Supreme Court Holds That Automobile Service Advisors Are Exempt
Apr. 2 2018

Supreme Court Holds That Automobile Service Advisors Are Exempt

Topics: Court Decisions, Wage & Hour Issues

Today, the United States Supreme Court issued its decision in Encino Motorcars, LLC v. Navarro, holding by a 5-4 vote that service advisors employed by a car dealership are exempt from overtime under the FLSA.  The case deals with a specific exemption provision of the FLSA, 29 USC section 213(b)(10)(A), which exempts “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks or farm implements” from the overtime requirements of the statute.  The plaintiffs in the case were current and former service advisors for Encino Motorcars who sued, claiming they were entitled to overtime pay.  After the district court held that the service advisors were exempt and dismissed the case, the plaintiffs appealed to the Ninth Circuit, which reversed and held that the FLSA exemption did not apply to service advisors.  In so holding, the Ninth Circuit relied on a 2011 interpretation of the Department of Labor, in which the DOL ruled that the exemption did not apply to service advisors.  Following a petition for review by Encino Motorcars, the Supreme Court held that the Ninth Circuit erred by relying on an invalid 2011 interpretation of the DOL.  Rather than decide whether or not the service advisors actually qualified as exempt, however, the Supreme Court remanded the matter to the Ninth Circuit to decide (without reliance on the 2011 DOL interpretation).  On remand, the Ninth Circuit doubled down, again finding that service advisors did not qualify for exemption under the FLSA provision in question.  Encino Motorcars again successfully petitioned for review.

Today, the high Court, in an opinion authored by Justice Thomas, reversed the Ninth Circuit’s opinion on the merits and held that service advisors are exempt from overtime under the FLSA.  The Court held that service advisors qualify as “salesmen” primarily engaged in “servicing” vehicles because they meet with customers and recommend (i.e. sell) services, maintenance, and repairs to them and are an integral part of the process of providing service to the customers’ vehicles.  The Court held that service advisors do not have to physically repair or service the actual vehicles in order to be deemed to be “providing service” to customers within the meaning of the FLSA exemption.  In so holding, the Court explicitly rejected the notion that FLSA exemptions must be construed “narrowly” (as the Ninth Circuit had reasoned).  Here’s the money quote:

Because the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation.’  Scalia, Reading Law, at 363.  The narrow construction principle relies on the flawed premise that the FLSA ‘pursues’ its remedial purpose ‘at all costs.’  American Express Co. v. Italian Colors Restaurant, 570 U. S. 228, 234 (2013) (quoting Rodriguez v. United States, 480 U. S. 522, 525–526 (1987) (per curiam)); see also Henson v. Santander Consumer USA Inc., 582 U. S. ___, ___ (2017) (slip op., at 9) (“[I]t is quite mistaken to assume . . . that whatever might appear to further the statute’s primary objective must be the law” (internal quotation marks and alterations omitted)).  But the FLSA has over two dozen exemptions in §213(b) alone, including the one at issue here.  Those exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement. See id., at ___ (slip op., at 9) (“Legislation is, after all, the art of compromise, the limitations expressed in statutory terms often the price of passage”).  We thus have no license to give the exemption anything but a fair reading.

Thus, while the specific holding of the case is narrowly applicable only to automobile service advisors, the Court’s broadly worded rejection of a narrow interpretation of the FLSA overtime exemptions in favor of a “fair” interpretation will prove generally useful in exempt/non-exempt misclassification cases brought under the FLSA.   

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Robin Largent represents employers, including major food and retail companies, in all types of employment litigation: wrongful termination, retaliation, breach of contract, wage and hour (California Labor Code) and unfair competition. She also regularly counsels and advises California employers on issues of compliance with California and federal employment laws.
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