By: Keith Clouse, Clouse Brown PLLC

This month, the U.S. Supreme Court announced that employees who work as service advisors at car dealerships are exempt from coverage under the Fair Labor Standards Act (FLSA), meaning that such employees are not entitled to receive overtime pay.

The FLSA requires employers to pay covered employees time and a half for any time worked beyond the 40-hour per-week statutory maximum. However, the FLSA also lists numerous categories of employees who are exempt from receiving overtime compensation. One such exemption is that for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” 29 U.S.C. § 213(b)(10)(A).

In its 5-4 decision in Encino Motorcars, LLC v. Navarro, the Supreme Court concluded that the phrase “primarily engaged in … servicing automobiles” includes some employees beyond those who manually repair and maintain cars. The Court held that by interacting with customers and suggesting repair and maintenance services, car dealership service advisors are “integral to the servicing process,” and thus fall under the language of the exemption. In arriving at this conclusion, the Court rejected the traditional notion that “exemptions to the FLSA should be construed narrowly.”

Rather, the Court noted that such a strict construction is unsupported by the text of the FLSA, concluding that exemptions should be given a “fair reading” instead. This expansive stance on statutory interpretation marks a significant departure from previous precedent, signaling that the Court may be inclined to broadly construe other FLSA exemptions in the future.

The four-justice dissent criticized the Court’s expansive read of the exemption, describing the ordinary meaning of “servicing” as “the action of maintaining or repairing a motor vehicle,” and noting that service advisors neither maintain nor repair cars.

Highlighting the importance of the FLSA’s legislative history, Justice Ruth Bader Ginsburg described Congress’s 1966 amendment to the FLSA, which changed the previous blanket exemption of all automobile dealership employees to explicitly enumerate only the three occupations listed in the current statute: “salesmen, partsmen, and mechanics.”

Thus, by leaving numerous other car dealership employees as not exempt, the dissent argued that this indicates a legislative intent to limit the exemption to only those three categories of employees. The dissent emphasized that by creating a fourth exemption for service advisors, the Court has essentially undermined the entire purpose behind Congress’s 1966 amendment.

Ultimately, this case marks a win for car dealerships who no longer are required to pay overtime wages to service advisors. Further, this decision provides a potential avenue for employers to argue that other employees may be exempt from the FLSA under the Court’s broadened statutory interpretation. However, employers should tread with caution when classifying employees as either exempt or non-exempt from the FLSA because the ultimate burden of establishing proper classification in court rests with the employers.

For assistance with compliance with the FLSA, responding to Department of Labor investigations, or other employee compensation laws, contact Clouse Brown PLLC. Our attorneys are available to assist employers in complying with the FLSA and other federal and state employment statutes. We also advise business owners and executives who may face personal liability under the FLSA.

Keith Clouse

About Keith Clouse

Keith Clouse is an employment law specialist with over 25 years of experience representing senior-level and C-suite executives, business owners, physicians, and corporations in complex employment litigation, arbitration, and negotiations. High-level business executives, physicians, and other professionals consistently rely on Mr. Clouse for employment law expertise and advice on employment contracts, covenants not to compete, severance agreements, equity awards, trade secret disputes, and breach of fiduciary duty claims. He is Board Certified in Labor and Employment Law by the Texas Board of Legal Specialization. He can be reached at keith@clousebrown.com.

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