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Supreme Court hears dealership OT pay suit

April 22, 2016
The U.S. Supreme Court on April 20 heard arguments in the case of five service advisers at a California dealership who say they are entitled to overtime pay for their 55-hour workweeks. The dispute could have big implications for dealerships and their compensation structures.
A ruling is expected before the court completes its session in late June. If the justices vote 4-4 on the matter, the ruling of the 9th U.S. Circuit Court of Appeals, which sided with the service advisers, would be upheld, although the tie would mean the case would not set any sort of precedent.
In the case, Navarro v. Encino Motorcars, the employees contend that their job descriptions and functions qualify them for overtime pay. The dealership countered that service advisers, who can suggest additional work for a customer’s car that is not immediately needed, are primarily salespeople who also take part in the servicing of vehicles and thus are exempt from overtime under provisions observed by the Fair Labor Standards Act.
Dealers and many courts have long considered service advisers to be exempt from overtime pay, and dealerships have structured their bookkeeping and compensation practices accordingly, with many paying service advisers on commission.
"A salesman is an employee who sells cars; a partsman is an employee who requisitions, stocks and dispenses parts; and a mechanic is an employee who performs mechanical work on cars," the 9th Circuit wrote in its March 2015 decision, backing a 2011 U.S. Labor Department ruling on the matter. "Service advisers do none of those things; they sell service for cars."
The Labor Department has written that service advisers could be covered by a separate overtime exemption for retail and service workers who derive more than half of their earnings from commission and earn more than 1½ times the minimum wage.
Auto dealerships have enjoyed special treatment under the labor standards law since 1961, when it was amended to exempt all dealership employees from the overtime pay requirement. A 1966 update removed the blanket exemption but retained exemptions for "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" at dealerships.
According to the National Automobile Dealers Association, service advisers work an average of 47 hours a week.