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Date: 03-24-2015

Case Style: Hector Navarro v. Encino Motorcars, L.L.C.

Case Number: 13-55323

Judge: Graber

Court: United States Court of Appeals for the Ninth Circuit on appeal from the Central District of California (Los Angeles County)

Plaintiff's Attorney: Keven Steinberg (argued), Fink & Steinberg, Los Angeles, California, for Plaintiffs-Appellants.

Defendant's Attorney: Todd Scherwin (argued), Karl Lindegren, and Colin Calvert, Fisher & Phillips LLP, Irvine, California, for Defendant-Appellee.

Description: 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.
Defendant Encino Motorcars, LLC, sells and services new
and used Mercedes-Benz automobiles.1 Defendant employed
1 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).
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 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
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
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
2 The court dismissed Plaintiffs’ other federal claims (claims 3, 5, and
7) on alternative grounds not challenged on appeal. For 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.
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 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 (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 (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 a permissible construction of the statute.’”
Id. (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 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 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
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).
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 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
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
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
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.
§ 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
agency’s 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,
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. Reg. at 18,838. 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.” Id. 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.” Id. 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
these circumstances, Chevron provides the appropriate legal
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), aff’d
sub. nom Dunlop v. N. Bros. Ford, Inc., 529 F.2d 524 (6th
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., 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 “[the] ‘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 the Montana Supreme Court held
in Thompson.4 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’ encompasses a broader category of
employees than those only engaged in selling vehicles”
because of “[t]he use of the disjunctive ‘or’ between the
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.
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
disjunctive 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
speaker’s 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 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, a
“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 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, 75 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, introduced in
the first half of 1966, exempted either “any salesman or
5 Defendant cites recent actions by the House of Representatives’
Committee on Appropriations in an apparent 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.
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.” Id. (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. S22,651
(Sept. 14, 1966) (“The resulting language follows the House
exemption—including the Senate floor amendment—but with
a somewhat narrower scope.”); Sen. Comm. 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 proposition 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 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(b)(10)(A).

Outcome: 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.

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