Car dealership “service advisors” are entitled to overtime pay, even though the regulations granting them overtime are not entitled to deference, the 9th U.S. Circuit Court of Appeals has ruled.

The appeals court held in 2015 that dealerships must pay advisors overtime, in compliance with new U.S. Department of Labor (DOL) regulations.

The Fair Labor Standards Act (FLSA) itself exempts a “salesman, partsman, or mechanic” from overtime, if they meet certain criteria. In 2011, the DOL defined those terms as follows:

• A salesman is an employee who is employed for the purpose of and is primarily engaged in making sales or obtaining orders or contracts for sale of the automobiles, trucks, or farm implements that the establishment is primarily engaged in selling.
• A partsman is any employee employed for the purpose of and primarily engaged in requisitioning, stocking, and dispensing parts.
• A mechanic is any employee primarily engaged in doing mechanical work (such as get-ready mechanics, automotive, truck, or farm implement mechanics, used car reconditioning mechanics, and wrecker mechanics) in the servicing of an automobile, truck or farm implement for its use and operation as such. (29 C.F.R. §779.372(c))

The employer appealed the 9th Circuit’s ruling to the U.S. Supreme Court, arguing that the appeals court should not have deferred to the DOL’s regulations because the agency has, at other times, expressed an opposite view. In a 1978 opinion letter, the DOL said it considered service advisors “salesmen,” which the FLSA itself exempts from overtime pay. The DOL also amended its Field Operations Handbook that same year to reflect the interpretation. In the new regulations, however, the DOL specifically declined to exempt service advisors.

The high court agreed with the employer, finding that the DOL had not properly explained its policy reversal. Agencies are free to change their existing policies but an unexplained inconsistency is a reason for finding that the regulations are arbitrary and capricious, the Court said, sending the case back to the 9th Circuit for it to interpret the FLSA without the help of the DOL’s regulations.

On remand, the 9th Circuit considered the relevant provision in the statute, which exempts from overtime “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.”

Ultimately, the court reached the same result. “[U]nder the most natural reading of the statute, Congress did not intend to exempt service advisors,” it said. And, “even if the text were ambiguous, the legislative history confirms that Congress intended to exempt only salesmen selling cars, partsmen servicing cars, and mechanics servicing cars,” the 9th Circuit concluded (Navarro v. Encino Motorcars, LLC, No. 13-55323 (9th Cir. Jan. 9, 2017)).

The 9th Circuit covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. The court acknowledged that its ruling is in direct conflict with a separate 2013 ruling from Montana’s Supreme Court. The ruling also conflicts with rulings from the 4th and 5th Circuits, it said. Those circuits together cover Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Texas, Virginia, and West Virginia.