Tuesday, January 17, 2017

On Remand, Ninth Circuit Holds that Car Service Advisors Do Not Fall within the Fair Labor Standards Act’s Car Salesman Exemption from Overtime Pay (Overturned by the United States Supreme Court in Encino Motorcars, LLC v. Navarro 584 U. S. ____ (2018))

Update: On April 2, 2018, the United States Supreme Court overturned the Ninth Circuit's decision in Encino Motorcars, LLC v. Navarro 584 U. S. ____ (2018).

On January 9, 2017 the Ninth Circuit held that car service advisors do not fall within the exemption from overtime-compensation for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” provided in § 213(b)(10)(A) of the Fair Labor Standards Act (“FLSA”). (Navarro v. Encino Motorcars, LLC, No. 13-55323, Slip Op. 4 (9th Cir. 2017)).

Individuals working as “service advisors” filed an FLSA overtime action against their employer, a dealership that sells and services new and used cars. Plaintiffs alleged that service advisors’ duties include: greeting car owners as they arrive at the dealership’s service area; evaluating cars’ repair and maintenance needs; suggesting services for cars; writing up estimates; and following up with customers. (Slip Op. 4-5)

The U.S. District Court for the Central District of California dismissed the overtime claim. Thus began the case’s long appellate journey. Initially, the Ninth Circuit reversed, holding that a 2011 regulation by the Department of Labor reasonably interpreted § 213(b)(10)(A) to exclude service advisors. The Supreme Court held that the Ninth Circuit’s first decision erred by relying on the 2011 regulation and vacated the decision. The Court then remanded to the Ninth Circuit to construe § 213(b)(10)(A) without deferring to the 2011 regulation. (Slip Op. 5)

On remand the Ninth Circuit performed a detailed inquiry into the text and legislative history surrounding § 213(b)(10)(A). After reviewing “the ordinary meaning of the exemption’s words and the rule that we must interpret exemptions narrowly,” the court concluded, “we are convinced that Congress intended to exempt only salesmen selling cars, partsmen servicing cars, and mechanics servicing cars.” (Slip Op. 23)

However, assuming for the sake of argument that the FLSA’s language leaves room for ambiguity, the court examined the legislative history of the amendments and held that “Congress did not intend to exempt service advisors.” The legislative history for the operative amendments to § 213(b)(10)(A) “reveal[s] clear concerns with applying the overtime-compensation requirement to exactly three categories of a dealership’s employees: automobile salesmen, partsmen, and mechanics. The extensive legislative record . . . contains hardly a mention of service advisors, and the few references that exist display no concern about overtime compensation for service advisors.” On these bases, the Court held that Congress did not intend to exempt service advisors. (Slip Op. 31)

In ruling that Congress did not intend to include service advisors within the § 213(b)(10)(A) exemption, the Ninth Circuit maintains a split with the Fourth and Fifth Circuits as well as the Supreme Court of Montana, each of which has held that car services advisors were exempt from overtime. Walton v. Greenbrier Ford, Inc., 370 F.3d 446 (4th Cir. 2004); Brennan v. Deel Motors, Inc., 475 F.2d 1095 (5th Cir. 1973); Thompson v. J.C. Billion, Inc., 294 P.3d 397 (Mont. 2013). Navarro's journey may include another trip to the Supreme Court.

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