How do you compensate your service advisors? Pay plans may change after the United States Supreme Court weighs in on whether Service Advisors are exempt from the Fair Labor Standards Act (FLSA) exemption for Service Advisors. Earlier this year that Court indicated it will address the recent controversy over the exempt status of service advisors. Under Section 13(b)(10)(A) of the Fair Labor Standards Act (FLSA), “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles, trucks or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers” is exempt from the FLSA’s overtime requirements. At least, that is the way it’s been read for thirty years.
The “salesperson” exemption has applied to service advisors since at least 1973, when the Fifth Circuit Court of Appeals decided Brennan v. Deel Motors, Inc. As recently as 2013, the Montana Supreme Court reiterated that decision in Thompson v. J.C. Billion, Inc. In between, courts have uniformly held that service advisors are exempt from overtime under Section 13(b)(10).
But the U.S. Department of Labor’s (USDOL) interpretation has not been consistent. Initially, the DOL said Service Advisors did not qualify and promulgated 20 C.F.R. § 779.372(c)(4) to say that. But after several courts disagreed, the DOL said that it would no longer dispute the issue. Things were settled for twenty years or so.
In April, 2011, USDOL deleted Section 779.372(c)(4). In accompanying commentary, it said that the change was made to reflect its view that the exemption is limited “to salesmen who sell vehicles and partsmen and mechanics who service vehicles,” and that service advisors did not fall within this description. In Navarro v. Encino Motorcars, LLC, the Ninth Circuit Court of Appeals deferred to USDOL’s most recent interpretation of the exemption and became the first court to hold that service advisors are not exempt from overtime pursuant to the “salesperson” exemption.
Sometime in the next year, the U.S. Supreme Court will take the matter under consideration and decide the issue for dealers, once and for all. In the event the Court agrees with the DOL and finds that service advisors are not exempt from overtime under the “salesperson” exemption, dealers should be prepared to explore alternatives, and, in particular, revise service advisor pay plans to satisfy the “commission-paid” exemption, available to dealers in most states. Bass Sox Mercer welcomes the opportunity to address any questions you may have about this issue.
- US Supreme Court will consider whether Service Advisors are exempt from FLSA’s overtime requirements
- The Ninth Circuit Court of Appeals recently held that service advisors are not exempt from overtime
- Dealers should be prepared to revise service advisor pay plans