Petition for Writ of Certiorari — Encino Motorcars, LLC v. Navarro, 136 S. Ct. 890 (2016) (No. 15-415)
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15-442
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In the
Supreme Court of the United States
ENCINO MOTORCARS, LLC,
Petitioner,
Vv
HECTOR NAVARRO; ANTHONY PINKINS:
KEVIN MALONE; AND REUBEN CASTRO,
Respondents.
On Petition for Writ of Certiorari to the
United States Court of Appeals
for the Ninth Circuit
PETITION FOR WRIT OF CERTIORARI
PAUL D. CLEMENT
KARL R. LINDEGREN Counsel of Record
TopD B. SCHERWIN JEFFREY M. HARRIS
COLIN P CALVERT SUBASH S. IYER
FISHER & PHILLIPS LLP BANCROFT PLLC
444 S. Flower Street 500 New Jersey Avenue, NW
Suite 1590 Seventh Floor
Los Angeles, CA 90071 Washington, DC 2000!
213-330-4450 202-234-0090
pelement@bancroftpllc.com
(Additional Counsel Listed on Inside Cover)
September 30, 2015
WENDY MCGUIRE COATS
MCGUIRE COATS LLP
3527 Mt. Diablo Blvd., #281
Lafayette, CA 94549
925-297-6415
Counsel for Petitioner
QUESTION PRESENTED
Respondents are “service advisors” at a car
dealership whose primary job responsibilities involve
identifying service needs and selling service solutions
to the dealership’s customers. Respondents brought
suit against the dealership under the Fair Labor
Standards Act (FLSA), 29 U.S.C. §§201-219, secking
time-and-a-half overtime pay for working more than
40 hours per week.
The FLSA exempts from its overtime
requirements “any salesman, partsman, or mechanic
primarily engaged in selling or servicing automobiles.”
Id. §213(b)(10)(A). Relying on an unbroken line of
authority from other jurisdictions, the district court
dismissed Respondents’ claims, concluding that a
service advisor is a “salesman ... engaged in
servicing automobiles” and is thus exempt from the
FLSA’s overtime requirements. The Ninth Circuit
reversed, deferring to a Department of Labor
interpretive regulation stating that service advisors
are not exempt under §213(b)(10)(A) because they do
not personally service automobiles. The Ninth Circuit
readily acknowledged that its holding “conflicts with
decisions of the Fourth and Fifth Circuits, several
district courts, and the Supreme Court of Montana,’
all of which hold that service advisors are exempt
employees. Pet.App.11.
The question presented is whether “service
advisors” at car dealerships are exempt under 29
U.S.C. §213(b)(10)(A) from the FLSA’s overtime-pay
requirements.
1
PARTIES TO THE PROCEEDING
Petitioner Encino Motorcars, LLC, was defendant
in the district court and appellee in the Ninth Circuit.
Respondents Hector Navarro, Anthony Pinkins, Kevin
Malone, and Reuben Castro were plaintiffs in the
district court and appellants in the Ninth Circuit.
il
CORPORATE DISCLOSURE STATEMENT
Encino Motorcars, LLC is a limited liability
corporation doing business as Mercedes Benz of
Encino. It has no parent corporation and no publicly
held corporation owns 10% or more of its stock.
1V
TABLE OF CONTENTS
Ny 8h gy - | nee i
PARTIES TO THE PROCEEDING ........................4.. il
CORPORATE DISCLOSURE STATEMENT........... iii
pe gh, reer v1
PETITION FOR WRIT OF CERTIORARI ................ 1
EE IIE ciscvcsenniedsianpoiionssiiedsinianbheneeeionssieine 4
TD ericcstincasetsmniininniisnindevaiuniiscmcnieunannitnensnii 4
STATUTORY PROVISIONS INVOLVED................. 4
STATEMENT OF THE CASE ................:::cccecssssseseees 5
A. The “Salesman, Partsman, or Mechanic”
Exemption and DOL’s __ Shifting
BN oo ccaiemniaenlipbesaindatomnets 5
B. Respondents’ Complaint and the District
a csiieeaeehannebetanieons 9
C. The Ninth Circuit's Decision...................... 11
REASONS FOR GRANTING THE PETITION....... 14
I. The Ninth Circuit’s Decision Openly Conflicts
With The Decisions Of Several Other Courts
And Is Wrong On The Merits............................ 18
A. The Ninth Circuit's Decision Squarely
Conflicts With Decisions of the Fourth
and Fifth Circuits and the Montana
III, accacccenscncuseecicastmncioptontionnces 18
B. The Ninth Circuit Badly Misconstrued
I TI, bsicindccnnrccnnecnsseenecnsssncs 23
1. Service advisors are salesmen
primarily engaged in servicing
IS a scisamiunioie 23
Vv
2. Ata minimum, DOL’s interpretation
is unreasonable and thus not
entitled to deference. ...........................- 29
3. The Ninth Circuit erred by holding
that FLSA exemptions should be
interpreted “narrowly.” .....................-+-- 32
Il. The Ninth Circuit’s Erroneous Decision Will
Have Far-Reaching Implications’ For
Dealerships And Will Inject Uncertainty Into
A Previously Settled Area Of The Law............. 33
I ccneaeeabeivenelpiinbsaiiedaineeioel 36
APPENDIX
Appendix A
Opinion of the United States Court of
Appeals for the Ninth Circuit, Hector
Navarro, et al. v. Encino Motorcars,
LLC, No. 13-55323 (Mar. 24, 2015)...... App-1l
Appendix B
Order of the United States Court of
Appeals for the Ninth Circuit
Denying Rehearing En Banc, Hector
Navarro, et al. v. Encino Motorcars,
LLC, No. 13-55323 (June 1, 2015)...... App-20
Appendix C
Order Re: Defendant's Motion to
Dismiss of the United States District
Court for the Central District of
California, Navarro, et al. v. Mercedes
Benz of Encino, No. 2:12-cv-08051-
RGK-MRW (Jan. 25, 2013) ................ App-22
v1
Appendix D
29 U.S.C. § 213........
Appendix E
29 C.F.R. § 779.372
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vil
TABLE OF AUTHORITIES
Cases
Brennan v. Deel Motors,
475 F.2d 1095 (Sth Cir. 1973)..................00000 passim
Brennan v. Import Volkswagen, Inc.,
No. W-4982, 1975 WL 1248
GD, Ss TL, ha: RNID cn cecnssenaveccesncesanieecsdnencmnsinevess 21
Brennan v. N. Bros. Ford,
No. 40344, 1975 WL 1074 (E.D. Mich. 1975)....8, 21
Chevron, U.S.A. v. Nat. Res. Def. Council,
I Os ee i iitiedarprctnteepirtininnsinssiceseciaiiin 23, 29
Christopher v. SmithKline Beecham,
f & & | eeeenenere passim
Davis v. Mich. Dep’t of Treasury,
ee I nse ecapianaensieeiennenenpeian 25
FCC v. AT&T,
en: er I chpiiauniaresabeesinberenain 27
FCC v. Fox Television Stations,
Se aes caeconncanieimeeaduniieentianinih 30
FCC v. Pacifica Found.,
Be ocak seeniinaeneiiniiinssneunabtaliial 25
Haro v. City of Los Angeles,
745 F.3d 1249 (9th Cir. 2014).......................... 12, 32
Hibbs v. Winn,
Ie EE... emtshininernsbeennenesoannpeabentia 26
Integrity Staffing Solutions v. Busk,
Oe et a vecciscrcinepinitneicteusveuiinevctin 3, 34
OWCP v. Newport News Shipbuilding,
oF CSREES ener 17, 32
vill
Reiter v. Sonotone Corp.,
i, ds sensineeepeeencbineeion 25
Smiley v. Citibank (S.D.), N.A.,
SO i I a cscs wladamdmseeuenoee 30
Solis v. Washington,
656 F.3d 1079 (Sth Cir. 203 7)...................000000 12, 32
Thompson v. J.C. Billion, Inc.,
294 P.3d 397 (Mont. 2013)..................... 1, 13, 20, 21
Walton v. Greenbrier Ford,
370 F.3d 446 (4th Cir. 2004).......................... passim
Yenney v. Cass Cty. Motors,
No. 76-0-294, 1977 WL 1678
ee a aa oc odes ninpieinain beens 21
Yi v. Sterling Collision Centers,
480 F.3d 505 (7th Cir. 2007)......................::000e 4, 34
Statutes
ST ach enepadianeieennanecibanonpiinented 5
I a aulsenmlacucunesnmabbs 16, 31
i San sacs osddeabiohicheameevententbnesasbedicniindnis 5
Be Cig I ond snscnvciadanadsaticiduedeossesite 16, 29, 31
td EER ne ee meee eH 5
Se iii sciatica ced sinuessencbotciinibntaicenens 5
a i ce cpeienlnainebinliin 5
Be ein SED vic csisicaxsccctevasscenssvinaceiese passim
ion ii cscamcanessietiieedameniannicstial 29
I ce alll ala nameaiaanbilcaiens 5
LE OE Es a ae. See ene rae 22
Pub. L. No. 89-601, 80 Stat. 830 (1966) Lg Pens See? 5
1x
Rules & Regulations
SOC.PR, STTOBIS (A971) «oni cceccsccccsacecs.-...:. 5, 6, 9, 26
35 Fed. Reg. 5856 (1970) .........cccccccececececsessecseseeeeeseeees 5
Fe es Be Ie SE beveescerecsrnesnsusiecscnensnncsanunnsase 8
76 Fed. Reg. 18,832 (2011)....................6. 9, 24, 27, 30
i rs Ne ned ccs ceases lava cameebakaoeenedeas? 15, 22
Other Authorities
Antonin Scalia, Assorted Canards of
Contemporary Legal Analysis,
40 Case W Res. L. Rev. 581 (1990).............000..000.. 33
Dep't of Labor, Wage & Hour Div., Field
Operations Handbook, Insert No. 1757,
24L04-4 (Oct. 20, 1987), available at
I a ao coarse taepinddcimindce vesupesevik 8
U.S. Dep’t of Labor, Wage & Hour Div.,
Opinion Letter on Fair Labor Standards
Act, 1978 WL 51403 (July 28, 1978) ................. 7, 30
PETITION FOR WRIT OF CERTIORARI
Respondents are “service advisors” at a car
dealership whose primary job responsibilities involve
identifying service needs and selling service solutions
to the dealership’s customers. They are an integral
part of the servicing process and are the salesmen
dedicated to the servicing business at their dealership.
And, like countless other salesmen, Respondents are
paid by commissions on their sales rather than on an
hourly basis.
The Fair Labor Standards Act (FLSA), 29 U.S.C.
§§201-219, exempts from its overtime-pay
requirements “any salesman, partsman, or mechanic
primarily engaged in selling or servicing automobiles.”
Id. §213(b)(10)(A). For more than 40 years, federal
and state courts across the country have uniformly
held that service advisors such as Respondents are
covered by the exemption because they are
“salesm[e]n ... engaged in ... servicing automobiles.”
See, e.g., Walton v. Greenbrier Ford, 370 F.3d 446 (4th
Cir. 2004); Brennan v. Deel Motors, 475 F.2d 1095 (5th
Cir. 1973); Thompson v. J.C. Billion, Inc., 294 P.3d 397
(Mont. 2013). Those courts have also uniformly
refused to defer to a Department of Labor (DOL)
interpretive regulation that adopts a narrow and
counter-textual interpretation of the exemption under
which service advisors are not exempt because they do
not personally service vehicles.
Respondents brought suit against their employer
under the FLSA, alleging that they were entitled to
time-and-a-half overtime pay for time worked each
week in excess of 40 hours. Relying on an unbroken
line of precedent holding that service advisors were
2
exempt under §213(b)(10)(A), the district court
dismissed the complaint. Pet.App.25-29. But the
Ninth Circuit reversed, holding that service advisors
were not exempt. Unlike every other court to consider
the issue, the Ninth Circuit held that DOL’s narrow
interpretation of §213(b)(10)(A) was entitled to
deference. Pet.App.11-19. The court also relied
heavily on a purported canon of construction under
which exemptions to the FLSA must be interpreted
“narrowly” rather than being interpreted in
accordance with their plain text. Pet.App.6. The
Ninth Circuit expressly acknowledged that its holding
“conflicts with decisions of the Fourth and Fifth
Circuits, several district courts, and the Supreme
Court of Montana.” Pet.App.11.
Certiorari is plainly warranted to resolve this
acknowledged split of authority over the meaning of a
federal statute. Indeed, the Ninth Circuit’s decision
not only opens up an explicit circuit split, but its
interpretation badly misconstrues the text of
§213(b)(10)(A). Congress’ use of the disjunctive “or” in
the phrase “primarily engaged in selling or servicing
automobiles” makes clear that a salesman is exempt if
he is “engaged in” either of those activities. Yet the
Ninth Circuit divided a dealership’s salesforce in half,
treating only those selling automobiles, and not those
selling services, as exempt. The court also ignored the
fact that service advisors are an integral part of the
servicing process because they are the salesforce that
identifies the service needs of, and sells services to, the
dealership’s customers.
The Ninth Circuit’s insistence that an employee
must be personally involved in servicing automobiles
3
not only adds a word to the statute, but also injects a
glaring textual anomaly over the status of “partsmen,”
who the statute treats as exempt even though they are
not personally involved in either selling or servicing
automobiles. Every other court to consider this issue
has correctly recognized that the phrase “primarily
engaged in ... servicing automobiles” encompasses
service advisors and partsmen who are engaged in the
servicing process even though they do not personally
service vehicles.
The Ninth Circuit's decision injects uncertainty
into what had been a settled area of the law, and will
have serious consequences for the nation’s 18,000 car
dealerships, which currently employ more than 45,000
service advisors. Those dealerships and their service
advisors have negotiated mutually beneficial
compensation plans in good-faith reliance on decades
of precedent holding that such employees are exempt
from the FLSA’s overtime requirements. If allowed to
stand, the Ninth Circuit’s decision would require a
wholesale (and wholly unwarranted) restructuring of
the way in which those employees are compensated,
and would force dealerships to divide their salesforces
into exempt and non-exempt categories in ways that
are both divisive and contrary to Congress’ plain
intent.
This Court has repeatedly rejected plaintiffs’
attempts to impose significant FLSA liability on
employers who have done nothing more than pay
workers in conformity with long-settled industry
practice. See, e.g., Integrity Staffing Solutions v. Busk,
135 S. Ct. 513 (2014) (rejecting novel FLSA claims for
time spent in security screenings); Christopher uv.
4
SmithKline Beecham, 132 S. Ct. 2156 (2012) (rejecting
FLSA claims by pharmaceutical sales representatives,
who had long been treated as exempt); see also Yi v.
Sterling Collision Centers, 480 F.3d 505, 510 (7th Cir.
2007) (rejecting novel FLSA challenge to a “system of
compensation [that] is industry-wide, and of long
standing’). The decision below should fare no better.
This Court should grant certiorari to correct the Ninth
Circuit’s deeply flawed interpretation of
§213(b)(10)(A) and restore uniformity to this
important area of the law.
OPINIONS BELOW
The opinion of the Ninth Circuit is reported at 780
F.3d 1267 and reproduced at Pet.App.1-19. The
district court's opinion is unpublished and is
reproduced at Pet.App.22-32.
JURISDICTION
The Ninth Circuit issued its opinion on March 24,
2015, and denied a timely petition for rehearing on
June 1, 2015. On August 20, 2015, Justice Kennedy
extended the time for filing this petition to September
30, 2015. See No. 15A210. This Court has jurisdiction
under 28 U.S.C. §1254(1).
STATUTORY PROVISIONS INVOLVED
The relevant provisions of the FLSA, 29 U.S.C.
§213, and DOL’s regulations, 29 C.F.R. §779.372, are
reproduced at Pet.App.33-61.
5
STATEMENT OF THE CASE
A. The “Salesman, Partsman, or Mechanic”
Exemption and DOL’s Shifting
Interpretations
1. The FLSA generally requires employers to pay
overtime compensation at a rate of one-and-a-half
times an employee’s regular rate of pay for all hours
worked in excess of forty in a week. 29 U.S.C.
§207(a)(1). Accompanying these overtime-pay
requirements are numerous exemptions for certain
types of employees. See id. §213(a), (b). The
exemptions range from very broad (all employees of
certain rail carriers and air carriers, id. §213(b)(2), (3))
to very narrow (employees “engaged in the processing
of maple sap into sugar,” id. §213(b)(15)).
As relevant here, the FLSA provides that the
overtime-pay requirements do not apply to “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.” Jd. §213(b)(10)(A); see Pub. L. No. 89-
601, 80 Stat. 830 (1966). In other words, an employee
of a car dealership is exempt from the overtime rules
if he: (1) is a “salesman, partsman, or mechanic,” and
(2) is “primarily engaged in selling or servicing
automobiles.”
