May 25, 2018 | Court Rulings
The U.S. Supreme Court recently ruled that service advisors at car dealerships, whose jobs included selling repair and maintenance services, are not eligible to receive overtime. According to the Court, they’re covered by the provision in the Fair Labor Standards Act (FLSA) that exempts any salesman, parts man, or mechanic who is primarily engaged in selling or servicing automobiles from being eligible for overtime pay. Over the years, this issue has been litigated many times, including as recently as last year by the U.S. Court of Appeals for the Ninth Circuit, which came to the opposite conclusion.
The Facts of the Case
Encino Motorcars, the defendant, sold and serviced new and used Mercedes-Benz automobiles. The defendant employed the plaintiffs as “service advisors.” Service advisors greeted vehicle owners when they came to the dealership’s service area. They listened to customers’ concerns about their vehicles, evaluated the repair and maintenance needs of the cars, suggested services to be done, recommended other services in addition to those that would resolve the customers’ concerns, wrote up estimates, and often checked in with the customers while the repair work was being done to suggest additional repairs and maintenance.
The service advisors claimed that Encino Motorcars violated the FLSA by not paying them overtime wages.
How the Appellate Court Ruled
In 2017, the U.S. Court of Appeals for the Ninth Circuit ruled that the service advisors were eligible to receive overtime. The Ninth Circuit said that the phrase “primarily engaged in selling… automobiles” includes only those who are actually and primarily occupied in selling cars. In addition, the phrase “primarily engaged in…servicing automobiles” includes only those who are actually and primarily occupied in the repair and maintenance of cars. The court ruled that the responsibilities of the service advisors weren’t included in either definition, and thus, the service advisors should be eligible to receive overtime.
How the Supreme Court Ruled
The Supreme Court reversed the Ninth Circuit’s ruling. It stated that a service advisor is “obviously a salesman.” The term “salesman” is not defined in the law. The High Court also said that the standard meaning of “salesman” is someone who sells goods or services. It concluded that service advisors do exactly that — they sell services for customers’ automobiles.
The service advisors met the “primarily engaged in… servicing automobiles” requirement in the law, according to the Court. It referenced the Oxford English dictionary, which says that the word “servicing” in this context can mean either “the action of maintaining or repairing a motor vehicle” or “the action of providing a service.”
The High Court stated that the service advisors jobs satisfied both definitions. They were essential to the servicing process. They met customers; heard their concerns about their cars; recommended repair and maintenance services; sold new accessories or replacement parts; recorded service orders; followed up with customers as the services were completed (for example, if problems were discovered during a repair); and explained the repairs and maintenance work when customers returned for their vehicles. (Encino Motorcars, LLC, v. Navarro, U.S. Sup. Ct., Dkt. No. 16-1362)