The U.S. Supreme Court this month ruled that service advisers who work in car dealerships and similar businesses are not eligible for overtime. The way the court arrived at that conclusion represents a major shift in the court”™s approach to interpreting federal wage and hour laws.
The outcome of this case does not come as a surprise; it is a continuation of the Supreme Court”™s pro-employer, or some would say pro-business, stance when deciding labor and employment cases.
At the micro-level, the 5-4 ruling, is a major victory for management at some 18,000 dealerships nationwide that together employ more than 100,000 service advisers. Those service advisers no longer have to be paid overtime under federal law.
Up until 2011, service advisers were considered exempt from overtime. In 2011, the U.S. Department of Labor reversed course and issued a rule that interpreted “salesman” to exclude service advisers, which meant service advisers would be paid overtime. It remained this way through the Obama administration.
No longer. From now on, service advisers will join a long list of positions, such as outside salespersons, administrative employees, seamen, taxicab drivers and many others that are considered exempt from overtime pay no matter how many hours they work. As a practical matter for service advisers, in many cases this represents a significant amount of money since dealerships tend to be open for longer hours to be available to the public.
The specific case involves service advisers at a Mercedes-Benz dealership in Encino, California, who argued that the dealership violated the Fair Labor Standards Act (FLSA) by failing to pay them overtime. They claimed that they were not covered by the section of the FLSA, which states that “any salesman primarily engaged in selling or servicing automobiles” is an “exempt” FLSA employee who doesn”™t have to be paid overtime. The dealership argued that the definition of salesman includes service advisers, whose job responsibilities range from helping diagnose mechanical problems to estimating repair costs.
Justice Clarence Thomas wrote in the majority opinion that the “ordinary meaning of ”˜salesman”™ is someone who sells goods or services” and that service advisers, “do precisely that.” In dissent, Justice Ruth Bader Ginsburg said service advisers “neither sell nor repair automobiles” so they should not be exempt from
overtime payments.
This is the second time the case has been before the Supreme Court, the first coming in 2016, after the death of Justice Antonin Scalia when the court had only eight members. The remaining eight-members of the Supreme Court avoided a decision sending it back to the Ninth Circuit, which after reviewing it ruled a second time in favor of the service advisers.
While the direct holding of the Supreme Court”™s decision may appear to have somewhat limited impact, the manner in which the court arrived at its conclusion has far reaching implications for future interpretations of federal wage and hour exemptions. The pendulum has swung 180 degrees and now favors the employer. The court backpedaled from decades of precedent where it had narrowly construed FLSA exemptions against the employers. Now, when interpreting exemptions to minimum wage or overtime laws, federal courts must give them a “fair” reading. The ruling gives employers legal ammunition to challenge FLSA overtime exemptions, particularly as U.S. Department of Labor regulations and decisions read them, which the Supreme Court has held should now be construed by courts neutrally.
An open question of importance to Connecticut employers and employees is whether our state courts will follow the Supreme Court”™s lead when they interpret Connecticut”™s minimum wage and overtime exemptions. Since as early as 1955, the Connecticut Supreme Court has held that wage and hour laws should be interpreted liberally to accomplish their purpose in protecting workers. In 1960, the Connecticut Supreme Court, relying on U.S. Supreme Court cases, stated that “it is essential that exemptions or exclusions be strictly and narrowly construed.” Now that the U.S. Supreme Court has departed from that principle, how our State will interpret exemptions to state minimum wage and overtime protection remains to be seen.
Employers in Connecticut are required to follow both federal and state wage and hours laws and where state law gives employees greater protection than federal laws, businesses must comply with the state laws. And, as employers in the state are all too aware, the Connecticut Department of Labor is more likely than the federal agency to come knocking on an employer”™s door to investigate alleged wage and
hour abuses.
Maria Garcia-Quintner is an attorney with the Stratford law firm Mitchell & Sheahan PC. She represents individuals and employers in all aspects of employment litigation before state and federal courts and administrative agencies. She can be reached at 203-873-0240 or mgarcia@mitchellandsheahan.com.
