eLABORate: U.S. Supreme Court Reverses Ruling: Auto Service Advisors Will Not Receive Overtime Pay

April 02, 2018

On April 2, 2018, in Encino Motorcars, LLC v. Navarro et al.,the United States Supreme Court held that service advisors at car dealerships are exempt from the overtime-pay requirements of the Fair Labor Standards Act (FLSA). That is, dealerships are not required to pay service advisors time and half for working more than 40 hours in a week. The Court based its decision on the application of an exemption to the FLSA. The Court also reversed a Ninth Circuit decision holding that the exemption did not apply to service advisors.

The case originated from a lawsuit filed by service advisors against their car dealership employer. The services advisors claimed that they were owed overtime pay under the FLSA for working more than 40 hours per week. In response, the dealership argued that the service advisors were exempt from the FLSA’s overtime requirements. The exemption on which the dealership relied states that the FLSA exempts from the overtime-pay requirements “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles . . . .” The district court agreed with the dealership. On appeal, however, the Ninth Circuit held that the exemption did not apply. The decision created a conflict among federal circuit courts that set the stage for the U.S. Supreme Court to resolve the issue.

The Court asked whether service advisors are “salesm[e]n . . . primarily engaged in . . . servicing automobiles,” as the exemption required. Because service advisors sell services to customers for their vehicles, the Court concluded that service advisors are indeed salesmen. Further, the Court concluded that service advisors are “primarily engaged in . . . servicing automobiles.” The Court focused on the term “servicing,” which it defined as “the action of maintaining or repairing a motor vehicle” or “[t]he action of providing a service.” The Court reasoned that service advisors meet both definitions because they are integral to the servicing process and explained that service advisors meet customers; listen to their concerns about their cars; suggest repair and maintenance services; sell new accessories or replacement parts; record service orders; follow up with customers and explain the repair and maintenance work.

Ultimately, the Court found that service advisors at car dealerships are exempt from the FLSA overtime-pay requirements. The Court also noted that Congress had not changed the exemption from 1978 to 2011 and that the U.S. Department of Labor agreed that the exemption applied to service advisors.