2. In 1970, the Secretary of Labor promulgated
interpretive regulations that sought to define several
terms in §213(b)(10)(A). See 29 C.F.R. §779.372
(1971); 35 Fed. Reg. 5856, 5895-96 (1970). Those
regulations defined “salesman” as “an employee who
6
is employed for the purpose of and is primarily
engaged in making sales or obtaining orders or
contracts for sale of [vehicles].” 29 C.F.R.
§779.372(c)(1) (1971).:. DOL further asserted that
“fe]mployees variously described as service manager,
service writer, service advisor, or service salesman
who are not themselves primarily engaged in the work
of a salesman, partsman, or mechanic ... are not
exempt under [§213(b)(10)].” Jd. §779.372(c)(4). DOL
believed that service advisors should be deemed non-
exempt even though “such an employee's principal
function may be diagnosing the mechanical condition
of vehicles brought in for repair, writing up work
orders for repairs authorized by the customer,
assigning the work to various employees and directing
and checking on the work of mechanics.” Jd.
In the years after DOL promulgated this
interpretive regulation, several courts rejected the
agency's narrow interpretation of the exemption.
Most significantly. the Fifth Circuit flatly rejected
DOL’s position and held that service advisors were
exempt. See Deel Motors, 475 F.2d at 1097-98. In Deel
Motors, DOL advanced the narrow interpretation of
the exemption set forth in its 1970 regulation, arguing
that service advisors should not be exempt because
they do not personally service vehicles. But the Fifth
Circuit rejected that view based on both the text and
|! The regulation defined a “partsman” as “any employee
employed for the purpose of and primarily engaged in
requisitioning, stocking, and dispensing parts.” 29 C.F.R.
§779.372(c)(2) (1971). It also defined a “mechanic” as “any
employee primarily engaged in doing mechanical work ... in the
servicing of an automobile, trailer, truck, farm implement, or
aircraft for its use and operation as such.” Id. §779.372(c)(3).
7
purpose of the exemption. As a textual matter, the
court concluded that service advisors were plainly
“salesm[e]n ... engaged in selling or servicing
automobiles.” Jd. at 1098. And, turning to the
purpose of the exemption, the Fifth Circuit noted that
“service salesmen are functionally similar to the
mechanics and partsmen who service’ the
automobiles.” Jd. at 1097 All of these employees
“work as an integrated unit, performing the services
necessary for the maintenance of the customer's
automobile.” Jd. And, like countless other salesmen
who are exempt from the FLSA’s overtime rules,
service advisors “are more concerned with their total
work product than with the hours performed.” Jd. The
Fifth Circuit thus concluded that service advisors
were exempt under §213(b)(10)(A).
3. Within a few years of the Fifth Circuit's
decision in Deel Motors, DOL backtracked from the
position advanced in its interpretive regulations. In
1978, the Secretary of Labor issued a policy letter
changing the agency’s position and providing that
service advisors should be treated as exempt as long
as a majority of their sales were for non-warranty
work. See U.S. Dep’t of Labor, Wage & Hour Div.,
Opinion Letter on Fair Labor Standards Act, 1978 WL
51403 (July 28, 1978) (“DOL 1978 Opinion Letter”)
(acknowledging that “[t]his position represents a
change from the position set forth in” the 1970
regulations).
Similarly, DOL’s 1987 Field Operations
Handbook instructed agency employees to “no longer
deny the [overtime] exemption for [service advisors].”
Dep't of Labor, Wage & Hour Div., Field Operations
8
Handbook, Insert No. 1757, 24L04-4 (Oct. 20, 1987),
available at perma.cc/5ghd-kcjj. The Handbook
explained that “two appellate courts (Fifth and Sixth
Circuits) and two district courts (in the Eighth and
Tenth Circuits)” have construed the exemption to
cover service advisors. Id.2 The Handbook
acknowledged that “this policy ... represents a change
from the position in [the 1970 regulations],” and
indicated that the agency’s regulations “will be revised
as soon as is practicable.” Jd.
Despite these clear (and clearly correct) changes
in DOL’s enforcement policy, the 1970 interpretive
regulations with the now-repudiated interpretation of
§213(b)(10)(A) remained in the Code of Federal
Regulations. In 2008, DOL initiated a formal
rulemaking process to update the text of the
regulations to confirm that service advisors were
exempt from the overtime-pay requirements. See
Updating Regulations Issued Under the FLSA, 73 Fed.
Reg. 43,654 (2008). As DOL explained, “[u]niform
appellate and district court decisions ... hold that
service advisors are exempt under [29 U.S.C.
§213(b)(10)(A)] because they are ‘salesmen’ who are
primarily engaged in ‘servicing’ automobiles.” Jd. at
43,658 (citing Walton, 370 F.3d at 452; Deel Motors,
475 F.2d at 1097; Brennan, 1975 WL 1074, at *3).
DOL’s notice of proposed rulemaking included a
2 In addition to the Fifth Circuit's decision in Deel Motors, the
Sixth Circuit had summarily affirmed a district court decision
finding service advisors to be exempt under §213(b)(10)(A). See
Brennan v. N. Bros. Ford, No. 40344, 1975 WL 1074, at *3 (E.D.
Mich. 1975), aff'd sub nom. Dunlop v. N. Bros. Ford, 529 F.2d 524
(6th Cir. 1976) (Table).
9
modified version of 29 C.F.R. §779.372(c)(4) that
would have codified this unbroken line of case law.
In 2011, however, DOL changed course yet again.
It issued a final rule that neither adopted the proposed
regulation nor brought the regulation in line with the
governing case law. See Updating Regulations Issued
Under the FLSA, 76 Fed. Reg. 18,832, 18,859 (2011).
Instead, DOL maintained the 1970 regulation’s
definition of “salesman,” see 29 C.F.R. §779.372(c)(1),
but also eliminated from its regulations any explicit
discussion of whether service advisors were covered
under the §213(b)(10)(A) exemption, see 76 Fed. Reg.
at 18,859. In its explanation accompanying the final
rule, DOL stated that service advisors should not be
treated as exempt because the regulatory definitions
“limit{] the exemption to salesmen who sell vehicles
and partsmen and mechanics who service vehicles.”
Id. at 18,838. That remains DOL’s position today’
DOL believes that service advisors are not exempt
under §213(b)(10)(A) because they do not personally
service vehicles.
B. Respondents’ Complaint and_ the
District Court’s Decision
Petitioner Encino Motorcars, LLC, sells and
services new and used Mercedes Benz automobiles.
Respondents are current and former employees of
Petitioner who worked at the dealership as “service
advisors.” On September 18, 2012, Respondents filed
a complaint alleging several violations of the FLSA
and California Labor Code.
The complaint alleges that, as service advisors,
Respondents would meet and greet car owners as they
entered the service area; evaluate customers’ service
10
and repair needs; suggest services to be performed on
the vehicle to address the customers’ complaints;
solicit supplemental services to be performed (such as
preventive maintenance); prepare price estimates for
repairs and services; and inform the owner about the
status of the vehicle. See Complaint 916 (DN 2). In
short, Respondents’ sales activities were integral to
the process of servicing vehicles at the dealership.
And, like countless other salesmen in both car
dealerships and other industries, Respondents were
paid by commission. Jd. J§18-19.; The more services
an advisor sold, the higher his or her commission
would be. Jd.
Respondents alleged that they often worked more
than 40 hours per week, and that Petitioner violated
the FLSA by failing to pay them time-and-a-half
overtime compensation for that excess time. Id. 9924-
31. Petitioner moved to dismiss the FLSA claims on
the ground that Respondents were exempt employees
under 29 U.S.C. §213(b)(10)(A).
On January 25, 2013, the district court granted
Petitioner's motion to dismiss the FLSA claims,
holding that Respondents were clearly covered by the
overtime-pay exemption in §213(b)(10)(A). See
Pet.App.25-29. The district court began by noting that
several other courts “have applied this exemption to
Service Advisors.” Pet.App.26 (citing Deel Motors, 475
F.2d at 1097; Walton, 370 F.3d at 453).
3 Some dealerships pay their service advisors a combination of
salary or hourly wages and commissions, whereas other
dealerships (like Petitioner) pay service advisors solely by
commission.
11
The district court acknowledged that DOL had
stated in 1970 and apparently again in 2011 that
§213(b)(10)(A) did not apply to service advisors.
Pet.App.27 The court nonetheless refused to defer to
those interpretations under the Chevron framework
because they were unreasonable. Pet.App.28-29. The
court agreed with the Fourth and Fifth Circuits that
DOL’s interpretations were an “impermissibly
restrictive construction of the statute.” Pet.App.29
(quoting Walton, 370 F.3d at 452). Because “Service
Advisors ... are functionally equivalent to salesmen
and mechanics and are similarly responsible for the
‘selling and servicing’ of automobiles,” the district
court concluded that it would be “unreasonable” to
carve those employees out of the exemption. Jd.
(emphasis added). The court did not believe that
“Congress intended to treat employees’ with
functionally similar positions differently.” Id.
(quoting Deel Motors, 475 F.2d at 1097-98). The
district court thus dismissed Respondents’ claim for
overtime under the FLSA on the ground that they
were exempt under §213(b)(10)(A).+
C. The Ninth Circuit’s Decision
On appeal, the Ninth Circuit reversed in relevant
part. In an opinion by Judge Graber issued on March
24, 2015, the court held that service advisors who
work at a car dealership are not exempt under
§213(b)(10)(A) from the FLSA’s overtime-pay
requirements. Pet.App.19.
4 After dismissing the FLSA claims, the district court declined
to exercise supplemental jurisdiction over Respondents’
remaining state-law claims. Pet.App.31.
12
The panel relied heavily on the purported canon
of construction that “[t]he FLSA is to be construed
liberally in favor of employees,” and “exemptions are
narrowly construed against employers.” Pet.App.6
(quoting Haro v. City of Los Angeles, 745 F.3d 1249,
1256 (9th Cir. 2014)). Because the statute does not
define “salesman, partsman, or mechanic,” and does
not explicitly mention “service advisors,” the Ninth
Circuit could not “conclude that service advisors ... are
‘persons plainly and unmistakably within [the
FLSA’s] terms and spirit.” Pet.App.7 (quoting Soltis v.
Washington, 656 F.3d 1079, 1083 (9th Cir. 2011)).
The Ninth Circuit also disagreed with the district
court’s application of Chevron, concluding that DOL
had reasonably interpreted an ambiguous FLSA
exemption. The court believed that there were two
“plausible” interpretations of the phrase “any
salesman, partsman, or mechanic primarily engaged
in selling or servicing automobiles.” Pet.App.7. Under
the first interpretation, a service advisor is a
“salesman ... primarily engaged in ... servicing
automobiles” and is thus exempt. Jd. Under the
second interpretation, which the Ninth Circuit
characterized as “at least as plausible,” the nouns in
the statute would be interpreted in a “more cabined”
way: “a salesman is an employee who sells cars; a
partsman is an employee who requisitions, stocks, and
dispenses parts; and a mechanic is an employee who
performs mechanical work on cars.” Jd. Under that
narrower interpretation, “[s]ervice advisors do none of
those things; they sell services for cars.” Id. The
Ninth Circuit thus concluded that the exemption is
ambiguous about whether it extends to service
advisors. Pet.App.8.
13
Turning to Chevron’s second step, the Ninth
Circuit upheld DOL’s current interpretation of the
exemption as reasonable. Pet.App.11-19. The court's
reasoning rested primarily on the same ambiguity
that it had identified earlier. In particular, the Ninth
Circuit concluded that it was reasonable for DOL to
read the exemption so that salesmen are exempt if
they are “engaged in selling ... automobiles,” but not if
they are “engaged in ... servicing automobiles.”
Pet.App.13-15.
The Ninth Circuit readily acknowledged that its
holding “conflicts with decisions of the Fourth and
Fifth Circuits, several district courts, and the
Supreme Court of Montana.” Pet.App.11 (citing
Walton, 370 F.3d 446; Deel Motors, 475 F.2d 1095;
Thompson, 294 P.3d 397). But the court “respectfully
disagree[d] with those decisions.” Id.
The panel rejected the other courts’ conclusion
that DOL’s 1970 interpretation of §213(b)(10)(A) was
“unduly restrictive.” Pet.App.12-13. Those courts had
held that DOL’s interpretation was unreasonable
because it unjustifiably restricted the scope of the
statutory text. In particular, DOL’s interpretation
disregarded the fact that a service advisor could be a
“salesman ... primarily engaged in ... servicing
automobiles.” See Walton, 370 F.3d at 452; Thompson,
294 P.3d at 402.
The Ninth Circuit, however, concluded that DOL’s
regulation honored the disjunctive nature of the
phrase “salesman ... primarily engaged in selling or
servicing automobiles.” First, the court concluded
that there was ambiguity as to whether the phrase
“primarily engaged in selling or servicing” refers to the
14
act of personally selling or servicing automobiles or
instead to “the general business” of selling or servicing
automobiles. Pet.App.12-14. Second, the court
identified as a potential ambiguity whether the word
“salesman” was modified only by the gerund “selling”
or was instead modified disjunctively by either
gerund, “selling” and “servicing.” Pet.App.13-15. The
court further noted that “[n]on-textual indicators of
congressional intent, such as legislative history, are
inconclusive.” Pet.App.15.
The Ninth Circuit ultimately concluded that
“there are good arguments’ supporting both
interpretations of the exemption,” but that “where
there are two reasonable ways to read the statutory
text, and the agency has chosen one interpretation, we
must defer to that choice.” Pet.App.19. The court thus
held that Respondents were not exempt under 29
U.S.C. §213(b)(10)(A) and reversed the district court’s
dismissal of Respondents’ claims.’ The Ninth Circuit
denied a timely petition for rehearing on June 1, 2015.
REASONS FOR GRANTING THE PETITION
This case presents an excellent vehicle for this
Court to resolve an acknowledged split of authority
over whether tens of thousands of “service advisors”
who work at car and truck dealerships are exempt
from the FLSA’s overtime-pay requirements.
5 The Ninth Circuit affirmed the district court’s dismissal of
the other federal claims because Respondents failed to challenge
the alternative grounds on which those claims were dismissed.
See Pet.App.3-4 n.2. And because it reinstated Respondents’
federal overtime-pay claim, the Ninth Circuit vacated the district
court’s dismissal of Respondents state-law claims for lack of
jurisdiction. See id.
15
I.A. In a clear departure from a previously
unbroken line of authority. the Ninth Circuit held that
service advisors are not exempt from the FLSA’s
overtime-pay requirements. The court readily
acknowledged that its decision “conflicts with
decisions of the Fourth and Fifth Circuits, several
district courts, and the Supreme Court of Montana.”
Pet.App.11. Certiorari is warranted because the
decision below is plainly in conflict with both “the
decision of another United States court of appeals on
the same important matter” and “a decision by a state
court of last resort.” S. Ct. R. 10(a).
I.B. It is unsurprising that the Ninth Circuit's
decision is an outlier, as that court badly misconstrued
the §213(b)(10)(A) exemption. That exemption
unambiguously extends to “any salesman ... primarily
engaged in ... servicing automobiles. 29 U.S.C.
§213(b)(10)(A). The plain text of this exemption
applies to service advisors, who are integral to the
process of servicing vehicles at the dealership and are
clearly “salesmfe]n ... primarily engaged in
servicing automobiles.” Yet the Ninth Circuit gave
dispositive weight to DOL’s narrow and counter-
textual interpretation of the exemption, which reads
out of the statute the phrase “any salesman
primarily engaged in ... servicing automobiles” and
reads into the statute a_ restrictive modifier
demanding that an exempt employee be personally
involved in servicing.
DOL’s interpretation flies in the face of the most
basic rules of statutory construction and grammar. As
to statutory construction, there is no cause for reading
into the statute a word that Congress did not include,
16
especially when doing so creates interpretive problems
for other statutory terms (e.g., partsmen are plainly
exempt even though they do not personally sell or
service automobiles) and practical problems for
employers (e.g., dealerships must divide their
salesforces between exempt and _ non-exempt
employees in ways Congress did not intend). As for
grammar, the term “or” in the phrase “salesman ...
primarily engaged in ... selling or servicing” is
disjunctive, and either gerund—‘“selling” or
“servicing —can sensibly be applied to the noun
“salesman.” Because a service advisor is_ the
paradigmatic “salesman ... primarily engaged in ...
servicing automobiles,” that should be the end of the
inquiry under Chevron. A service advisor is clearly
covered by the plain language of the exemption, as
every court to consider this issue (other than the Ninth
Circuit) has correctly recognized.
Moreover, treating service advisors as non-
exempt makes little sense in the context of the broader
FLSA scheme. The FLSA contains many provisions
that are designed to exclude from the mandatory
overtime rules individuals who are engaged in sales or
paid by commission. See, e.g., 29 U.S.C. §§207(i),
213(a)(1). Such exemptions reflect the basic reality
that salesmen, including service advisors, “are more
concerned with their total work product than with the
hours performed.” Deel Motors, 475 F.2d at 1097.
