For dealerships in nine Western states, uncertainty about service advisers' eligibility for overtime pay continues.
A federal appeals court has ruled for a second time that advisers, unlike a dealership's service technicians, parts employees and salespeople, aren't exempt from overtime requirements. The advisers' employer, Mercedes-Benz of Encino in California, is considering a further appeal.
The case arose when service advisers sued the dealership under the Federal Labor Standards Act for failing to pay overtime. The store initially won, but the appeals court has twice sided with the advisers, most recently last month.
That decision by the 9th Circuit U.S. Court of Appeals conflicts with appellate rulings elsewhere.
Last year, the U.S. Supreme Court vacated the 9th Circuit's initial ruling, sending the case back to the appeals court for further consideration. The case could now return to the high court.
What should dealerships in states covered by the ruling -- California, Washington, Oregon, Hawaii, Alaska, Montana, Idaho, Nevada and Arizona -- do in the meantime?
"That's what everybody wants to know," says Felicia Reid, a partner in the Hirschfeld Kraemer law firm in San Francisco. She filed a friend-of-the-court brief on behalf of the National Automobile Dealers Association and dealer associations in the affected states.
"My advice is dealers shouldn't give up and start paying people overtime, but should audit their pay practices" and consult their own lawyers, Reid says.
In the Western states, "the law of the land currently is that service advisers are not covered by the exemption, and [dealers] need to determine if potentially another exemption might apply first," Reid adds.
She and Jeffrey Brecher, a Long Island, N.Y., attorney who heads the wage and hour practice group at the Jackson Lewis law firm, say the most likely alternative federal exemption applies to service advisers who earn more than half their compensation from commissions.
In addition, individual states' laws may exempt advisers, they say.
Brecher identifies two other options for dealerships: limit service advisers to 40 hours a week, or reclassify them until the issue is settled. Both lawyers agree dealers might be on the hook for retroactive overtime pay if the new decision stands.
Plaintiffs' lawyer Keven Steinberg of the Thompson Coe law firm in Los Angeles says dealers should have changed their pay practices as long ago as 2011, when the U.S. Labor Department ruled that advisers aren't exempt from overtime regulations.
Brecher says courts aren't the only way to resolve the dispute. He notes that President Donald Trump and the Republican-controlled Congress say they are committed to reducing regulations that impede businesses.
"The new secretary of labor could issue new regulations that expressly include service advisers and clarify the whole issue, potentially making the case moot," Brecher says. But he notes that the rulemaking process include time-consuming requirements for public notice and comment.
Congress also could amend federal law expressly to exempt dealership service advisers, along with salespeople, parts workers, and technicians, from overtime rules. Mercedes-Benz of Encino has until mid-March to ask the 9th Circuit Court for a rehearing or to ask the U.S. Supreme Court to take the case.