Legal Alert: Department of Labor Reverses Position on Exemption of Service Advisors Working for Automobile Dealerships

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In a further attempt to add to the heavy regulatory burden already placed on car dealerships, the Wage and Hour Division of the U.S. Department of Labor announced on April 5, 2011, that a proposed clarification for overtime requirements for service advisors would not be adopted. Therefore, the Department of Labor will not regard service advisors as exempt from overtime.

Section 13(b)(10)(A) of the Fair Labor Standards Act (29 U.S.C. §213(b)(10)(A)) provides that "any salesman, parts man or mechanic primarily engaged in selling or servicing automobiles . . . if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to the ultimate purchaser" is exempt from the Act's overtime requirements. Although the Department of Labor's current regulation which interprets this provision states that "a service manager, service writer, service advisor or service salesman who is not primarily engaged in the work of a salesman, partsman or mechanic is not exempt" (29 C.F.R. § 779.372(c)(4)), since 1987, the Department has adopted an enforcement position that it will not deny this exemption for service advisors. Wage and Hour Division Field Operations Handbook, Section 24L04(k). The agency took this position after numerous courts had rejected the Department's treatment of these persons as overtime eligible, concluding that the Department had misread the requirements of Section 13(b)(10)(A) of the Act. See generally Walton v. Greenbrier Ford, Inc., 370 F.3d 446, 452 (4th Cir. 2004) (service advisors are "functionally similar to the mechanics and parts men who service the automobiles. All these work as an integrated unit, performing the services necessary . . . with the service salesmen coordinating these specialties.")

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