Forcing car dealerships to pay overtime to service
advisors is little more than an attempt to fit a square
peg (salesmen) into a round hole (FLSA-mandated
hourly compensation). See Christopher, 132 S. Ct. at
2173 (rejecting FLSA claim by sales representatives
who were “hardly the kind of employees that the FLSA
17
was intended to protect”). Worse still, retroactively
treating service advisors as non-exempt under
§213(b)(10)(A) would result in perverse and disruptive
outcomes for both dealerships and service advisors
alike, as it would force them into pay plans very
different from the plans they had _ voluntarily
negotiated.
Finally, the Ninth Circuit's heavy reliance on the
purported canon of construction that “the FLSA is to
be construed liberally in favor of employees” and that
“exemptions are narrowly construed against
employers,” Pet.App.6, is profoundly misplaced. This
“anti-employer” canon—which is just an FLSA-
specific version of the broad-construction-of-remedial-
statutes canon that this Court has characterized as
“that last redoubt of losing causes,” OWCP v. Newport
News Shipbuilding, 514 U.S. 122, 135-36 (1995)—is a
recipe for extravagant interpretations of the FLSA. In
addition to resolving the circuit split over the proper
interpretation of §213(b)(10)(A), this Court could
usefully instruct lower courts that the FLSA and its
exemptions are to be construed neither narrowly nor
broadly, but fairly and correctly.
II. The Ninth Circuit’s erroneous interpretation
of §213(b)(10)(A) will have far-reaching implications
for the nation’s 18,000 franchised car dealerships,
which employ an estimated 45,000 service advisors.
Dealerships and _ service advisors’ voluntarily
negotiated mutually beneficial compensation plans in
good-faith reliance on the unbroken line of authority
finding such employees to be exempt. Yet the Ninth
Circuit’s decision would require a wholesale reworking
of that position, to the detriment of dealerships and
18
service advisors alike. This Court has been justifiably
skeptical of attempts by plaintiffs to impose
significant retroactive liability for settled industry
practices that had long been viewed as outside the
scope of the FLSA. See, e.g., Christopher, 132 S. Ct. at
2167-68. It may be possible for unlawful employment
practices to escape detection for decades on end, but
the far more plausible view is that the employers have
been left alone because their practices simply do not
violate the FLSA.
Moreover, the lack of uniformity is especially
troubling in the FLSA context because of the
availability of nationwide FLSA collective actions.
Because plaintiffs may file collective action claims in
the most plaintiff-friendly forum, the Ninth Circuit’s
decision will lkely become the de facto nationwide
rule for any dealership that has operations within the
Ninth Circuit. Certiorari is plainly warranted to
restore national uniformity to this important area of
the law.
I. The Ninth Circuit’s Decision Openly
Conflicts With The Decisions Of Several
Other Courts And Is Wrong On The Merits.
A. The Ninth Circuit’s Decision Squarely
Conflicts With Decisions of the Fourth
and Fifth Circuits and the Montana
Supreme Court.
In a stark departure from a previously unbroken
line of authority, the Ninth Circuit held that service
advisors are not exempt from the FLSA’s overtime-pay
requirements. The court readily acknowledged that
its decision “conflicts with decisions of the Fourth and
Fifth Circuits, several district courts, and the
19
Supreme Court of Montana,” and noted that it
“respectfully disagree[s]” with the reasoning of those
cases. Pet.App.11-12. There is thus no serious
question that the lower courts are divided over the
meaning of §213(b)(10)(A).
1. In Walton v. Greenbrier Ford, 370 F.3d 446, the
Fourth Circuit held that service advisors fall within
the plain text of the FLSA’s overtime-pay exemption.
The Walton plaintiffs job duties were identical to
Respondents’ job duties here: he would “greet
customers, listen to their concerns about their cars,
write repair orders, follow-up on repairs, [] keep
customers informed about maintenance, [and] suggest
to customers additional services that needed to be
performed.” Id. at 449.
Under the plain text of §213(b)(10)(A), the Fourth
Circuit concluded that service advisors were
“salesm[e]n ... primarily engaged in _ servicing
automobiles.” Jd. at 453. Service advisors are an
“integral part of the dealership’s servicing of
automobiles” because they are the “first line ... service
sales representative[s].” Jd. at 452-53. Their role was
to figure out what services the customer needed,
prepare cost estimates, and sell both necessary repair
services and supplemental services. Jd. The court
thus concluded that those employees were salesmen
“primarily engaged in servicing automobiles.” Jd.
The Fourth Circuit also held that DOL’s
interpretation of the exemption in its 1970
interpretive regulation was “unreasonable” because it
is “an impermissibly restrictive construction of the
statute.” Jd. at 452. Under DOL’s view, a salesman
would be covered by the exemption only if he were
20
primarily engaged in selling vehicles. But, as the
Fourth Circuit explained, that interpretation
effectively ignores the second half of the disjunctive
clause “selling or servicing automobiles.” 29 U.S.C.
§213(b)(10)(A) (emphasis added). The court refused to
defer to DOL’s “restrictive regulatory definition”
because it “unreasonably implements _ the
congressional mandate.” 370 F.3d at 452.
Similarly, in Deel Motors, 475 F.2d 1095, the Fifth
Circuit flatly rejected DOL’s position and held that
service advisors were exempt from the FLSA. Under
the plain text of the exemption, the court concluded
that service advisors were “salesm[e]n ... engaged in
selling or servicing automobiles.” Jd. at 1098. And the
court further noted that “service salesmen are
functionally similar to the mechanics and partsmen
who service the automobiles.” Jd. at 1097. All of these
employees “work as an integrated unit, performing the
services necessary for the maintenance of the
customer’s automobile.” Jd. And, like countless other
salesmen who are exempt from the FLSA’s overtime
rules, service advisors “are more concerned with their
total work product than with the hours performed.”
Id. The Fifth Circuit thus had little difficulty
concluding that service advisors were exempt under
§213(b)(10)(A), notwithstanding DOL’s arguments to
the contrary.
Several other courts have reached the same
conclusion. In Thompson, 294 P.3d 397, the Montana
Supreme Court agreed with the Fourth and Fifth
Circuits that the §213(b)(10)(A) exemption covers
service advisors at car dealerships. Jd. at 402. The
court found no ambiguity in the relevant statutory
21
text because “[a] plain, grammatical reading of 29
U.S.C. §213(b)(10)(A) makes clear that the term
‘salesman’ encompasses a broader category of
employees than those only engaged in selling
vehicles.” Jd. The court added that “[t]he use of the
disjunctive ‘or’ between the words ‘selling or servicing
means that the exemption applies to any ‘salesman,
partsman, or mechanic,’ who [is] primarily engaged in
either of these duties.” /d.
The federal district courts that have addressed
this issue have also uniformly concluded that the
exemption in §213(b)(10)(A) applies to service advisors
at car dealerships. See, e.g., Yenney v. Cass Cty.
Motors, No. 76-0-294, 1977 WL 1678 (D. Neb. Feb. 8,
1977); Brennan v. N. Bros. Ford, No. 40344, 1975 WL
1074 (E.D. Mich. Apr. 17, 1975), aff'd sub nom. Dunlop
v. N. Bros. Ford, 529 F.2d 524 (6th Cir. 1976); Brennan
v. Import Volkswagen, Inc., No. W-4982, 1975 WL
1248 (D. Kan. Oct. 21, 1975). The district court here
likewise held that service advisors were exempt. See
Pet.App.29. Thus, describing this case as presenting
an acknowledged circuit’ split substantially
understates matters. The Ninth Circuit expressly
parted company with every other court to consider the
question.
2. The Ninth Circuit readily acknowledged that
its decision “conflicts with” the decisions cited above,
Id. at 11. It had no choice. Respondents perform the
exact same job functions as the service advisors in the
cases cited above, yet the Ninth Circuit found them to
be non-exempt while every other court has found them
to be exempt. Moreover, each of the decisions cited
above rejected DOL’s interpretation of the exemption
22
on the ground that it was an_ unreasonable
interpretation of the statute, whereas the Ninth
Circuit gave DOL’s position controlling weight. Jd. at
19 (“we must defer to [DOL’s] choice”). It is difficult to
imagine a clearer example of “a decision in conflict
with the decision of another United States court of
appeals on the same important matter,” and a decision
that “conflicts with a decision by a state court of last
resort.” S. Ct. R. 10(a).
A circuit split over the meaning of a federal
statute would be undesirable under any
circumstances, but the need for a uniform rule in this
context is particularly critical. The FLSA provides for
nationwide collective actions “by any one or more
employees for and in behalf of himself or themselves
and other employees similarly situated.” 29 U.S.C.
§216(b). Because of the availability of nationwide
FLSA collective actions, the most plaintiff-friendly
jurisdiction will often be able to establish the de facto
substantive law that governs many employers
throughout the entire country
Indeed, as the National Automobile Dealers
Association noted in an amicus brief below, there are
hundreds of car dealerships that operate at locations
both within and outside the Ninth Circuit. As a result,
even though the Ninth Circuit is the only court to have
ever found service advisors to be non-exempt, that
jurisdiction will likely become a forum of choice for
plaintiffs seeking to challenge the exempt status of
service advisors. One way or the other, the scope of a
critical federal labor statute should not turn on the
happenstance of the state in which a company is
23
operating. Certiorari is plainly warranted to restore a
nationally uniform interpretation of §213(b)(10)(A).
B. The Ninth Circuit Badly Misconstrued
Section 213(b)(10)({A).
It is not surprising that the Ninth Circuit is the
only court to have found service advisors to be non-
exempt, as the decision below is unmoored from both
the text and purpose of §213(b)(10)(A).
The FLSA exempts from the overtime
requirements “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.” Jd. §213(b)(10)(A). There is
no dispute that Petitioner is “a nonmanufacturing
establishment primarily engaged in the business of
selling [automobiles] to ultimate purchasers.” Jd. The
only question is whether each Respondent is a
“salesman, partsman, or mechanic primarily engaged
in selling or servicing automobiles.” Jd. They plainly
are, and the Ninth Circuit’s reasons for holding
otherwise do not withstand scrutiny.
1. Service advisors are salesmen
primarily engaged in_ servicing
automobiles.
If a statute is neither “silent [nor] ambiguous with
respect to the specific issue,” the statute’s clear
meaning controls. Chevron, U.S.A. v. Nat. Res. Def.
Council, 467 U.S. 837, 843 (1984). The FLSA
exemption at issue here unambiguously extends to
“any salesman ... primarily engaged in selling or
servicing automobiles.” 29 U.S.C. §213(b)(10)(A).
24
That should be the end of the matter, as a service
advisor is integral to the process of servicing vehicles
at a dealership, and is the paradigmatic “salesman ...
primarily engaged in ... servicing automobiles.”
According to Respondents’ own complaint, their job
duties included evaluating customers’ service and
repair needs; suggesting services to address specific
problems with the vehicles; preparing cost estimates;
and offering supplemental services such as
preventative maintenance. See Complaint 916 (DN 2).
As the Fourth Circuit has correctly recognized, service
advisors are “primarily engaged in_ servicing
automobiles” because they are an “integral part of the
dealership’s servicing of automobiles” and are the
“first line ... service sales representatives.” Walton,
370 F.3d at 452-53. They are thus exempt under a
straightforward textual interpretation of
§213(b)(10)(A).
In holding to the contrary, the Ninth Circuit gave
dispositive weight to DOL’s interpretation of the
exemption. According to DOL, despite the statute’s
disjunctive language—“any salesman, partsman, or
mechanic primarily engaged in selling or servicing
automobiles”’—the exemption covers salesmen
“engaged in selling” cars, but not salesmen “engaged
in servicing” them. See 76 Fed. Reg. at 18,838
(asserting that exemption is limited to “salesmen who
sell vehicles and partsmen and mechanics who service
vehicles”).
That interpretation flies in the face of the most
basic rules of grammar. In interpreting a sentence
with multiple disjunctive nouns and multiple
disjunctive direct-object gerunds, each noun is linked
25
to each gerund as long as that noun-gerund
combination has a sensible meaning. See, e.g., Reiter
vu. Sonotone Corp., 442 U.S. 330, 339 (1979) (“Canons
of construction ordinarily suggest that terms
connected by a disjunctive be given separate
meanings, unless the context dictates otherwise ....”);
FCC v. Pacifica Found., 438 U.S. 726, 739-40 (1978)
(“The words ... are written in the disjunctive, implying
that each has a separate meaning.”). Here, there is no
question that the term “or” in the phrase “salesman ...
primarily engaged in selling or servicing’ is
disjunctive and that both gerunds can sensibly be
applied to the noun “salesman.” Thus, both parts of
the disjunctive phrase “engaged in selling or servicing
automobiles” can plainly be applied to the noun
“salesman.”
The Ninth Circuit offered two basic reasons for
finding ambiguity and deferring to DOL
interpretation, but neither withstands scrutiny First,
the Ninth Circuit offered an alternative interpretation
of the statute in which the words “selling” and
“servicing” refer only to the specific acts of personally
selling or servicing cars, and not to the general process
of sales or service. See Pet.App.12-13. Under that
view, because a service advisor does not personally
service vehicles, he cannot be “primarily engaged in ...
servicing automobiles.”
That argument impermissibly injects a word into
the statute and creates a significant interpretative
anomaly for one of the key words that actually appears
in the statutory text. See Davis v. Mich. Dep't of
Treasury, 489 U.S. 803, 809 (1989) (“It is a
fundamental canon of statutory construction that the
26
words of a statute must be read in their context and
with a view to their place in the overall statutory
scheme.”). The notion that an exempt employee must
be personally involved in servicing automobiles
requires adding a restrictive modifier that is absent in
the statutory text. That is problematic enough, but
the word DOL would add to the statute also creates a
significant textual anomaly. Partsmen are plainly
exempt employees under the statute, but they do not
personally engage in either selling or servicing.
Instead, those workers are “employed for the purpose
of and primarily engaged in requisitioning, stocking,
and dispensing parts.” 29 C.F.R. §779.372(c)(2).
There is no satisfactory answer to the anomaly
that arises if the statute is interpreted as requiring
direct personal involvement in servicing. It cannot
seriously be contended that the exemption covers only
partsmen who personally service automobiles, for that
is a null set. See Hibbs v. Winn, 542 U.S. 88, 101
(2004) (statute or regulation must be construed “so
that effect is given to all its provisions, so that no part
will be inoperative or superfluous, void or
insignificant”). But if, as is clearly the case, partsmen
come within the plain terms of the exemption because
they are engaged in the general process of selling or
servicing automobiles rather than personally engaged
in selling or servicing automobiles, then service
advisors must also come within the terms of the
exemption. Indeed, if anything, the service advisors,
who diagnose problems and recommend solutions are
more personally involved in servicing than the plainly
exempt partsmen. And no canon of construction
permits interpreting the concept of servicing broadly
for partsmen and narrowly for salesmen. See, e.g.,
27
FCC v. AT&T, 562 U.S. 397, 408 (2011) (“identical
words and phrases within the same statute should
normally be given the same meaning” throughout the
statute).
Second, in attempting to conjure up ambiguity in
the statutory text, the Ninth Circuit asserted that the
exemption could be construed such that the noun
“salesman” is modified only by “selling” rather than
“selling” and “servicing.” Pet.App.14-15; see also 76
Fed. Reg. at 18,838 (limiting exemption to “salesmen
who sell vehicles” and “mechanics who service
vehicles”). The court provided two stylized analogies
that, in its view, highlighted this purported
ambiguity. The Ninth Circuit first presented the
sentence, “if my dogs or cats are eating or drinking,
then I know not to pet them.” Pet.App.14. In this
sentence, it is clear from the context that both “eating”
and “drinking” can apply to both “dog” and “cat.” The
court contrasted that sentence with the sentence, “if
my dogs or cats are barking or meowing, then I know
that they need to be let out.” Jd. It is equally clear
from the context of this sentence that “barking”
applies only to dogs and “meowing” applies only to
cats. Reasoning by analogy, the Ninth Circuit
concluded that the phrase “salesman, partsman, or
mechanic primarily engaged in selling or servicing”
could be understood as akin to either the “barking or
meowing’ sentence or the “eating or drinking’
sentence, the -eby resulting in ambiguity for DOL to
fill.
There are two serious problems with those
examples. First, rather than demonstrating any
ambiguity here, those examples simply underscore
28
that context matters and can provide clear answers.
Neither dog/cat example is ambiguous. The first
illustrates the default grammatical rule that unless
the disjunctive gerund is distinct to one of the
disjunctive nouns, then the gerund modifies all the
nouns to which it could apply. An effort to limit that
phrase to eating dogs and drinking cats would be
nonsensical. Put differently, there is no ambiguity as
to whether that phrase covers drinking dogs and
eating cats. They are plainly covered. The second
example demonstrates that the default rule can be
overcome when the gerunds are by their nature
limited to a particular noun. Meowing dogs and
barking cats are not covered because there are no such
animals. Once again, the phrase is unambiguous. But
there is nothing oxymoronic or even anomalous about
a salesman primarily engaged in the servicing of
automobiles. That is exactly what service advisors do,
and they are unambiguously covered by the
exemption.
