Supreme Court Hears Oral Argument in Service Advisors FLSA Case

Principle of construing exemptions narrowly may be abandoned

Allen Smith, J.D. By Allen Smith, J.D. January 22, 2018
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​A case that had oral arguments before the U.S. Supreme Court Jan. 17 may decide not only whether the nation's 100,000 service advisors at car dealerships should be exempt from overtime pay under the Fair Labor Standards Act (FLSA), but how narrowly all FLSA exemptions should be interpreted.

Five service advisors at Encino Motorcars, a Mercedes-Benz dealership in Los Angeles, sued, claiming the dealership violated the law by failing to pay them overtime compensation. The 9th U.S. Circuit Court of Appeals originally relied on the Department of Labor's (DOL's) 2011 regulations to hold that they should be paid overtime, but the Supreme Court vacated the decision in 2016. The regulations were deemed invalid because the DOL had flipflopped without adequate explanation about its stand on whether service advisors, who sell repair services but not the vehicles themselves, should be exempt.

The Supreme Court sent the case back to the 9th Circuit, which relied on the plain language of the statute to again hold that the service advisors are not exempt from the overtime requirements, noted T. Christopher Bailey, an attorney with Greensfelder, Hemker & Gale in St. Louis. Encino Motorcars appealed, and the Supreme Court agreed to hear the case again.

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

Car Dealership's Argument

Paul Clement, an attorney with Kirkland & Ellis in Washington, D.C., who represents the dealership, argued that service advisors fit within the FLSA's exemption for salespeople, partsmen or mechanics primarily engaged in selling or "servicing" vehicles.

"Is there any other person that's not specifically enumerated that's subsumed under one of these categories?," asked Justice Ruth Bader Ginsburg.

Yes, Clement replied—automobile body repairmen. So, service advisors wouldn't be the only category of jobs to be exempt without being named.

Justice Elena Kagan doubted that the advisors "service" vehicles, saying that the ordinary definition of servicing cars is to repair them.

Clement said Congress intended a broader meaning of "servicing." He said this was clear from Congress's inclusion of partsmen, who do not get under the hood either, within the exemption.

"If you took partsmen out of this statute, I don't really think that you'd have a leg to stand on here," Kagan said. "We would just naturally mean servicing automobiles is like fixing them."

Clement replied that the dealership still would have a strong argument, especially in light of car dealerships' four decades of reliance on the DOL's stance that service advisors are exempt prior to the 2011 regulations' assertion that they are nonexempt.

How Narrowly Should Exemptions Be Interpreted?

Justice Neil Gorsuch asked Clement, "What about our narrow construction canon?"

This principle is the longstanding rule that FLSA exemptions are to be narrowly construed, Jeffrey Brecher, an attorney with Jackson Lewis in Melville, N.Y., explained to SHRM Online.

"It may be time to put that canon to rest," Clement replied.

If the Supreme Court's decision discredits this principle, it could have wide-ranging implications for employers when courts analyze other exemptions under the FLSA well beyond the narrow issue of the automobile dealer exemption, Brecher noted.

Lee Schreter, an attorney with Littler in Atlanta, agreed in an interview. She said that because there are more than 20 exemptions that Congress worked into the text of the statute, it plainly intended for certain groups not to be covered by overtime protections. She thinks the narrow construction principle should be abandoned.

"I can't tell you the number of decisions where that canon gets tossed around," she said, predicting that if it's tossed out, lawyers will advise HR that more positions fit within particular exemptions.

Service Advisors' Argument

James Feldman, a solo practitioner and adjunct professor of law at the University of Pennsylvania Law School in Philadelphia who represents the service advisors, argued that they weren't exempt.

The most obvious reason why they don't fit within the exemption for salespeople, partsmen or mechanics is that they don't service automobiles, he said.

In his brief, he cited five dictionaries of the English language, and they defined "to service" as to maintain or repair, he said. "You don't maintain or repair a car in the way people would ordinarily speak, with a pad or a clipboard and a pencil or a telephone, which are the primary tools that service advisors use. You do it in the back of the shop when you're actually working on the car."

Don't service advisors look under the hood of cars sometimes?, asked Chief Justice John Roberts Jr. "They go out and at least listen to the noise, and sometimes they can say right away: 'Oh, that's probably this,' " he stated.

"I don't think so," Feldman answered. "They may make a guess as to what's wrong. … But it's up to the mechanic to actually figure out what's wrong."

Roberts said that service advisors do try to get a description of what's wrong with the car from the customer and said that was analogous to someone taking down symptoms at the doctor's office. He asked if that person would be part of the medical treatment.

No, Feldman said. "If this court were to construe 'engaged in' to be a term of breadth like that in this case, I think it would actually upset a lot of settled expectations across broad areas of the law," he added.

It's a close call as to how the Supreme Court will decide this case, according to Matt Disbrow of Honigman in Detroit. "It appears the key issue centers around whether the statute must be narrowly interpreted to limit the application of the exemption or whether in the modern economy a more expansive definition should be used."

 

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