The highest court of the United States, the U.S. Supreme Court, made an industry-changing ruling last Monday, April 2, 2018 that changes the pay structure and income of people working at over 10,000 U.S. car dealerships. They ruled that a car dealerships’ service advisers, which include both car dealership salesmen and mechanics working at car dealerships, aren’t required by federal law to receive overtime pay. The ruling affects more than 100,000 of these service advisers in the U.S..
Car dealership service advisers have been through tumultuous times when it comes to overtime pay. At first, since about the 1980s until early 2011, the Department of Labor assumed that federal law didn’t require overtime pay for them.
But when the Department of Labor revisited their interpretation of the Fair Labor Standards Act (FLSA) in 2011, the Ninth Circuit U.S. Court of Appeals ruled that these service advisers were required to receive overtime pay under federal law. But, the U.S. Supreme Court didn’t seem to like that ruling – they asked that appellate court to review its decision in 2016, but they still ruled in favor of car dealership salesmen and mechanics receiving overtime pay under the FLSA.
Now the U.S. Supreme Court took matters into their own hands and reinstated the decades’ old treatment of car dealership service advisers not being required to receive overtime pay. They scrutinized the FLSA’s wording that “any salesman” who is “…primarily engaged in selling or servicing automobiles…” isn’t required to receive overtime pay from his employer. They found that these service advisers are “salesmen” under the ordinary meaning that they “sell goods or services” by greeting potential customers and also proposing a variety of repair services.
Are You Entitled to Overtime Pay But Don’t Realize It?
If you’re not a car dealership service adviser and not getting paid overtime, you could be entitled to overtime pay under federal law even if your employer says you’re not. Your employer may have titled your position as a salesman or administrator to avoid paying you more for working overtime hours, but a court decides whether you’re really a salesman, administrator, or other overtime pay-exempted position by your duties and pay structure rather than the arbitrary job title your employer slapped on.
Federal wage and overtime pay laws can be found in 29 U.S.C. sections 206 and 213, and are interpreted in 29 CFR 541. Let’s examine some key provisions of 541:
Jobs That the FLSA Specifically Says Require Overtime Pay
The FLSA outlines occupations that should receive overtime pay. Those are:
Manual labor or “blue collar” workers. You fall into this category if you execute repetitive physical tasks with your hands while using physical skills and physical energy. The FLSA says that no matter how high your salary is, you’ll be entitled to overtime pay if you’re considered a manual laborer under these standards.
The FLSA also gives some clear-cut examples of manual laborers:
- police officers
- deputy sheriffs
- state troopers
- highway patrol officers
- iron workers
- construction workers
- correctional officers
- parole or probation officers
- park rangers
- operating engineers
- fire fighters
- rescue workers
- emergency medical technicians
- hazardous materials workers
- ambulance personnel
If you have one of the above outright listed occupations, you most likely should be receiving overtime pay under federal law for working overtime hours.
Managers and Supervisor-like Positions Aren’t Entitled to Overtime Pay Under the FLSA
If your overall duties are managing or supervising the enterprise or the employees where you work, and the weekly salary your employer pays you is greater or equal to the 40th percentile of full-time nonhourly employees in the lowest-wage Census Region, then you’re considered an executive employee under the FLSA. Executive employees aren’t required to receive overtime pay under federal law.
Even if your gross income doesn’t fall within the 40th percentile, the FLSA counts the monetary value of fringe benefits, like lodging, boarding, airfare, and other things the company pays for you. If the value of these fringe benefits added to your gross income puts you over or within the 40th percentile, then that satisfies the salary requirement.
What does it mean to have managerial or supervisory duties? The FLSA defines these as routinely directing the work of a minimum of two full-time employees and having the minimum ability to suggest a change in an employee’s status (e.g.: promoting, hiring, and firing) such that this suggestion carries significant weight. Also, this means that if you direct the work of four part-time employees, that counts as two full-time employees and satisfies the requirement.
What does it mean to direct the work of employees? The FLSA gives some examples, like planning their work, dividing work among employees, and telling them which techniques, equipment, materials, supplies, tools, and machinery to use. They also include planning and controlling the company budget, making sure the company is complying with regulations, providing for employee safety and company property security, and overseeing and directing the buying, selling, stocking, and flow of supplies and merchandise.
You’re also considered to be performing overall managerial or supervisory duties if you’re in charge or the head of a separate establishment, subdivision, or division of your employer’s enterprise. This separate establishment doesn’t need to be in the same physical location as your employer’s main business headquarters, but it must have a permanent status and a continuing function. Being the head of a temporary unit that sends out advertisement fliers to customers during a promotional period, then having that unit disband or go inactive when the promotion is over doesn’t make that a recognized separate establishment or division under the FLSA, which means you wouldn’t be considered a manager or supervisor of a division and would be entitled to overtime pay under federal law.
But, if you’re simply temporarily filling in for a manager or head of a division and performing oversight duties and directing at least two full-time employees within that division, then the FLSA doesn’t consider you a manager or supervisor of that division. The requirement is that you’re regularly performing managerial or supervisory duties, and not just doing them when the real manager or supervisor is absent – unless they’re absent on a routine basis and you fill in for them on a routine basis.
What exactly are managerial or supervisory duties? The FLSA gives a few examples, like interviewing potential applicants, participating in the applicant selection process, training current employees, disciplining employees, handling employee feedback (like complaints), and setting the work hours, pay rate, and salary of employees. Keeping and maintaining digital or physical sales and production records whose main purpose is to track employee performance or supervise employees, and appraising employees’ work performance for possible promotions, demotions, and other employment status changes are both considered managerial and supervisory duties too.
On the flip side, if your employer also has you doing routine, physical tasks that non-managerial employees usually do (e.g.: shelving items, working on the assembly line, and doing the duties of absent employees), even if you do them for a significant amount of your work hours everyday, you’re still considered primarily a manager or supervisor under the FLSA if you satisfy the other requirements.
Confused? Here’s a Cheat Sheet to Help You Figure Out If You May Be Entitled to Overtime Pay Under Federal Law
- If you do manual labor or blue collar work, you’re most likely entitled to overtime pay under federal law. See list of blue collar jobs above that federal law explicitly says require overtime pay. If you’re not on the list but perform daily repetitive actions with physical skills, you’re most likely a blue collar employee under the FLSA.
If you meet ALL of these requirements, you’re not entitled to overtime pay under federal law:
- Your income from your employer is at or higher than the 40th percentile
- You manage or supervise the work of the equivalent of two full-time employees at your employer’s company
- You’re the head of a permanent division with a continuing function within your employer’s enterprise (or you fill in for the head of such a division on a regular basis)
There are other occupations that aren’t entitled to overtime pay under the federal law, like teachers, doctors, computer experts, and etc.. Remember that it’s not what title your employer gives you that matters, but what your regular duties and salary are. If you think your boss isn’t paying you right, always consult with an employment overtime lawyer before taking action.