Ninth Circuit Finds Auto 'Service Advisors' Not Exempt Under FLSA

In Navarro v. Encino Motorcars, LLC (9th Cir. Mar. 24 2015), the U.S. Court of Appeals for the Ninth Circuit addressed an issue of first impression in the Circuit: whether individuals who worked for automobile dealerships as “service advisors” were exempt from the Fair Labor Standards Act's (“FLSA”) overtime premium pay requirements. In reversing the district court's decision, the Navarro court held the FLSA's exemption for automobile dealership salesman, partsman, and mechanics did not apply to service advisors.

This decision is significant because, in holding the exemption was inapplicable to service advisors, the Ninth Circuit declined to follow the lead of the Fourth and Fifth Circuits, which previously ruled auto dealership service advisors were exempt from the FLSA's overtime requirements in Walton v. Greenbrier Ford Inc., 370 F.3d 446 (4th Cir. 2004) and Brennan v. Deel Motors, Inc., 475 F.2d 1095 (5th Cir. 1973). By creating a split between the Circuits, the decision introduced a new level of uncertainty as to how other Circuits may decide the issue. In the short term, however, auto dealerships in the Ninth Circuit using this exemption should review their pay practices to make sure they comply with this decision.

The Facts of the Case

The defendant in Navarro was a dealership that sold and serviced new and used automobiles. The plaintiffs worked for the defendant as service advisors who were responsible for meeting and greeting vehicle owners as they entered the dealership's service area. They would evaluate the service and/or repairs the vehicle needed based on the vehicle owner's requests/complaints and recommend the dealership perform certain repair work. They would also suggest supplemental service at an additional cost for the vehicle in addition to the work related to the customer's complaints. They would then write up the repair estimate. Once the estimate was written, the vehicle would be turned over to a mechanic who would perform the actual repair/service work. While the mechanic was working on the vehicle, or shortly thereafter, the service advisor would call the vehicle owner and again suggest additional work for the vehicle at additional costs. It was undisputed that the plaintiffs did not sell vehicles; procure, stock, or deliver parts; or work on vehicles.

The service advisors were paid on a commission basis only. They did not receive an hourly wage or a salary. They were also not paid overtime, although they...