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Supreme Court Exempts Auto Service Advisors from Overtime

05/03/18

Author: ADP Admin/Tuesday, May 1, 2018/Categories: Bulletin News

After years of litigation, the United States Supreme Court held in Encino Motorcars, LLC v. Navarro that under the Fair Labor Standards Act (FLSA), “service advisors” are exempt from overtime under the “automobile dealer” exemption applicable to salesmen, partsmen, and mechanics.

The FLSA exempts certain auto dealership employees from legally mandated premium pay for work in excess of 40 hours a week.  The exemption applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks or farm implements.”

In 1970, the Department of Labor issued an interpretive regulation defining a “salesman” to be one who sells vehicles, specifically stating that service managers, service advisors or others whose jobs are to recommend necessary service and assign and supervise mechanics are not exempt from the overtime protection. In 2008, the Department of Labor sought public comment on a proposed rule stating that service advisors were exempt from overtime, and noting that, over the years, courts had determined service advisors to be exempt.  But the Department of Labor did not broadcast the proposed rule, and in 2011 it issued a final ruling that service advisors are not exempt, defining the exemption for “salesman” to include only employees who sell vehicles.

Thereafter, five service advisors at a Mercedes Benz dealership sued to recover alleged unpaid overtime. After years of litigation, the Supreme Court recently concluded that service advisors are “obviously” a form of salesmen of services—and sometime parts—related to the maintenance and repair of automobiles, and thus fall well within the language of the FLSA exemption. In other words, service advisors are not entitled to overtime pay for work in excess of 40 hours a week.

Coverage: Employers who employ partsmen.

Effective: Currently in effect (April 2, 2018)

Action Required: You should familiarize yourself with the new requirements and contact your HR Business Partner or Payroll Service Representative if you have any questions.

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Tags: 05/03/18

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