Show Me the Money: On Whether Car Dealership Service Advisors Are Entitled to or Exempt from Overtime Pay Under the FLSA

INTRODUCTION Mercedes-Benz of Encino ("MB Encino") has served the San Fernando Valley region of greater Los Angeles since 1964. (1) The swanky, community-focused dealership invites individuals to stop by and enjoy a cup of coffee while browsing its showroom and gift boutique, (2) and proudly shares on Instagram images of social events and customers enjoying its luxury automobiles. (3) An interactive enterprise, MB Encino also uses social media to feature friendly photos of employees and depicts employee portraits on its website. (4) While MB Encino and its employees have joined forces to bring together individuals in the San Fernando Valley community, a recent dispute involving the dealership and a subset of its employees--this time as adverse parties--has caused a rift in the legal community. In Navarro v. Encino Motorcars, LLC, (5) Hector Navarro, Mike Shirinian, Anthony Pinkins, Kevin Malone, and Reuben Castro, all "service advisors" at MB Encino, sued the dealership alleging it had violated the Fair Labor Standards Act (6) (FLSA) by failing to pay time and one-half overtime wages. (7) To determine MB Encino's liability, the United States Court of Appeals for the Ninth Circuit had to weigh the reasonableness of a Department of Labor (DOL) regulation that effectively entitles service advisors to time and one-half overtime pay. The FLSA overtime-pay requirement "mandat[es] that all hours worked in excess of 40 hours [in a seven-day work week] be paid at one and one-half (150%) of the employee's normal hourly rate." (8) However, the overtime requirement does not apply to a host of exempted employees across various industries. (9) As set forth in 29 U.S.C. [section] 213(b)(10)(A) (the "Dealership Employee Exemption" or the "Exemption"), one such employee that is not entitled to time and one-half overtime pay is, "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." (10) Administration of the FLSA, and thus interpretation of its exemptions, is carried out by the DOL's Wage and Hour Division, which the Act created. (11) The DOL's interpretation of the Dealership Employee Exemption, as set forth in 29 C.F.R. [section] 779.372 (the "DOL Dealership Regulation" or the "Regulation"), has always considered service advisors, who are broadly defined as dealership employees responsible for diagnosing and soliciting repair and maintenance services for vehicles, (12) as outside the definition of "salesm[e]n ... primarily engaged in selling or servicing automobiles," and therefore entitled to time and one-half overtime pay. (13) Agency regulations duly promulgated after a notice-and-comment period, such as the DOL Dealership Regulation, (14) are subject to the deferential standard of review set forth in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (15) Under this standard, commonly known as Chevron deference, "legislative regulations are given controlling weight" (16) if a two-part test is satisfied. First, the court must determine that "the statute [interpreted by the regulation] is silent or ambiguous with respect to the specific issue." (17) Second, the regulation must be reasonable in that it is not "arbitrary, capricious, or manifestly contrary to the statute." (18) In addition to the standard set forth in Chevron, the Supreme Court has dictated that "[FLSA] exemptions are to be narrowly construed against the employers seeking to assert them and their application limited to those [contexts] plainly and unmistakably within their terms and spirit." (19) Accordingly, in Encino Motorcars, the Ninth Circuit had to determine whether the DOL Dealership Regulation should be afforded Chevron deference. (20) The Ninth Circuit panel unanimously held that it should (21)--i. …