Navarro v. Encino Motorcars, LLC, No. 13–55323.

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtGRABER, Circuit Judge
Citation780 F.3d 1267
PartiesHector NAVARRO; Mike Shirinian; Anthony Pinkins; Kevin Malone; and Reuben Castro, Plaintiffs–Appellants, v. ENCINO MOTORCARS, LLC, erroneously sued as Mercedes Benz of Encino, a corporation, Defendant–Appellee.
Docket NumberNo. 13–55323.
Decision Date24 March 2015

780 F.3d 1267

Hector NAVARRO; Mike Shirinian; 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.

Argued and Submitted Feb. 11, 2015.
Filed March 24, 2015.


780 F.3d 1269

S. Keven Steinberg (argued), Keith A. Fink ; Fink & Steinberg, Los Angeles, CA, for Plaintiffs–Appellants.

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

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

Before: SUSAN P. GRABER and KIM McLANE WARDLAW, Circuit Judges, and JAMES C. MAHAN,* District Judge.

OPINION

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, 83 U.S.L.W. 3651 (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
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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
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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, ––– U.S. ––––, 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, 104 S.Ct. 2778. 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 a permissible construction of the statute.’ ” Id. (quoting Chevron, 467 U.S. at 843, 104 S.Ct. 2778 ).

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, 124 S.Ct. 1587, 158 L.Ed.2d 338 (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, ––– U.S. ––––, 135 S.Ct. 138, 190 L.Ed.2d 45 (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 claims an exemption from the FLSA bears the burden of demonstrating that such an exemption applies.” Id. (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

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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...

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