The second problem with the Ninth Circuit's
example once again stems from the exemption’s
undeniable coverage of partsmen. Congress’ inclusion
of partsmen is fatal to the Ninth Circuit’s theory that
Congress intended to limit the application of each of
the disjunctive gerunds to only one of the listed nouns.
In the “dog-cat” analogy, the partsman is the
figurative “horse” (or any other animal) in the
sentence that confirms that the gerunds are more
similar to generic “eating or drinking” than to species-
particular “barking or meowing.” Indeed, the FLSA
exemption in §213(b)(10)(A) contains three nouns but
only two gerunds, which makes it mathematically
impossible to link the nouns to the gerunds on a one-
29
to-one basis. Context matters, and the number and
positioning of the nouns and gerunds makes clear that
a salesman—like a partsman or mechanic—can be
“primarily engaged in ... servicing automobiles.”
2. Ata minimum, DOL’s interpretation
is umreasonable and thus not
entitled to deference.
Unlike other subsections of the FLSA, Congress
did not expressly delegate to DOL authority to
interpret §213(b)(10)(A). Compare, e.g., 29 U.S.C.
§213(a)(1) (granting DOL authority to “define[] and
delimit{] from time to type by regulations” the
definition of “outside salesman”), and id. §213(b)(14)
(granting DOL authority to define the phrase “area of
production”), with id. §213(b)(10)(A) (no comparable
grant of authority). Accordingly, DOL’s regulation is
not a legislative regulation, but merely an interpretive
one. See Chevron, 467 U.S. at 843-44. Interpretive
regulations are accorded less deference than
legislative regulations, and may be upheld by a court
only if they “implement the congressional mandate in
a reasonable manner.” Walton, 370 F.3d at 452; see
also Pet.App.29 (“mere interpretation” is “accorded
lower deference”).
DOL’s interpretation of §213(b)(10)(A) plainly
fails that test. All of the arguments for why the text
of the exemption is unambiguous apply with equal, if
not greater, force in explaining why DOL’s
interpretation is unreasonable. See Walton, 370 F.3d
at 452 (finding DOL interpretation to be
“unreasonable, as it is an impermissibly restrictive
interpretation of the statute”).
30
Moreover, DOL’s flimsy justification for reversing
its interpretation of §213(b)(10)(A) in 2011 only
compounds the unreasonableness of its position and
the inappropriateness of substantial deference. For
nearly 40 years, service advisors and car dealerships
have negotiated mutually beneficial compensation
plans in good-faith reliance upon DOL's oft-repeated
assertion that service advisors were exempt
employees. See DOL 1978 Opinion Letter, 1978 WL
51403 (service advisors exempt from FLSA as long as
their sales are primarily for non-warranty service).
Yet DOL purported to change that longstanding
interpretation in 2011 based on the very same
counter-textual reading of §213(b)(10)(A) that a
number of courts had already rejected. See 76 Fed.
Reg. at 18,838 (limiting exemption to “salesmen who
sell vehicles and partsmen and mechanics who service
vehicles”). That specious justification falls far below
the type of reasoned decisionmaking expected of an
agency before it upends a policy that “has engendered
serious reliance interests.” FCC v. Fox Television
Stations, 556 U.S. 502, 515-16 (2009); see also Smiley
vu. Citibank (S.D.), N.A., 517 U.S. 735, 742 (1996)
(under Chevron, a “change that does not take account
of legitimate reliance on prior interpretation[s] ... may
be ‘arbitrary, capricious [or] an abuse of discretion”).
In all events, DOL’s position must be rejected
regardless of the level of deference it receives. In
addition to the significant textual flaws discussed
above, treating service advisors as non-exempt makes
little sense in the broader scheme of the FLSA. The
FLSA contains numerous provisions (in addition to
§213(b)(10)(A)) that are designed to exclude from the
mandatory overtime rules individuals who are
31
engaged in sales or paid by commission. See, e.g., 29
U.S.C. §207(7) (excluding certain employees of retail or
service establishments who are paid commissions); id.
§213(a)(1) (excluding “any employee employed ... in
the capacity of outside salesman’).
Those provisions reflect the basic reality that it is
both common and reasonable for salesmen to be
compensated based on their success at selling, rather
than the sheer number of hours worked. As the Fifth
Circuit has explained, “[t]he enactment of
[§213(b)(10)(A)] was an implicit recognition by
Congress of the incentive method of remuneration for
salesmen, partsmen, and mechanics employed by an
automobile dealership.” Deel Motors, 475 F.2d at
1097. Like countless other salesmen who are treated
as exempt under the FLSA, service advisors “are more
concerned with their total work product than with the
hours performed.” /d. Forcing an employer to pay
service advisors—who are quintessential salesmen—
overtime compensation on an hourly basis would be a
misguided attempt to fit a square peg into a round
hole, and would do nothing to promote the policies
underlying the FLSA. Cf. Christopher, 132 S. Ct. at
2173 (noting that pharmaceutical sales
representatives “are hardly the kind of employees that
the FLSA was intended to protect”).
Finally, DOL’s interpretation also forces
dealerships to differentiate among their employees in
ways that are contrary to Congress’ plain intent.
Service advisors are in some sense a hybrid, since
their job is to sell, but they sell services. If the
salesforce were entirely exempt and the service staff
(such as mechanics and partsmen) were entirely non-
32
exempt, there might be a boundary question on which
DOL was due some deference. But here DOL has
seized on the fact that service advisors are a hybrid
between two fully exempt categories as a ground for
deeming them non-exempt. That interpretation
makes no sense and needlessly creates fissures among
similar employees that Congress plainly did not
intend.
3. The Ninth Circuit erred by holding
that FLSA exemptions should be
interpreted “narrowly.”
Finally, the Ninth Circuit buttressed its
untenable conclusion by relying heavily on the
purported canon of construction that “the FLSA is to
be construed liberally in favor of employees,” and that
“exemptions are narrowly construed against
employers.” Pet.App.6 (quoting Haro, 745 F.3d at
1256). Indeed, the Ninth Circuit effectively applied a
clear statement rule, holding that employees must be
treated as subject to the FLSA’s overtime rules unless
they “plainly and unmistakably” fall within an
exemption. Jd. (quoting Solis, 656 F.3d at 1083).
That purported canon of construction is just an
FLSA-specific variant of the disfavored notion that
courts should interpret remedial statutes broadly.
See, e.g., OWCP, 514 U.S. at 135-36 (describing broad-
construction canon as “that last redoubt of losing
causes”). But applying this misguided canon does
nothing but guarantee extravagant results in FLSA
cases. The goal of a court interpreting a statute
“should be neither liberally to expand nor strictly to
constrict its meaning, but rather to get the meaning
precisely right.” Antonin Scalia, Assorted Canards of
33
Contemporary Legal Analysis, 40 Case W Res. L. Rev.
581, 582 (1990). Thus, in addition to addressing the
circuit split concerning the meaning of §213(b)(10)(A),
granting plenary review would give this Court an
opportunity to clarify that the FLSA should be
construed neither narrowly nor broadly, but fairly and
correctly.
Il. The Ninth Circuit’s Erroneous Decision Will
Have Far-Reaching Implications For
Dealerships And Will Inject Uncertainty
Into A Previously Settled Area Of The Law.
The scope of the FLSA exemption under
§213(b)(10)(A) is of tremendous practical significance
to the automobile industry nationwide. The nation’s
18,000 franchised car dealerships employ an
estimated 45,000 service advisors. Based on decades
of settled precedent treating those employees as
exempt, service advisors and dealerships negotiated
compensation packages based primarily on sales
commissions rather than hourly wages. Yet the Ninth
Circuit has now concluded that this entire
arrangement has been unlawful all along.
This Court has not looked favorably upon
attempts by plaintiffs to use novel theories of FLSA
liability to upset long-settled industry practices. As
the Court has explained, it may be “possible for an
entire industry to be in violation of the [FLSA] for a
long time” with no one noticing, but the “more
plausible hypothesis” is that the industry’s practices
simply were not unlawful. Christopher, 132 S. Ct. at
2168. The Court has thus repeatedly rejected FLSA
claims that would have exposed settled industry
practices to potentially significant retroactive liability
34
(including back pay and double damages). See, e.g.,
Integrity Staffing, 135 S. Ct. at 518-19 (rejecting novel
attempt to impose FLSA liability for time spent in
security screenings); Christopher, 132 S. Ct. at 2170-
74 (rejecting FLSA liability for pharmaceutical sales
representatives where “the pharmaceutical industry
had little reason to suspect that its longstanding
practice of treating [sales representatives] as exempt
-.. transgressed the FLSA”); see also Yi, 480 F.3d at
510-11 (rejecting FLSA challenge to a “system of
compensation [that] is industry-wide, and of long
standing”).
Those concerns are at their zenith in cases like
this and Christopher where the plaintiffs seek to have
employees who were actually paid on a commission-
basis retroactively reclassified as non-exempt
employees. Not only were workers focused on earning
commissions, rather than working a set number of
hours, but employers did not have an incentive to
strictly track the number of hours worked, which
creates both evidentiary difficulties and the prospect
of wholly unjustified windfalls. See Christopher, 132
S. Ct. at 2173 (sales work was “difficult to standardize
to any time frame,” which “ma[de] compliance with the
overtime provisions difficult”). And, of course, the
Ninth Circuit’s holding would force both service
advisors and dealerships into compensation plans
other than the ones they had voluntarily negotiated,
to the detriment of employers and employees alike.
The problems with allowing Respondents to reap
such windfalls are exacerbated by the differential
treatment implicit in DOL’s approach. Under the
approach adopted by every other court to consider the
35
issue, all sales employees are treated the same, viz.,
as exempt. The Ninth Circuit’s decision, however,
would grant service advisors, but not other
salespeople (or others engaged in providing service,
such as partsmen or mechanics), a huge windfall.
Those windfalls cannot help but prove to be divisive.
Thus, dealers would face the prospect of not only
having to pay out damages retrospectively, but also
having to deal with anomalous divisions among their
salesforces going forward.
Finally, as noted above, because the FLSA
provides for nationwide collective actions, the Ninth
Circuit’s decision will likely become the de facto
nationwide rule for all dealerships that have at least
some operations within the Ninth Circuit. Thus, this
is not a case in which further percolation of the
relevant issues would be helpful or desirable. The far
better course is to grant certiorari immediately to
restore uniformity to this important area of the law
and reaffirm what numerous courts have held since
the 1970s—that service advisors are exempt from the
FLSA’s overtime rules under the plain text of 29
U.S.C. §213(b)(10)(A).
36
CONCLUSION
For the foregoing reasons, this Court should grant
the petition for certiorari.
Respectfully submitted,
PAUL D. CLEMENT
KARL R. LINDEGREN Counsel of Record
TODD B. SCHERWIN JEFFREY M. HARRIS
COLIN P CALVERT SUBASH S. IYER
FISHER & PHILLIPS LLP BANCROFT PLLC
444 S. Flower Street 500 New Jersey Avenue, NW
Suite 1590 Seventh Floor
Los Angeles, CA 90071 Washington, DC 20001
213-330-4450 202-234-0090
pclement@bancroftplic.com
WENDY MCGUIRE COATS
MCGUIRE COATS LLP
3527 Mt. Diablo Blvd., #281
Lafayette, CA 94549
925-297-6415
Counsel for Petitioner
September 30, 2015
APPENDIX
TABLE OF APPENDICES
Appendix A
Opinion of the United States Court of
Appeals for the Ninth Circuit, Hector
Navarro; Anthony Pinkins; Kevin Malone;
and Reuben Castro v. Encino Motorcars,
LLC, No. 13-55323 (Mar. 24, 2015) ............ App-1l
Appendix B
Order of the United States Court of
Appeals for the Ninth Circuit Denying
Rehearing En Banc, Hector Navarro, et
al. v. Encino Motorcars, LLC, No. 13-
9 Eee ee App-20
Appendix C
(In Chambers) Order Re: Defendant's
Motion to Dismiss of the United States
District Court for the Central District of
California, Navarro, et al. v. Mercedes
Benz of Encino, No. 2:12-cv-08051-RGK-
gE a aot ee a App-22
Appendix D
SIU TEIN sncescodoncttieneecetiepuibedaewenpccese’ App-33
Appendix E
kM Ly |, App-58
App-l
Appendix A
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 13-55323
HECTOR NAVARRO; ANTHONY PINKINS; KEVIN MALONE;
AND REUBEN CASTRO,
Plaintiffs-Appellants,
v.
ENCINO MOTORCARS, LLC, ERRONEOUSLY SUED AS
MERCEDES BENZ OF ENCINO, A CORPORATION,
Defendant-Appellee.
Argued: February 11, 2015
Filed: March 24, 2015
OPINION
Before: Susan P Graber and Kim McLane
Wardlaw, Circuit Judges, and James C. Mahan,*
District Judge.
GRABER, Circuit Judge:
We consider here a question of first impression for
our circuit: Are “service advisors” who work at a car
dealership exempt from the overtime pay
* The Honorable James C. Mahan, United States District Judge
for the District of Nevada, sitting by designation.
App-2
requirements of the Fair Labor Standards Act (FLSA)
of 1938, 29 U.S.C. §§ 201-219, under 29 U.S.C.
§ 213(b)(10)(A), which exempts “any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles”? Reviewing de novo, Fortyune
v. City of Lomita, 766 F.3d 1098, 1101 (9th Cir. 2014),
petition for cert. filed, _U.S.L.W__ (U.S. Jan. 26,
2015) (No. 14-920), we answer that question “no” and,
accordingly, reverse the district court’s holding to the
contrary
FACTUAL AND PROCEDURAL HISTORY
Defendant Encino Motorcars, LLC, sells and
services new and used Mercedes-Benz automobiles.'
Defendant employed or employs Plaintiffs Hector
Navarro, Mike Shirinian, Anthony Pinkins, Kevin
Malone, and Reuben Castro as “service advisors.” The
complaint alleges:
The job duties and obligations of Service
Advisors ... are to meet and greet Mercedes
Benz owners as they enter the service area of
the dealership and then to evaluate the
service and/or repair needs of the vehicle
owner in light of complaints given them by
these vehicle owners. Upon evaluation of the
service deeds of the vehicle, the Service
Advisors ... then solicit and suggest[] that
certain service[s] be conducted on the vehicle
to remedy the complaints of the vehicle owner
! Because the district court dismissed this case under Federal
Rule of Civil Procedure 12(b)(6), we take the facts alleged in the
complaint as true. Brown v. Elec. Arts, Inc., 724 F.3d 1235, 1247
(9th Cir. 2013).
App-3
by conducting certain repairs at [Defendant’s
dealership] and through [Defendant’s] own
mechanics. The Service Advisors ... are also
duty bound and obligated by [Defendant] to
solicit and suggest that supplemental service
be performed on the vehicle above and beyond
that which is required in response to the
initial complaints of the vehicle owner. The
Service Advisors ... then write up an estimate
for the repairs and services and provide[] that
to the vehicle owner. The vehicle is then
taken to the mechanics at [Defendant] for
repair and maintenance.
As required by [Defendant] and oftentimes
while the vehicle is with [Defendant's]
mechanics, the Service Advisors ... will then
call the vehicle owner and solicit and suggest
that additional work be performed on the
vehicle at additional cost.
Defendant pays service advisors on a commission
basis only; Plaintiffs receive neither an hourly wage
nor a salary.
In 2012, Plaintiffs filed this action alleging,
among other things, that Defendant has violated the
FLSA by failing to pay overtime wages. The district
court dismissed the overtime claim because, the court
concluded, Plaintiffs fall within the FLSA’s exemption
for “any salesman, partsman, or mechanic primarily
engaged in selling or servicing automobiles.” 29 U.S.C.
§ 213(b)(10)(A). Plaintiffs timely appeal.?
2 The court dismissed Plaintiffs’ other federal claims (claims 3,
5, and 7) on alternative grounds not challenged on appeal. For
App-4
DISCUSSION
Title 29 U.S.C. § 207(a)(1) requires that
employers pay time-and-a-half for hours worked in
excess of 40 per workweek. But § 213(b)(10)(A)
provides that “[t]he provisions of section 207 of this
title shall not apply with respect to ... 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.”
Defendant, as a car’ dealership, is a
“nonmanufacturing establishment primarily engaged
in the business of selling ... vehicles ... to ultimate
purchasers.” Jd. The question is whether each Plaintiff
is a “salesman, partsman, or mechanic primarily
engaged in selling or servicing automobiles.” Jd.
Plaintiffs argue that we must defer to the United
States Department of Labors 2011 regulatory
definitions, set out at 29 C.F.R. § 779.372(c). 76 Fed.
Reg. 18,832-01 (Apr. 5, 2011). Those regulations state,
in relevant part:
Salesman, partsman, or mechanic.
