a dealership's service advisors should be exempt from overtime under the Fair Labor Standards Act (FLSA). For those not in the industry, a service advisor is responsible for the intake of customers who enter the service area of a dealership. The intake process includes the service advisor evaluating the customer's complaints, determining the service needs of the vehicle, and selling supplemental services beyond those that would directly address the customer's complaint.

For several decades, the USDOL interpreted the FLSA to exempt service advisors from overtime requirements. The agency relied upon the portion of the statute that provides an exemption for "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles." Obviously, there is no specific mention of "service advisors" in this section of the statute, but the agency agreed with numerous lower courts in determining that service advisors fell within the exemption.

Then, in 2011, the USDOL unexpectedly backtracked and determined that service advisors were generally not exempt. The agency limited its interpretation of the FLSA to exempt only salesmen who sold automobiles (not services) or service technicians who worked on vehicles. According to the USDOL, including service advisors in the exemption would contradict the language of the statute.

And so a group of service advisors relied upon that agency interpretation and sued their dealership employer seeking unpaid overtime and penalties. In a 2015 decision, the 9th Circuit Court of Appeals (with jurisdiction over federal cases arising from California, Washington, Nevada, Arizona, Oregon, Alaska, Hawaii, Idaho, and Montana) described the USDOL's radical position change as "rationally explained" and supported by history showing that it had given the issue "considerable thought." The appeals court ruled that service advisors were not exempt from overtime, following the USDOL's guidance.

The dealership did not let the matter rest, and battled its way to the Supreme Court in 2016. But with only eight justices presiding at the time due to the death of Justice Scalia, the court did not render a decision on the merits. Instead, it remanded the case to the 9th Circuit Court of Appeals and directed the appeals court to interpret the exemption's statutory language with no deference given to the USDOL's interpretation.  

In 2017, the 9th Circuit once again ruled that service advisors were not exempt from the FLSA's overtime requirements. For a second time, the dealership asked the Supreme Court for relief. This time around, with a fully constituted complement of nine justices, the Court granted dealerships their wish—a final decision ruling that service advisors are exempt from federal OT law.

Three Lefts Make A Right: The Supreme Court's Decision

In today's ruling, the Supreme Court rejected the 9th Circuit's 2016 decision and affirmed the long-standing decisions of several other courts across the country that had determined that service advisors are exempt from the FLSA's overtime requirements. The majority opinion, drafted by Justice Clarence Thomas, determined that services advisors fall under the exemption even though they do not personally go under the vehicle's hood. Instead, the Court agreed that exempt status was justified because service advisors are primarily engaged in servicing automobiles vis-à-vis their sales of those services.

The Court rested its decision on the plain language of the statute, which it explained, "has long been understood to cover services advisors." The Court concluded that Congress' inclusion of specific language in the statute meant that a salesman who primarily engages in servicing automobiles is exempt, and service advisors fall within that description.

What reads like an English grammar exercise in diagraming sentence structure, the Court began with the first uncontroversial premise that service advisors are salesmen. It then determined that service advisors are primarily engaged in both dictionary definitions of "servicing," such that they satisfy the exemption under the statute. It importantly noted that the "primarily engaged in  . . . servicing automobiles" applies to both partsmen and service advisors.

The Supreme Court also handed employers across all industries a potentially significant victory by rejecting the oft-invoked principle that FLSA exemptions should be interpreted narrowly. Noting that the FLSA's text provides no suggestion that it should be construed in such a restrictive manner, the Court announced the "narrow-construction principle relied on the flawed premise that the FLSA 'pursues' its remedial purposes at 'all costs'." Thus, the Court made clear that a court's role in reading FLSA exemptions is not to give them a "narrow" reading but a fair one.

This rejection of the "narrow reading" of FLSA exemptions should soon affect a whole host of FLSA exemption cases. The rejection of the anti-exemption canon means that the judicial thumb should now be off the scale when employers fairly assert that employees are overtime exempt under the FLSA.

Now That The Fight Is In The Rearview Mirror, What Does This Mean For Dealerships?

Today's Supreme Court's decision ratifies roughly 40 years of established pay practices for the approximately 100,000 service advisors employed at dealerships throughout the United States. You can now confidently treat these employees as exempt from overtime and minimum wage requirements under the FLSA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Todd B. Scherwin
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions