On June 20, 2016, in the case of Navarro v. Encino Motorcars, LLC, the Supreme Court of the United States issued an opinion vacating the Ninth Circuit’s decision from March 24, 2015 which held that service advisors are not exempt from overtime pay.

The Supreme Court determined that the Ninth Circuit had given too much weight to the Department of Labor’s (“DOL”) 2011 regulation indicating that service advisors are not “salesman” included in the exemption from overtime pay. Instead, the Supreme Court remanded the case to the Ninth Circuit for reconsideration of the issue consistent with the Fair Labor Standards Act and the decades-old practice of considering service advisors as exempt under the salesman exemption.

In the underlying Ninth Circuit case, five current and former service advisors, who received commission for services they sold, brought suit against the dealership alleging that the dealership should have paid them overtime wages required by the Fair Labor Standards Act. The Ninth Circuit relied on a 2011 DOL regulation and found that service advisors did not fall within the definition of “salesman, partsman or mechanic.”

However, this new Supreme Court ruling requires the Ninth Circuit to interpret the statute taking into account the dealerships’ decades-long reliance on the exemption and not consider the DOL’s 2011 regulation. The effect of the Court’s decision is that service advisors continue to remain exempt from the payout of overtime in Michigan.

If you would like more information on the ruling, or if you need assistance determining if your employees are exempt from overtime pay, please do not hesitate to contact a member of the Dealer Practice Group at 248-645-9300 or by email.