The first week of April brought with it more than showers; it also brought an employer-friendly ruling from the Supreme Court of the United States (“SCOTUS”) regarding overtime pay exemptions!
In Encino Motorcars, LLC v. Navarro et al. (US 16–1362 4/2/18), current and former service advisors at Encino Motorcars, LLC (“Encino Motorcars”), a car dealership in California, sued Encino Motorcars for backpay in 2012, claiming that it had violated the Fair Labor Standards Act (“FLSA”) by misclassifying them as exempt from overtime pay.
The FLSA exempts “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” from overtime pay. Service advisors do not fit neatly into any of these three categories, as their role, both in this case and generally throughout the automotive industry, was to greet customers upon arrival, listen to customers’ concerns about their vehicles, assess the repair and maintenance needs, suggest services, and provide estimates, among other tasks. Employers have argued that service advisors are similar to salesman and therefore are properly exempt while plaintiff attorneys have argued that they do not fit the definition of the exemption.
The district court dismissed the plaintiffs’ claim, concluding that a service advisor is a “salesman…engaged in…servicing automobiles” and is therefore exempt from overtime under the FLSA. On appeal, the Ninth Circuit disagreed and concluded that the exemption does not include service advisors, deferring to a 2011 Obama-era DOL rule that specifically excluded service advisors from overtime pay exemption because they do not service automobiles personally.
In a narrow 5-4 opinion, SCOTUS overturned the Ninth Circuit’s decision and sided with the district court. SCOTUS held that service advisors are indeed exempt from overtime pay as salesmen under the FLSA. In a dissenting opinion, Justice Ginsburg argued that the term “salesmen” was meant to cover only employees who sold automobiles to customers and that it was not intended to include those who sold services to customers. Justice Ginsburg also noted that the majority’s ruling represented a massive departure from precedent, as it allegedly rejected the long-held principle of “narrowly construing” FLSA exemptions.
COUNSEL TO MANAGEMENT:
SCOTUS’ employer-friendly decision in this case shines a hopeful light on future employment-related rulings. However, its immediate consequences are rather specific and limited – service advisors are officially exempt from overtime under the FLSA.
If you find yourself facing allegations of misclassification, please contact the experts at The Saqui Law Group.