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Even without DOL reg, service advisors at auto dealerships still not exempt from overtime

On remand from the Supreme Court, the Ninth Circuit concluded that Congress did not intend for the overtime exemption in Sec. 213(b)(10)(A) of the FLSA to encompass service advisors employed by automobile dealerships. Giving no deference to the Department of Labor’s 2011 regulation holding that service advisors were entitled to overtime pay as required by the Supreme Court, the appeals court still concluded that under the most natural reading of the statute, Congress did not intend to exempt service advisors from overtime. Moreover, even if the text were ambiguous, the legislative history confirmed that Congress intended to exempt only salesmen selling cars, partsmen servicing cars, and mechanics servicing cars. It did not intend to exempt service advisors (Navarro v. Encino Motorcars, LLC, January 9, 2017, Graber, S.).

Deference. Service advisors at an automobile dealership brought suit under the FLSA alleging that their employer failed to pay them required overtime wages. The employer countered that the service advisors were exempt from the overtime provisions of the FLSA as engaged in selling or servicing automobiles. A district court granted the employer’s motion to dismiss. In a prior appeal, the Ninth Circuit reversed. It held that a regulation promulgated by the Department of Labor in 2011 reasonably interpreted the statutory exemption not to encompass service advisors. Applying the principles of agency deference described in Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., the appeals court deferred to the agency’s interpretation.

However, the U.S. Supreme Court held that the Ninth Circuit erred by applying the Chevron framework. The High Court found the Department of Labor failed to give a reasoned explanation for the change in policy in its 2011 regulations to hold that automobile service advisors are entitled to FLSA overtime compensation, and so concluded that the regulation was not entitled to Chevron deference. It vacated the Ninth Circuit’s contrary ruling and remanded the matter for the appeals court to interpret Sec. 213(b)(10)(A) without placing controlling weight on the DOL’s 2011 regulation.

Exemptions. While the FLSA was enacted to protect covered workers from substandard wages and oppressive working hours, not all workers are covered by the FLSA’s minimum wage and overtime provisions. Subsec. 213(a) lists categories of employees who are exempt from both the minimum-wage and overtime-compensation requirements, while Sec. 213(b) lists categories of employees who are exempt from the overtime compensation requirement only. Over the intervening years, Congress has made changes to the exemptions that have impacted employees of automobile dealerships. In 1974, Congress amended Sec. 213(b)(10) to its present-day form.

Regulatory changes. In 1978, the DOL issued an opinion letter stating that, contrary to the agency’s regulation, service advisors were exempt under Sect. 213(b)(10)(A). In 1987, the agency amended its Field Operations Handbook along the same lines, stating that the agency would “no longer deny the [overtime] exemption” for service advisors. In 2008, the DOL proposed to amend its formal regulation to conform to its practice of allowing the exemption for service advisors. However, after receiving public comments the agency issued a final rule in 2011 that reaffirmed its original position: service advisors are not exempt under Sec. 213(b)(10)(A).

The parties disputed whether the appeals court owed deference to the Secretary of Labor’s interpretation that the statute does not exempt service advisors. However, the appeals court declined to resolve this dispute because the answer does not affect the outcome. Rather, assuming that no weight is given to the agency’s interpretation of the regulation, the Ninth Circuit interpreted Sec. 213(b)(10)(A).

Automobile dealerships. The FLSA exempts from the overtime-compensation requirement any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements. The employer is an automobile dealership within the meaning of the exemption. Here, the Ninth Circuit concluded that, under the most natural reading of the statute, Congress did not intend to exempt service advisors. Even if the text were ambiguous, the court noted that the legislative history confirmed that Congress intended to exempt only salesmen selling cars, partsmen servicing cars, and mechanics servicing cars. It did not intend to exempt service advisors.

Selling or servicing. Looking only at the statutory exemption’s list of job titles, service advisors were excluded. Congress’ choice to exempt three—not four—job titles suggested that service advisors were not exempt. Next, the appeals court considered whether service advisors primarily engage in selling or servicing cars. Service advisors may be salesmen of a sort, but they do not qualify as salesmen primarily engaged in selling cars because they do not sell cars. Moreover, a service advisor neither performs any repairs nor provides any maintenance. Instead, a service advisor “wait[s] on customers who bring their automobiles in for maintenance and repairs.”

The Ninth Circuit concluded that the phrase “primarily engaged in selling . . . automobiles” encompasses only those who are actually and primarily occupied in selling cars, and it concluded that the phrase “primarily engaged in . . . servicing automobiles” encompasses only those who are actually and primarily occupied in the repair and maintenance of cars. Because service advisors meet neither definition, the FLSA did not exempt them from overtime compensation.