MG
Moderator
Auto dealers claimed victory today after the U.S. Supreme Court rejected a lower court’s decision that dealership service advisers are eligible for overtime pay under U.S. labor law.
In a 6-2 vote, the high court today vacated a 2015 ruling by the 9th U.S. Circuit Court of Appeals that service advisers are eligible for overtime pay because they are not covered by an exemption to the overtime requirements in the Fair Labor Standards Act that applies to dealership vehicle salespeople, mechanics and parts department workers.
The high court found that a 2011 Department of Labor rule upon which the lower court based its decision lacked the force of law, and ordered the lower court to revisit its earlier ruling.
The decision marks a victory for auto dealers, many of whom pay service advisers on commission without overtime eligibility, a practice that other appeals courts had upheld until the 9th Circuit’s 2015 decision.
The Supreme Court’s decision stopped short of answering the broader question of whether service advisers should be eligible for overtime nationwide. A ruling in favor of overtime would have created a potentially major disruption to the way service advisers are compensated at many of the more than 16,000 new-car dealerships in the United States. A ruling that service advisers are eligible for overtime would have required dealers to retool those compensation plans.
National Automobile Dealers Association spokesman Jared Allen said in a statement that the trade group was pleased with the court’s decision. NADA filed a brief with the high court arguing that that the overtime exemption should apply to service advisers in addition to salespeople, mechanics and parts workers, which previous appeals courts have upheld.
“We are still reviewing the decision, but we are pleased that the Supreme Court expressly rejected a 2011 U.S. Department of Labor interpretative regulation that service writers/advisors are not ‘salesmen’ exempt from overtime, and that the Court vacated the Ninth Circuit’s ruling and sent the case back for a more appropriate review of the statute,” Allen said.
Justice Anthony Kennedy wrote the majority opinion to remand the case, and was joined by Justices John Roberts, Ruth Bader Ginsberg, Stephen Breyer, Sonia Sotomayor and Elena Kagan.
Justices Clarence Thomas and Samuel Alito dissented on the decision to remand the case, arguing that the overtime exemption does apply to service advisers.
The case before the Supreme Court originated with five service advisers from Mercedes-Benz of Encino near Los Angeles, who sued the dealership in 2012 for refusing to pay them overtime.
In their complaint, the five said they were paid solely on commission and were “mandated” to work from 7 a.m. to 6 p.m. at least five days a week. They were also required to be “on call” during their lunch breaks and on vacation.
A California district court dismissed the case, citing the Fair Labor Standards Act’s overtime exemptions. But the 9th Circuit reversed that decision, breaking with previous appeals court decisions, which paved the way for the Supreme Court to weigh in on the dispute.
The overtime exemption in the Fair Labor Standards Act applies to “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles” at a dealership.
After years of back-and-forth on the issue, the Labor Department in 1978 issued an opinion letter that service advisers were included in the exemption. The department interpreted the law that way until reversing its position in a 2011 rulemaking.
The high court’s majority found that the 2011 change by the Labor Department failed to adequately explain the about-face on its decades-long interpretation of the exemption, and lacked the force of law as a result.
“The retail automobile and truck dealership industry had relied since 1978 on the Department’s position that service advisors are exempt from the FLSA’s overtime pay requirements,” Kennedy said in the majority opinion. “Whatever potential reasons the Department might have given, the agency in fact gave almost no reasons at all.”