(1) As used in section 13(b)(10)(A), a salesman
is an employee who is employed for the
purpose of and is primarily engaged in
making sales or obtaining orders or contracts
that reason, we affirm the court’s dismissal of those claims. The
court also exercised its discretion under 28 U.S.C. § 1367(c) to
dismiss Plaintiffs’ state-law claims for lack of supplemental
jurisdiction. Because we reverse the dismissal of the overtime
claim (claim 1), we also reverse the dismissal of the state-law
claims.
App-5
for sale of the automobiles, trucks, or farm
implements that the establishment is
primarily engaged in selling...
(2) As used in section 13(b)(10)(A), a
partsman is any employee employed for the
purpose of and primarily engaged in
requisitioning, stocking, and _ dispensing
parts.
(3) As used in section 13(b)(10)(A), a mechanic
is any employee primarily engaged in doing
mechanical work (such as get ready
mechanics, automotive, truck, or farm
implement mechanics, used car
reconditioning mechanics, and wrecker
mechanics) in the servicing of an automobile,
truck or farm implement for its use and
operation as such....
29 C.F.R. § 779.372(c). As the agency explained in
2011, the regulatory definitions “limit[] the exemption
to salesmen who sell vehicles and partsmen and
mechanics who service vehicles.” 76 Fed. Reg. at
18,838. Because Plaintiffs do not fit within any of
those definitions, they are not exempt from the FLSA’s
overtime wage provisions. Defendant concedes that
Plaintiffs do not meet the regulatory definitions, but
counters that we should not defer to the regulation.
We conduct the familiar two-step inquiry to
determine whether to defer to the agencys
interpretation. McMaster v. United States, 731 F.3d
881, 889 (9th Cir. 2013), cert. denied, 135 S. Ct. 160
(2014). “At step one, we ask ‘whether Congress has
directly spoken to the precise question at issue.” Id.
(quoting Chevron, U.S.A, Inc. v. Natural Res. Def.
App-6
Council, Inc., 467 U.S. 837, 842 (1984)). If so, then the
inquiry is over, and we must give effect to the
“unambiguously expressed intent of Congress.”
Chevron, 467 U.S. at 843. But if the statute is silent or
ambiguous, then we must determine, before step two,
what level of deference applies. McMaster, 731 F.3d at
889. “If we determine that Chevron deference applies,
then we move to step two, where we will defer to the
agency's interpretation if it is ‘based on permissible
construction of the statute” Jd. (quoting Chevron, 467
U.S. at 843).
A. At Chevron Step One, the Statute is
Ambiguous.
When construing a congressional enactment, “our
inquiry begins with the statutory text.” BedRoc Ltd. v.
United States, 541. U.S. 176, 183 (2004). In addition,
in the present context we must apply the background
rule that “[t]he FLSA is to be construed liberally in
favor of employees; exemptions are narrowly
construed against employers.” Haro v. City of Los
Angeles, 745 F.3d 1249, 1256 (9th Cir.), cert. denied,
135 S. Ct. 138 (2014). “FLSA exemptions ... are to be
withheld except as to persons plainly and
unmistakably within their terms and spirit.”3 Solis v.
Washington, 656 F.3d 1079, 1083 (9th Cir. 2011)
(internal quotation marks omitted). “An employer who
3 The rule that courts should construe the FLSA’s exemptions
narrowly originated in Arnold v. Ben Kanowsky, Inc., 361 U'S.
388, 392 (1960). In recent years, the Supreme Court has clarified
that the presumption applies only to the exemptions in § 213 and
not more generally. Sandifer v. U.S. Steel Corp., 134 S. Ct. 870,
879 n.7 (2014); Christopher v. SmithKline Beecham Corp., 132
S. Ct. 2156, 2172 n.21 (2012).
App-7
claims an exemption from the FLSA bears the burden
of demonstrating that such an exemption applies.” Jd.
(internal quotation marks omitted).
As noted, the statute exempts “any salesman,
partsman, or mechanic primarily engaged in selling or
servicing automobiles.” 29 U.S.C. § 213(b)(10)(A). The
statute does not define the terms “salesman,
partsman, or mechanic.” Examining the statutory text
and applying canons of statutory interpretation, we
cannot conclude that service advisors such as
Plaintiffs are “persons plainly and unmistakably
within [the FLSA’s] terms and spirit,” Solis, 656 F.3d
at 1083 (internal quotation marks omitted).
It is plausible to read the term “salesman” broadly
and to connect the term to “servicing automobiles’;
that is, one could consider a service advisor to be a
“salesman ... primarily engaged in ... servicing
automobiles.” But, as explained in more detail below,
in Part C, it is at least as plausible to read the nouns
in a more cabined way: a salesman is an employee who
sells cars; a partsman is an employee who
requisitions, stocks, and dispenses parts; and a
mechanic is an employee who performs mechanical
work on cars. Service advisors do none of those things;
they sell services for cars. They do not sell cars; they
do not stock parts; and they do not perform mechanical
work on cars.
It is not clear from the text of the statute whether
Congress intended broadly to exempt any salesman
who is involved in the servicing of cars or, more
narrowly, only those salesmen who are selling the cars
themselves. Certainly Congress did not exempt all
employees of a car dealership; for example, a
App-8
bookkeeper who tracks invoices for car sales and
servicing is plainly not exempt, nor is a secretarial
employee who routes calls to the salesmen, partsmen,
and mechanics. Nor do canons of statutory
interpretation aid Defendant. To the contrary, the
§ 213 “exemptions are narrowly construed against
employers.” Haro, 745 F.3d at 1256.
In sum, the statutory text and canons of statutory
interpretation yield no clear answer to whether
Congress intended to include service advisors within
the exemption. Because Congress has not “directly
spoken to the precise question at issue,” Chevron, 467
U.S. at 842, the statute is ambiguous.
B. Chevron Provides the Appropriate Lens.
When a statute is ambiguous, then we must
determine, “prior to step two,” the appropriate
standard: either the Chevron test of reasonableness or
a lower standard under United States v. Mead Corp.,
533 U.S. 218 (2001). McMaster, 731 F.3d at 889.
Because we consider here a_ regulation duly
promulgated after a notice-and-comment period,
Chevron’s “reasonableness” standard applies. See, e.g.,
Renee v. Duncan, 623 F.3d 787, 795 (9th Cir. 2010)
(“The challenged federal regulation interprets a
federal statute. The regulation was adopted by the
responsible federal agency through notice and
comment rulemaking. We therefore apply the
analytical framework outlined in Chevron.”).
Nothing in the history of the regulation
undermines that conclusion. Indeed, the original
version of the regulation, promulgated in 1970,
contained the same narrow definitions of “salesman,”
“partsman,” and “mechanic.” See 29 C.F.R.
App-9
§ 779.372(c)(1)-(3) (1970); see also Dep’t of. Lab., Wage
& Hour Div., Opinion Letter No. 660, 66-69 Lab. Cas.
(CCH) 30,652 (Aug. 4, 1967) (also providing the same
narrow definitions). Those regulatory definitions have
not changed in any relevant way since 1970. Because
the agency's formal, regulatory position has not
changed, the cases cited by Defendant are not on
point. In Christopher v. SmithKline Beecham Corp.,
132 S. Ct. 2156, 2165 (2012), the Supreme Court
addressed what level of deference to give to an
agencys interpretation of its own _ regulations.
Importantly, the parties agreed that “the regulations
themselves ... [were] entitled to deference under
Chevron.” Id. Similarly, U.S. Steel, 678 F.3d at 598-99,
involved only opinion letters; the agency had not
issued formal! regulations.
It is true that the Department of Labor
occasionally has adopted the broader definitions,
urged by Defendant here, in documents other than
regulations. For example, the agency issued an
opinion letter in 1978 that defined a “salesman” to
encompass service advisors. Dep’t of Lab. Opinion
Letter No. WH-467, 1978 WL 51403 (July 28, 1978).
Similarly, the agency amended its Field Operations
Handbook in 1987 along the same lines. Field
Operations Handbook, Dep’t of Lab., Wage & Hour
Div., 24L04-4, Insert No. 1757 (Oct. 20, 1987).
The agency even proposed amending the formal]
regulation to adopt the broader definitions. 73 Fed.
Reg. 43,654-01, 43,658-59, 43,671 (July 28, 2008). But
it ultimately decided against making that change after
receiving comments from the public and considering
the relevant court decisions. 76 Fed. Red. at 18,838.
App-10
The agency “acknowledge[d] that there are strongly
held views on several of the issues presented in this
rulemaking, and it has carefully considered all of the
comments, analyses, and arguments made for and
against the proposed changes in developing this final
rule.” Jd. at 18,832. The regulatory history shows that
the Department of Labor has given this particular
issue considerable thought and has concluded that the
better reading of the statute is to “limit[] the
exemption to salesmen who sell vehicles and partsmen
and mechanics who service vehicles.” Jd. at 18,838.
Moreover, even if we were to consider the agency’s
2011 final rule a change of position, we still would
conclude that Chevron supplies the appropriate
standard of deference. As the Supreme Court
explained in FCC v. Fox Television Stations, Inc., 556
U.S. 502 (2009), an agency is permitted to change its
position. Consistent with Fox, the agency here
expressly acknowledged that its position was contrary
to its earlier opinion letter, and the agency rationally
explained why, in its view, the court decisions to the
contrary were erroneous. Under Fox, 556 U.S. at 515-
18, nothing more is required. Cf. Perez v. Mortg.
Bankers Ass’n, No. 13-1041, 2015 WL 998535 (U.S.
Mar. 9, 2015) (holding that an agency may change its
position in an interpretive rule without notice and
comment).
The Department of Labor's _ regulations
consistently—for 45 years—have interpreted the
statutory exemption to apply narrowly. The agency
reaffirmed that interpretation most recently in 2011,
after thorough consideration of opposing views and
after a formal notice-and-comment process. Under
App-11l
these circumstances, Chevron provides _ the
appropriate legal standard.
C. At Chevron Step Two, the Regulation is
Reasonable.
“Under Chevron step two, if the agency's
interpretation is a reasonable one, this court may not
substitute its own construction of the statutory
provision.” CHW W. Bay v. Thompson, 246 F.3d 1218,
1223 (9th Cir. 2001) (brackets and internal quotation
marks omitted). Here, the Department of Labor has
interpreted the statutory exemption to exclude service
advisors by choosing the narrower definition of the
term “salesman.” For the reasons described below, we
conclude that the agency has made a permissible
choice. The interpretation accords with the
presumption that the § 213 exemptions should be
construed narrowly. Haro, 745 F.3d at 1256.
Moreover, we are mindful of our role as a reviewing
court: “The agency’s interpretation need not be the
best construction of the ambiguous statute.” Cervantes
v. Holder, 772 F.3d 583, 591 (9th Cir. 2014).
We recognize that our decision to uphold the
agency's interpretation conflicts with decisions of the
Fourth and Fifth Circuits, several district courts, and
the Supreme Court of Montana. Walton v. Greenbrier
Ford, Inc., 370 F.3d 446 (4th Cir. 2004); Brennan v.
Deel Motors, Inc., 475 F.2d 1095 (5th Cir. 1973);
Brennan v. N. Bros. Ford, Inc., No. 40344, 1975 WL
1074 (E.D. Mich. Apr. 17, 1975) (unpublished), affd
sub. nom Dunlop v. N. Bros. Ford, Inc., 529 F.2d 524
(6t Cir. 1976) (table); Brennan v. Import Volkswagen,
Inc., No. W-4982, 1975 WL 1248 (D. Kan. Oct. 21,
1975) (unpublished); Yenney v. Cass Cnty. Motors Co.,
App-12
No. 76-0-294, 1977 WL 1678 (D. Neb. Feb. 8, 1977)
(unpublished); Thompson v. J. C. Billion, Inc., 294
P.3d 397 (Mont. 2013). We respectfully disagree with
those decisions.
In Deel Motors and the district court opinions
following that case in the 1970s, courts held that
service advisors are exempt because their duties and
pay structure are “functionally similar” to those of the
salesmen, partsmen, and mechanics whom the statute
expressly exempts. 475 F.2d at 1097 But those cases
pre-dated Chevron and the modern framework for
deferring to an agency’s interpretation. See id. (asking
not whether the agency’s interpretation was
reasonable but, instead, determining for itself “the
best interpretation,” “the better reasoned
interpretation,” and “a common sense interpretation’);
see also id. at 1098 (concluding that “[t]he intended
scope of [the exemption] is not entirely clear” but not
considering deference to the agency’s position). In that
regard, we agree with the Fourth Circuit that “[thej
‘functionally similar’ inquiry cannot be squared with
FLSA’s plain statutory and regulatory language.”
Walton, 370 F.3d at 451. Nothing in the statutory text
suggests that Congress meant to exempt salesmen,
partsmen, mechanics, and any other employees with
functionally similar job duties and pay structure; the
text exempts only certain salesmen, partsmen, and
mechanics.
The closer question is whether the agency's
interpretation is unreasonable because it is unduly
restrictive, as the Fourth Circuit held in Walton and
App-13
the Montana Supreme Court held in Thompson.
Those courts read § 213(b)(10)(A) as follows: “any
salesman, partsman, or mechanic primarily engaged
in [the general business of] selling or service
automobiles.” Service advisors are “salesmen” because
their job is to sell services for cars. And service
advisors are involved in the general business of
“servicing automobiles,” because their role is to help
customers receive mechanical work on their cars.
Accordingly, service advisors fall within the statutory
definition. In effect, those courts held that that is the
only reasonable reading of the statute.
The agency reads the statute differently: “any
salesman, partsman, or mechanic primarily [and
personally] engaged in_ selling or _ servicing
automobiles.” Service advisors may be “salesmen” in a
generic sense, but they do not personally sell cars and
they do not personally service cars. Accordingly,
service advisors fall outside the statutory definition.
In effect, the agency reads the statute as exempting
salesmen who sell cars and partsmen and mechanics
who service cars.
The Fourth Circuit rejected that interpretation as
unreasonable because, with respect to “salesman,” it
purportedly reads out of the statute the second half of
the disjunctive clause “selling or _ servicing
automobiles.” Walton, 370 F.3d at 452 (emphasis by
Walton) (quoting § 213(b)(10)(A)); see also Thompson,
294 P.3d at 402 (“A plain, grammatical reading of [the
statute] makes clear that the term ‘salesman’
4 Walton considered the issue at Chevron step two, whereas
Thompson considered the issue at Chevron step one. Otherwise,
the reasoning of both courts is largely the same.
App-14
encompasses a broader category of employees than
those only engaged in selling vehicles” because of
“{t]he use of the disjunctive ‘or’ between the words
‘selling or servicing”). The Fourth Circuit’s point is
that, when Congress uses a list of disjunctive subjects
(here, “salesman, partsman, or mechanic”) followed by
a list of disyunctive verbs (here, “selling or servicing”),
the ordinary interpretation of that construction is that
each subject is linked with each verb. For example, if
someone says, “if my dogs or cats are eating or
drinking, then I know not to pet them,” we understand
that phrase to be all-encompassing: the speaker
refrains from petting a dog that is eating or drinking
and a cat that is eating or drinking. It would
contravene the speakers intent to include, for
example, only cats that were eating but to exclude
dogs that were eating.
Critically, however, that analysis depends on
context. Consider this slightly modified hypothetical:
“if my dogs or cats are barking or meowing, then I
know that they need to be let out.” The Fourth
Circuit's grammatical interpretation of that phrase
would include a meowing dog and a barking cat. But
most English speakers would interpret the sentence to
refer only to a barking dog and a meowing cat. At a
minimum, that implicit limitation would offer a
reasonable interpretation of the speaker’s intent.
Returning to the statute at hand, the agency's
interpretation is reasonable. A natural reading of the
text strongly suggests that Congress did not intend
that both verb clauses would apply to all three
subjects. For example, it is hard to imagine, in
ordinary speech, a “mechanic primarily engaged in
App-15
selling ... automobiles.” That is, it seems that
Congress intended the subject “mechanic” to be
connected to only one of the two verb clauses,
“servicing.” The nature of the word “mechanic”
strongly implies the actions that the person would
take—servicing. See American Heritage College
Dictionary 842 (3d ed. 2000) (defining “mechanic” as a
“worker skilled in making, using, or repairing
machines, vehicles, and tools”). The same can be said
of the subject “salesman.” It is hard to imagine, in
ordinary speech, “salesman ... primarily engaged in ...
servicing automobiles.” Congress likely intended the
subject “salesman” to be connected to only one of the
two verb clauses, “selling.” The nature of the word
“salesman” strongly implies the actions that the
person would take—selling. See id. at 1203 (defining
“salesman” as a “man who sells merchandise’).
It is important to note that the agency’s reading
does not render any term meaningless or superfluous.
All three subjects (salesman, partsman, and
mechanic) and both verbs (selling and servicing)
retain meaning; it is just that some of the verbs do not
apply to some of the subjects. If the agency read out a
word altogether, its interpretation likely would be
unreasonable. See, e.g., Chubb Custom Ins. Co. v.
Space Sys./Loral, Inc., 710 F.3d 946, 966 (9th Cir.
