On March 24, 2015, the Ninth Circuit Court of Appeals held that automobile service advisors – those friendly faces that evaluate your car troubles and recommend services and repairs – are not exempt from the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay requirements under the industry-specific exemption available to automobile dealerships.
The FLSA exempts from its overtime requirements “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” In the past, the U.S. Department of Labor had issued opinion letters and guidance confirming that this exemption made service advisors exempt. But the Department issued new regulations in 2011 that limited the reach of this exemption to salesmen who sell automobiles, as opposed to salesmen who sell services. Since then courts around the country (including the 4th and 5th Circuit Courts of Appeal) have generally disagreed with the Department’s 2011 regulations, finding them inconsistent with the statute. As a result, most automobile dealerships have continued to classify service advisors as exempt.
But, consistent with its reputation, the Ninth Circuit took a different road and deferred to the Department’s 2011 regulations and agreed that service advisors are not exempt under the automobile dealership exemption for salesmen, partsmen, and mechanics.
Despite the Ninth Circuit’s ruling, automobile dealerships in this jurisdiction may still classify service advisors as exempt, but they must rely upon a different exemption – such as the FLSA’s exemption for commissioned retail sales employees. There are, however, specific requirements that must be met to qualify for this exemption and dealerships would be wise to restructure service advisors’ compensation, job descriptions and duties to ensure compliance.
For further information regarding how to comply with the Fair Labor Standards Act, please contact any of the attorneys at BurnsBarton PLC.
