Supreme Court to rehear case on overtime exemption for service advisors

The U.S. Supreme Court has said it will again hold hearings on a case involving overtime pay for dealer service advisors. NADA will work with the state dealer associations to file a “friend of the court” brief on behalf of the dealers.

For nearly 35 years, auto dealers have relied on the Department of Labor’s position that service advisors were exempt from overtime. In 2011, the DOL issued regulations saying that the exemption did not apply to sales personnel unless they sell vehicles. That meant that, according to the DOL, service advisors suddenly were eligible for overtime pay.

In light of that DOL interpretation, service advisors at Encino (CA) Motorcars, sued the Mercedes-Benz dealership, demanding overtime pay under the Fair Labor Standards Act (FLSA). The dealer won in federal district court, but that decision was overturned in appeals court. The Supreme Court held hearings and sent the case back for retrial.

The Ninth Circuit court in California concluded that when Congress wrote the FLSA, it did not intend for service advisors to be exempt from overtime. The act exempts “salesmen, partsmen, or mechanics primarily engaged in selling or servicing automobiles.” The question was whether service advisors were covered by that definition. So dealers in California and other Western states that are covered by the Ninth Circuit lost the exemptions.

Meanwhile, the Fourth Circuit, which covers Maryland, Virginia, West Virginia and North and South Carolina, reached the opposite conclusion in a similar case. The court here determined that at least half of the service advisor’s “specific job responsibilities” were “service and sales related functions.” So service advisors are exempt from overtime.

The Supreme Court will resolve the difference between the Circuit Court decisions. As in the past, NADA is providing support to the dealers who are litigating the California case. The association anticipates that the Supreme Court will rule in favor of the dealer defendants and all the dealers who for decades have applied the overtime exemption to service advisors.

Briefing in the case will begin later this year, with oral arguments scheduled for some time in 2018.

Thanks to NADA and Shawe/Rosenthal, an employers’ management law firm, for providing information for this article.

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