This morning, a divided 5-4 Supreme Court rejected an
Obama-era FLSA regulation and found that automobile service advisors were
exempt under the FLSA. Encino
Motorcars LLC v. Navarro, No. 16-1362
(4-2-2018). Section 213(b)(10)(A) of
the FLSA exempts “any salesman,
partsman, or mechanic primarily engaged in selling or servicing automobiles” and
“if he is employed by a nonmanufacturing establishment primarily engaged in the
business of selling such vehicles or implements to ultimate purchasers” at a
covered dealership. The question
presented was whether this exemption covered service advisors—employees at car
dealerships who consult with customers about their servicing needs and sell
them servicing solutions. After decades
of this exemption covering services advisors, the Obama Administration
determined in 2011 that it did not.
Notably, the Court explicitly rejected the rule that FLSA exemptions are
to be construed narrowly. “Because the FLSA gives no ‘textual indication’ that
its exemptions should be construed narrowly, ‘there is no reason to give [them]
anything other than a fair (rather than a ‘narrow’) interpretation.’”
The Court observed that when the FLSA was enacted
in 1938, all car dealership employees were exempt. That exemption was narrowed over the years
until the current version was enacted in 1974. A number of courts found this exemption to
cover service advisors and the DOL agreed in an opinion letter in 1978. In 2011, the Obama DOL reversed course and
issued a formal regulation finding that service advisors were not exempt under
the FLSA. The plaintiffs filed suit for
unpaid overtime over the prior three years. The Ninth Circuit found the statute to be
ambiguous and deferred to the Obama 2011 regulation. The Supreme Court previously reversed this
decision on the grounds that the regulation was procedurally defective by
changing decades of reliance on the prior determinations without a reasoned
explanation. The Court remanded the
matter to determine whether service advisors were covered under the
statute. Although it found that service
advisors were “salesmen” engaging primarily ‘in servicing automobiles,” the
Ninth Circuit again determined that they were not covered by the statutory
exemption because they did not actually service the cars themselves. A divided Supreme Court again reversed.
The parties agreed that if the service advisors
were covered, it was as salesmen (i.e., someone who sells goods or services). They also agreed that service advisors were
not engaged in the selling of automobiles.
The only question was whether they were primarily engaged in the
servicing of automobiles when they never actually repaired or serviced the
automobiles themselves. The Court found that the service advisors
sold customers services for their automobiles.
The Court also found that the service advisors were involved in
servicing the automobiles even if they never repaired the vehicles because they
met and listen to the customer, suggested repair and maintenance services, and explained the work. That the advisors did not physically repair
the cars was not important when partsmen were similarly exempt even though they
spent little time under the hood.
In other words, the phrase “primarily engaged in .
. . servicing automobiles” must include some individuals who do not physically
repair automobiles themselves but who are integrally involved in the servicing
process. That description applies to partsmen and service advisors alike.
This conclusion was reinforced by the statutory language:
The text of the exemption covers “any salesman,
partsman, 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.
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, they seem
most properly to relate.” 2A N. Singer
& S. Singer, Sutherland Statutes and Statutory Construction §47:26, p. 448
(rev. 7th ed. 2014).
But 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, partsman,
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. . . .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.” . . . 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.
The Court also rejected the Ninth Circuit’s opinion
on the grounds that FLSA exemptions should be construed narrowly:
We reject this principle as a useful guidepost for
interpreting the FLSA. Because the FLSA
gives no “textual indication” that its exemptions should be construed narrowly,
“there is no reason to give [them] anything other than a fair (rather than a
‘narrow’) interpretation.” Scalia,
Reading Law, at 363. The narrow construction
principle relies on the flawed premise that the FLSA “‘pursues’” its remedial
purpose “‘at all costs.’” . . .
But the FLSA has over two dozen exemptions in §213(b) alone, including
the one at issue here. Those exemptions
are as much a part of the FLSA’s purpose as the overtime-pay requirement. . . . .(“Legislation is, after all, the art of
compromise, the limitations expressed in statutory terms often the price of
passage”). We thus have no license to give
the exemption anything but a fair reading.
The Court also rejected the Ninth Circuit’s
reliance on legislative history, which that court had initially found to be
inconclusive, because the legislative history never specifically noted the
existence of “service advisors.” As
would be true with respect to “sex” in Title VII, the silence of legislative
history cannot overcome clear statutory language:
Even for those Members of this Court who consider
legislative history, silence in the legislative history, “no matter how
‘clanging,’” cannot defeat the better reading of the text and statutory
context. If the text is clear, it needs no repetition in the legislative
history; and if the text is ambiguous, silence in the legislative history
cannot lend any clarity. . . . Even if Congress did not foresee all of
the applications of the statute, that is no reason not to give the statutory
text a fair reading. . . .
The dissent found that only three automobile
employees were exempt: salesmen, partsmen and mechanics. It refused to create a fourth category for
service advisors.
NOTICE: This
summary is designed merely to inform and alert you of recent legal developments.
It does not constitute legal advice and does not apply to any particular
situation because different facts could lead to different results. Information
here can be changed or amended without notice. Readers should not act upon
this information without legal advice. If you have any questions about anything
you have read, you should consult with or retain an employment attorney.
