Supreme Court to Review “Service Advisors” Entitlement to Overtime

January 19, 2016 Alerts and Newsletters

The following was originally posted to Verrill Dana's Labor & Employment law blog, Taking Care of HR Business at:

(1/19/2016) On Friday, the United States Supreme Court granted certiorari in a case where it will determine "whether 'service advisors' at car dealerships are exempt . . . from the FLSA's overtime pay requirements." Up for review is the Ninth Circuit's decision in Encino Motorcars, LLC v. Navarro, No. 13-55323 (9th Cir. Mar. 24, 2015), in which the Ninth Circuit found that Mercedes Benz "service advisors" did not personally service automobiles and therefore were not subject to the overtime exemption. The "service advisors" instead, "meet and greet Mercedes Benz owners as they enter the service area of the dealership and then . . . evaluate the service and/or repair needs of the vehicle owner in light of complaints given them by these vehicle owners." The plaintiff employees were paid on a commission basis only, receiving neither hourly wages or a salary.

The FLSA overtime pay provision in question provides that overtime for employees who work over forty (40) hours in a workweek, does not apply to: "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers".

The Ninth Circuit noted, "It is not clear from the text of the statute whether Congress intended broadly to exempt any salesman who is involved in the servicing of cars or, more narrowly, only those salesmen who are selling the cars themselves." Instead, the court relied upon a 2011 Labor Department regulation that noted that service advisors do not fall within the exemption because they are not personally servicing automobiles. That regulation defined salesman as "an employee who is employed for the purpose of and is primarily engaged in making sales or obtaining orders or contracts for sale of the automobiles, trucks, or farm implements that the establishment is primarily engaged in selling," while a partsman is "any employee employed for the purpose of and primarily engaged in requisitioning, stocking, and dispensing parts," and a mechanic is defined as "any employee primarily engaged in doing mechanical work (such as get ready mechanics, automotive, truck, or farm implement mechanics, used car reconditioning mechanics, and wrecker mechanics) in the servicing of an automobile, truck or farm implement for its use and operation as such." 29 C.F.R. § 779.372(c). In concluding that "service advisors" were not covered by this exemption, the Ninth Circuit acknowledged that the holding conflicted with rulings in "the Fourth and Fifth Circuits, several district courts, and the Supreme Court of Montana," all of which have held that service advisors are exempt employees. Other courts have refused to defer to the Department of Labor's "counter-textual interpretation" of the FLSA exemption which limits salesmen to only those who sell cars and not those who sell (or up sell) services.

For our vehicle dealership clients and friends who are currently categorizing all sales associates (in both the service center and the dealership) as exempt employees, the Supreme Court's decision to grant certiorari on this issue could potentially affect overtime requirements as to a significant portion of your service sales force. Verrill Dana's Labor and Employment Practice Group will keep clients advised when the Court rules on this issue.

This communication is intended for general information purposes and as a service to clients and friends of Verrill Dana, LLP. This publication, which may be considered advertising under the ethical rules of certain jurisdictions, should not be construed as legal advice or a legal opinion on any specific facts or circumstances, nor does it create attorney-client privilege.

Firm Highlights


Nearly 80 Verrill Attorneys Recognized by Best Lawyers® 2021, Including a Dozen Named Lawyers of the Year

(August 24, 2020) – Nearly 80 Verrill attorneys were recognized as "Best Lawyers" by Best Lawyers® 2021 , including 12 attorneys named “Lawyer of the Year,” a distinguished recognition for only a single lawyer...


Discrimination Defense

We successfully defended a large aviation ground handling service company against claims of violation of the ADA and the FMLA—garnering summary judgment in their favor.


Should You Adjust Your Plans Based on the New PPP Forgiveness Guidance?

Your inbox is likely flooded with news about the forgiveness guidance from the Small Business Administration (SBA) that came in the form of instructions on how to fill out the application. These instructions provided...


This Week's Show: Why Diversity and Inclusion Programs Fail

On Saturday, September 19, Tawny interviewed Asker Saeed, Principal of Saeed Consulting LLC, for this segment of HR Power Hour. For this episode, Asker and Tawny discuss why diversity and inclusion programs fail...


This Week's Show: Purposeful Leadership

On Saturday, September 12, David Ciullo, co-host of HR Power Hour, interviewed Jennifer McCollum, CEO of Linkage, Inc. , for this segment of HR Power Hour. For this episode, David and Jennifer discuss purposeful...


As the Economy Reopens, Businesses Must be Aware of Possible Lawsuits

On May 11, the Bangor Daily News published an article, "Lawsuits may be next battleground for businesses as pandemic economy reopens," where legal experts give insight on the lawsuits to come as businesses begin...


Discrimination Defense

We successfully defended a regional hotel chain against administrative claims of ADA and MHRA disability discrimination.


Employee Non-Competition and Non-Solicitation Restrictions: Traps for the Unwary

On Tuesday, October 6, employment and labor attorneys Tawny Alvarez and Scott Connolly will be presenting with The Middlesex Corporation Vice President and General Counsel Joshua Wernig for Verrill and ACC Northeast's program, Employee...


Webinar Materials: Avoiding Risk & Litigation in the COVID-19 Work Environment

On May 28, Verrill attorney Tawny Alvarez and MassPay's Paul Carelis presented "Avoiding Risk & Litigation in the COVID-19 Work Environment" and discussed unknowns and liabilities for businesses when returning to work begins. Our...


Action Item & FAQ: New Maine Paid Leave Rules Address Business Concerns

On January 1, 2021, LD 369, An Act Authorizing Earned Employee Leave takes effect for Maine employers. Passed by the Legislature in 2019, Maine employers have been patiently waiting for clarification as to the...