Service Advisors Are Exempt from Overtime Pay
On April 2, 2018, the Supreme Court ruled that automotive service managers and service advisors are not entitled to overtime pay under the Fair Labor Standards Act.
A group of current and former service advisors at Encino Motorcars in California sued the dealership for back pay, claiming that the dealership violated the FLSA by failing to pay them overtime. After two trips to the Supreme Court, we have final word that service advisors are “salesm[e]n… primarily engaged in… servicing automobiles,” and therefore are exempt from the FLSA's overtime-pay requirement.
The so-called “automobile dealer” exemption, FLSA section 213(b) (10(A), was first enacted in 1966. It says that sales people, parts workers, or mechanics who work for an automotive dealership are in the business of selling or servicing automobiles. Thus, auto dealerships are not required to pay these staff members overtime. The Department of Labor issued a regulation providing that service advisors were likewise not eligible for overtime. This was the law for over 30 years. After a nearly seven-year change of course, it is the law again.
What does this mean for auto dealers? For starters, dealerships can pay their service advisors, service managers, mechanics, and parts workers a salary. With more certainty about payroll expenses for these employees, auto dealers can devote more resources to other priorities.
This has been a thorny issue for dealers for decades. This is a tremendous legal result for our industry.