2013) (“It is a well-established rule of statutory
construction that courts should not interpret statutes
in a way that renders a provision superfluous.”), cert.
denied, 134 S. Ct. 906 (2014). But the regulation does
not run afoul of that doctrine.
Non-textual indicators of congressional intent,
such as legislative history, are inconclusive. See
App-16
Fournier v, Sebelius, 718 F.3d 1110, 1123 (9th Cir.
2013) (holding that, at Chevron step two, “legislative
history permissibly may be considered”), cert. denied,
134 S. Ct. 1501 (2014). We have found no mention, in
the relevant reports or hearings, of service advisors,
by name or by role. All references to “salesman”
appear to refer to an employee who sells cars only. See,
e.g., 112 Cong. Rec. S20,504 (Aug. 24, 1966)
(statement of Sen. Yarborough) (“It would not affect
the salesman. He can go out and sell an Oldsmobile, a
Pontiac, or a Buick all day long and all night.”); id.
(“The salesman tries to get people mainly after their
hours of work. In some cases a man will leave his job,
get his wife, and go to look at automobiles. So the
hours of a salesman are different.”).
In 1961, Congress exempted “any employee” of a
car dealership. 29 U.S.C. § 213(a)(19) (1961); Pub. L.
No. 87-30, § 9, 7S Stat. 65 (1961). A few years later,
the Eighty-Ninth Congress considered three bills on
this topic. The first bill, introduced in 1965, would
have repealed altogether the exemption for employees
of dealerships. H.R. 8259, 89th Cong. § 305
(introduced in House on May 18, 1965). The next bill,
also introduced in 1965, would have exempted from
overtime requirements “any salesman or mechanic
employed by” a car dealership. H.R. 10,518, 89th
Cong. § 209 (introduced in House on Aug. 17, 1965);
H.R. 10,518, 89th Cong. § 209 (reported in House on
Aug. 25, 1965). Neither of those bills passed.
The final bill—H.R. 13,712—was enacted into law
on September 23, 1966.5 The first three versions,
5 Defendant cites recent actions by the House of
Representatives Committee on Appropriations in an apparent
App-17
introduced in the first half of 1966, exempted either
“any salesman or mechanic” or “any salesman,
mechanic, or partsman” employed by a car dealership.
H.R. 13,712, 89th Cong. § 209 (introduced in House on
Mar. 16, 1965); id. (reported in House on Mar. 29,
1966); id. (referred in Senate on May 27, 1966). The
final three versions all qualified the list of employees
with the phrase, “primarily engaged in selling or
servicing automobiles.” Jd. (reported in Senate on Aug.
23, 1966); id. (ordered to be printed in Senate on Aug.
25, 1966); Pub. L. No. 89-601 (Sept. 23, 1966). We
know. then, that sometime in 1966 between May 27
and August 23, the Senate added that phrase.
Unfortunately, the legislative history is silent on its
meaning. See, e.g., 112 Cong. Rec. H21,940 (Sept. 7,
1966) (House Conference Report: “The conference
substitute conforms to the House provision regarding
partsmen, except that such exemption shall be
available only to salesmen, partsmen, and mechanics
primarily engaged in selling or servicing such
vehicles.”); 112 Cong. Rec. $22,651 (Sept. 14, 1966)
(‘The resulting language follows the House
exemption— including the Senate floor amendment—
but with a somewhat narrower scope.”); Sen. Comm.
attempt to prevent enforcement by the agency of the 2011 rule.
That appropriations rider is not relevant. What one house of
Congress thinks, in the 2010s, about enforcement priorities for
the agency is entirely uninformative about the intent of Congress
when it enacted a statute in 1966. Moreover, enforcement
priorities do not change the content of the statute. If the
Appropriations Committee were to instruct, for instance, that it
did not want money spent on enforcing the statutes forbidding
cultivation of fewer than five marijuana plants on federal lands,
such cultivation would not become lawful.
App-18
on Lab. & Pub. Welf., Report: No. 1487, p. 14, 89th
Cong. (Aug. 23, 1966) (“Committee Report”) (“Section
13(b) is amended to provide an overtime exemption for
salesmen and mechanics who are primarily engaged
in selling or servicing automobiles....”).
The only possible exception, noted by Deel Motors,
475 F.2d at 1097 n.2, is found in the Committee Report
on August 23, 1966:
It is the intent of this exemption to exclude
from the coverage of section 7 all mechanics
and salesmen (other than partsmen)
employed by an automobile, trailer, truck,
farm implement or aircraft dealership even if
they work in physically separate buildings or
areas, or even if, though working in the
principal building of the dealership, their
work relates to the work of physically
separate buildings or areas, so long as they
are employed in a department which is
functionally operated as part of the
dealership.
Committee Report at 32. The Fifth Circuit quoted
selectively from that passage for the preposition that
the committee intended to exempt all mechanics and
salesmen. Deel Motors, 475 F.2d at 1097 n.2. But the
quoted passage also is found in earlier committee
reports, which were written before the limiting phrase
was added. E.g., Sen. Comm. on Educ. & Lab., Report
No. 871, p. 38, 89th Cong. (Aug. 25, 1965). Because the
passage appeared both before and after the addition of
the “primarily” proviso, the best reading of that
passage is that the committee was addressing what
App-19
provisions apply to employees who work in separate
buildings, not what types of salesmen are exempt.
In sum, there are good arguments supporting both
interpretations 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. Chevron, 467 U.S. at 844.
Accordingly, we hold that Plaintiffs are not exempt
under 29 U.S.C. § 213(b6)(10)(A).
Dismissal of claims 3, 5, and 7 AFFIRMED;
dismissal of claim 1 and the supplemental state-law
claims REVERSED; case REMANDED. Costs on
appeal awarded to Plaintiffs.
App-20
Appendix B
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
No. 13-55323
HECTOR NAVARRO; ET AL.,
Plaintiffs-Appellants,
Vv.
ENCINO MOTORCARS, LLC, ERRONEOUSLY SUED AS
MERCEDES BENZ OF ENCINO,
Defendant-Appellee.
Filed: June 1, 2015
ORDER
Before: GRABER and WARDLAW, Circuit
Judges, and MAHAN,” District Judge.
Judges Graber and Wardlaw have voted to deny
Appellee’s petition for rehearing en banc, and Judge
Mahan has so recommended.
The full court has been advised of the petition for
rehearing en banc, and no judge of the court has
requested a vote on it.
* The Honorable James C. Mahan, United States District Judge
for the District of Nevada, sitting by designation.
App-21
Appellee’s petition for rehearing en banc is
DENIED.
App-22
Appendix C
UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT
OF CALIFORNIA
No. 2:12-cv-08051-RGK-MRW
NAVARRO, ET AL.,
Plaintiffs
Vv.
MERCEDES BENZ OF ENCINO,
Defendant.
Filed: January 25, 2013
(IN CHAMBERS) ORDER RE: DEFENDANT'S
MOTION TO DISMISS
R. Gary Klausner, United States District Judge.
I. Introduction
On September 18, 2012, Hector Navarro, Mike
Shirinian, Anthony Pinkins, Kevin Malone, and
Reuben Castro (collectively “Plaintiffs”) filed this
complaint alleging «ine claims against Mercedes Benz
of Encino (“Defendant”) for various violations of the
Fair Labor Standards Act (“FLSA”) and the California
Labor Code.
App-23
On November 16, 2012, Defendant filed this
Motion to Dismiss. The Court reviews Defendant's
Motion to Dismiss as to four of the nine claims: (1)
First Claim: violation of FLSA 29 U.S.C. § 207 for
failure to pay overtime wages,! (2) Third Claim:
violation of FLSA 29 U.S.C. § 206 for failure to pay
minimum wage, (3) Fifth Claim: violation of FLSA 29
U.S.C. § 207 for failure to provide extra compensation
for work completed during mandatory meal and rest
periods, and (4) Seventh Claim: violation of FLSA 29
U.S.C. § 211 for failure to provide a written, itemized
statement detailing hours worked and compensation
received.
For the reasons stated below, the Court GRANTS
Defendant's Motion to Dismiss. Additionally, the
remaining claims are state claims over which the
Court will not exercise supplemental jurisdiction.
Therefore, the Court dismisses those claims for lack of
subject matter jurisdiction.
Il. Factual Background
With the exception of Plaintiff Reuben Castro,
Plaintiffs are all current employees of Defendant.
Plaintiff Reuben Castro is a former employee.
Defendant owns and operates a Mercedes Benz
automobile dealership in Encino, California. This
business sells and services both new and _ used
Mercedes Benz automobiles. Plaintiffs work (or have
worked) at the dealership as Service Advisors.
! The Court notes that Plaintiffs’ Complaint alleges a violation
of 29 U.S.C. § 201; however, the proper statutory basis for the
allegations asserted in the first claim is 29 U.S.C. § 207.
App-24
As Service Advisors, the Plaintiffs must: (1) meet
and greet Mercedes Benz owners as they enter the
service area and evaluate their service and repair
needs; (2) solicit service to be conducted on the vehicle;
(3) solicit supplemental service to be performed on the
vehicle; and (4) inform the vehicle owner about the
status of the vehicle while Defendant’s mechanics
repair and service the vehicle. For every additional
service or repair provided, the commission increases.
Defendant pays Service Advisors, such as Plaintiffs,
solely on this commission.
On September 18, 2012, Plaintiffs filed a
complaint against Defendant alleging violations of
both federal and state laws for failure to pay overtime,
failure to pay minimum wage, failure to provide extra
compensation for Plaintiffs’ work during mandatory
meal and rest periods, and failure to provide itemized
wage statements to Plaintiffs. Additionally, Plaintiffs
allege that because of these practices, Defendant has
engaged im unfair competition in violation of
California Business & Professions Code §17200.
Ill. Judicial Standard
To comply with Federal Rules of Civil Procedure
8, a complaint must allege “enough facts to state a
claim for relief that 1s plausible on its face.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). Under
Rule 12(b)(6), a party may move to dismiss a claim for
failure to allege enough facts to comply with Rule 8.
In deciding a Rule 12(b)(6) motion, a court must
assume allegations in the challenged complaint are
true, and must construe the complaint in the light
most favorable to the nonmoving party. Cahill v.
Liberty Mut. Ins. Co., 80 F 3d 336, 337-38 (9th Cir.
App-25
1996). However, a court need not accept as true
unreasonable inferences, unwarranted deductions of
fact, or conclusory legal allegations cast in the form of
factual allegations. See W. Mining Council v. Watt, 643
F.2d 618, 624 (9th Cir. 1981). The complaint need not
contain detailed factual allegations, but must provide
more than a “formulaic recitation of the elements of a
claim.” Twombly, 550 U.S. at 555.
IV Discussion
Defendant argues Plaintiffs’ claims should be
dismissed for the following reasons: (1) Plaintiffs’
First, Third, and Fifth Claims fail because Plaintiffs
are exempt from the FLSA’s maximum hour and
minimum wage requirements; (2) alternatively,
Plaintiffs’ Third Claim fails because the Complaint
pleads insufficient facts; (3) alternatively, Plaintiffs’
Fifth Claim fails because § 207 does not require meal
and rest periods; and (4) Plaintiffs’ Seventh Claim
fails because a violation of § 211 does not create a
private right of action. The Court agrees.
A. First, Third, Fifth Claims Fail Based on
Exemptions
Section 206 states, in pertinent part, that every
employer shall pay to each of his employees not less
than $7.25 an hour. 29 U.S.C. § 206(a)(1)(C). Section
207 states no employer shall employ any employee for
a workweek longer than forty hours unless the
employee receives additional compensation specified
at a rate not less than one-half the regular rate at
which the employer generally pays the employee. 29
U.S.C. §207(a).
Section 213 creates an exemption to the above
provision for “any salesman, partsman, or mechanic
App-26
primarily engaged in selling or servicing automobiles
if he is employed by a nonmanufacturing
establishment primarily engaged in the business of
selling such vehicles or implements to ultimate
purchasers.” Courts have applied this exemption to
Service Advisors. See Brennan v. Deel Motors, 475
F.2d 1095, 1097 (5th Cir. 1973) (“... a common sense
interpretation and application of this exemption
mandates inclusion of service salesmen within its
scope.”); Walton v. Greenbrier Ford, 370 F.3d 446, 453
(4th Cir. 2004).
The Department of Labor (“DOL”), however, has
expressly rejected this interpretation. The DOL
defines a salesman as an employee “primarily engaged
in making sales or obtaining orders or contracts for
sale of automobiles.” 29 C.F.R. § 779.372(c)(1). A
mechanic is an employee “primarily engaged in doing
mechanical work in the servicing of an automoile.” 29
C.F.R. § 779.372(c)(3). In a “final rule,” the Wage and
Hour Division of the DOL explained that “[t]he
Department notes that current § 779.372(c)(1) ...
limit[s] the exemption to salesmen who sell vehicles
and partsmen and mechanics who service vehicles.”
Updating Regulations Issued Under the Fair Labor
Standards Act, 76 Fed. Reg. 18832-01 (April 5, 2011).
Thus, under the DOL’s enforcement of § 213(b)(10)(A),
Service Advisors are not exempt from the hour/wage
requirements set forth in §§ 206 and 207
Given the conflicting interpretations, the Court
must first look to the statutory language. Where the
statutory language is clear, the Court is bound by such
language as a clear expression of legislative intent.
Chevron, U.S.A., Inc. v. Natural Resources Defense
App-27
Council, 467 U.S. 837, 842-43 (1984). Where the
statutory language is ambiguous, however, the Court
accords deference to the DOL action based on the
nature of that action. “Legislative regulations” are
given a high level of judicial deference, and will stand
unless arbitrary or capricious. Jd. at 844. Mere
“interpretations,” however, are accorded lower
deference, and will stand only so long as they are
reasonable. Jd.
1. The Statutory Language is Ambiguous as
Applied to Service Advisors
Here, the statutory language of § 213(b)(10)(A)
does not expressly exempt Service Advisors. However,
the job description of a Service Advisor encompasses
those of both a salesman and a mechanic, and falls
squarely within the category of positions exempted by
the provision. The legislative history demonstrates an
intent to “narrow significantly the reach of the
automobile dealership employee exemption.” Gieg v.
Howarth, 244 F.3d 775, 776 (9th Cir. 2001).
Nonetheless, it is not clear that Congress intended
Service Advisors to be excluded, particularly when
their job duties are simply a hybrid of two jobs
expressly listed within the exemption. For this reason,
the Court finds § 213(b)(10)(A) ambiguous as applied
to Service Advisors. See Brennan v. Deel Motors, Inc.,
475 F.2d 1095, 1098 (5th Cir. 1973) (“The intended
scope of [the exemption] is not entirely clear. Indeed,
the Secretary's own interpretation of the coverage of
that section is not altogether consistent.”).
App-28
2. The DOL’s Interpretation is_ not
Reasonable
In light of the finding above, the Court's role is to
“determine whether the agency's interpretation is
based on a permissible construction of the statute.”
Chevron, 467 U.S. at 843. As previously stated, the
permissiveness of the agency’s construction depends
upon the nature of the agency action, as allowed by
Congress. When Congress has “explicitly left a gap for
the agency to fill, there is an express delegation of
authority to the agency.” Jd. at 844. In such a case,
agency decisions are “legislative regulations” that are
given “controlling weight unless they are arbitrary.
capricious, or manifestly contrary to the statute.” Jd.
When Congress has not left such an explicit gap,
agency actions are mere interpretations that are
upheld only if reasonable. Jd.
Within the § 213 arena, the U.S. Supreme Court
has found agency action to constitute “legislative
regulation.” See Auer v. Robbins, 519 U.S. 452 (1997);
Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158
(2007). However, in those cases, the specific provisions
being reviewed expressly grant the Secretary of Labor
the power to “defin[e] and delimi[t]” the terms in the
section. Jd. As such, the Court found that the statute
creates an explicit gap for the agency to fill. Jd. at 172.
This case is distinguishable. Here, the applicable
section, § 213(10)(b)(A), does not contain any such
language. It is clear that where Congress intended to
grant the agency power to create legislative
regulation, it included language to that effect. In the
absence of similar language, this Court will not read
into the statute the grant of such power. Therefore, the
App-29
Court finds that the agency action is not a legislative
regulation, but rather, a mere interpretation, which is
accorded lower deference.
Having established that the DOL’s action is an
interpretation, the Court is bound to the DOL
interpretation only if the interpretation is reasonable.
Chevron, 467 U.S. at 844. The Court agrees with both
the Fourth and Fifth Circuits, and holds that the DOL
interpretation of § 213(b)(10)(A) is unreasonable.
When faced with facts nearly identical to those of the
present case, the Fourth Circuit concluded that the
“Secretary's interpretation of ... [salesman] is
unreasonable, as it is an imp2rmissibly restrictive
construction of the statute.” Walton, 370 F.3d at 452.
Similarly, the Fifth Circuit explained that “[ijJn the
absence of clear intent to the contrary, we cannot
assume that Congress intended to treat employees
with functionally similar positions differently.”
