Overtime Exemption – Automobile Dealerships

Kayla Moreland , May 13, 2015

automobile dealershipsThe Fair Labor Standards Act (“FLSA”), which governs the minimum wage and overtime pay requirements, contains specific exemptions from overtime pay.  In addition to the traditional “white collar” exemptions for certain executive, administrative, and professional employees, the FLSA has some specific, less-known industry exemptions for automobile dealerships. Here’s a quick overview of one exemption under Section 13(b)(10)(A) of the FLSA, which applies to certain service employees of nonmanufacturing establishments.

1. Which employees are covered under this exemption?

• “Salesmen” – includes those employed for the primary purpose of making sales or obtaining orders or contracts for sale. This also includes any work performed incidental to sales (deliveries or collections).

• “Partsmen” – includes those employees primarily engaged in requisitioning, stocking, and dispensing parts.

• “Mechanic” – includes those employees primarily engaged in mechanical work for the automobile’s use and operation, such as wrecker mechanics, automotive implement mechanics, and any mechanical work for safe operation.  This does not include tire changing, installing seat covers, dispatching, or any painting or polishing.

2. Are the employees “primarily engaged” in selling or servicing automobiles?

• To fall under this exemption, employees must spend at least 50% of their work hours each week selling or servicing automobiles.

3. Is the employer a “nonmanufacturing establishment” that is “primarily engaged” in selling automobiles to the ultimate purchaser?

• For the exemption to apply, over half of the establishment’s annual dollar volume must be derived from sales of the vehicles.

• This exemption applies to employees even if they work in a physically separate building from the principal establishment, so long as they are employed in a department that is “functionally operated as part of the dealership.” 29 C.F.R. 779.372.

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