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U.S. Supreme Court Broadens Construction of FLSA Overtime Exemption

On Monday of this week, the U.S. Supreme Court reversed the Ninth Circuit when it ruled in Encino Motorcars, LLC v. Navarro that auto dealership service advisors are exempt from the FLSA’s overtime requirements. The justices’ analysis led the five-justice majority to conclude that service advisors fall squarely within the applicable exemption for “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles.” 29 U.S.C. § 213(b)(10)(A). This case, however, promises broad national impact because the majority rejected the longstanding principle established through decades of FLSA jurisprudence that exemptions should be construed narrowly.

In the majority’s view, because service advisors sell customers services for their vehicles, they are unmistakably engaged in servicing automobiles, as the sale of such automotive parts and services is integral to the servicing process. In other words, the statute plainly states that service advisors are “salesm[e]n…primarily engaged in…servicing automobiles.”

Legislative history arguments advocating against application of the exemption did not convince the Court because it observed that the legislative history of the exemption is silent on service advisors, and such silence “cannot defeat the better reading of the text and statutory context.”

Justice Ginsburg penned a dissent grieving the four dissenting justices’ collective perception that the Court’s majority seemed to have ignored over 50 years of precedent.  According to the dissent, that precedent has long mandated a narrow construction of the exemptions consistent with the FLSA’s purpose that eligibility for overtime pay be the default setting.

The majority’s outright dismissal of the principle that FLSA exemptions should be narrowly construed is the most significant outcome of this case. The Court said that principle “relies on the flawed premise that the FLSA ‘pursues’ its remedial purpose ‘at all costs.’” Instead, the Court endorsed the principle of a “fair (rather than narrow) interpretation.” The Court pointed out that because the FLSA has dozens of exemptions, the exemptions are just as crucial to the FLSA’s purpose as its overtime requirement.

While this decision undoubtedly clarifies whether service advisors are exempt from overtime, it remains to be seen how lower federal courts might apply the Court’s instruction to apply a “fair (rather than narrow) interpretation.”  Even if courts across the country are to interpret FLSA exemptions more expansively, employers still have the burden of proving that one of the enumerated FLSA exemptions from overtime applies to a particular employee or job title.  While the ruling in Navarro arguably lowers that hurdle, employers must continue to carefully analyze whether an exemption applies, as the cost of non-compliance with the overtime requirement is a risk not to be taken lightly.

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Donald C. Davis

Practice Group Associate

Donald C. Davis counsels Mintz clients on employment matters, including employment contracts, wage and hour disputes, employment discrimination, disability accommodations, retaliation, wrongful discharge claims, family and medical leave, defamation, and whistleblower rights.