U.S. Supreme Court undertakes additional review of federal service advisor overtime exemption

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We previously reported on the Encino Motorcars LLC v. Navarro case, in which federal courts have grappled with the issue of whether dealership service advisors fall within a provision of the Fair Labor Standards Act that exempts from overtime employees in certain dealership sales positions. (See our previous article here) In Navarro, the Ninth Circuit Court of Appeals originally ruled that, due to the particular wording of the FLSA provision at issue (29 U.S.C. Section 213(b)(10)(A)) in light of the Department of Labor Regulations, service advisors were not covered by this exemption and remanded the case to the district court level to proceed with the case in light of the ruling. Last year, the U.S. Supreme Court vacated the Ninth Circuit decision, finding that is was faulty based on its reliance on the DOL regulations and remanded it back to the Ninth Circuit to re-decide the issue without reliance on the DOL regulations.

The Ninth Circuit has issued its new decision, arriving at the same result: that the overtime exemption under 29 U.S.C. Section 213(b)(10)(A) does not apply to service advisors. This decision is at odds with the position taken by other federal Courts of Appeal, and now the U.S. Supreme Court has announced that it will once again review the case, which will hopefully resolve the conflicting court rulings.

However, as we previously stated, this decision should not be as impactful for California dealerships, because: (1) many auto dealerships already used commission pay structures for service advisors, which meet a different federal overtime exemption under 29 U.S.C. Section 207(i); and (2) dealerships that are in full compliance with California law (specifically, Wage Order 7 - commissioned salesperson exemption) also already comply with the other federal overtime exemption. Accordingly, the Supreme Court’s decision would have no effect on California auto dealers who are already in compliance with California’s Wage Order 7. In any event, it is important for all dealers to review their service advisor pay structures to ensure that they are in compliance when it comes to service advisor overtime and commission issues.