Retail automotive dealerships enjoy a special exemption from the overtime provisions of the Fair Labor Standards Act. Section 13(b)(10)(A) of the FLSA provides an overtime exemption for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles….” For decades, automobile dealerships and the Department of Labor have struggled with the application of the industry exemption to jobs which are similar but not specifically listed in the statute. These include finance and insurance sales, paint and body shop employees, and service advisors.
In a modern dealerships, service advisors serve as liaisons between customers and mechanics. They provide estimates, arrange for loaner cars and resolve problems with repairs or delays in repairs. Over the years, DOL has taken differing positions with regard to the exempt status of automobile dealership service advisors. In recent years, the agency issued an opinion letter stating that these workers do not meet the qualifications for the Section 13(b)(10)(A) exemption. Federal courts have largely disagreed with this interpretation, but last year in Encino Motorcars, LLC v. Navarro, the Ninth Circuit Court of Appeals deferred to the DOL opinion, concluding that service advisors fall outside the statutory overtime exemption.
On January 15, the U.S. Supreme Court accepted review of Navarro. The Court’s decision should resolve the circuit court split and provide guidance on the scope of the automotive industry overtime exemption. Although the decision could limit its application to service advisors, a broad reading of the statutory exemption could prompt dealerships to extend exempt status to other related occupations.
The Section 13(b)(10)(A) exemption only applies to overtime and not minimum wage. Unless service advisors fall within another FLSA exemption (some dealerships classify service advisors as exempt commissioned employees), dealerships would be required to maintain accurate records of hours worked to assure that minimum wages are paid. Also, individual states have the ability to pass stricter laws applying overtime requirements to these employees. The Court should reach a decision in Navarro by late spring.
