Service writers no longer exempt from overtime pay

Service writers no longer exempt from overtime pay

The U.S. Department of Labor (DOL) has reversed itself on a position it has held since 1978, ruling that service writers at dealerships are no longer exempt from overtime pay requirements.

The DOL had previously held that service writers were salespeople who are exempt from overtime pay rules, but it changed its mind earlier this month when it decided that selling activities are limited to selling vehicles and technician activities are limited to turning wrenches, and since service advisors do neither, they will not be considered exempt.

Dealer attorney Michael Charapp notes this is an edgy position for the DOL to take since it has not withdrawn its original opinion letter on the subject and the rule is contrary to three federal court of appeals decisions on the wage and hour statute. But Charapp cautions that dealers will still have to be concerned about DOL audits.

He also notes that service writers can still be exempted from the overtime pay rules under another provision of the wage and hour law, known as the 7(i) exemption, for employees paid commissions by retail establishments. There are three conditions that must be met for an employee to fit under the 7(i) exemption. These are:

1. The employee must be employed by a retail or service establishment, and

2. The employees regular rate of pay must exceed one and one-half times the applicable minimum wage for every hour worked in a workweek in which overtime hours are worked, and

3. More than half the employees total earnings in a representative period must consist of commissions.

The Department of Labor has the position that unless all three conditions are met, workers must be paid overtime for all hours worked over 40 in a workweek.

Charapp advises dealers to review service writer pay plans with the aforementioned developments in mind.