The Fair Labor Standards Act (“FLSA”) requires most employers to pay workers overtime for hours worked over 40 in any given week. However, the FLSA creates exceptions for workers in specific categories.
One such category applies to workers at automobile dealerships, specifically: salesman, partsman or mechanic primarily engaged in selling or servicing automobiles. See 29 U.S.C. 213(b)(10). Until 2011, the Department of Labor (“DOL”), the federal agency charged with enforcing the FLSA, considered service advisors to be exempt from overtime. In 2011, the DOL switched courses and issued a new rule applying the exemption only to a “salesman,” requiring employers to pay service advisors overtime. However, the Fourth and Fifth Circuits have held that service advisors are exempt and therefore, not entitled to overtime compensation.
The Court of Appeals for the Ninth Circuit relied on the DOL’s regulation and determined in Navarro v. Encino Motorcars that the plaintiff service advisors were entitled to overtime compensation. Last year, the United States Supreme Court determined that the Ninth Circuit improperly deferred to the 2011 regulation, noting the regulation’s history. Instead of deciding the ultimate issue – whether the advisors are exempt – the Supreme Court remanded the case to the Ninth Circuit for it to review whether the exemption applied without taking into account the regulation. The Ninth Circuit again found that service advisors are not exempt based on its review of the statute and legislative history.
The Ninth Circuit’s holding has created uncertainty for automobile dealerships because of the circuit split. On September 28, 2017, the Supreme Court granted certiorari to resolve this question.
Employers should be mindful of how they categorize their employees for purposes of overtime.
Practice AreasLabor, Employment, Employee Benefits and ERISA