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9th Circ. Reiterates Overtime for Dealership Advisers

Reversing a federal judge’s ruling, perpetuating a circuit-court split and going in the face of a Supreme Court decision, a Ninth Circuit panel on Monday held that service advisers at car dealerships aren't exempt from overtime under federal law.

PASADENA, Calif. (CN) – Reversing a federal judge’s ruling, perpetuating a circuit-court split and going in the face of a Supreme Court decision, a Ninth Circuit panel on Monday held that service advisers at car dealerships aren't exempt from overtime under federal law.

Hector Navarro and other service advisers had accused Encino Motorcars, a Mercedes-Benz dealership in Southern California, of violating the Fair Labor Standards Act by refusing to pay them overtime wages.

The act requires that overtime be paid to employees who work more than 40 hours in a week. However, it exempts "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" from overtime rules.

Navarro and his co-plaintiffs had said they didn't meet that definition.

The Ninth Circuit agreed Monday, holding in a 32-page ruling that the statute's phrase "primarily engaged in selling or servicing automobiles" applies only to employees who are "actually and primarily occupied in" selling, repairing and maintaining them.

"It does not cover salesmen selling other goods and, critically, it does not cover salesmen selling services," Circuit Judge Susan Graber for panel regarding the exemption's definition of "salesman."

While salesmen, partsmen and mechanics who spend most of their time selling or servicing cars have been exempted from the federal overtime rule since 1966, the blanket exemption has applied to employees who sell automotive services since 1978.

But the Department of Labor issued a rule change in 2011 clarifying that "salesmen" applies only to employees who sell vehicles, not to those who sell car services.

According to Navarro and the others, Encino Motorcars pays its advisers on commission to meet with customers and solicit their business after evaluating their service or repair needs.

Despite working from 7 a.m. to 6 p.m. at least five days a week, they said Encino paid them commissions only for services or repairs they sold to customers.

Though a federal judge dismissed the suit, the U.S. Supreme Court took up the case after the Ninth Circuit created a circuit split in 2015 when it reversed the dismissal.

The high court found that the 2011 regulation can't control the outcome of a lawsuit, because the department made the new rule with "little explanation for its decision to abandon its decades-old practice of treating service advisers as exempt."

But on Monday, the Ninth Circuit reiterated its 2015 finding, ruling that Encino's argument that service advisers are salesman is "implausible" due to an entrenched rule that the exemptions must be defined narrowly.

"In order to conclude that [the FSLA] encompasses service advisers, we would be required to do the opposite – construe the exemption broadly," Graber wrote. "We are bound by Supreme Court precedent to construe the exemption narrowly."

Expanding on the panel's finding, Graber said that if Congress had intended to exempt service advisers, it would have included the "service adviser" title in the exemptions list.

"In sum, the most natural reading of the exemption is that Congress exempted only three commonly understood job titles—automobile salesmen, partsmen, and mechanics – and Congress therefore excluded service advisers," she said.

The panel also affirmed the dismissal of the plaintiffs' other federal claims and reversed the dismissal of their state-law claims. The case was remanded to the Central District of California.

Monday's ruling conflicts with decisions by the Fourth and Fifth Circuits and the Montana Supreme Court. Nonetheless, Graber said the panel was "unpersuaded" by their analyses.

Plaintiffs' attorney Keven Steinberg said in an interview Monday that he was pleased with the decision.

"I'm glad the Ninth Circuit found as they did earlier," he said. "They looked at it from many angles. It goes to prove in the law as well, there are many ways to skin a cat."

U.S. Circuit Judge Kim McLane Wardlaw and U.S. District Judge James Mahan, sitting by designation from the District of Nevada, joined the opinion.

Steinberg is with Thompson, Coe, Cousins & Irons in Los Angeles.

Encino was represented by Colin Calvert of Fisher & Phillips in Irvine, California. He did not return a request for comment.

Categories / Appeals, Employment

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