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Dealers win important wage and salary court case

November 22, 2010

SAN FRANCISCO—Automobile dealer finance and insurance managers are exempt from overtime under Section 7(i) of the Fair Labor Standards Act, or the federal wage and hour law, the 9th Circuit Court of Appeals decreed in May.

If the original trial court decision had not been reversed, dealerships across the country would have been faced with multi-million dollar class-action lawsuits seeking back wages for finance and insurance managers.


Since dealers first became subject to the federal wage and hour law, dealers had relied on the Section 7(i) exemption from overtime. Section 7(i) provides that if (1) more than one-half of the employee’s earnings are from commission and (2) the employee earns one and one-half times the minimum wage for all hours worked, the employee is exempt from overtime. 

The validity of the Section 7(i) exemption was never questioned until three courts in the Northwest issued decisions holding that auto dealership finance and insurance managers were not selling retail products—and, therefore, not entitled to the exemption.


The appeal was pursued by attorneys representing Haselwood Buick-Pontiac in Bremerton, Wash, and by the U.S. Department of Labor, which stated that the decisions of the district courts were absolutely contrary to the federal wage and hour law.