Navarro v. Encino Motorcars, LLC, 1/9/17, 9th Cir.
The issue facing 9C was whether the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201–219, requires automobile dealerships to pay overtime compensation to service advisors. The district court said no and threw the case out. Held: Reversed (again).
Plaintiffs are service advisors for a Mercedes dealership that sells and services Mercedes-Benz cars.
In 1970, the DOL had issued a regulation that the 213(b)(10) exemption did not encompass service advisors. In 1974, 29 U.S.C. § 213(b)(10) was amended. It excludes from overtime compensation “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” at auto dealerships.
In 1978, the DOL issued an opinion letter that stated, contrary to the agency’s regulation, service advisors were exempt under 29 U.S.C. § 213(b)(10)(A). In 2007, the DOL proposed to amend the 1970 regulation to make it consistent with the 1978 opinion letter, but in 2011 it reaffirmed its regulation that service advisors are not exempt from overtime. Confused yet?
In throwing the case out, the trial court must have relied on the DOL’s 1974 opinion letter; in reversing the trial court, 9C gave deference to the DOL’s 2011 final rule reaffirming the agency’s original 1970 position under the principles of agency deference described in Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).
The Supreme Court reversed, holding that the DOL’s 2011 regulation was arbitrary and capricious for lack of even minimal supporting analysis, and it therefore lacked the force of law under the Administrative Procedure Act: “This lack of reasoned explication for a regulation that is inconsistent with the Department’s longstanding earlier position results in a rule that cannot carry the force of law.”
On remand, 9C still reversed the trial court. This time it did an old fashioned statutory construction, giving no deference to the DOL’s 2011 regulation.
The court found that because the exemption only lists “salesman, partsman, or mechanic,” service advisors are not covered. And even if service advisors are “salesmen,” they are not selling cars. They are also not servicing cars because Random House defines servicing as maintaining or repairing cars. And that service advisors are integral to the servicing process doesn’t make them servicers.
It didn’t help the employer that exemptions are narrowly construed. Finally, the court examined the legislative history and saw nothing to suggest that Congress intended to cover service advisors, only salesmen and mechanics.
If you want to still use the exemption, you’ll have to open your dealership in 4C, 5C or Montana.