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Supreme Court Rules Auto Service Advisors Are Overtime-Exempt

April 2, 2018

By Michael J. Wietrzychowski

On April 2, 2018, the U.S. Supreme Court issued its opinion in Encino Motorcars v. Navarro, holding that service advisors employed at auto dealerships are exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA).

The case involved a Mercedes-Benz dealership in California and its current and former service advisors, whose job duties include meeting customers to hear concerns about their cars, suggesting repair and maintenance services, and selling new or replacement parts. In 2012, the service advisors sued for back pay, alleging Encino violated the FLSA by failing to pay them overtime. They relied on a 2011 rule from the Department of Labor which interpreted “salesman” to exclude service advisors. However, the Lower Court dismissed the case, agreeing with Encino that service advisors fall under the “salesman” exemption to the FLSA, which exempts from overtime: “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles.”  Subsequently, the Ninth Circuit reversed, but the U.S. Supreme Court vacated the decision and remanded the case to the Ninth Circuit, asking the court to decide the case without reference to the 2011 rule that the Supreme Court deemed procedurally defective.

With these instructions, the Ninth Circuit again held that the service advisors were covered under the FLSA overtime requirements.  The decision again was appealed to the U.S. Supreme Court, which overturned the Ninth Circuit, concluding that service advisors fall under the salesman overtime exemption.  The Supreme Court explained that service advisors are “salesmen” because they sell customers services for their vehicles and that they are “primarily engaged in servicing automobiles” because they are integrally involved in the servicing process, even though they do not manually repair the vehicles.

For more information regarding this or other labor and employment issues, please contact Michael J. Wietrzychowskico-chair of Schnader’s Labor and Employment Practices Group. 

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