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By: NHADA

Wage & Hours

Service Writers Not Eligible For Overtime

The Supreme Court on Monday, June 20, issued an opinion in Encino Motorcars v. Navarro, vacating a 2015 Ninth Circuit Court of Appeals decision that had held that dealership "service writers" are not covered by the federal "salesmen" exemption from overtime pay. In doing so, the Supreme Court expressly rejected a 2011 U.S. Department of Labor (DOL) interpretative regulation that service writers/advisors are not "salesmen" exempt from overtime. In particular, the Court faulted DOL for failing to give adequate weight to dealerships' reliance interests during the rulemaking process, and for failing to provide a "reasoned explanation" for the abrupt change of policy. The Supreme Court's decision requires the Ninth Circuit to reconsider its prior decision consistent with the language of the Fair Labor Standards Act (FLSA) without giving "controlling weight" to the DOL's 2011 regulation.  
 
In March 2015, the federal Ninth Circuit Court of Appeals ruled that service writers are not exempt from overtime as "salesmen." That decision was based on the Ninth Circuit's conclusion that preamble language found in a 2011 DOL rulemaking constituted an interpretation of the FLSA entitled to legal deference. Together with the state dealer associations covered by the Ninth Circuit, NADA filed an amicus brief in support of a certiorari petition with the U.S. Supreme Court. The Supreme Court granted "cert" in January and heard oral argument in April. Former Solicitor-General Paul Clement expertly (and successfully) argued on behalf of the petitioner with NADA's amicus brief being cited several times during the argument and in the Opinion itself.  

Unless exempt, employees are generally entitled to an overtime pay premium for all hours worked over 40 in a workweek. Congress amended the FLSA in 1966 to exempt dealership "salesmen, partsmen, and mechanics" from the federal overtime pay entitlement. Soon after, the Department of Labor (DOL) issued a rule narrowly interpreting the statute to exclude service advisors. In 1973, the Fifth Circuit rendered the first of several uncontroverted federal court decisions spanning three Circuits finding the DOL's rule to be unduly restrictive and holding that service advisors do fall within the statutory overtime exemption. In 1978, the DOL issued a letter opinion, consistent with the case law, stating that service advisors are exempt from overtime as "salesmen." In that letter and elsewhere, the DOL stated an intent to amend its rules consistent with the case law, which it proposed to do in 2008. But in 2011 the Obama Administration issued a rule purporting to reverse its 1978 position that service writers, service advisors, service managers, and service salesmen employed by car and truck dealers are exempt from overtime, an attempt the Supreme Court has now soundly rejected.