Hey Compliance Warriors!
On September 28, 2017, the U.S. Supreme Court agreed to hear a case in regarding the FLSA’s overtime exemption covering “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” The case is Encino Motorcars v. Navarro, No. 16-1362. Read on…
“On September 28, 2017, the U.S. Supreme Court agreed to hear a case in which the Court will be asked to decide whether the FLSA’s overtime exemption covering “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” The case is Encino Motorcars v. Navarro, No. 16-1362.
If this sounds like déjà vu to anyone, that’s because the Supreme Court heard and issued a ruling on this very same case in June 2016. As we explained in our summary of that decision, the Court punted on the ultimate question of whether service advisers are exempt. Instead, it held that the DOL regulations that the Ninth Circuit Court of Appeals relied upon to hold that service advisers are not exempt were invalid. Rather than decide the matter, the Court remanded the case back to the Court of Appeals for reconsideration. On remand, the Court of Appeals reconsidered the issue without reference to the views of the Department of Labor. Looking solely at the language and intent of the statute, the Court of Appeals once again found that service advisers do not fall within the meaning of the terms “salesman, partsman, or mechanic” as used in the FLSA.
This ruling once again puts the Ninth Circuit’s position on the exemption at odds with rulings in the Fourth and Fifth Circuits. This time around, we anticipate that the Supreme Court will definitively resolve the issue one way or another.
In the meantime, automobile dealerships that employ service advisers or service writers should continue to think carefully before relying on the sales / parts / mechanics overtime exemption. Even in those circuits where the Courts of Appeals have ruled that the exemption applies to service advisers, a different ruling from the Supreme Court would supersede those decisions. Further, auto dealers should be mindful that state law might differ from federal law. In Illinois for example, the Illinois Minimum Wage Law provides an exemption for salesmen and mechanics, but does not include partsmen. 820 ILCS 105/4a(2)A. For the moment it’s not clear how a ruling on the federal exemption would affect the law in Illinois.
Until all of this is sorted out, auto dealers who wish to classify their service writers or service advisers as exempt from overtime may wish to focus on the FLSA Section 7(i) exemption for employees of retail or service establishments who are paid primarily on a commission basis. For more information on how service advisers can fall under that exemption, check out this post.”
Until Next Time, Be Audit Secure!