The Supreme Court on Monday limited overtime pay for service advisors at car dealerships nationwide, ruling that those employees are primarily salespeople who sell brake jobs, oil changes and other service work.
The 5-4 ruling is a victory for Encino Motorcars, a Mercedes-Benz dealership in the San Fernando Valley, but the case has been watched by 18,000 auto dealerships across the country.
Had the court ruled differently, the industry feared it would be liable for back pay for tens of thousands of the employees who greet customers and help them decide on needed service work.
At issue was whether these advisors were primarily salespeople or something else. The Fair Labor Standards Act includes a perplexing phrase adopted in 1966 that has resulted in conflicting rulings in the lower courts and two trips to the Supreme Court. The overtime law exempts "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" at dealerships.
The Obama administration had sought to expand the reach of the laws that promise employees minimum wages and extra pay for overtime hours. And in 2011, the Labor Department said service advisors were entitled to overtime pay because they were not primarily engaged in selling cars or servicing them.
A year later, a lawsuit brought on behalf of Hector Navarro and other service advisors sought back pay from Encino Motorcars. The 9th Circuit upheld their claim based on the Labor Department rule.
Two years ago, however, the Supreme Court heard an appeal from the dealership and overturned the agency's rule. But when the case returned to the 9th Circuit, the San Francisco-based judges ruled again that service advisors were entitled to overtime because they did not directly sell cars or service them.
The Supreme Court agreed to hear a second appeal in Encino Motors vs. Navarro and ruled Monday that service advisors are not entitled to overtime pay.
Justice Clarence Thomas spoke for the court's conservatives. "A service adviser is obviously a 'salesman,'" he wrote. And they are also "primarily engaged...in servicing automobiles," citing the words of the law. "If you ask the average customer who services his car, the primary, and perhaps only, person he is likely to identify is his service advisor," Thomas said. Chief Justice John G. Roberts Jr. and Justices Anthony M. Kennedy, Samuel A. Alito Jr. and Neil M. Gorsuch agreed.
In dissent, Justice Ruth Bader Ginsburg said the service advisors at Encino Motorcars "work regular hours, 7 a.m. to 6 p.m., at least five days per week, on the dealership premises. Their weekly minimum is 55 hours." Federal law calls for a time-and-a-half pay after 40 hours in a week, she noted. "Because service advisers neither sell nor repair automobiles, they should remain outside the exemption and within the act's coverage," she said. Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan agreed.
12:50 p.m.: This article was updated with additional quotes from the decision.