Apr 09, 2018

Car Dealership Service Advisors Ruled Exempt From Federal Overtime Pay Requirements

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Service Advisors May Not Be Exempt Under State Law

On April 2nd, The U.S. Supreme Court ruled that service advisors—employees at car dealerships who consult with customers about their servicing needs and sell them servicing solutions—are exempt from the federal Fair Labor Standards Act (FLSA) overtime pay requirements. Previously, the U.S. Department of Labor and a federal appellate court held that a service advisor did not fall within the FLSA's overtime pay exemption category as a "salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles." However, employers of service advisors are reminded that these employees may still be eligible for overtime pay under state law.

The court ruled 5-4 that service advisers, who greet customers and propose various repair services, are salespeople. The case affects the more than 18,000 dealerships nationwide. Together, they employ more than 100,000 service advisers.

The case the high court made its decision in involves a Mercedes Benz dealership in Encino, California, and several current and former service advisers. Each side had a different interpretation of the Fair Labor Standards Act, which says that "any salesman ... primarily engaged in selling or servicing automobiles" doesn't have to be paid overtime.

The dealership argued that the definition of salesman clearly includes service advisers, who have a range of job responsibilities from helping to diagnose mechanical problems to preparing price estimates for repairs. Service advisers had argued that they weren't covered by the definition.

Justice Clarence Thomas wrote in a majority opinion that the "ordinary meaning of 'salesman' is someone who sells goods or services" and that service advisers "do precisely that."

In a dissent, Justice Ruth Bader Ginsburg wrote that because service advisers "neither sell nor repair automobiles" they should not be exempt from overtime payments.

The issue came to the high court after the Department of Labor changed its interpretation of the Fair Labor Standards Act in 2011. For the three decades up to then, the department operated under the view that service advisers didn't have to be paid overtime.

The recent decision was the second time the court has ruled in the case. In an earlier round of litigation, the U.S. Court of Appeals for the 9th Circuit ruled that service advisers were entitled to overtime. But in 2016, following the death of Justice Antonin Scalia, an eight-member Supreme Court sidestepped the overtime question and told the appeals court to take another look at the case. After a second look, the appeals court once again ruled in favor of the service advisers.



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