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On January 17, 2018, the Supreme Court heard oral argument in Encino Motorcars v. Navarro, a case on its second trip to the high court regarding a dispute over the application of the Fair Labor Standard Act’s overtime-pay requirements for service advisors at car dealerships.

Congress enacted the Fair Labor Standards Act (FLSA) in 1938 to “protect all covered workers from substandard wages and oppressive working hours,” and it requires overtime pay for employees covered under the Act who work more than 40 hours in a given week.  The FLSA exempts from this requirement, however, “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers….”  

Hector Navarro and other service advisors filed suit against their employer Encino Motorcars, alleging that it violated the FLSA by failing to pay them overtime wages. Encino countered that as service advisors, Navarro and the other plaintiffs fell within the FLSA exemption.  The district court ruled in favor of Encino, but the U.S. Court of Appeals for the Ninth Circuit reversed, relying upon a 2011 regulation issued by the Department of Labor (DOL) and indicating that service advisors were not covered by the exemption. The Supreme Court, however, thereafter vacated the judgment of the Ninth Circuit.  Determining that the regulation at issue was procedurally defective, the Court remanded the case for the Ninth Circuit to construe the FLSA exemption without “placing controlling weight” on the DOL regulation.

On remand, the Ninth Circuit, assuming without deciding that the DOL regulation was entitled to no weight, held that the FLSA exemption, on its own terms, did not encompass service advisors. As a result, the court indicated, plaintiffs could proceed against Encino on their claims for overtime.  Encino petitioned for certiorari, however, and the Supreme Court agreed to take up the case a second time to consider again whether service advisors at car dealerships are exempt from the Fair Labor Standards Act's overtime-pay requirements. 

To discuss the case, we have Tammy McCutchen, Principal at Littler Mendelson, PC. 

This podcast is cosponsored with the Labor & Employment Law Practice Group.