The 9th Circuit again reversed a decision on the FLSA Mercedes Dealer suit alleging the a California Mercedes-Benz dealer is shorting their “service advisers” on overtime pay. They found that Congress never had intentions of exempting advisers from overtime pay. The panel of three judges based their findings on the “extensive legislative record” including amendments from 1966-1974. The record used for the basis of the panel’s findings constituted tens of thousands of pages that spanned close to two decades. In all of the data, there is barely a mention of service advisors. The few times they are mentioned, were connected in no way to concern regarding overtime pay.
Service advisers diagnose vehicle service and repairs and recommend additional work that, while not immediately necessary, would be beneficial for the car. A group of these employees filed suit in 2012 listing allegations that Encino Motorcars LLC was in violation of FLSA legislation because service advisers were paid strictly on commission even though their collective hours for the week on average amounted to more than the legal standard work of 40 hours.
The Mercedes-Benz dealership urged the court to dismiss the claims made by service advisers stating that the FLSA exemption for salesmen, mechanics, partsmen, etc. (whose primary functions are to sell or service vehicles) also applied to service advisers. The plaintiffs’ FLSA overtime and state-law claims were dismissed by district court in January 2013.
In March 2015, the 9th Circuit reversed the district court’s dismissal, citing DOL regulations that state that only workers who sell cars were to be designated as salesmen and that only workers who personally provided service to cars were to be designated as mechanics. The 9th Circuit found the definitions to be reasonable and in accordance with the U.S. Supreme Court’s Chevron standard, this in spite of the Fourth and Fifth Circuits so far declining to adopt the DOL’s definitions.
In June 2016, the Supreme Court justices voted 6-2 to vacate the appellate ruling. They ordered the 9th Circuit to reconsider the matter without taking into consideration the DOL rules/definitions as they were issued in 2011 and were not offered alongside appropriate explanation that would enable them to be used as guidance in this type of dispute.
In August 2016, the DOL secretary presented arguments that the 9th Circuit got it right when they originally reversed the district court’s dismissal of the plaintiffs’ claims. They argued that the FLSA explicitly exempts three occupations in the dealership setting from overtime pay and overtime requirements and that according the plain language of the section being applied to the case, the statute does not include (or therefore apply) to service advisers. Encino Motorcars continued to stand behind arguments that the court should hold that service advisers are exempt like its sister circuits instead of deferring to the DOL’s redefinition of “salesman.”
After reconsidering the matter, the 9th Circuit again reversed the district court’s dismissal and remanded the FLSA claims and related state claims, finding that even without considering the DOL definitions, the plain language of the law indicates Congress did not intend for service advisers to be exempt from overtime requirements/overtime compensation. In addition, it was noted that even if the text of the FLSA statute were decidedly ambiguous, the legislative history of the FLSA and amendments confirm Congress’s intentions for overtime exemptions and the list did not include service advisers. During discussions, Congress’ silence regarding exempting service advisers was significant and taken as a strong suggestion that they not be exempt to overtime pay.
If you have questions regarding overtime pay or exemptions from overtime pay, please contact an experienced southern California employment law attorney at Blumenthal, Nordrehaug & Bhowmik.