780 F.3d 1267 (9th Cir. 2015), 13-55323, Navarro v. Encino Motorcars, LLC

Docket Nº:13-55323
Citation:780 F.3d 1267
Opinion Judge:GRABER, Circuit Judge:
Party Name: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
Attorney:S. Keven Steinberg (argued), Fink & Steinberg, Los Angeles, California, for Plaintiffs-Appellants. Todd B. Scherwin (argued), Karl R. Lindegren, and Colin P. Calvert, Fisher & Phillips LLP, Irvine, California, for Defendant-Appellee.
Judge Panel:Before: Susan P. Graber and Kim McLane Wardlaw, Circuit Judges, and James C. Mahan,[*] District Judge. Opinion by Judge Graber.
Case Date:March 24, 2015
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
SUMMARY

Defendant, a car dealership, employed or employs Plaintiffs as “service advisors.” Plaintiffs filed this action alleging, inter alia, that Defendant violated the Fair Labor Standards Act (FLSA) by failing to pay overtime wages. The district court dismissed the overtime claim, concluding that Plaintiffs fell within a statutory exemption from the the FLSA’s overtime pay requirements for “any... (see full summary)

 
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Page 1267

780 F.3d 1267 (9th Cir. 2015)

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

No. 13-55323

United States Court of Appeals, Ninth Circuit

March 24, 2015

Argued and Submitted, Pasadena, California: February 11, 2015.

Page 1268

Appeal from the United States District Court for the Central District of California. D.C. No. 2:12-cv-08051-RGK-MRW. R. Gary Klausner, District Judge, Presiding.

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.

SUMMARY[**]

Labor Law

Affirming in part and reversing the dismissal of an action under the Fair Labor Standards Act, the panel held that " service advisors" who worked at a car dealership did not fall within a statutory exemption under 29 U.S.C. § 213(b)(10)(A) from the Act's overtime pay requirements for " any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles."

Disagreeing with the Fourth and Fifth Circuits, the panel deferred to the United States Department of Labor's regulatory definitions, set out at 29 C.F.R. § 779.372(c), because the statute was ambiguous, and under the Chevron standard, the regulation was reasonable.

The panel reversed the dismissal of the FLSA overtime claim and supplemental state-law claims. It affirmed the dismissal of other federal claims not challenged on appeal.

S. Keven Steinberg (argued), Fink & Steinberg, Los Angeles, California, for Plaintiffs-Appellants.

Todd B. Scherwin (argued), Karl R. Lindegren, and Colin P. Calvert, Fisher & Phillips LLP, Irvine, California, for Defendant-Appellee.

Before: Susan P. Graber and Kim McLane Wardlaw, Circuit Judges, and James C. Mahan,[*] District Judge. Opinion by Judge Graber.

OPINION

Page 1269

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 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.1 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

Page 1270

vehicle owners. Upon evaluation of the service needs 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 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

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." Id. The question is whether each Plaintiff is a " salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles." Id.

Plaintiffs argue that we must defer to the United States Department of Labor's 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 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 Page 1271

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 agency's interpretation. McMaster v. United States, 731 F.3d 881, 889 (9th Cir. 2013), cert. denied, 135 S.Ct. 160, 190 L.Ed.2d 49 (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. Council, Inc., 467 U.S. 837, 842, 104 S.Ct. 2778, 81 L.Ed.2d 694 (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...

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