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Car Dealerships, Overtime, and the Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (“FLSA”) sets important employment law standards, such as minimum wage and overtime pay, as a skilled overtime lawyer can explain. The US Supreme Court recently made an important ruling in the domain of overtime payments and the FLSA, particularly with regard to car dealerships. With Encino Motorcars v. Navarro, the Court held that service advisors at car dealerships are not covered by the FLSA protections around overtime. In other words, they are exempt from this law and not entitled to its benefits. “Service advisors” are the service salespeople and those who service cars. The Court, in holding these workers exempt from the FLSA, essentially reversed the Ninth Circuit’s ruling that they were non-exempt, i.e., that they were covered by the law and were entitled to overtime pay.

Service Advisors Before the Law

In 1961, Congress amended the FLSA to exempt everyone who worked at car dealerships. Then, in 1966, Congress narrowed the exemption, including people “engaged in selling or servicing automobiles.” Until 2011, the Department of Labor stood by a similar opinion, that service advisors were exempt from overtime pay requirements. However, in 2011, the Department flipped this opinion, stating that they were not exempt from the law, and thereby should get overtime. Then, a dealership brought suit, landing the case in the Ninth Circuit (ruling they were not exempt), and finally up to the Supreme Court (disagreeing with the Ninth Circuit and ruling that they were exempt).

Basically, according to the Court in Encino, because of the kinds of activities that people conducting sales and servicing at dealerships do, they fit within the definition of exempt employees in the FLSA. For this reason, workers who perform these jobs should not get overtime protections. So, because Congress originally intended them to be exempt when it created the FLSA, this should hold true into the present according to the Court, and therefore these workers should still be considered exempt. While the rules have undergone changes over the years, the Court established the law of the land in Encino.

The Future?

Finally, the Court rejected the Ninth Circuit’s argument that the exemptions under the FLSA reaching back to when it was created should be construed narrowly and limited. In other words, because the Court’s ruling also rejected the idea that FLSA exemptions ought to be read in a more limited way, this effectively means potentially other workers – beyond these service advisors – might also be exempt from the requirements as well. Hence, while this case has particularly significant meaning for dealerships, it also could signal that overtime and other FLSA issues might be more up for debate now.


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