Skip to main content

Breaking: Supreme Court Holds Service Advisors Are Exempt From FLSA Overtime Requirements


It is a rare when I post twice in a day, however, today is an exception, namely because of a decision issued by the United States Supreme Court a few hours ago.  Back in January, I had pointed readers to this case as one to keep an eye on.  The Court's decision in Encino Motorcars, LLC v. Navarro clarified that service advisors at auto dealerships are exempt from the FLSA overtime requirements.  In order to streamline the Court’s ruling and how we got to this point, let me break things down a bit.


Procedural Background:  For several decades, the Department of Labor has interpreted the Fair Labor Standards Act ("FLSA") to exempt service advisors from overtime requirements.  The FLSA provides an exemption for "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles."  Although "service advisors" were not specifically identified in this exemption, many courts held that the service advisors actually fell within this exemption.  However, in 2011, the Department of Labor switched course and determined that service advisors generally were not exempt from overtime under the FLSA.  In doing so, the Department of Labor limited this interpretation to apply only to salesman who sold automobiles (and not services) or service technicians who worked on automobiles.

After this 2011 change in interpretation of the FLSA, several service advisors filed suit against their employers for unpaid overtime.  In a 2015 decision, the Ninth Circuit Court of Appeals followed the Department of Labor's new reading of the FLSA and held that the service advisors were not exempt from overtime.  The case then proceeded to the Supreme Court.  However, with only eight Justices on the bench (as a result of Justice Scalia's death), the case was ultimately remanded to the Ninth Circuit Court of Appeals with instructions to interpret the FLSA with no deference given to the Department of Labor's interpretation.  After another ruling from the Ninth Circuit Court of Appeals in favor of the service advisors, the Supreme Court chose to again take up the appeal.

Facts:  As noted above, several service advisors filed suit against their employer on the grounds that they were owed overtime.  These service advisors had a variety of job responsibilities which included identifying service needs, selling service solutions to the dealerships' customers, suggesting repair and maintenance services, selling new accessories and replacement parts, and recording service orders.  Their employer contended that they were not entitled to overtime pay under the FLSA because they were fell under an exemption.  The procedural history which ultimately brought this appeal before the United States Supreme Court is outlined above.

Holding:  At the outset of the Court's opinion, Justice Thomas noted the statutory provisions of the FLSA, including the numerous exemptions that exist.  While Congress had initially exempted all employees at a car dealership from overtime pay requirements, that had been narrowed provide that FLSA overtime pay requirements did not apply to "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trailers, trucks, or farm implements, if he is employed by a non manufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers."  As noted above, this language had been held to include service advisors.

In the majority opinion, Justice Thomas parsed the language of "salesman" to hold that it includes someone who sells goods or services.  In this instance, it was found that service advisors are also "primarily engaged in...servicing automobiles."  Ultimately, it was held that the the phrase "primarily engaged in...servicing automobiles" includes some individuals that do not physically repair automobiles themselves but who are integrally involved in the servicing process...a description that would apply to partsmen and service advisors alike.

Judgment:  The United States Supreme Court ruled, in a 5 - 4 decision, that service advisors working at a car dealership are exempt from the overtime pay requirements of the FLSA, and therefore are not entitled to overtime pay for any work done over 40 hours in a week.

The Takeaway:  I had predicted back in January that this would likely be a 5 - 4 decision with potentially Justices Kennedy and Gorsuch being the swing votes.  Well, with the Court ruling in favor of employers in this 5 - 4 decision, it appears this came down to a rather close ruling.  Chief Justice Roberts and Justices Thomas, Kennedy, Alito, and Gorsuch ruled in favor of Encino Motorcars, LLC while Justices Ginsburg, Breyer, Sotomayor, and Kagan ruled in favor of the service advisors.

Besides the Court's holding that service advisors are exempt from overtime pay under the FLSA, the other big takeaways from the decision was the Court's rejection of the notion that FLSA exemptions should be narrowly interpreted.  The Court pointed out that the FLSA provided no "textual indication" that its exemptions should be construed narrowly.  Instead, the Court's holding that courts should apply FLSA exemptions ‘fairly’ rather than narrowly has the potential to benefit employers going forward (and potentially limit a claim by employees that they are entitled to overtime pay under the FLSA).  Besides the Court's ruling on the ultimate issue this case presented, this is the other big development that I can see having a lasting impact on related FLSA cases in the future.

Majority Opinion Judge:  Judge Thomas

Date:  April 2, 2018

Opinion:  https://www.supremecourt.gov/opinions/17pdf/16-1362_gfbh.pdf

Comments

Popular posts from this blog

NLRB: Discussion Among Employees About Tip Pooling is Protected Concerted Activity

  This Advice Memorandum from the National Labor Relations Board’s Associate General Counsel, Jayme Sophir, addressed whether employees which discussed and complained about tip pooling at work constituted protected concerted activity. In relevant part, an employer in New York operated a chain of steakhouses.  While tip pooling was in place at these steakhouses, some of the employees objected to it on the grounds that it was not transparent and improperly divided tips among the workers.  Employees were told not to complain or talk to each other about the tip pool and were told that doing so would endanger their jobs.  Despite the employer later attempting to provide some clarity as to how the tips were being divided, rancor still existed among some employees.  At one point, the employees were told by a general manager that some employees that had been talking about the tip pool were “cleared out” and the employer would continue to do so. In the Advice Memorandum, it was noted that emplo

What I’ve Been Reading This Week

A few years ago, I remember when the “Fight for $15” movement was taking off around the country.  Lo and behold, it appears that a $15/hour minimum wage is not the stopping point, which should be no surprise.  As the below article notes, New York is aggressively moving to ramp up hourly wage rates even higher.  While all the  below articles are worth a read, I called particular attention to that one. As always, below are a couple article that caught my eye this week. Disney World Workers Reject Latest Contract Offer Late last week, it was announced that workers at Disney World had rejected the most recent contract offer from the company, calling on their employer to do better.  As Brooks Barnes at The New York Times writes, the unions that represent about 32,000 workers at Disney World reported their members resoundingly rejected the 5 year contract offer which would have seen workers receive a 10% raise and retroactive increased back pay.  While Disney’s offer would have increased pa

Utah Non-Compete Bill Falters in House

Last month, a non-compete bill sponsored by Representative Brian Greene (Republican from Pleasant Grove) & up for vote in the Utah House failed to make it through the Legislature.  The bill sought to ban enforcement of non-competes if they came after a worker was already employed, given no compensation (such as a bonus or promotion) for signing the non-compete, and laid off within six months.  However, by a 22 - 49 vote, the bill was resoundingly defeated after some business groups lobbied to kill the non-compete bill.  One group in particular, The Free Enterprise Utah coalition, argued that the Utah State Legislature should hold off on any changes to non compete laws in the state until a survey about non competes was done among Utah businesses.  Representative Greene had countered this claim and argued that a survey was not needed to show that the current non compete laws in the states allowed many businesses, including some small high tech companies in the state, to per