On Monday, April 2, the U.S. Supreme Court (SCOTUS) issued a 5-4 decision ruling that an auto dealership’s service advisors that greeted and advised customers on their auto service needs were covered under the Fair Labor Standards Act (FLSA) special exemption addressing auto dealership personnel. This decision overturned a Ninth Circuit Court of Appeals ruling in 2016 that these service providers were not covered by the FLSA’s exemption and were eligible for overtime. At a point in the opinion however, it reads more like an English grammar class tutorial than a legal decision.

The case results from current and former service advisors working for an auto dealership suing it for backpay in violation of the FLSA’s overtime pay requirements due to classifying their positions as exempt. The auto dealership argued the service advisor position should be classified exempt under 29 U.S.C, Sec. 213 (b)(10)(A) which stated “any salesmen, parts-man, or mechanics primarily engaged in selling or servicing automobiles, trucks, or farm implements” were exempt form overtime under the law.  Justice Thomas agreed, holding an auto dealership service advisor is engaged in the servicing of goods or services.

SCOTUS found the Ninth Circuit holding (also relying on a 2011 DOL regulation change on same) that the FLSA could only find the service advisors non-exempt incorrect. The Ninth Circuit held that FLSA was ambiguous, and the legislative history was inconclusive. However, SCOTUS held this was the wrong way to interpret the FLSA. Re-visiting English grammar education and deconstructing the pertinent sentence pertaining to auto dealership salesmen, parts-man, or mechanics primarily engaged in selling or servicing automobiles, trucks, or farm implements…”  SCOTUS asked, regardless of the fact that the service advisor was not a parts-man or a mechanic and was not “primarily engaged…selling automobiles”, were they still primarily engaged in… servicing automobiles?

What is a “Gerund” and other English Construction Terms?

Here starts the Court’s English lesson. The Court’s opinion states Service Advisors are:

“primarily engaged in … servicing automobiles.” Servicing automobiles is defined as either “the action of maintaining or repairing a motor vehicle” or “[t]he action of providing a service.” 15 Oxford English Dictionary, at 39; see also Random House Dictionary of the English Language, at 1304 (“to make fit for use; repair; restore to condition for service.”)

Because the text of the FLSA exemption covers “any salesman, parts-man, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements.” §213(b)(10)(A).The exemption uses the word “or” to connect all of its nouns and gerunds, and “or” is “almost always disjunctive.” United States v. Woods, 571 U. S. 31, 45 (2013). Thus, the use of “or” to join “selling” and “servicing” suggests that the exemption covers a salesman primarily engaged in either activity.”

SCOTUS further schools us and states:

Unsurprisingly, statutory context can overcome the ordinary, disjunctive meaning of “or.” The distributive canon, for example, recognizes that sometimes “[w]here a sentence contains several antecedents and several consequents,” courts should “read them distributively and apply the words to the subjects which, by context, seem most properly to relate.” 2A N. Singer & S. Singer, Sutherland Statutes and Statutory Construction §47:26, p. 448(rev. 7th ed. 2014).”

BUT SCOTUS states:

Here, context favors the ordinary disjunctive meaning of “or” for at least three reasons. First, the distributive canon has the most force when the statute allows for one-to-one matching. But here, the distributive canon would mix and match some of three nouns— “salesman, parts-man, or mechanic”—with one of two gerunds— “selling or servicing.” §213(b)(10)(A). We doubt that a legislative drafter would leave it to the reader to figure out the precise combinations. Second, the distributive canon has the most force when an ordinary, disjunctive reading is linguistically impossible. Cf., e.g., Huidekoper’s Lessee v. Douglass, 3 Cranch 1, 67 (1805) (Marshall, C. J.) (applying the distributive canon when a purely disjunctive reading “would involve a contradiction in terms.”) But as explained above, the phrase “salesman . . . primarily engaged in . . . servicing automobiles” not only makes sense; it is an apt description of a service advisor. Third, a narrow distributive phrasing is an unnatural fit here because the entire exemption bespeaks breadth. It begins with the word “any.” See Ali v. Federal Bureau of Prisons, 552 U. S. 214, 219 (2008) (noting the “expansive meaning” of “any.”) And it uses the disjunctive word “or” three times. In fact, all agree that the third list in the exemption— “automobiles, trucks, or farm implements”—modifies every other noun and gerund. But it would be odd to read the exemption as starting with a distributive phrasing and then, halfway through and without warning, switching to a disjunctive phrasing—all the while using the same word (“or”) to signal both meanings. 

Back to the Law

For this ruling that reversed the Ninth Circuit Appeals Court, SCOTUS rejected the legal principal that FLSA exemptions must be construed narrowly and stated rather than giving it “a fair interpretation” was the superseding principal at hand.  It reasoned that because there were so many exemptions built into the law, the FLSA was NOT written to “pursue” remedial purpose “at all costs” as the Ninth Circuit Court posited in its decision. The Ninth Circuit based its decision on the DOL’s Occupational Handbook.  While it lists12 job titles in car dealerships, it does not have service advisors listed. SCOTUS found this explicit approach to exemption interpretation too narrowly construed.

This case demonstrates how fact-based Wage and Hour interpretation can be and how misunderstood the FLSA can be. Keep in mind also, there were four SCOTUS Justices that disagreed with the decision. Justine Ginsberg in her dissent noted that “the High Court had long recognized that the "particularity" of FLSA exemptions meant they were not to be enlarged "by implication," and any jobs that fell outside "narrow and specific" exemptions were to remain covered by the Act’s protection.”

When conducting job analysis employers must analyze each job for proper FLSA classification determination.  And even then, a correct interpretation can be difficult as demonstrated above. In this case the employer was correct in its classification, but it is doubtful as to whether the employer really understood how it got to its position in the first place.

ASE Resources

·        FLSA Changes and Working with Exempt/Non-exempt Classification Analysis – In this course, participants will take a hands-on approach to determine the test specifications for Executive, Professional and Outside Sales exemptions. This course will teach participants how to identify what information needs to be collected and validated to correctly assign exempt or non-exempt status to the employee.  The next class will run May 2, 2018. To learn more about this class or to register click here.

·        HR Consulting Services – ASE also can provide classification analysis services through its HR Management Group, Inc. HR consulting services. Contact Michael Burns at (248) 223-8039 or [email protected].

·        Research Services – ASE’s Research Services can provide a host of information on FLSA exempt/non-exempt regulation and practice. Contact Kris Cifolelli at (248) 223-8021 or [email protected].

·        CCH HRAnswersNow – This member-exclusive database offers FLSA information helpful to HR professionals.  Members can access the database through their ASE Dashboard.

Sources: Encino Motorcars, LLC v. Navarro et al (No.16-1362) 4/2/2018; CCH Supreme Court rules auto dealership service advisors are overtime-exempt; FLSA exemptions need not be ‘narrowly construed’ — US SUPREME COURT DOCKET, (Apr. 4, 2018)