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Saturday, October 3, 2015

Navarro v. Encino Motorcars: Ninth Circuit Defers to Federal Regulations, Holds that Car Dealership's "Service Advisors" Are Not Exempt from FLSA Overtime Requirement

A quick word on Navarro v. Encino Motorcars, ___ F.3d ___ (9th Cir. 3/24/15), which I missed earlier in the year. The plaintiffs worked as service advisors at a car dealership. Their job was to greet customers, evaluate service needs, suggest required services, and suggest additional services above and beyond those required to resolve the customers' complaints. They filed suit for payment of overtime wages under the Fair Labor Standards Act (FLSA). The district court dismissed their overtime claim, holding that they fell within the FLSA's exemption for "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles." The Ninth Circuit reversed, holding as follows:

The FLSA requires covered employers to pay their employees minimum wage and overtime compensation. The FLSA exempts "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles" from the overtime requirement. Federal regulations define these terms, and the parties agreed that the plaintiffs were not "salesmen, partsmen, or mechanics" as defined within the regulations. The question then was whether the Court should defer to the regulations.

First, the FLSA does not define the terms "salesman, partsman, or mechanic" and it is ambiguous as to their meaning. This is particularly so given that the exemptions are to be applied only to those "plainly and unmistakably within their terms and spirit."

Second, because the regulation was duly promulgated after a notice-and-comment period and has not changed since its promulgation in 1970, the Court reviewed the regulation under the "reasonableness" standard set forth in 
Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1984). 

Third, the regulation represents a reasonable interpretation of the statute and is consistent with the presumption that the exemptions should be construed narrowly. The Court noted that "there are good arguments" supporting the defendant's reading of the exemption, "But where there are two reasonable ways to read the statutory text, and the agency has chosen one interpretation, we must defer to that choice."

The opinion is available here.

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