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
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