Encino Motorcars, LLC v. Navarro
584 U.S. 79, 2018 U.S. LEXIS 2065, 138 S.Ct. 1134 (2018)
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Rule of Law:
The Fair Labor Standards Act's overtime exemption under 29 U.S.C. §213(b)(10)(A) for "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" applies to service advisors because they are "salesmen" who sell services for vehicles and are "primarily engaged in servicing automobiles" due to their integral role in the servicing process.
Facts:
- Encino Motorcars, LLC operates a Mercedes-Benz dealership in California.
- Hector Navarro and other respondents are current and former service advisors for Encino Motorcars.
- Service advisors interact with customers, sell them services for their vehicles, meet customers to listen to concerns, suggest repair and maintenance services, sell new accessories or replacement parts, record service orders, follow up with customers, and explain repair work.
- Respondents alleged that Encino Motorcars violated the FLSA by failing to pay them overtime compensation.
Procedural Posture:
- Respondents (current and former service advisors for Encino Motorcars, LLC) sued Encino Motorcars, LLC in District Court for backpay, alleging FLSA violations based on a 2011 Department of Labor (DOL) rule.
- Encino Motorcars, LLC moved to dismiss, arguing that service advisors are exempt from the FLSA’s overtime-pay requirement under 29 U.S.C. §213(b)(10)(A).
- The District Court agreed with Encino Motorcars, LLC and dismissed the suit.
- The Court of Appeals for the Ninth Circuit reversed the District Court's judgment, finding the statute ambiguous and deferring to the 2011 DOL rule.
- The Supreme Court of the United States granted certiorari (Encino I) and vacated the Ninth Circuit’s judgment, holding that the 2011 DOL rule was procedurally defective and could not be deferred to, but did not decide whether the exemption covers service advisors.
- On remand from the Supreme Court, the Ninth Circuit again held that the exemption does not include service advisors.
- The Supreme Court of the United States granted certiorari to review the Ninth Circuit's decision on remand.
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Issue:
Does the Fair Labor Standards Act's overtime exemption in 29 U.S.C. §213(b)(10)(A), which applies to "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements," cover service advisors employed by car dealerships?
Opinions:
Majority - Justice Thomas
Yes, service advisors are exempt from the FLSA’s overtime-pay requirement because they are "salesm[e]n . . . primarily engaged in . . . servicing automobiles." The Court determined that a service advisor is a "salesman" under the ordinary meaning of the term, as they "sell [customers] services for their vehicles." Furthermore, service advisors are "primarily engaged in . . . servicing automobiles" because they are integral to the servicing process by meeting customers, suggesting repairs, selling parts, recording orders, and explaining work, even if they do not physically repair vehicles. This interpretation aligns with how partsmen, who also do not physically repair vehicles, are considered "primarily engaged in . . . servicing automobiles." The Court rejected the Ninth Circuit's application of the distributive canon, emphasizing that the word "or" in the exemption's text is almost always disjunctive, suggesting the exemption covers a salesman primarily engaged in either selling or servicing. The Court also explicitly rejected the principle that FLSA exemptions should be construed narrowly, stating there is no textual indication for such an approach and that exemptions should be given a "fair" reading, as they are as much a part of the FLSA's purpose as the overtime requirement. Finally, the Court found references to the 1966–1967 Occupational Outlook Handbook and legislative history unpersuasive, holding that external sources or legislative silence cannot override the clear text and statutory context.
Dissenting - Justice Ginsburg
No, the exemption does not include service advisors, and the Court should not enlarge the exemption to cover occupations outside Congress's specific enumeration. The dissent highlighted that Congress deliberately narrowed the FLSA dealership exemption in 1966 to cover only three specific categories: salesmen, partsmen, and mechanics, and service advisors were not among them despite being known job titles at the time. Service advisors do not "service" (i.e., repair or maintain) vehicles but rather solicit and suggest repair services. The dissent argued that the majority's expansive reading risks restoring the blanket exemption Congress intended to terminate. While partsmen are exempt, they "get their hands dirty" by supplying parts and are directly involved in the physical repair process, and their inclusion was justified by their irregular hours. In contrast, service advisors work ordinary, fixed schedules, unlike the other exempt positions, and thus do not fit the rationale underlying the exemption. The dissent also reiterated the long-standing principle that FLSA exemptions should be narrowly construed against employers, a principle the majority rejected without sufficient justification. It also pointed out that other FLSA provisions, such as §207(i) for commission-based workers, already address compensation for many service advisors, and expanding §213(b)(10)(A) upsets Congress's careful balance by stripping protection from lower-income workers.
Analysis:
This decision significantly reinterprets a key FLSA overtime exemption, broadening its scope by rejecting the long-standing principle of narrowly construing FLSA exemptions. The Court's emphasis on a "fair" reading rather than a "narrow" one marks a notable shift in judicial approach to statutory exemptions and may influence future interpretations of other statutory provisions beyond the FLSA. For employers in the automobile industry, this ruling provides greater clarity and potentially broader applicability of the exemption for service advisors. However, for employees, it reduces overtime protections, particularly affecting those with lower commission rates not covered by other FLSA exemptions, underscoring a textualist approach to statutory interpretation over historical policy rationales or remedial purposes.
