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One to Keep An Eye On: Encino Motorcars v. Navarro (United States Supreme Court)


As with many employment and labor law related cases (and bills) being litigated around the country, there are always a few that stand out.

This is one to keep an eye on.


Encino Motorcars v. Navarro - United States Supreme Court


Facts:  Respondents in the present case are service advisors at a car dealership whose primary job responsibilities include identifying service needs, selling service solutions to the dealership's customers, suggesting repair and maintenance services, selling new accessories and replacement parts, and recording service orders.  These service advisors argued they should be entitled to overtime pay, as provided by the Fair Labor Standards Act ("FLSA").  Note, under the relevant section of the FLSA however, "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" is exempt from the overtime pay requirement.

The Ninth Circuit Court of Appeals reversed the dismissal of the case by the district court and held that the service advisors were not exempt from the overtime pay requirements of the FLSA because they did not personally sell or service automobiles.  The United States Supreme Court subsequently heard the case and in 2016 vacated and remanded the Ninth Circuit's decision on the grounds that a 2011 Department of Labor ("DOL") interpretation of the overtime pay provision had been issued without a "reasonable explanation" and therefore the lower court had to construe the case without placing weight on the DOL's interpretation.  The Ninth Circuit  reached the same conclusion on remand and acknowledged that while these service advisors came within the "literal" terms of the FLSA exemption, it found the service advisors to be non-exempt (and therefore entitled to overtime pay) by applying a narrow interpretation of the FLSA (and its exemptions).

A writ was filed with the United States Supreme Court again and the Court agreed to take the matter up for the second time, given in part to a conflict on the matter among circuits.

Issue:  Are service advisors at car dealerships exempt from the protections of the Fair Labor Standards Act's mandatory overtime requirements?

Current Status:  Last Wednesday, the Court heard oral arguments on the case.  In relevant part, much of last week's argument turned on the language of the FLSA and exactly what these employees do.  Counsel for the service advisors posited as to why the service advisors were not exempt from the FLSA overtime requirement with a straightforward explanation:  The service advisors do not actually service automobiles.  "You do not maintain or repair a car...with a pad or a clipboard and a pencil or a telephone..."

Several Justices, including Breyer, Ginsburg, Kagan, and Sotomayor, seemed to favor this reading of the FLSA that any salesman selling automobiles or any partsman or mechanic servicing automobiles would be covered by the exemption, but any salesman servicing automobiles would not.  I think Justice Kagan phrased it well:

"...a service advisor is customer facing...[T]he primary job is to deal with customers, to sell them things, to liaison with them, to make sure they're happy.  Mechanics and also partsmen are car-facing...[T]heir job is to do stuff with the car. ...[T]heir focus is on the automobile, whereas the service provider's focus is on the customer."

Under this interpretation and reading of the FLSA, the service advisors would be held to not be exempt from the FLSA and therefore entitled to overtime pay.

On the other end of the spectrum, counsel for Encino Motorcars argued that the service advisors were "plainly salespeople, and what they sell and what they are primarily engaged in is the servicing of automobiles." Chief Justice Roberts pointed out that in his mind, service advisors can be viewed as salesmen engaged in the servicing of automobiles as they "...look under the hood sometimes...[T]hey [the service advisors] go out and at least listen to the noise [in a customer's car], and sometimes they can say right away [what the problem is]."  Under the Chief Justice's viewpoint, he seemed inclined to hold that these service advisors were exempt from the mandatory overtime requirements of the FLSA.  However, counsel for the service advisors disagreed and suggested that while the service advisors may be able to make a guess as to what is wrong, it is actually up to the mechanic to figure out what is wrong and fix the problem. 

Looking Ahead:  As noted, it appears that Justices Breyer, Ginsburg, Kagan, and Sotomayor seem to favor holding that these service advisors are not exempt from overtime pay under the FLSA.  However, Chief Justice Roberts and Justices Thomas and Alito are thought to favor the argument that these service advisors are exempt from overtime pay under the FLSA.  Therefore, I would expect this case to turn upon the viewpoints of Justices Kennedy and Gorsuch.  A 5 - 4 decision, either way, would not surprise me, with potentially Justice Gorsuch being the swing vote.  (Remember, Justice Gorsuch was not on the bench when the case was originally heard in 2016, so his position on the matter is less clear.)

I would expect a decision from the Court in the next few months.



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