For more than half a decade, the federal Ninth Circuit Court of Appeals, notorious for its progressive decision making, has been out of step with decisions from other federal circuits and district courts that have considered the language of the car dealer exemption to the Fair Labor Standards Act as it applies to service advisors. The statute in question exempts from overtime:
- any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a non-manufacturing establishment primarily engaged in the business of selling such vehicles orimplements to ultimate purchasers
Most courts that have reviewed this language have taken a common sense reading and have said that a service advisor is a “salesman”. And there has never been a question that a dealership is a “non-manufacturing establishment primarily engaged in the business of selling such vehicles…to ultimate purchasers.” As analyzed by the United States Supreme Court, the United States Department of Labor, Wage and Hour Division (“WHD”), agreed from 1978 to 2011 that service advisors were exempt from overtime.
The change came in 2011 when the Obama-era WHD attempted to reverse course. It issued a regulation that a service advisor was not a “salesman”. In 2012, using that interpretation, service advisors at a Mercedes Benz dealership in California sued for back pay alleging the dealership did not pay them overtime. The trial court agreed with the employer, but the federal Ninth Circuit Court of Appeals sided with the Obama administration WHD by holding that service advisors are entitled to overtime pay. The United States Supreme Court took up the case and reversed it on a very narrow ground that the WHD’s rule was procedurally defective. It returned the case to the Ninth Circuit Court of Appeals that again held that service advisors are entitled to overtime pay, leading the Supreme Court to again hear the case.
The decision should not have been this difficult. The language of the statute appears clear. However, the Ninth Circuit Court of Appeals, and four of the Supreme Court justices who reviewed it, felt that the language should be narrowly construed to tightly define who is a salesman, a partsman, or a mechanic. Therefore, a service advisor, being none of those by that reasoning, should be entitled to overtime pay. The United States Supreme Court settled the issue in a split decision for the dealership – a win for all dealerships.
The Supreme Court found: “Under the best reading of the text, service advisors are ‘salesm[e]n,’ and they are ‘primarily engaged in…servicing automobiles.’”
The decision of the United States Supreme Court, a victory for common sense statutory construction, settles the dispute stirred up by the Obama-era WHD more than half a decade ago. Even in states covered by the Fourth Circuit Court of Appeals (Maryland, North Carolina, South Carolina, Virginia, and West Virginia) that long ago decided service advisors are exempt from overtime pay, dealers feared that a Supreme Court decision going the other way could have led to years of litigation by service advisors seeking back pay for overtime. Absent Congressional change in the statute, service advisors are not entitled to overtime pay.