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Wednesday, April 24, 2024 | Back issues
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Circuit Split by the 9th on Automotive Overtime

PASADENA, Calif. (CN) - Federal law does not exempt a car dealership from paying "service advisors" overtime, the 9th Circuit ruled Tuesday, creating a circuit split.

The ruling comes in a lawsuit brought by three employees of Encino Motorcars, a dealership that sells and services new and used Mercedes-Benz vehicles.

Though the Federal Labor Standards Act exempts "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" from overtime rules, Hector Navarro and the other "service advisor" plaintiffs said they do not meet this definition.

Encino pays the advisers commission only to meet with customers and solicit their business after evaluate their service or repair needs.

Though a federal judge found that the advisers meet the statutory exemption, a three-judge panel with the 9th Circuit reversed Tuesday.

Judge Susan Graber wrote in the Circuit's 19-page opinion that the statute is ambiguous.

"A salesman is an employee who sells cars; a partsman is an employee who requisitions, stocks, and dispenses parts; and a mechanic is an employee who performs mechanical work on cars," Judge Susan Graber wrote for the court. "Service advisors do none of those things; they sell services for cars."

The statute is unclear on "whether Congress intended broadly to exempt any salesman who is involved in the servicing of cars or, more narrowly, only those salesmen who are selling the cars themselves," the ruling continues.

Pointing to the statute's regulatory history, the court found that the Department of Labor has concluded that the better reading of the statute is the narrow one.

The ruling acknowledges a divergence from 4th and 5th Circuit precedent, but says the courts must ultimately defer to the Department of Labor's reading of the law.

"There are good arguments supporting both interpretations of the exemption," Graber wrote. "But where there are two reasonable ways to read the statutory text, and the agency has chosen one interpretation, we must defer to that choice."

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