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The Fair Labor Standards Act (FLSA) requires employers to pay overtime compensation to certain employees. 29 U. S. C. §201. There are, however, exceptions to the rule. In automobile dealerships, “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles…” is exempt and not entitled to overtime wages. §213(b)(10)(A) ( “FLSA exemption”). The FLSA was meant to be construed narrowly, but statutory ambiguity still existed as to whether the exemption included service advisors. The United State Supreme Court in Encino Motorcars, LLC v. Navarro, U.S., 584 U. S. ____ (2018), in a 5-4 decision, held that service advisors fell within the exemption and, therefore, were not entitled to overtime pay. The main question considered was whether service advisors were considered “salesmen” primarily engaged in servicing automobiles. The lower appellate court found that service advisors were exempt from the FLSA overtime wage requirement, and consequently dismissed the action. Navarro appealed and the United States Court of Appeals for the Ninth Circuit reversed and held that service advisors did not fall under the FLSA exemption and were entitled to overtime wages. The US Supreme Court disagreed and on April 2, 2018, it held that service advisors were considered salesmen engaged in servicing automobiles and therefore were exempt from the FLSA overtime wage requirement. Peter Mavrick is a Fort Lauderdale employment lawyer who defends businesses against overtime wage lawsuits.

In Encino, current and former service advisors of Encino Motorcars, LLC (“Encino”), a Mercedes-Benz dealership, sued Encino for backpay.  They alleged Encino violated the FLSA by failing to pay them overtime wages. Encino argued that the service advisors fell under the FLSA exemption and were not entitled to overtime pay. The circuit court agreed with Encino and dismissed the lawsuit. The United States Court of Appeals for the Ninth Circuit reversed and held that service advisors did not fall under the FLSA exemption.  This allowed the service advisors to collect backpay. The Ninth Circuit used the FLSA Occupational Outlook Handbook (“Handbook”) as a guide and concluded that because “automobile service advisors” were listed in the Handbook as one of the job titles and not listed in the FLSA exemption, service advisors were not exempt. The Ninth Circuit “also determined that service advisors were not primarily engaged in “servicing” automobiles, which it defined to mean ‘only those who are actually occupied in the repair and maintenance of cars.’” Navarro, et al. v. Encino Motorcars, LLC, 845 F.3d 925, 931 (9th Cir. 2017). Furthermore, the Ninth Circuit held, “the exemption does not cover salesmen who were primarily engaged in servicing.

In its reversal of the Ninth Circuit’s opinion, the United States Supreme Court concluded that service advisors were “salesmen” who sold customers services for their vehicles and were also primarily engaged in servicing vehicles. The Supreme Court classified service advisors as integral to the servicing process, as they “mee[t] customers; liste[n] to their concerns about their cars; sugges[t] repair and maintenance services; sel[l] new accessories or replacement parts; recor[d] service orders; follo[w] up with customers as the services are performed (for instance, if new problems are discov­ered); and explai[n] the repair and maintenance work when customers return for their vehicles.”

This recent Supreme Court ruling has a favorable impact on automotive dealership employers as it is determinative when addressing overtime disputes. This is especially important to the automobile dealership industry because of the trend of ever larger numbers of FLSA lawsuits.

Peter Mavrick is a Fort Lauderdale employment attorney who represents and advises businesses. This article does not serve as a substitute for legal advice tailored to a particular situation.

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