Business & Economy

Supreme Court rules auto service advisers aren't entitled to overtime

The Supreme Court says that car dealerships aren't required under federal law to pay overtime to their service advisers, the employees that greet customers and assess their service and repair needs.
The Supreme Court says that car dealerships aren't required under federal law to pay overtime to their service advisers, the employees that greet customers and assess their service and repair needs.
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If you've ever had your car serviced or repaired at a dealership, you've spoken with a service adviser.

They're the people who deal with customers, scheduling things like oil changes, brake pad replacements, and tire rotations. They're also the ones who go over repairs with you. Such employees, like car sales people and mechanics, generally work on commission. 

The question facing U.S. Supreme Court in Encino Motorcars LLC v Navarro was whether service advisers should get paid for working overtime.

Workers at an Encino Mercedes-Benz car dealership first sued their employer in 2012. They argued they should be getting paid for shifts that often stretched 7 a.m. to 6 p.m. five days per week, well over the 40-hour per week threshold for overtime.  Their employer countered that Congress had long-exempted auto dealer employees involved in sales from those rules.

The Ninth Circuit Court of Appeals had sided with the workers. On Monday, the U.S. Supreme Court disagreed, ruling 5-4 in favor of dealerships. 

"A service adviser is obviously a 'salesman,'" Justice Clarence Thomas wrote for the majority. "Service advisers 'sell [customers] services for their vehicles.'"

Thomas said that means they should be treated the same as car sales people, who also do not qualify for overtime.

Industry groups welcomed the decision, while labor advocates see the ruling as further erosion of federal protections for workers.

An 'unfair advantage'

Exemptions to labor rules are common, said Brishen Rogers, an associate professor of law at Temple University who specialized in labor law. Congress, he said, has granted niche industries permission to ignore swaths of the Fair Labor Standards Act.

Taxi drivers don't get overtime pay, he said, and federal child labor laws, overtime laws, and minimum wage laws don't apply to people who make evergreen wreaths. 

"There's kind of a political economy story here," Rogers said. "Automobile dealers are very powerful at the local level, they contribute a great deal to political campaigns, so it's not at all surprising that they were able to convince Congress to exempt a large number of their employees."

For some, it could make sense, he said. People who sell cars often work odd hours suited to when they're most likely to have customers. Mechanics may have to go off-site for tractor or car repairs. But that's not the case with service advisers, who answer phone calls and interact with customers during set hours, he said.

"It's not at all clear that Congress meant to exempt these workers," he said.

Rogers was one of four law professors to sign an amicus brief urging the court to side with the service advisers. He said there's been a near steady erosion of the Fair Labor Standards Act since it passed in the 1930s. 

"It's part of a line of decisions that really do benefit business and put workers at an unfair disadvantage," he said.

'Not your typical minimum wage' worker

Peter Welch, of the National Automobile Dealers Association, however, said the ruling was fair.

"A good service adviser, and this was a Mercedes-Benz dealership, can make really good money," he said. "These are not your typical minimum wage folks that the overtime rules are typically enforced for." 

Dealerships, he said, have been treating such workers as salespeople for decades, and the Ninth Circuit's decision to suddenly require them to be paid overtime would have hurt the industry. 

The ruling could impact over 100,000 workers. There are about 16,500 car and truck dealerships nationwide, each of which on average, employ two to ten service advisers, Welch said. Some states, however, like California have tighter labor laws that may exempt some people from the ruling. 

In California, commission-based employees can be exempted from overtime rules if a certain portion of their take-home pay comes from sales, said Brian Maas, president of the California New Car Dealers Association. Most service advisers, he said, likely will receive overtime pay in California. 

Read the ruling:

 

This story has been updated.