High Court Ruling Could Shrink Overtime Pay Eligibility

Mark Gruenberg Editor, Press Associates Union News

A new Supreme Court ruling against a small group of workers – auto dealership service advisors – potentially blows a big hole in which workers nationwide are eligible to get overtime pay, a top union attorney warns.

That’s because the April 17 opinion in Encino Motorcars v Navarro gives the Labor Department wide latitude to decide which classes of workers are ineligible to get time-and-a-half pay when they toil for more than 40 hours a week, adds Andrew Strom, associate general counsel for the Service Employees, writing in Harvard Law School’s On Labor blog.

The case started several years ago at a Mercedes-Benz dealership in Encino, Calif., when the advisors – who counsel customers on what repairs their vehicles need and even occasionally make small fixes – sued for overtime pay. They worked a minimum of 55 hours weekly, from 7 am to 6 pm, Monday through Friday, and often more.

They argued that among more than 20 occupations in auto dealership service departments, only three – “salesmen, partsmen and mechanics” – were specifically listed in the Fair Labor Standards Act as exempt from overtime pay.

In the 5-4 ruling, the 5-man GOP-named court majority said the FLSA doesn’t cover the service advisors either. Siding with auto dealer, and the Chamber of Commerce, Justice Clarence Thomas called the advisers salesmen. That means they’re exempt from overtime.

The 80-year-old FLSA, the basic overtime and minimum wage law, was amended in 1966 to cover most auto dealer workers. Before that it covered virtually none, the court explained. “The 9th Circuit” Court of Appeals, which had ruled for the service advisors, “also invoked the principle that exemptions to the FLSA should be construed narrowly,” Thomas said. “We reject this principle as a useful guidepost.”

Because the law doesn’t say, in its text, that its exemptions should be narrow, “There is no reason to give them anything other than a ‘fair’ interpretation,” Thomas wrote. He didn’t define “fair,” leaving that to DOL.

Those exemptions from overtime pay eligibility are one of the two key issues courts and the GOP-run Congress are wrestling with in the current brouhaha over who’s eligible for overtime, and who isn’t. The pay limit for which workers are automatically eligible is the other.

“The question is whether service advisers are ‘salesmen primarily engaged in servicing automobiles,’” and other vehicles, Thomas said. “We conclude that they are…The practice of construing FLSA exemptions narrowly and legislative history do not persuade us otherwise.”

“A service advisor is obviously a salesman…They sell customers services for their vehicles,” even if the advisors occasionally make repairs, too, Thomas added.

Citing a friend-of-the-court brief from the Machinists, the dissenters pointed out FLSA exempts only the three listed occupations in auto dealer service departments from overtime pay: Salesmen, partsmen and mechanics.

“The court approves the exemption of a fourth: Automobile service advisors…I would not enlarge the exemption to include service advisors or other occupations outside Congress’ enumeration,” Justice Ruth Bader Ginsburg wrote.

Ginsburg, too, warned the majority could let DOL loose to exempt the other auto dealership workers. “By expansively reading the exemption to encompass all salesmen, partsmen and mechanics ‘integral to the servicing process,’ the court (majority) risks restoring what Congress intended” in 1966 “to terminate: The blanket exemption of all dealership employees from overtime pay,” she wrote.

Strom warned of wider consequences.

“The 5-person (court) majority reached out to do a favor for the Chamber of Commerce, changing the rules for interpreting all exemptions to the FLSA – something that could have a big impact,” he warned.

The auto dealers’ service advisors “are the people customers talk to when they bring their cars to the dealer for repair and maintenance work. All nine justices agreed the service advisors are salespeople. The case turned on whether service advisors are ‘primarily engaged in servicing automobiles.’” 

In 1945,1959 and 1960 the justices said that because FLSA is supposed to ensure a worker gets a fair day’s pay for a fair day’s work, exemptions from overtime should be narrow. The 9th Circuit, Strom explained, followed those cases in ruling the auto service advisors could get overtime pay.  “The lower court held the (overtime) exemption should be limited to those who spend most of their time actually maintaining and repairing cars.”

The Chamber of Commerce asked the justices in a friend-of-the-court brief to toss out all three prior cases limiting overtime pay exemptions, thus leaving that issue up to DOL, Strom said. It called narrow exemptions “anti-employer.” The court majority agreed.

Since 1938, hundreds of lower courts have ruled FLSA exemptions should be narrow, Strom said. “Thousands of additional cases have likely settled because employers knew they could not overcome narrow construction” of which workers can’t get overtime pay.

Encino Motorcars will not only embolden employers in wage and hour cases, but the Chamber of Commerce will undoubtedly use it to argue more broadly against the liberal construction of other” laws “to make it harder for workers to prevail in court. Even for the Chamber, it isn’t easy to enact legislation, but it appears the Chamber can now get the Supreme Court to effectively rewrite existing laws.”



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