Service Advisors-Exempt v. Nonexempt
We have received many telephone and email inquiries regarding whether or not service advisors are exempt or nonexempt. The article below has been written by Art Silbergeld, Attorney-at-Law, and my long time mentor.
The U.S. Department of Labor has refused to clarify its long-standing position that that service advisors are exempt from overtime. Although the Department of Labor’s current regulation states that a service manager, service writer, service advisor or service salesman who is not primarily engaged in the work of a salesman, partsman or mechanic is not exempt, since 1987 it has agreed in its enforcement handbook not to deny exempt status to service advisors in enforcing this regulation.
In 2008, the Department agreed to formally adopt the position that would continue to treat service advisors as exempt from overtime. Caving in to pressure from the AFL-CIO, however, which would want a member union seeking to represent service department employees to include service advisors in bargaining unit, the Department onApril 5, 2011abandoned its enforcement position. The Department now regards the regulation as binding and thereafter will hold dealerships responsible for paying service advisors overtime.
Dealerships must now require service advisors to keep accurate daily time records, including time in, time out to lunch and back, and time out at the end of the day. Regardless of whether the service advisor is paid on a commission or base plus commission basis, the service advisor will be eligible for overtime pay for work in excess of 40 hours per week and, inCalifornia, for work in excess of 8 hours per day. Each service advisor’s “regular rate of pay” will be calculated on salary plus commission. The California Labor Commissioner calculates the regular rate as 1/40th of this amount. Overtime pay will be calculated at 1.5 times the regular rate times the number of hours over 40 or 8, but not both.
Dealerships should anticipate litigation from attorneys seeking to represent a class of service advisors seeking back pay. Whether a court will honor the defense that the dealer relied in good faith on the Department of Labor’s 1987 enforcement guideline remains a prospect. Dealerships should also anticipate possible audits by the Department of Labor and the California Division of Labor Standards Enforcement.
Arthur F. Silbergeld
(310) 255-9077
