On Monday, the U.S. Supreme Court ruled that service advisers at car dealerships are exempt from the Fair Labor Standards Act (FLSA).  In Encino Motorcars v. Navarro, the majority, Chief Justice John Roberts and Justices Clarence Thomas, Anthony Kennedy, Samuel Alito, and Neil Gorsuch voted to overturn the Ninth Circuit’s ruling on this exemption a second time, deciding that service advisors are “salesm[e]n . . . primarily engaged in . . . servicing automobiles,” and thus are exempt from overtime pay. 

The case turned on interpretation of an exemption from the FLSA’s overtime requirements for car dealership employees.  In 1961, Congress amended the FLSA to exempt all employees at car dealerships. However, five years later, Congress limited the exemption to cover “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” 29 U.S.C. § 213(b)(10)(A). This more narrow limitation created uncertainty with respect to service advisors.  Initially, the Department of Labor (DOL) took the view that service advisors were not exempt.  However, the federal courts disagreed, and DOL changed its position in 1978 via a formal opinion letter.  In 2011, however, DOL changed direction yet again and issued a new guidance declaring that service advisors were not exempt.  On appeal, the Ninth Circuit deferred to the DOL’s 2011 regulation, applying Chevron deference.  In a 2016 opinion, the Supreme Court reversed, holding that Chevron deference was inapplicable because the DOL failed to justify the change.  On remand, the Ninth Circuit again found that service advisors were non-exempt—this time based on the text of the statute itself.  Again, the Supreme Court reversed.

The Supreme Court, reasoned that service advisors engage in selling services.  This, according to the majority, means they are salesmen in the “ordinary meaning” of the word. Additionally, the majority reviewed the tasks of service advisors and determined they “are integral to the servicing process.” The majority acknowledged that “service advisors do not spend most of their time physically repairing automobiles,” but emphasizes that the same is true of partsmen. The inclusion of partsmen in the statute means that “the phrase ‘primarily engaged in … servicing automobiles’ must include some individuals who do not physically repair automobiles themselves but who are integrally involved in the servicing process.”

Although this holding is narrow in that it is based upon the specific language of this exemption, the opinion is notable in that the majority rejects the longstanding principle that FLSA exemptions should be construed narrowly.  According to the majority, “the narrow-construction principle relies on the flawed premise that the FLSA ‘pursues its remedial purpose at all costs.’” In addition, the majority dismisses reliance on legislative history, stating “if the text [of the statute] is ambiguous, silence in the legislative history cannot lend any clarity.”  Interestingly, the Department of Labor did not participate in this matter or offer its views.  The restriction of the narrow-construction principle could hamper DOL’s future regulatory and enforcement efforts. Overall, this opinion signals that employers can expect a friendlier Supreme Court and a potentially expanded view of FLSA exemptions in the future.