Brennan, 475 F.2d at 1097-98. Service Advisors, such
as Plaintiffs, are functionally equivalent to salesmen
and mechanics and are similarly responsible for the
“selling and servicing” of automobiles. Accordingly.
the Court finds the DOL’ interpretation
unreasonable. As such, the Court finds that Service
Advisors fall within the exemption of § 213(b)(10)(A).
The Court dismisses Plaintiffs’ first, third, and
fifth claims, which all allege violations of §§ 206 and
207
B. Third Claim Fails to Allege Sufficient Facts
As discussed above, the minimum wage
requirements established in § 206 do not apply to
Plaintiffs because Service Advisors are exempt under
§ 213(b)(10)(A). Even if they did apply, however,
App-30
Plaintiffs Third Claim fails to plead sufficient facts to
survive a Rule 12(b)(6) Motion.
Legal conclusions alone, without some factual
allegations, do not provide fair notice of the nature of
the claim nor the grounds on which the claim rests.
Bell Atlantic Corp. v. Twombly, 550 U.S. at 556. Here,
Plaintiffs allege only that Defendant (1) failed to
provide an hourly wage, (2) paid Plaintiffs on a pure
commission basis, (3) required Plaintiffs to work for
wages less than the legal minimum, and (4) refused to
pay minimum wages. A salary based solely on
commission can still satisfy the minimum wage
requirement. See 29 C.F.R. § 778.117. No facts
demonstrate that the commissions Plaintiffs earned
do not satisfy the minimum wage requirements. Even
if a Motion to Dismiss is not designed to correct
inartistic pleading, as Plaintiff argues, these legal
conclusions alone are insufficient to survive a Rule
12(b)(6) Motion.
C. Fifth Claim Fails to State a Claim
To the extent Plaintiffs’ Fifth Claim alleges that
Defendant failed to provide Plaintiffs with overtime
compensation in violation of § 207, this Section does
not apply to Service Advisors. As discussed above,
Plaintiffs are exempt under § 213(b)(10)(A).
To the extent Plaintiffs’ Fifth Claim alleges that
Defendant failed to provide Plaintiffs with meal or rest
periods, neither § 207 nor the cited DOL regulations
mandate rest and meal periods. Section 785.18 simply
states that: “Rest periods of short duration, running
from 5 minutes to about 20 minutes... must be counted
as hours worked.” 29 C.F.R.§ 785.18. Section 785.19
states that “[b]ona fide meal periods are not worktime
App-31
... The employee must be completely relieved from
duty for the purposes of eating regular meals ... The
employee is not relieved if he is required to perform
any duties, whether active or inactive, while eating.”
29 C.F.R. § 785.19. These statutes simply determine
when employees must be compensated for working
during these periods, but do not require an employer
to provide their employees with meal or rest periods.
On this ground, the Court dismisses Plaintiffs Fifth
Claim.
D. Seventh Claim Fails Because § 211 Does Not
Create a Private Right of Action
Section 29 U.S.C. § 211 states: “Every employer
subject to any provision of this chapter ... shall make,
keep, and preserve such records of the persons
employed by him and of the wages, hours, and other
conditions and practices of employment maintained by
him, and shall preserve such records...” Section 217
authorizes only the Secretary to initiate injunction
proceedings involving an employer's failure to comply
with the record keeping requirements. 29 U.S.C.
§ 217 Put simply, § 211(c) does not create a private
action against an employer for failure to comply with
the record-keeping provisions. Elwell v. University
Hospitals Home Care Services, 276 F. 3d 832, 843 (6th
Cir. 2002). Therefore, the Court dismisses Plaintiffs
Seventh Claim.
E. The Remaining State Law Causes of Action
Having dismissed all federal claims alleged, the
Court exercises its discretion under 28 U.S.C.
§ 1367(c) to dismiss the remaining state law causes of
action for lack of subject matter jurisdiction.
App-32
V Conclusion
The Court GRANTS Defendant's Motion to
Dismiss as to Plaintiffs’ First, Third, Fifth, and
Seventh claims. The Court sua sponte DISMISSES the
remaining state law causes of action. As_ such,
Plaintiffs’ Complaint is dismissed 1. its entirety.
ITIS SO ORDERED.
App-33
Appendix D
29 U.S.C. § 213
EXEMPTIONS
(a) Minimum wage and maximum hour
requirements
The provisions of sections 206 (except subsection
(d) in the case of paragraph (1) of this subsection) and
207 of this title shall not apply with respect to—
(1) any employee employed in a bona fide
executive, administrative, or professional
capacity (including any employee employed in the
capacity of academic administrative personnel or
teacher in elementary or secondary schools), or in
the capacity of outside salesman (as such terms
are defined and delimited from time to time by
regulations of the Secretary. subject to the
provisions of subchapter II of chapter 5 of title 5,
except that an employee of a retail or service
establishment shall not be excluded from the
definition of employee employed in a bona fide
executive or administrative capacity because of
the number of hours in his workweek which he
devotes to activities not directly or closely related
to the performance of executive or administrative
activities, if less than 40 per centum of his hours
worked in the workweek are devoted to such
activities); or
(2) Repealed. Pub. L. 101—157, §3(c)(1), Nov
17, 1989, 103 Stat. 939.
(3) any employee employed by = an
establishment which is an amusement or
recreational establishment, organized camp, or
App-34
religious or non-profit educational conference
center, if (A) it does not operate for more than
seven months in any calendar year, or (B) during
the preceding calendar year, its average receipts
for any six months of such year were not more
than 331/3 per centum of its average receipts for
the other six months of such year, except that the
exemption from sections 206 and 207 of this title
provided by this paragraph does not apply with
respect to any employee of a private entity
engaged in providing services or facilities (other
than, in the case of the exemption from section
206 of this title, a private entity engaged in
providing services and facilities directly related to
skiing) in a national park or a national forest, or
on land in the National Wildlife Refuge System,
under a contract with the Secretary of the Interior
or the Secretary of Agriculture; or
(4) Repealed. Pub. L. 101—157, §3(c)(1), Nov.
17, 1989, 103 Stat. 939.
(5) any employee employed in the catching,
taking, propagating, harvesting, cultivating, or
farming of any kind of fish, shellfish, crustacea,
sponges, seaweeds, or other aquatic forms of
animal and vegetable life, or in the first
processing, canning or packing such marine
products at sea as an incident to, or in conjunction
with, such fishing operations, including the going
to and returning from work and loading and
unloading when performed by any such employee;
or
(6) any employee employed in agriculture (A)
if such employee is employed by an employer who
App-35
did not, during any calendar quarter during the
preceding calendar year, use more than five
hundred man-days of agricultural labor, (B) if
such employee is the parent, spouse, child, or
other member of his employer's immediate family,
(C) if such employee (i) is employed as a hand
harvest laborer and is paid on a piece rate basis
in an operation which has been, and is
customarily and generally recognized as having
been, paid on a piece rate basis in the region of
employment, (ii) commutes daily from his
permanent residence to the farm on which he is so
employed, and (iii) has been employed in
agriculture less than thirteen weeks during the
preceding calendar year, (D) if such employee
(other than an employee described in clause (C) of
this subsection) (i) is sixteen years of age or under
and is employed as a hand harvest laborer, is paid
on a piece rate basis in an operation which has
been, and is customarily and generally recognized
as having been, paid on a piece rate basis in the
region of employment, (ii) is employed on the
same farm as his parent or person standing in the
place of his parent, and (i11) is paid at the same
piece rate as employees over age sixteen are paid
on the same farm, or (E) if such employee is
principally engaged in the range production of
livestock; or
(7) any employee to the extent that such
employee is exempted by regulations, order, or
certificate of the Secretary issued under section
214 of this title; or
App-36
(8) any employee employed in connection with
the publication of any weekly, semiweekly, or
daily newspaper with a circulation of less than
four thousand the major part of which circulation
is within the county where published or counties
contiguous thereto; or
(9) Repealed. Pub. L. 93-259, §23(a)(1), Apr.
8, 1974, 88 Stat. 69.
(10) any switchboard operator employed by
an independently owned public telephone
company which has not more than seven hundred
and fifty stations; or
(11> Repealed. Pub. L. 93—259, §10(a), Apr. 8,
1974, 88 Stat. 63.
(12) any employee employed as a seaman on
a vessel other thar in American vessel; or
(13), (14) Repealed. Pub. L. 93-259, §§9(b)(1),
23(b)(1), Apr. 8, 1974, 88 Stat. 63, 69.
(15) any employee employed on a casual basis
in domestic service employment to provide
babysitting services or any employee employed in
domestic service employment to _ provide
companionship services for individuals who
(because of age or infirmity) are unable to care for
themselves (as such terms are defined and
delimited by regulations of the Secretary); or
(16) a criminal investigator who is paid
availability pay under section 5545a of title 5; or
(17) any employee who is a computer systems
analyst, computer programmer, software
engineer, or other similarly skilled worker, whose
primary duty is—
App-37
(A) the application of systems analysis
techniques and _ procedures, including
consulting with users, to determine
hardware, software, or system functional
specifications;
(B) the design, development,
documentation, analysis, creation, testing, or
modification of computer systems. or
programs, including prototypes, based on and
related to user or system design
specifications;
(C) the design, documentation, testing,
creation, or modification of computer
programs related to machine operating
systems; or
(D) a combination of duties described in
subparagraphs (A), (B), and (C) the
performance of which requires the same level
of skills, and
who, in the case of an employee who is
compensated on an hourly basis, is compensated
at a rate of not less than $27.63 an hour.
(b) Maximum hour requirements
The provisions of section 207 of this title shall not
apply with respect to—
(1) any employee with respect to whom the
Secretary of Transportation has power to
establish qualifications and maximum hours of
service pursuant to the provisions of section
31502 of title 49; or
App-38
(2) any employee of an employer engaged in
the operation of a rail carrier subject to part A of
subtitle IV of title 49; or
(3) any employee of a carrier by air subject to
the provisions of title II of the Railway Labor Act
[45 U.S.C. 181 et seq.]; or
(4) Repealed. Pub. L. 93—259, §11(c), Apr. 8,
1974, 88 Stat. 64.
(5) any individual employed as an outside
buyer of poultry, eggs, cream, or milk, in their raw
or natural state; or
(6) any employee employed as a seaman; or
(7) Repealed. Pub. L. 93-259, §21(b)(3), Apr.
8, 1974, 88 Stat. 68.
(8) Repealed. Pub. L. 95-151, §14(b), Nov. 1,
1977, 91 Stat. 1252.
(9) any employee employed as an announcer,
news editor, or chief engineer by a radio or
television station the major studio of which is
located (A) in a city or town of one hundred
thousand population or less, according to the
latest available decennial census figures as
compiled by the Bureau of the Census, except
where such city or town is part of a standard
metropolitan statistical area, as defined and
designated by the Office of Management and
Budget, which has a total population in excess of
one hundred thousand, or (B) in a city or town of
twenty-five thousand population or less, which is
part of such an area but is at least 40 airline miles
from the principal city in such area; or
App-39
(10)(A) 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; or
(B) any salesman primarily engaged in
selling trailers, boats, or aircraft, if he is
employed by a nonmanufacturing
establishment primarily engaged in the
business of selling trailers, boats, or aircraft
to ultimate purchasers; or
(11) any employee employed as a driver or
driver's helper making local deliveries, who is
compensated for such employment on the basis of
trip rates, or other delivery payment plan, if the
Secretary shall find that such plan has the
general purpose and effect of reducing hours
worked by such employees to, or below, the
maximum workweek applicable to them under
section 207(a) of this title; or
(12) any employee employed in agriculture or
in -onnection with the operation or maintenance
of ditches, canals, reservoirs, or waterways, not
owned or operated for profit, or operated on a
sharecrop basis, and which are used exclusively
for supply and storing of water, at least 90 percent
of which was ultimately delivered for agricultural
purposes during the preceding calendar year; or
(13) any employee with respect to his
employment in agriculture by a_ farmer,
notwithstanding other employment of such
employee in connection with livestock auction
App-40
operations in which such farmer is engaged as an
adjunct to the raising of livestock, either on his
own account or in conjunction with other farmers,
if such employee (A) is primarily employed during
his workweek in agriculture by such farmer, and
(B) is paid for his employment in connection with
such livestock auction operations at a wage rate
not less than that prescribed by section 206(a)(1)
of this title; or
(14) any employee employed within the area
of production (as defined by the Secretary) by an
establishment commonly recognized as a country
elevator, including such an establishment which
sells products and services used in the operation
of a farm, if no more than five employees are
employed in the establishment in such operations;
or
(15) any employee engaged in the processing
of maple sap into sugar (other than refined sugar)
or syrup; or
(16) any employee engaged (A) in the
transportation and preparation for transportation
of fruits or vegetables, whether or not performed
by the farmer, from the farm to a place of first
processing or first marketing within the same
State, or (B) in transportation, whether or not
performed by the farmer, between the farm and
any point within the same State of persons
employed or to be employed in the harvesting of
fruits or vegetables; or
(17) any driver employed by an employer
engaged in the business of operating taxicabs; or
App-41
(18), (19) Repealed. Pub. L. 93-259, §§15(c),
16(b), Apr. 8, 1974, 88 Stat. 65.
(20) any employee of a public agency who in
any workweek is employed in fire protection
activities or any employee of a public agency who
in any workweek is employed in law enforcement
activities (including security personnel in
correctional institutions), if the public agency
employs during the workweek less than 5
employees in fire protection or law enforcement
activities, as the case may be; or
(21) any employee who is employed in
domestic service in a household and who resides
in such household; or
(22) Repealed. Pub. L. 95-151, §5, Nov 1,
1977, 91 Stat. 1249.
(23) Repealed. Pub. L. 93—259, §10(b)(3), Apr.
8, 1974, 88 Stat. 64.
(24) any employee who is employed with his
spouse by a nonprofit educational institution to
serve as the parents of children—
(A) who are orphans or one of whose
natural parents is deceased, or
(B) who are enrolled in such institution
and reside in residential facilities of the
institution,
while such children are in residence at such
institution, if such employee and his spouse reside
in such facilities, receive, without cost, board and
lodging from such institution, and are together
compensated, on a cash basis, at an annual rate of
not less than $10,000; or
App-42
(25), (26) Repealed. Pub. L. 95-151, §§6(a),
7(a), Nov. 1, 1977, 91 Stat. 1249, 1250.
(27) any employee employed by an
establishment which is a motion picture theater;
or
(28) any employee employed in planting or
tending trees, cruising, surveying, or felling
timber, or in preparing or transporting logs or
other forestry products to the mill, processing
plant, railroad, or other transportation terminal,
if the number of employees employed by his
employer in such forestry or lumbering operations
does not exceed eight;
(29) any employee of an amusement or
recreational establishment located in a national
park or national forest or on land in the National
Wildlife Refuge System if such employee (A) is an
employee of a private entity engaged in providing
services or facilities in a national park or national
forest, or on land in the National Wildlife Refuge
System, under a contract with the Secretary of the
Interior or the Secretary of Agriculture, and (B)
receives compensation for employment in excess
of fifty-six hours in any workweek at a rate not
less than one and one-half times the regular rate
at which he is employed; or
(30) a criminal investigator who ~ paid
availability pay under section 5545a of title 5.
(c) Child labor requirements
(1) Except as provided in paragraph (2) or (4),
the provisions of section 212 of this title relating
to child labor shall not apply to any employee
App-43
employed in agriculture outside of school hours for
the school district where such employee is living
while he is so employed, if such employee—
(A) is less than twelve years of age and (i)
is employed by his parent, or by a person
standing in the place of his parent, on a farm
owned or operated by such parent or person,
or (ii) is employed, with the consent of his
parent or person standing in the place of his
parent, on a farm, none of the employees of
which are (because of subsection (a)(6)(A) of
this section) required to be paid ai the wage
rate prescribed by section 206(a)(5) of this
title,
(B) is twelve years or thirteen years of
age and (i) such employment is with the
consent of his parent or person standing in
the place of his parent, or (ii) his parent or
such person is employed on the same farm as
such employee, or
(C) is fourteen years of age or older.
(2) The provisions of section 212 of this title
relating to child labor shall apply to an employee
below the age of sixteen employed in agriculture
in an occupation that the Secretary of Labor finds
and declares to be particularly hazardous for the
employment of children below the age of sixteen,
except where such employee is employed by his
parent or by a person standing in the place of his
parent on a farm owned or operated by such
parent or person.
(3) The provisions of section 212 of this title
relating to child labor shall not apply to any child
App-44
employed as an actor or performer in motion
pictures or theatrical productions, or in radio or
television productions.
