Supreme Court Holds That Service Advisors are Exempt from the FLSA’s Overtime Requirements

In a 5-4 decision, the Supreme Court on Monday held in Encino Motorcars, LLC v. Navarro, et al., that current and former service advisors in a car dealership were not entitled to overtime under the Fair Labor Standards Act. The Court ruled that the service advisors were exempt from overtime under 29 U.S.C. §2113(b)(10)(A), which applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements. . .”

The service advisors claimed that while their job description required them to attempt to sell additional services beyond what prompted the customers’ visits, they did not sell cars or perform repairs. The majority of the Supreme Court disagreed with the service advisors and stated that the question is whether service advisors are “salesm[e]n . . . primarily engaged in . . . servicing automobiles.”  The Court concluded that they were. Much of the majority opinion and the dissent focused on the grammatical interpretation of the use of “or” to disjoin three types of employees doing two types of work on three kinds of products. The majority found that the language meant that a salesman primarily engaged in servicing automobiles was exempt, while the dissent argued that a salesman had to be engaged only in selling automobiles to qualify.

The service advisors also argued that the FLSA exemptions should be construed narrowly. The Supreme Court also rejected this argument because, according to the majority, the FLSA gives no “textual indication” that its exemptions should be construed narrowly and that there was no reason to give them “anything other than a fair (rather than a ‘narrow’) interpretation.” Notably, the Court stated that exemptions contained in the FLSA are to be construed just the same as the basic protections in the Act, noting that exceptions are often the price paid to have the law passed in the first place.

This is the second time this case has been before the Supreme Court.  In 2011, the Department of Labor issued a rule that interpreted “salesmen” to exclude service advisors, and the Ninth Circuit deferred to that administrative determination. In 2016, the Supreme Court, in its prior Encino Motorcars’ decision, held that courts should not defer to that rule because it was procedurally defective. The Supreme Court remanded the case back to the Ninth Circuit Court of Appeals to address whether service advisors are exempt. The Court of Appeals for the Ninth Circuit held on remand that service advisors were exempt without regard to the 2011 interpretation and that decision was reversed by the Supreme Court on April 2.