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Supreme Court Rejects "Narrow Construction" of FLSA Exemptions

April 3, 2018 Posted in Legal Updates Share

On Monday, April 2, the Supreme Court released a new opinion that could significantly improve the ability of employers to claim overtime exemptions under the Fair Labor Standards Act.

For years, plaintiff’s lawyers have argued that the supposed “remedial purpose” of the FLSA required courts to read the exemptions provided by that statute “narrowly.”  In practice, that often meant that courts decided close cases against the employer.

Last year, the Ninth Circuit relied on that principle (in part) in holding that Encino Motorcars (a California Mercedes dealership) had improperly classified its service advisors as exempt. 

For years, the Department of Labor had taken the position that service advisors were exempted from overtime by Section 213(b)(10)(A) of the FLSA, which exempted “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements….” In 2011, the Obama DOL issued a rule that attempted to exclude service advisors from the exemption.  After that rule was issued, the plaintiffs filed a suit seeking overtime pay.  Although the trial court initially dismissed the suit, the Ninth Circuit reversed, based on the new regulation.

In 2016, the Supreme Court struck the DOL’s new rule and sent the case back to the Ninth Circuit for a decision on whether service advisors fit within the phrasing of the exemption.  The Ninth Circuit held in 2017 that they did not, and the employer appealed again. 

In an opinion released April 2 (Encino Motorcars, LLC v. Navarro, No. 16-1362, 4/2/18), the Court ultimately held that service advisors fit within the phrasing of the exemption because they were “salesmen . . . primarily engaged in . . . servicing automobiles.”  While the opinion focused mainly on “construction” of the statute, the Court also included a section that addressed the Ninth Circuit’s conclusion that the exemption should be “construed narrowly.”

According to the Court, “[b]ecause the FLSA give no ‘textual indication’ that its exemptions should be considered narrowly, ‘there is no reason to give them anything other than a fair (rather than a ‘narrow’) interpretation.”  Writing for the majority, Justice Thomas noted that the FLSA has over two dozen exemptions in Section 213(b) alone, and that “those exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement.”  The majority concluded that the Court had “no license to give the exemption anything but a fair reading.”

This principle is significant.  Exemption cases often present close calls that depend heavily on the facts at issue.  Plaintiffs frequently trot out the “narrow construction” principle to try to sway a court in their favor.  By returning FLSA cases to a principle of fair construction, the Court has taken this weapon away from plaintiffs and taken a big step toward leveling the playing field for employers.