Phone: 630-495-2282 Fax: 630-495-2260 Map/Directions

Supreme Court to hear case on service advisor overtime pay

January 29, 2016
The U.S. Supreme Court has agreed to hear a case that will determine whether auto dealership service advisors, who are responsible for evaluating vehicles and suggesting repairs to their owners, qualify for an exemption from the overtime requirements of the Fair Labor Standards Act.
The 9th Circuit Court of Appeals, headquartered in San Francisco, last year ruled in Navarro v. Encino Motorcars, LLC that service advisors are not eligible for an FLSA exemption for (in the gendered language of its day) a "salesman, partsman or mechanic primarily engaged in selling or servicing automobiles." The ruling conflicted with rulings by other courts that held the opposite, notably the 4th and 5th Circuits.
The entire issue was further complicated in 2011, when the U.S. Department of Labor changed its long-standing position and issued a new regulation which limited this exemption strictly to salespeople who sell cars exclusively and to parts workers and technicians who service cars (but not service advisors).
In the Navarro case, the California dealership conceded that its service advisors did not fit within the parameters of this regulation. But it argued that the court should not defer to the regulation because the statute was ambiguous and could be interpreted to cover service advisors.
The 9th Circuit rejected that argument, saying the statute also could be interpreted to define a salesperson as an employee who sells cars; a parts worker as an employee who requisitions, stocks, and dispenses parts; and a technician as an employee who performs mechanical work on cars.
"Service advisors do none of those things; they sell services for cars. They do not sell cars; they do not stock parts; and they do not perform mechanical work on cars," the court stated.
The dealership appealed to the Supreme Court, arguing that the Navarro ruling:
• Conflicts with rulings from the 4th and 5th Circuits;
• "Badly misconstrue[s]" the statute because "a service advisor is integral to the process of servicing vehicles at a dealership, and is the paradigmatic ‘salesman’"; and
• Will upend "decades of settled precedent" by which 18,000 franchised car dealerships have treated an estimated 45,000 service advisors as exempt, basing compensation packages primarily on sales commissions rather than hourly wages.
The plaintiffs, in turn, responded that:
• There is not in fact a split in the circuits because the 4th and 5th Circuit rulings cited by the dealership predate the DOL’s regulation, which was issued in 2011;
• The 9th Circuit was correct in deferring to the DOL’s regulation because the original statute was ambiguous; and
• Any decision would have limited effect because most service advisors also could be exempt from overtime pay under an FLSA exemption for commissioned salespersons.
It is uncertain when the Supreme Court will issue a ruling in the Navarro case, but it could happen before the end of the Court’s current term at the end of June. Any dealer with questions about these developments should contact CATA Employee Relations Counsel Dave Radelet at or (312) 786-6190.