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US Supreme Court Says No Overtime Pay for Auto Service Advisors

In a case of straightforward statutory interpretation, the U.S. Supreme Court held on April 2, 2018 in Encino Motorcars LLC v. Navarro that service advisors employed at car dealerships are exempt from the overtime pay requirement under the Fair Labor Standards Act (FLSA).

The dispute began in 2011, when service advisors employed by Encino Motorcars, a Mercedes-Benz dealership in California’s San Fernando Valley, sued their employer for allegedly unpaid overtime compensation.  The dealership moved to dismiss their lawsuit, relying on the exemption in Section 213(b)(10)(A) of the FLSA, which exempts employers of “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements” from the requirement to pay overtime compensation.  The district court granted the dealership’s motion and the service advisors appealed to the Ninth Circuit Court of Appeals, which reversed.  The appeals court found that the duties performed by the service advisors did not meet the language of the statutory exemption, as their jobs did not involve servicing of cars, but rather involved meeting and greeting car owners, soliciting and suggesting repair services to fix the customer’s problem as well as suggesting other maintenance and repair services, and providing owners with cost estimates.  The dealership appealed the Ninth Circuit’s decision to the US Supreme Court. 

The dispute before the Court centered on whether service advisors are “salesmen” “primarily engaged” in “servicing automobiles.”  Encino argued that the service advisors’ tasks meet the exemption, as courts had routinely found for decades before the Ninth Circuit’s ruling in this case.  The service advisors countered they should be eligible for overtime pay because they don’t sell automobiles and don’t engage in the manual labor of maintaining or repairing automobiles.

The five-justice majority opinion, authored by Justice Clarence Thomas, deemed it unnecessary to go beyond the plain language of the FLSA to resolve the issue.  The majority easily concluded that service advisors are engaged in sales, thus meeting the definition of salesmen.  They further found that service advisors are “primarily engaged” in “servicing” of cars because, in this context, servicing can mean “the action of maintaining or repairing a motor vehicle” or the “the action of providing a service,” and that service advisors meet both definitions because they are integral to the servicing process by performing their service sales functions, even if they do not themselves perform the actual repair services.  Justice Thomas explained that the “ordinary meaning of ‘salesman’,” “is someone who sells goods or services … Service advisors do precisely that. … [S]ervice advisors ‘sell [customers] services for their vehicles.'”

The majority specifically rejected the need to look outside the text of the statute to reach a decision.  “If the text is clear, it needs no repetition in the legislative history; and if the text is ambiguous, silence in the legislative history cannot lend any clarity.”  The majority also rejected the Ninth Circuit’s position that exemptions under the FLSA should be narrowly construed, concluding that nothing in the statute gives any indication that exemptions should be given anything other than a fair reading.  In the end, the matter boiled down to simple proposition:  “If you ask the average customer who services his car,” Justice Thomas rhetorically posed, “the primary, and perhaps only, person he is likely to identify is his service advisor.”

The Court’s ruling is a major win for not only Encino Motorcars, but thousands of car dealerships nationwide.  Had the Court ruled differently, the industry could have been liable for back pay for thousands of the employees who work with customers to help them with their car service and repair needs.

© Copyright 2019 Squire Patton Boggs (US) LLP

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About this Author

Daniel B. Pasternak, Squire Patton Boggs, Phoenix, Labor Litigation Layer
Partner

Dan Pasternak focuses his practice on litigating labor and employment claims, representing management in traditional labor relations matters, and working with employers to develop and enforce business-sensible policies and practices to effectively manage their human resources.

Dan represents employers before federal and state courts and administrative agencies, and in arbitration and mediation proceedings, in employment matters arising under the array of federal and state employment laws, including discrimination, harassment, retaliation,...

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