U.S. Supreme Court Rules that Service Advisors are Exempt from Overtime Pay Requirements

April 3, 2018

By: Michelle R. Magruder

The federal Fair Labor Standards Act (“FLSA”) is the federal law which governs wage and hour requirements for employees.  Section 213(b)(10)(A) of the FLSA specifically exempts the following category of positions from overtime pay requirements:

(A) Any salesmen, partsmen, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements if [the person] is employed by a non-manufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.

The U.S. Department of Labor (“DOL”) enforces the FLSA.  For many years, the DOL interpreted this subsection of the FLSA to include Service Advisors as exempt from overtime pay.  However, in April 2011, the DOL issued a new opinion which said that Service Advisors do not qualify for the overtime exemption as they were not “salesmen, partsmen, or mechanics primarily engaged in selling or servicing automobiles.”  This proposed rule change was litigated throughout the United States.  Several federal District Courts issued conflicting opinions on whether Service Advisors were exempt from overtime under this subsection of the FLSA.

The split among the federal District Courts created a need for the U.S. Supreme Court to ultimately rule on whether Service Advisors are exempt from overtime pay under the FLSA.  On April 2, 2018, a final order was issued by the U.S. Supreme Court in the case of Encino Motorcars, LLC v. Navarro, et al.

On April 2, 2018, the U.S. Supreme Court held that because Service Advisors are “salesmen primarily engaged in servicing automobiles,” they are exempt from the FLSA overtime pay requirements.  The key points within the U.S. Supreme Court’s opinion includes:

  • A salesman is someone who sells goods or services.  A Service Advisor sells customers service for their vehicles.
  • The phrase “primarily engaged in . . . servicing automobiles” must include some individuals who do not physically repair automobiles themselves, but who are integrally involved in the service process.  Such a description applies to “partsmen” and Service Advisors alike.
  • The Ninth Circuit Court of Appeals, which had ruled Service Advisors were not exempt from overtime pay, erred in construing the FLSA too narrowly.

The U.S. Supreme Court concluded that Service Advisors are exempt from the overtime pay requirements of the FLSA because they are “salesmen . . . primarily engaged in . . . servicing automobiles,” and therefore, Service Advisors, are included in the FLSA overtime exemption, pursuant to Section 213(b)(10)(A).

After years of uncertainty, this opinion by the U.S. Supreme Court concludes this on-going issue as to whether Service Advisors are exempt from overtime pay under the FLSA.  Please note that dealerships remain under the federal and state minimum wage requirements for all positions within the dealership.

This Article is published for general information, not to provide specific legal advice. The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

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