Federal Court Rules on Auto Dealer Exemption

Last week, the Ninth Circuit Court of Appeals considered whether service advisors at automobile dealerships fall under the Fair Labor Standards Act (FLSA) overtime exemption for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” Navarro v. Encino Motorcars, LLC (9th Cir. 2015). The exemption applies if the employee is employed by a non-manufacturing establishment primarily engaged in the business of selling such vehicles, such as an automobile dealership. In making its determination, the court looked at the definitions for salesman, partsman, and mechanic outlined in the Code of Federal Regulations.

The court gave deference to these definitions and determined that service advisors are not salesman, partsman, or mechanics and are thus nonexempt and entitled to overtime. This decision represents a split between the Ninth Circuit and the Fourth and Fifth Circuits, which concluded differently. If your organization is an automobile dealership in Arizona, California, Alaska, Hawaii, or Idaho and has service advisors, then this decision may impact your business. Call MSEC for assistance.