Benz Dealer’s Service Advisers Eligible for Overtime

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By Jon Steingart

Automobile service advisers at a Mercedes-Benz dealer in California are entitled to overtime when they work more than 40 hours in a week, a federal appeals court ruled Jan. 9 ( Navarro v. Encino Motorcars, LLC , 2017 BL 5153, 9th Cir., No. 13-55323, 1/9/17 ).

The U.S. Court of Appeals for the Ninth Circuit reached the same conclusion in 2015, but the U.S. Supreme Court held on June 20, 2016, that the appeals court erroneously deferred to a Labor Department rule on advisers who sell repair services provided by other workers. The regulation was “procedurally defective,” the high court said, sending the case back to the Ninth Circuit.

“Just like the first time the Ninth Circuit issued a decision in this case, there still remains a clear circuit split,” Wendy McGuire Coats, an attorney for Encino Motorcars LLC told Bloomberg BNA Jan. 9.

The most recent ruling relies solely on the statutory language and legislative history of the Fair Labor Standards Act section that addresses advisers, Judge Susan P. Graber wrote for the appeals court. Judges Kim McLane Wardlaw and James C. Mahan joined the opinion.

Circuit Split Remains

The decision may result in the question of advisers’ entitlement to overtime pay returning to the Supreme Court. It creates a split among the federal appeals courts on whether the advisers are covered by the exemption, which is typically considered a strong predictor of whether the justices would be willing to review a question of law.

“In some respects it’s the same outcome but almost a completely different case on review,” Coats said. “To some extent while the result is the same, the path to that conclusion is different.”

“This case is a prime example in the legal field there’s many ways to skin a cat,” Keven Steinberg, an attorney for the advisers, told Bloomberg BNA Jan. 9. “I think the Supreme Court analyzed the case differently from what we expected. They analyzed it much more as a deference case.”

Graber’s analysis focused on the FLSA section codified at 29 U.S.C. § 213(b)(10)(A), which provides an exemption from overtime for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” Congress in 1966 narrowed an exemption that included all employees of an automobile dealer by limiting it to specific positions, she said.

This statutory language is “arguably flexible” enough to support an interpretation that service advisers are involved in servicing autos because they contribute to the dealer’s process for supplying maintenance and repair, Graber said. But this would go too far beyond the words’ ordinary meaning, she said.

Coats said her team hasn’t settled on next steps. “We are exploring all of our options. We haven’t made a decision yet,” she said.

Stephanos Bibas, James Feldman and Nancy Bregstein Gordon with the University of Pennsylvania Law School Supreme Court Clinic in Philadelphia and Keven Steinberg of Thompson, Coe & O’Meara in Los Angeles represented the advisers.

Fisher & Phillips LLP attorneys Wendy McGuire Coats in San Francisco and Karl Lindergren, Todd Scherwin and Colin Calvert in Irvine, Calif., represented Encino Motorcars.

To contact the reporter on this story: Jon Steingart in Washington at

To contact the editors responsible for this story: Peggy Aulino at; Terence Hyland at; Christopher Opfer at

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