In a five to four decision announced Monday morning, the U.S. Supreme Court ruled that auto dealership service advisors are exempt from overtime pay rules and can continue to be paid by commission no matter how many hours they work in a week.
The decision reverses a decision from the Ninth Circuit Court that ruled in 2016 that service writers at an Encino, California, dealership were owed back pay for working 55-hour weeks.
Auto dealers have received special treatment under the federal Fair Labor Standards Act (FSLA) since 1961 when the 1940 law was amended to exempt all dealership employees from overtime pay rules. The change was later updated to remove the blanket exemption but retained the exemptions for salespeople, parts department employees and mechanics engaged in selling or servicing vehicles.
In 2011 the Obama administration’s Department of Labor ruled that service advisors do not sell cars, dispense parts or perform mechanical work on cars; rather, they “sell services for cars” and are thus not exempt from overtime pay requirements.
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In the appeal of the 2016 circuit court ruling, The National Automobile Dealers Association (NADA) said upholding the ruling may result in hundreds of millions of dollar in claims by service advisors trying to recover back pay. According to NADA a service advisor works an average of 47 hours per week and is paid a commission on sales.
In the ruling issued Monday, Justice Thomas wrote for the majority that because service advisors are “salesm[e]n . . . primarily engaged in . . . servicing automobiles,” they are exempt from the FLSA’s overtime-pay requirement.
Justice Ginsburg, who wrote the dissenting opinion, noted:
Unlike salesmen, partsmen, and mechanics, service advisors “wor[k] ordinary, fixed schedules on-site” … for instance … regular 11-hour shifts, at all times of the year, for a weekly minimum of 55 hours. … Service advisors thus do not implicate the concerns underlying the … exemption. Indeed, they are precisely the type of workers Congress intended the FLSA to shield “from the evil of overwork” …
The full Supreme Court opinion is available at the court’s website.
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