On June 20, the U.S. Supreme Court issued a decision that finally puts to rest questions about the overtime status of “service advisors” employed by retail automotive dealerships. The decision reverses a lower court ruling that service advisors are entitled to overtime pay, and rejects a 2011 Department of Labor (DOL) advisory opinion, which had held that service advisors are not exempt from overtime under the automotive salespersons exemption.
With this decision, the status of service writers is now clear: service writers are exempt from overtime under Section 13(b)(10) of the Fair Labor Standards Act, provided that exemption’s standards are met. They must be “primarily engaged” (over 50% of their activity) in the sale of service and repair services, and be employed by a business primarily engaged in the sale of automobiles, trucks, farm equipment, and trailers.
This decision is being hailed as a victory for the retail automotive industry, as it eliminates the uncertainty over the status of service writers, and also eliminates the threat of litigation that results whenever the law on an issue like this is unsettled. This issue was believed to be well-settled decades ago, with the DOL and the Courts in agreement that “service writers” are exempt from overtime under the same exemption that applies to vehicle salespersons. The DOL suddenly, and unexpectedly, reversed its position in a proposed Rule revision published in 2011.
From that time until the Supreme Court’s ruling on June 20, the status of service writers was hotly disputed, with the DOL taking one position, and conflicting opinions being issued by several of the U.S. Circuit Courts of Appeal. To add to the confusion, Congress took action to block implementation of the DOL’s interpretation through a series of budget provisions prohibiting the DOL from expending any funds to take any enforcement action or implement its new position. These budget provisions were not enough to eliminate the uncertainty over the matter, because they prohibited the DOL from bringing enforcement actions, but private attorneys were free to bring lawsuits and urge the court to apply the DOL’s new interpretation. The Supreme Court’s decision reverses the outcome of one of these private actions that was decided by the Ninth Circuit Court of Appeals in Navarro v. Encino Motorcars, LLC (March 24, 2015).