Supreme Court Punts on Whether Service Advisors Are Exempt from FLSA Overtime Premium Pay

The United States Supreme Court recently issued its long awaited decision in Encino Motorcars, LLC v. Navarro. At issue in the case was whether “service advisors” employed by car dealerships are exempt from the Fair Labor Standards Act’s overtime premium pay requirement, as well as the validity of a related 2011 United States Department of Labor regulation. Unfortunately, the Court did not decide whether service advisors are exempt. Instead, the Court remanded the case to the Ninth Circuit Court of Appeals with the instruction that the Ninth Circuit decide the issue “without placing controlling weight” on the DOL’s 2011 regulation. The issues in Encino Motorcars were rooted in a provision of the FLSA that expressly provides that “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” is exempt from the FLSA’s overtime premium pay requirement. The FLSA is silent as to whether service advisors qualify for this exemption. In 1970, the DOL issued an interpretive regulation in which it concluded that service advisors do not fall within the exemption. Several courts rejected the DOL’s interpretation, and in a 1978 Opinion Letter the DOL changed course and took the position that service advisors are exempt. The DOL maintained this position until 2011, when it issued a regulation that, without explanation, excluded service advisors from the exemption. The Supreme Court’s opinion in Encino Motorcars arose from a Ninth Circuit decision in which the Ninth Circuit relied on the DOL’s 2011 regulation to hold that a group of service advisors were eligible for overtime premium pay. The service advisors at issue would meet with a customer, evaluate the customer’s car, suggest repairs and dealership service plans, and then send the car to a mechanic who repaired and/or serviced the car. In remanding the case, the Supreme Court found that the DOL failed to follow basic procedural requirements of administrative rulemaking, which require administrative agencies to explain their rules. The Supreme Court found this especially important here, where the DOL issued a rule contrary to its prior position. The Supreme Court was critical of the DOL for its failure to explain adequately its rationale for changing its position, and its failure to consider the public’s reliance on the DOL’s longstanding policy. Car dealerships will have to wait for the Ninth Circuit’s subsequent decision, and possibly another Supreme Court decision, before the issue of whether service advisors are exempt from the FLSA’s overtime premium pay requirement is resolved. For more information regarding the potential impact of the Supreme Court’s decision, or regarding any other wage and hour issues, please contact John R. Vreeland, Esq. Director of the Firm’s Wage & Hour Compliance Practice Group, at 973-535-7118 or jvreeland@genovaburns.com, or Joseph V. Manney, Esq. at 973-646-3297 or jmanney@genovaburns.com.