Auto Dealer Cannot Apply FLSA’s Auto-Dealer Exemption to Service Advisers

March 30, 2015 by Susan Garea

The federal Fair Labor Standards Act’s requirement that employers pay overtime pay for all hours worked over 40 in a week is riddled with exceptions.  One of these is for any “salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles . . .” employed by an auto or truck dealer.  In a decision issued March 24, the Ninth Circuit parted company with other courts and concluded that “service advisors” − employees charged with selling auto service and repair − do not fall under this exemption.

The Ninth Circuit reached its decision by deferring to a Department of Labor regulation that applies the auto-dealer salesman’s exemption only to salesmen who primarily sell automobiles − and not to salesmen who primarily sell service.  Other courts that have considered this question, including the trial court in this case, have refused to defer to the DOL’s regulation, rejecting it as unreasonably ignoring the functional similarity between service advisors and the admittedly exempt dealer employees, all of whom are involved in the general business of “selling” and “servicing cars.”  The Ninth Circuit, on the other hand, emphasized the long-accepted practice of interpreting FLSA exemptions narrowly in concluding the DOL regulation to be reasonable.

Given the split among courts, the issue could go to the Supreme Court.  California does not have a similar exemption.

The plaintiffs’ fight in this case is not over.  These Service Advisers are paid strictly by commission, and both the FLSA and California have overtime exemptions for employees of retail establishments who receive at least half their compensation from commissions and who earn at least one-and-a-half times the minimum wage.

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