In what has become a long, back-and-forth battle regarding overtime pay for dealership service advisors, the case of Navarro v. Encino Motorcars, LLC will head back to the Supreme for the second time. The retailer, Encino Motorcars, (a Mercedes Benz dealer located in Encino, CA) had originally won the case in district court, only to have the decision reversed twice by the 9th U.S. Circuit Court of Appeals. The first case went all the way to the Supreme Court but was sent back for a retrial.
The legal battle initially started back in 2012 when service advisors working at Encino Motorcars banded together to sue the dealership under the Fair Labor Standards Act for failing to pay overtime. The practice of exempting service advisors from overtime pay is a practice that had been previously upheld by other Appeals Courts in the past until the 2015 decision by the 9th Circuit Court.
Arguments about regulation involving overtime pay for service advisors go back many years, but the US Department of Labor issued an opinion letter in 1978 indicating that service advisors were to be included in the overtime exemption.
The regulation became less clear, however, in 2011 when the Labor Department offered a new interpretation that service writers /advisors are not ‘salesmen’ and are therefore not exempt from overtime. The Supreme Court’s 2016 Ruling to retry the Navarro v. Encino Motorcars, LLC case added another twist to this debate.
In regards to the June 2016 Supreme Court Ruling to retry the case, Jared Allen, spokesman for the National Automobile Dealers Association said in a statement to Automotive News: “We are very pleased with the Supreme Court’s decision today, and NADA will continue to actively support the case in anticipation that the Court will resolve the issue in favor of the dealer defendants and of all those dealers who have for decades applied the overtime exemption to service advisors.”
It is worth staying tuned to developments in this case, as it could have a widespread effect on the auto business. Currently, it is common practice for a dealer to exempt service advisors from overtime pay, due to the commissions for which they are eligible. Overtime pay is generally only applicable to hourly workers, but if Encino Motorcars loses this case, it could mean that service advisors across the US may no longer be exempt from overtime pay.
Supreme Court Justice Anthony McLeod Kennedy recognized that “[r]equiring dealerships to adapt to the department’s new position could necessitate systemic, significant changes to the dealerships’ compensation arrangements,” and that as a result, “the department needed a more reasoned explanation for its decision to depart from its existing enforcement policy.”
There are good arguments on both sides of this case, but it seems the Supreme Court is conscious of the widespread ramifications of requiring service advisors to be eligible for overtime pay, and are proceeding with caution.
