Encino Motorcars v. Navarro (SCOTUS, April 2, 2018)

Encino Motorcars v. Navarro (SCt. Case No. 16-1362) (Encino II) held that service advisors at car dealerships are exempt from the provisions of the Fair Labor Standards Act (FLSA) requiring employers to pay overtime to employees who work more than forty hours in a week. Enacted in 1938, the FLSA is the United States labor law that created the employee right to minimum wage, and overtime pay (generally, one and a half times the employee’s regular hourly rate) for employees who work over forty hours a week. The FLSA, however, contains numerous exemptions — categories of employees who are not entitled to receive overtime pay under the FLSA based on their job duties. These employees are referred to as “exempt” from the right to receive overtime pay.

One such provision, codified at 29 U.S.C. §213(b)(10)(A), provides an exemption to the overtime-pay requirement for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements.” The plaintiff employee Navarro in Encino Motorcars worked for a car dealership as a service advisor. Navarro sued the dealership on behalf of himself and other service advisors, arguing that the dealership violated the FLSA by failing to pay them overtime wages. The primary question for the Supreme Court was whether the FLSA entitled service advisors to overtime pay, or whether the job of service advisor fell into the exemption for “salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles[.]”

At the trial court level, the district court had dismissed the suit on the grounds that service advisors were exempt and therefore were not entitled to overtime pay. The employees appealed that decision, and the Court of Appeals for the Ninth Circuit reversed the trial court, finding that the exemption for “salesman … primarily engaged in selling or servicing automobiles” did not apply to service advisors at car dealerships. In a 5-4 decision, the Supreme Court reversed the Ninth Circuit and held that the service advisors were exempt and therefore not entitled to overtime pay. Justice Thomas wrote the majority opinion. Justice Ginsberg wrote the dissent.

The Court first determined that a service advisor is a “salesman” for the purposes of the exemption at issue, because the ordinary meaning of “salesman” is someone who sells goods or services, and service advisors “sell [customers] services for their vehicles[.]” Encino II at 6 (cite to earlier decision omitted).

Next, the Court held that service advisors are also “primarily engaged in . . . servicing automobiles.” Thomas’ reasoning here was that “servicing” can mean either “the action of maintaining or repairing a motor vehicle” or “[t]he action of providing a service,” and service advisors satisfy both definitions because they are integral to the servicing process. Encino II at 6-7. Service advisors meet customers and listen to their concerns about their cars; suggest repair and maintenance services; sell new or replacement parts; record service orders; follow up with customers as the services are performed; and explain the repair and maintenance work being performed. Encino II at 6-7 (quotes omitted). Therefore, service advisors are primarily engaged in servicing automobiles.

In reaching this conclusion, Thomas rejected the Ninth Circuit’s approach to interpreting the word “or” in the language of the exemption (“any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles”). The Ninth Circuit had applied the distributive method — matching “salesman” with “selling” and “partsman [and] mechanic” with “servicing”— and therefore determined that the exemption does not apply to “salesm[e]n . . . primarily engaged in . . . servicing automobiles.” The Supreme Court disagreed with that approach, observing that the word “or,” is “almost always disjunctive” — meaning, in this context of this language, that “salesman” could be matched with “servicing.” Encino II at 7-9 (citing United States v. Woods, 571 U. S. 31, 45.) The Court also pointed out that the distributive use of “or” worked best when one-to-one matching was possible and did not make as much sense when trying to pair three terms (“salesman, partsman, or mechanic”) with two terms (“selling” or “servicing”). Therefore, the Court applied the disjunctive meaning of “or.” By using “or” to join “selling” and “servicing”, Thomas determined that the exemption covers a salesman primarily engaged in either selling or servicing. This included service advisors, which the Court had concluded were salesmen primarily engaged in servicing automobiles. Encino II at 7-9.

Thomas also discussed the Ninth Circuit’s application of the long-standing principle in FLSA jurisprudence that exemptions should be narrowly construed. Thomas rejected that approach, reasoning that because the FLSA “gives no textual indication that its exemptions should be construed narrowly, there is no reason to give them anything other than a fair (rather than a ‘narrow’) interpretation.” Encino II at 9 (citing and quoting Scalia, Reading Law, at 363.)

In sum, this case determined that service advisors at auto dealerships are exempt from the overtime-pay requirement, and departed from the Court’s long-standing principle that FLSA exemptions should be construed narrowly.

This article was originally published on timcoffieldattorney.com

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