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Dealership Workers get Overtime, 9th Rules in Circuit Split

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By Casey C. Sullivan, Esq. on March 27, 2015 10:08 AM

Customer service workers at car dealerships aren't exempt from the FLSA's overtime protections, the Ninth Circuit ruled on Tuesday. The court's unanimous holding revived a lawsuit seeking unpaid overtime brought by four "service advisers" at a Mercedes Benz dealership in California.

The Fair Labor Standards Act establishes minimum pay and overtime requirements, but exempts many workers, such as managers and commissioned sales employees. The Ninth Circuit's ruling that dealership customer service workers don't fall under one of the Act's exceptions stands in opposition to holdings by the Fourth and Fifth Circuits, creating a new FLSA circuit split.

FLSA's Automobile Exception

Under the FLSA, "any salesman, partsman, or mechanic primarily engaged in the selling or serving of automobiles" is exempted from the Act's wage and hour regulations. The four plaintiffs in the case, Navarro v. Encino Motorcars, worked in primarily customer service roles, greeting car owners as they arrived, evaluating service and repair needs, and pushing owners towards in-house repairs. They were paid solely on commission and brought suit alleging they were entitled to backpay for unpaid overtime.

Under regulations administered by the Department of Labor, a salesman covered under the automobile exception must be primarily engaged in car sales, while a partsman must work primarily in ordering, stocking and dispensing parts, and a mechanic must -- you guessed it -- work servicing a car. Applying Chevron deference, the court found these to be reasonable interpretations of the exception and ruled that the customer service workers did not fall under such definitions. Thus, they were entitled to minimum wage and overtime pay.

Split with Fourth and Fifth Circuits

The Ninth's holding contrasts with that of the Fourth and Fifth Circuits, however. Those courts, as well as several district courts and the Supreme Court of Montana, had found the exemption to cover most auto repair and dealership employees. The Fifth Circuit's ruling, which predated Chrevon, expanded the exemption to all employees whose jobs and pay structure was "functionally similar" to the exempted employees.

The Fourth had ruled the DOL's interpretation was unreasonably restrictive, finding customer service workers to be "salesmen" because their jobs involved selling services for cars.

The DOL exempted only salesmen who primarily sold cars, not services for cars. That's a perfectly fine reading of the statute, the Ninth Circuit held, criticizing the Fourth's interpretation that the phrase "selling or servicing automobiles" covered the sale of services.

The split could ultimately be decided by the Supreme Court, should the dealership appeal. In the mean time, workers in dealerships across the West may be entitled to significant extra pay.

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