National Automobile Dealers Association (NADA) and the National Independent Automobile Dealers Association (NIADA) both celebrated this week when the U.S. Supreme Court made a ruling in their favor.
The associations recapped that on Monday the Supreme Court ruled automotive service advisers are not covered by the Fair Labor Standards Act’s overtime pay requirement, the final word in a long court battle that actually made it to the high court twice.
In a 5-4 decision, the court held that service advisers fall under the FLSA provision that exempts a “salesman, partsman or mechanic primarily engaged in selling or servicing automobiles” from federal overtime pay.
NADA and NIADA explained that decision overturned a 2011 ruling by the Obama administration’s Department of Labor that dealerships were required to pay overtime to service advisers. The DOL policy was challenged in 2012 but was upheld by the Ninth Circuit Court of Appeals in 2015 and again in 2017 after the Supreme Court vacated the first decision and sent it back to the lower court.
“The court’s decision ratifies what has been an industry practice in dealerships for decades — a practice that had been satisfactory to both federal regulators and courts,” NIADA senior vice president of legal and government affairs Shaun Petersen said. “NIADA is pleased the court’s ruling allows dealers much needed flexibility in structuring service advisers’ pay plans.”
In his majority opinion, Justice Clarence Thomas said a service adviser is a salesman because service advisers sell services to customers, and service advisers are also engaged in servicing automobiles because they are integral to the servicing process.
The court noted service advisers’ active and essential participation in the auto service process — meeting customers, listening to their concerns, suggesting and discussing repairs, selling parts and accessories, recording repair orders and following up with customers — qualifies them as “primarily engaged in servicing automobiles,” even though they do not actually perform the mechanical service work on vehicles.
NADA chairman Wes Lutz applauded the action by the Supreme Court in its decision in the case — Encino Motorcars LLC v. Navarro.
“NADA is extremely pleased with the Court’s decision that dealership service advisers clearly fall within the salesmen, partsmen and mechanics overtime pay exemption under the federal Fair Labor Standards Act,” Lutz said.
“This decision upholds more than 40 years of consistent interpretation by the courts and the executive branch, and will allow the auto retail industry to continue structuring employment relationships that are efficient and beneficial to dealerships, their employees and their customers,” he went on to say.
NADA provided extensive support to the dealers litigating the case and worked with the state dealer associations in the Ninth Circuit to file several “friend of the court” briefs on behalf of all dealers.
NIADA emphasized that this ruling only affects federal law regarding overtime. State laws still apply.
Several states, such as California, have laws governing overtime pay requirements for dealership employees, including service advisers, according to NIADA.
“Consult your legal counsel about your state’s overtime rules,” NIADA said.