(CN) – The U.S. Supreme Court said Thursday it will consider whether service advisers at car dealerships are exempt from overtime wage laws.
The announcement comes after the Ninth Circuit in January reversed for a second time a federal judge’s dismissal of a suit accusing a Southern California car dealership of breaking the law by refusing to pay service advisers overtime.
Holding that service advisers at car dealerships aren’t exempt from overtime under federal law, the Ninth Circuit's January decision perpetuated a circuit-court split created in 2015 when it reversed the first time – and flouted a Supreme Court decision.
The January ruling conflicted with decisions by the Fourth and Fifth Circuits and the Montana Supreme Court. Nonetheless, Circuit Judge Susan Graber wrote at the time that the panel was “unpersuaded” by those courts' analyses.
Hector Navarro and other service advisers had accused Mercedes-Benz dealership Encino Motorcars of violating the Fair Labor Standards Act by refusing to pay them overtime.
The law 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, holding in January 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,” Graber wrote at the time 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 paid 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.
The U.S. Supreme Court took up the case after the Ninth Circuit created a circuit split when it reversed the first time.
The high court found the 2011 regulation couldn'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 the Ninth Circuit shot back this year that if Congress had intended to exempt service advisers, it would have included the “service adviser” title in its exemptions list.
“Congress exempted only three commonly understood job titles—automobile salesmen, partsmen, and mechanics – and Congress therefore excluded service advisers,” Graber wrote.
Circuit Judge Kim McLane Wardlaw and U.S. District Judge James Mahan, sitting by designation from the District of Nevada, joined the January opinion.
On Thursday, the high court agreed to take up the case again and did so without further comment per its custom.
The plaintiffs are represented by Stephanos Bibas with the University of Pennsylvania Law School's Supreme Court Clinic in Philadelphia. He declined to comment Thursday.
Encino Motorcars is represented by Paul Clement of Bancroft PLLC in Washington. He could not be reached for comment.
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