Car dealership workers—from salespersons to mechanics—often work long hours without overtime pay. Over the years, courts have held that these workers are not entitled to overtime pay because they are covered by an exemption to the Fair Labor Standards Act (“FLSA”). A recent case from the Ninth Circuit Court of Appeals, however, calls those cases into question, at least with regards to one specific type of employee: service advisors.
In Navarro v. Encino Motorcars, LLC, No. 13-55323 (9th Cir. Mar. 24, 2015), service advisors for a Mercedes Benz car dealership alleged that the dealership failed to pay them overtime wages in violation of the FLSA. The service advisors’ job duties consisted of greeting Mercedes Benz owners as they entered the dealership, talking with them, listening to their complaints, and evaluating the service or repairs the owners’ vehicles needed. The dealership also required the service advisors to “upsell” owners on additional services. The dealership did not pay the service advisors overtime when they worked more than forty hours in a week. Rather, it paid them on a commission-only basis.
Generally, the FLSA requires employers to pay overtime compensation at a rate of one-and-one half times an employee’s regular rate of pay when he or she works over forty hours in a workweek. But in some instances, the FLSA’s overtime requirements do not apply. One such situation is when an employee is a “salesman, partsman, or mechanic primarily engaged in selling or serving automobiles” and he or she works for a company “primarily engaged in the business of selling such vehicles.” In 2011, however, the U.S. Department of Labor (“DOL”) clarified its stance on how this provision of the FLSA should be interpreted in a new regulation, stating that the statute was meant to exempt two different groups of workers from overtime pay: (1) “salesmen who sell vehicles” and (2) “partsmen and mechanics who service vehicles.”
The service advisors in Navarro argued that they neither sold vehicles nor serviced vehicles; thus, under the DOL’s interpretation, they were not covered by the exemption and were entitled to overtime pay. The dealership disagreed, arguing that the service advisors were “salesmen” because their job was to sell services for cars. As such, the dealership argued that the service advisors were exempt and not entitled to overtime pay.
Over the years, other car dealerships have made similar arguments and several courts—including the Fourth Circuit, the Fifth Circuit, and the Montana Supreme Court—have agreed, holding that service advisors are not entitled to overtime pay. Rejecting these holdings, the Ninth Circuit in Navarro deferred to the DOL’s regulation, concluding that it was not clear whether Congress intended to broadly exempt any salesperson involved in the servicing of cars, or if Congress meant to only exempt those salespersons who sold the cars themselves. While specifically recognizing that “there are good arguments supporting both interpretations of the exemption,” the Ninth Circuit held that it (and other courts) “must defer” to the DOL’s chosen interpretation because it is reasonable given the plain language of the statute.
The Ninth Circuit’s decision in Navarro leaves a few questions unanswered. First, it is unclear whether service advisors are exempt from overtime pay under another exemption. Second, the Navarro litigation may not be over: given the split in authority, the car dealership may choose to appeal the decision to the United States Supreme Court. Finally, it remains to be seen whether car dealerships in the states over which the Ninth Circuit has jurisdiction (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) change the way they pay their service advisor employees.
Nichols Kaster is currently investigating whether service advisors in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington are entitled to overtime wages. If you work or worked as a service advisor in one of those states within the last two years, please contact us for a free consultation about whether your employer paid you correctly.