The Federal Fair Labor Standards Act (FLSA) requires that covered employees who work more than forty hours in a week be paid overtime. However, the statute contains a number of exemptions removing certain groups of employees from the law’s protections. These “exempt” employees are not entitled to overtime pay when they work more than forty hours in a week, whereas “non-exempt” employees must be paid at the higher overtime rate for excess hours.
One of the FLSA’s exemptions applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” For many years, it was generally understood that this exemption included auto service advisors—those auto dealership employees who meet customers, listen to their concerns about their cars, suggest repair and maintenance services, sell accessories and replacement parts, and explain the repair work to customers once completed. However, in 2011, the Department of Labor changed its position, and determined that service advisors were non-exempt, a decision which led to litigation. In a newly-issued opinion, Encino Motorcars, LLC v. Navarro, a divided U.S. Supreme Court resolved the issue by holding that service advisors are exempt.
At issue in the case was whether service advisors are “salesmen … primarily engaged in … servicing automobiles.” Writing for the five-justice majority, Justice Clarence Thomas noted that it is beyond question that service advisors are salespeople in that they sell services. And while service advisors generally do not do the hands-on work of auto repairs, Justice Thomas wrote that they are “integral to the servicing process.” The majority decision also discusses how technical principles of statutory interpretation and a lack of convincing legislative history support the conclusion that service advisors are exempt under the FLSA.
While yesterday’s decision will obviously be of interest to owners of auto dealerships, the case may also have broader implications. In his majority opinion, Justice Thomas noted that, by interpreting the FLSA’s auto dealership exemption provision to include service advisors, the court was “reject[ing]” the principle that FLSA exemptions should be construed narrowly. Justice Thomas wrote that “the FLSA gives no textual indication that its exemptions should be construed narrowly” and therefore “there is no reason to give them anything other than a fair (rather than a narrow) interpretation.” Justice Ruth Bader Ginsburg, writing for the four dissenting justices, wrote that “[t]he reach of today’s ruling,” with its expansive reading of the FLSA’s exemption language, “is uncertain, troublingly so.”
It will remain to be seen if the reach of the Encino Motorcars decision will remain confined to a small group of auto dealership employees, or if, as suggested by Justice Ginsburg, it signals a coming trend of expansive interpretation of who is exempt under the FLSA and who is not.