(4)(A) An employer or group of employers may
apply to the Secretary for a waiver of the
application of section 212 of this title to the
employment for not more than eight weeks in any
calendar year of individuals who are less than
twelve years of age, but not less than ten years of
age, as hand harvest laborers in an agricultural
operation which has been, and is customarily and
generally recognized as being, paid on a piece rate
basis in the region in which such individuals
would be employed. The Secretary may not grant
such a waiver unless he finds, based on objective
data submitted by the applicant, that—
(i) the crop to be harvested is one
with a particularly short harvesting
season and the application of section 212
of this title would cause severe economic
disruption in the industry of the
employer or group of employers applying
for the waiver;
(ii) the employment of _ the
individuals to whom the waiver would
apply would not be deleterious to their
health or well-being;
(iii) the level and type of pesticides
and other chemicals used would not have
an adverse effect on the health or well-
being of the individuals to whom the
waiver would apply;
App-45
(iv) individuals age twelve and above
are not available for such employment;
and
(v) the industry of such employer or
group of employers has traditionally and
substantially employed individuals
under twelve years of age without
displacing substantial job opportunities
for individuals over sixteen years of age.
(B) Any waiver granted by the Secretary
under subparagraph (A) shall require that—
(i) the individuals employed under
such waiver be employed outside of
school hours for the school district where
they are living while so employed;
(ii) such individuals while _ so
employed commute daily from their
permanent residence to the farm on
which they are so employed; and
(iii) such individuals be employed
under such waiver (I) for not more than
eight weeks between June 1 and October
15 of any calendar year, and (II) in
accordance with such other terms and
conditions as the Secretary shall
prescribe for such individuals’ protection.
(5)(A) In the administration and enforcement of
the child labor provisions of this chapter, employees
who are 16 and 17 years of age shall be permitted to
load materials into, but not operate or unload
materials from, scrap paper balers and paper box
compactors—
App-46
(i) that are safe for 16- and 17-year-
old employees loading the scrap paper
balers or paper box compactors; and
(ii) that cannot be operated while
being loaded.
(B) For purposes of subparagraph (A),
scrap paper balers and paper box compactors
shall be considered safe for 16- or 17-year-old
employees to load only if- -
(i)(1) the -scrap paper balers and
paper box compactors meet the American
National Standards Institute’s Standard
ANSI Z245.5—1990 for scrap paper balers
and Standard ANSI Z245.2-1992 for
paper box compactors; or
(II) the scrap paper balers and paper
box compactors meet an _ applicable
standard that is adopted by the American
National Standards Institute after
August 6, 1996, and that is certified by
the Secretary to be at least as protective
of the safety of minors as the standard
described in subclause (1);
(11) the scrap paper balers and paper
box compactors include an on-off switch
incorporating a key-lock or other system
and the control of the system is
maintained in the custody of employees
who are 18 years of age or older;
(ii) the on-off switch of the scrap
paper balers and paper box compactors is
maintained in an off position when the
App-47
scrap paper balers and paper box
compactors are not in operation; and
(iv) the employer of 16- and 17-year-
old employees provides notice, and posts
a notice, on the scrap paper balers and
paper box compactors stating that—
(1) the scrap paper balers and paper
box compactors meet the applicable
standard described in clause (i);
(Il) 16- and 17-year-old employees
may only load the scrap paper balers and
paper box compactors; and
(III) any employee under the age of
18 may not operate or unload the scrap
paper balers and paper box compactors.
The Secretary shall publish in the
Federal Register a standard that is adopted
by the American National Standards
Institute for scrap paper balers or paper box
compactors and certified by the Secretary to
be protective of the safety of minors under
clause (i)(II).
(C)Gi) Employers shall prepare and
submit to the Secretary reports—
(I) on any injury to an employee
under the age of 18 that requires medical
treatment (other than first aid) resulting
from the employee's contact with a scrap
paper baler or paper box compactor
during the loading, operation, or
unloading of the baler or compactor; and
App-48
(II) on any fatality of an employee
under the age of 18 resulting from the
employee's contact with a scrap paper
baler or paper box compactor during the
loading, operation, or unloading of the
baler or compactor.
(1) The reports described in clause (i)
shall be used by the Secretary to
determine whether or not the
implementation of subparagraph (A) has
had any effect on the safety of children.
(i) The reports described in clause
(i) shall provide—
(1) the name, telephone number, and
address of the employer and the address
of the place of employment where the
incident occurred;
(Il) the name, telephone number,
and address of the employee who suffered
an injury or death as a result of the
incident;
(IIT) the date of the incident;
(IV) a description of the injury and a
narrative describing how the incident
occurred; and
(V) the name of the manufacturer
and the model number of the scrap paper
baler or paper box compactor involved in
the incident.
(iv) The reports described in clause
(i) shall be submitted to the Secretary
promptly, but not later than 10 days after
App-49
the date on which an incident relating to
an injury or death occurred.
(v) The Secretary may not rely solely
on the reports described in clause (i) as
the basis for making a determination
that any of the employers described in
clause (i) has violated a provision of
section 212 of this title relating to
oppressive child labor or a regulation or
order issued pursuant to section 212 of
this title. The Secretary shall, prior to
making such a determination, conduct an
investigation and inspection in
accordance with section 212(b) of this
title.
(vi) The reporting requirements of
this subparagraph shall expire 2 years
after August 6, 1996.
(6) In the administration and enforcement of
the child labor provisions of this chapter,
employees who are under 17 years of age may not
drive automobiles or trucks on public roadways.
Employees who are 17 years of age may drive
automobiles or trucks on public roadways only
if---
(A) such driving is restricted to daylight
hours;
(B) the employee holds a State license
valid for the type of driving involved in the job
performed and has no records of any moving
violation at the time of hire;
App-50
(C) the employee has _ successfully
completed a State approved driver education
course;
(D) the automobile or truck is equipped
with a seat belt for the driver and any
passengers and the employee's employer has
instructed the employee that the seat belts
must be used when driving the automobile or
truck;
(E) the automobile or truck does not
exceed 6,000 pounds of gross vehicle weight;
(F) such driving does not involve—
(i) the towing of vehicles;
(11) route deliveries or route sales;
(iii) the transportation for hire of
property, goods, or passengers;
(iv) urgent, time-sensitive deliveries;
(v) more than two trips away from
the primary place of employment in any
single day for the purpose of delivering
goods of the employee’s employer to a
customer (other than urgent, time-
sensitive deliveries);
(vi) more than two trips away from
the primary place of employment in any
single day for the purpose of transporting
passengers (other than employees of the
employer);
(vii) transporting more than three
passengers (including employees of the
employer); or
App-51
(vii) driving beyond a 30 mile radius
from the employee’s place of employment;
and
(G) such driving is only occasional and
incidental to the employee’s employment.
For purposes of subparagraph (G), the
term “occasional and incidental” is no more
than one-third of an employee’s worktime in
any workday and no more than 20 percent of
an employee's worktime in any workweek.
(7)(A)(i) Subject to subparagraph (B), in the
administration and enforcement of the child labor
provisions of this chapter, it shall not be
considered oppressive child labor for a new
entrant into the workforce to be employed inside
or outside places of business where machinery is
used to process wood products.
(ii) In this paragraph, the term “new
entrant into the workforce” means an
individual who—
(1) is under the age of 18 and at least
the age of 14, and
(II) by statute or judicial order is
exempt from compulsory _ school
attendance beyond the eighth grade.
(B) The employment of a new entrant
into the workforce under subparagraph (A)
shall be permitted—
(i) if the entrant is supervised by an
adult relative of the entrant or is
supervised by an adult member of the
App-52
same religious sect or division as the
entrant;
(ii) if the entrant does not operate or
assist in the operation of power-driven
woodworking machines;
(iii) if the entrant is protected from
wood particles or other flying debris
within the workplace by a _ barrier
appropriate to the potential hazard of
such wood particles or flying debris or by
maintaining a sufficient distance from
machinery in operation; and
(iv) if the entrant is required to use
personal protective equipment to prevent
exposure to excessive levels of noise and
saw dust.
(d) Delivery of newspapers and
wreathmaking
The provisions of sections 206, 207, and 212 of this
title shall not apply with respect to any employee
engaged in the delivery of newspapers to the consumer
or to any homeworker engaged in the making of
wreaths composed principally of natural holly, pine,
cedar, or other evergreens (including the harvesting of
the evergreens or other forest products used in making
such wreaths).
(e) Maximum hour requirements and
minimum wage employees
The provisions of section 207 of this title shall not
apply with respect to employees for whom the
Secretary of Labor is authorized to establish minimum
wage rates as provided in section 206(a)(3) of this title,
App-53
except with respect to employees for whom such rates
are in effect; and with respect to such employees the
Secretary may make rules and regulations providing
reasonable limitations and allowing reasonable
variations, tolerances, and exemptions to and from
any or all of the provisions of section 207 of this title if
he shall find, after a public hearing on the matter, and
taking into account the factors set forth in section
206(a)(3) of this title, that economic conditions
warrant such action.
(f) Employment in foreign countries and
certain United States territories
The provisions of sections 206, 207, 211, and 212
of this title shall not apply with respect to any
employee whose services during the workweek are
performed in a workplace within a foreign country or
within territory under the jurisdiction of the United
States other than the following: a State of the United
States; the District of Columbia; Puerto Rico; the
Virgin Islands; outer Continental Shelf lands defined
in the Outer Continental Shelf Lands Act (ch. 345, 67
Stat. 462) [43 U.S.C. 1331 et seq.]; American Samoa;
Guam; Wake Island; Eniwetok Atoll; Kwajalein Atoll;
and Johnston Island.
(g) Certain employment in retail or service
establishments, agriculture
The exemption from section 206 of this title
provided by paragraph (6) of subsection (a) of this
section shall not apply with respect to any employee
employed by an establishment (1) which controls, is
controlled by, or is under common control with,
another establishment the activities of which are not
related for a common business purpose to, but
App-54
materially support the activities of the establishment
employing such employee; and (2) whose annual gross
volume of sales made or business done, when
combined with the annual gross volume of sales made
or business done by each establishment which
controls, is controlled by, or is under common control
with, the establishment employing such employee,
exceeds $10,000,000 (exclusive of excise taxes at the
retail level which are separately stated).
(h) Maximum hour requirement: fourteen
workweek limitation
The provisions of section 207 of this title shall not
apply for a period or periods of not more than fourteen
workweeks in the aggregate in any calendar year to
any employee who—
(1) is employed by such employer—
(A) exclusively to provide _ services
necessary and incidental to the ginning of
cotton in an establishment primarily engaged
in the ginning of cotton;
(B) exclusively to provide _ services
necessary and incidental to the receiving,
handling, and storing of raw cotton and the
compressing of raw cotton when performed at
a cotton warehouse or compress-warehouse
facility, other than one operated in
conjunction with a cotton mill, primarily
engaged in storing and compressing;
(C) exclusively to provide services
necessary and incidental to the receiving,
handling, storing, and _ processing of
cottonseed in an establishment primarily
App-55
engaged in the receiving, handling, storing,
and processing of cottonseed; or
(D) exclusively to provide services
necessary and incidental to the processing of
sugar cane or sugar beets in an establishment
primarily engaged in the processing of sugar
cane or sugar beets; and
(2) receives for—
(A) such employment by such employer
which is in excess of ten hours in any
workday. and
(B) such employment by such employer
which is in excess of forty-eight hours in any
workweek,
compensation at a rate not less than one and
one-half times the regular rate at which he is
employed.
Any employer who receives an exemption under
this subsection shall not be eligible for any other
exemption under this section or section 207 of this
title.
(i) Cotton ginning
The provisions of section 207 of this title shall not
apply for a period or periods of not more than fourteen
workweeks in the aggregate in any period of fifty-two
consecutive weeks to any employee who—
(1) is engaged in the ginning of cotton for
market in any place of employment located in a
county where cotton is grown in commercial
quantities; and
App-56
(2) receives for any such employment during
such workweeks—
(A) in excess of ten hours in any workday,
and
(B) in excess of forty-eight hours in any
workweek,
compensation at a rate not less than one and
one-half times the regular rate at which he is
employed. No week included in any fifty-two week
period for purposes of the preceding sentence may
be included for such purposes in any other fifty-
two week period.
(j) Processing of sugar beets, sugar beet
molasses, or sugar cane
The provisions of section 207 of this title shall not
apply for a period or periods of not more than fourteen
workweeks in the aggregate in any period of fifty-two
consecutive weeks to any employee who—
(1) is engaged in the processing of sugar
beets, sugar beet molasses, or sugar cane into
sugar (other than refined sugar) or syrup; and
(2) receives for any such employment during
such workweeks—
(A) in excess of ten hours in any workday,
and
(B) in excess of forty-eight hours in any
workweek,
compensation at a rate not less than one and
one-half times the regular rate at which he is
employed. No week included in any fifty-two week
period for purposes of the preceding sentence may
App-57
be included for such purposes in any other fifty-
two week period.
App-58
Appendix E
29 C.F.R. § 779.372
NONMANUFACTURING ESTABLISHMENTS
WITH CERTAIN EXEMPT EMPLOYEES
UNDER SECTION 13(b)(10).
(a) General. A specific exemption from only the
overtime pay provisions of section 7 of the Act is
provided in section 13(b)(10) for certain employees of
nonmanufacturing establishments engaged in the
business of selling automobiles, trucks, farm
implements, trailers, boats, or aircraft. Section
13(b)(10)(A) states that the provisions of section 7
shall not apply with respect to “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.”
Section 13(b)(10)(B) states that the provisions of
section 7 shall not apply with respect to “any salesman
primarily engaged in selling trailers, boats, or aircraft,
if he is employed by a nonmanufacturing
establishment primarily engaged in the business of
selling trailers, boats, or aircraft to ultimate
purchasers.” This exemption will apply irrespective of
the annual dollar volume of sales of the establishment
or of the enterprise of which it is a part.
(b) Character of establishment and employees
exempted. (1) An establishment will qualify for this
exemption if the following two tests are met:
(i) The establishment must not be
engaged in manufacturing; and
App-59
(ii) The establishment must be primarily
engaged in the business of selling
automobiles, trucks, or farm implements to
the ultimate purchaser (for _ section
13(b)(10)(A) to apply. If these tests are met by
an establishment the exemption will be
available for salesmen, partsmen and
mechanics, employed by the establishment,
who are primarily engaged during the work
week in the selling or servicing of the named
items. Likewise, the establishment must be
primarily engaged in the business of selling
trailers, boats, or aircraft to the ultimate
purchaser for the _ section 13(b)(10)(B)
exemption to be available for salesmen
employed by the establishment who are
primarily engaged during the work week in
selling these named items. An explanation of
the term “employed by” is contained in
§§779.307 through 779.311. The exemption is
intended to apply to employment by such an
establishment of the specified categories of
employees even if they work in physically
separate buildings or areas, or even if, though
working in the principal building of the
dealership, their work relates to the work of
physically separate buildings or areas, so long
as they are employed in a department which
is functionally operated as part of the
dealership.
(2) This exemption, unlike the former exemption
in section 13(a)(19) of the Act prior to the 1966
amendments, is not limited to dealerships that qualify
as retail or service establishments nor is it limited to
App-60
establishments selling automobiles, trucks, and farm
implements, but also includes dealers in trailers,
boats, and aircraft.
(c) Salesman, paritsman, or mechanic. (1) As used
in section 13(b)(10)(A), a salesman is an employee who
is employed for the purpose of and is primarily
engaged in making sales or obtaining orders or
contracts for sale of the automobiles, trucks, or farm
implements that the establishment is primarily
engaged in selling. As used in section 13(b)(10)(B), a
salesman is an employee who is employed for the
purpose of and is primarily engaged in making sales
or obtaining orders or contracts for sale of trailers,
boats, or aircraft that the establishment is primarily
engaged in selling. Work performed incidental to and
in conjunction with the employee’s own sales or
solicitations, including incidental deliveries and
collections, is regarded as within the exemption.
(2) As used in section 13(b)(10)(A), a
partsman is any employee employed for the
purpose of and _ primarily engaged in
requisitioning, stocking, and dispensing parts.
(3) As used in section 13(b)(10)(A), a mechanic
is any employee primarily engaged in doing
mechanical work (such as get ready mechanics,
automotive, truck, or farm implement mechanics,
used car reconditioning mechanics, and wrecke.
mechanics) in the servicing of an automobile,
truck or farm implement for its use and operation
as such. This includes mechanical work required
for safe operation, as an automobile, truck, or
farm implement. The term does not include
employees primarily performing such
App-61
nonmechanical work as washing, cleaning,
painting, polishing, tire changing, installing seat
covers, dispatching, lubricating, or other
nonmechanical work. Wrecker mechanic means a
service department mechanic who goes out on a
tow or wrecking truck to perform mechanical
servicing or repairing of a customer’s vehicle away
from the shop, or to bring the vehicle back to the
shop for repair service. A tow or wrecker truck
driver or helper who primarily performs
nonmechanical repair work is not exempt.
(d) Primarily engaged. As used in _ section
13(b)(10), primarily engaged means the major part or
over 50 percent of the salesman’s, partsman’s, or
mechanic's time must be spent in selling or servicing
the enumerated vehicles. As applied to the
establishment, primarily engaged means that over
half of the establishment’s annual dollar volume of
sales made or business done must come from sales of
the enumerated vehicles.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.