Fixed Ops Journal - April 2018 - F11

FIXED OPS JOURNAL

DEALERS PREVAIL, BUT ...

 State laws may limit U.S. Supreme Court ruling on advisers' overtime

ERIC FREEDMAN
foj@autonews.com

ttorneys for dealers hailed a longawaited U.S. Supreme Court ruling
this month that service advisers
are exempt from overtime pay requirements under federal law, clarifying a
murky issue of labor regulation.
The 5-4 decision applies to parts workers as well.
"This is very, very good news for car dealerships, especially those relying on the exemption for 33 years," said Los Angeles attorney
Karl Lindegren, who represents Encino Motorcars, a Mercedes-Benz store in Encino, Calif.
Five service advisers had sued the dealership under the federal Fair Labor Standards
Act. They sought time-and-a-half pay for what
they claimed were a minimum of 55-hour
workweeks.
Doug Greenhaus, chief regulatory counsel
for the National Automobile Dealers Association, said the high-court ruling "returned us to
the normal order and understanding dealers
had" until 2011, when the U.S. Labor Department ruled that service advisers were not covered by the overtime exemption.

Congress may act
Including service advisers under the exemption "was well understood by employers
and employees," Greenhaus said. "It means
they have freedom to negotiate the form of a
compensation plan that works for them."
NADA estimates that franchised new-vehicle dealerships employ 82,000 service advisers. The dealer association filed a friend-ofthe court brief backing Encino Motorcars, as
did dealer groups in nine Western states.
However, a lawyer for the service advisers at
the Mercedes-Benz dealership, Keven Steinberg of Sherman Oaks, Calif., said Congress
could restore what the Supreme Court took
away.
"I believe Congress may now step in using
their separation of powers authority to give
back what the court has taken away from
these hardworking service advisers," Steinberg said.
"Indeed, this is in the works," he added, "and
I suspect that soon this section of the FLSA
will be amended by Congress to specifically
exclude service advisers to allow them to re-

ceive overtime pay and other well-deserved
benefits."
The impact of the Supreme Court decision
may be limited because labor laws in California, Washington, Hawaii and several other
states still enable at least some service advisers to receive overtime pay, experts say.
"I'm telling my clients to pay attention to
state law as well," Lindegren said. "You have to
comply with the stricter of" federal law or
state law, he said.
The decision also won't affect service advisers who are represented by unions and covered by collective bargaining agreements,
said David Rosenberg, a lawyer in Alameda,
Calif. Rosenberg filed a friend-of-the-court
brief supporting the service advisers on behalf
of the International Association of Machinists
and Aerospace Workers.
The roots of the issue go back to 1961, when
Congress exempted all dealership employees
from overtime pay requirements. In 1966,
lawmakers narrowed the exemption to "any
salesman, partsman or mechanic primarily
engaged in selling or servicing automobiles."

Two trips to the Supreme Court
A 1970 Labor Department regulation excluded service advisers from the overtime pay
mandate. But after several courts disagreed,
the department recognized the exemption in
1978, only to change its mind and disallow it
in 2011.
The next year, five service advisers sued Encino Motorcars. The case has been bouncing

around the judicial system ever since, including two trips to the Supreme Court.
In the majority opinion, Justice Clarence
Thomas wrote: "A service adviser is obviously
a 'salesman.' The ordinary meaning of 'salesman' is someone who sells goods or services.
Service advisers do precisely that."
Advisers are also "primarily engaged in servicing automobiles," Thomas wrote, and "are
integral to the servicing process." Although
service advisers don't spend most of their
time physically working on vehicles, "if you
ask the average customer who services his car,
the primary, and perhaps only, person he is
likely to identify is his service adviser," he said.
Parts workers, too, are "integrally involved
in the servicing process," Thomas added.
The four dissenters, led by Justice Ruth Bader Ginsburg, contended: "Because service advisers neither sell nor repair automobiles,
they should remain outside the exemption."
The dissenting justices also noted that Congress didn't exempt many other categories of
dealership employees, including automobile
painters, shipping and receiving clerks, upholsterers and cashiers.
Attorney Rosenberg said that industry
trends suggest "more and more automation,
and [service advisers] will be doing nothing
more than scheduling. More and more will
not do any sales work, or it will not be their
primary function."
In the long run, he added, the Supreme
Court decision may not "do dealers a lot of
good." 

APRIL 2018

PAGE 11

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