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May 1st, 2018
employment
THE SUPREME COURT ADOPTS A BROADER VIEW OF FLSA EXEMPTIONS REJECTING THE LONGSTANDING NARROW CONSTRUCTION PRINCIPLE

On April 2, 2018, the Supreme Court of the United States issued a ruling in Encino Motorcars, LLC v. Navarro, 584 U.S. ___ (2018), holding that auto dealership service advisors are exempt from the Fair Labor Standards Act’s (“FLSA”) overtime pay requirement.  The case began in 2012 in a California District Court, and was later appealed to the Ninth Circuit Court of Appeals, when Encino Motorcars’ service advisor employees brought suit seeking time-and-a-half compensation for overtime hours.  The primary issue was whether service advisors at an automobile dealership met the definition of an exempt employee under FLSA section 13(b)(10)(A).  That section exempts from the federal overtime requirement “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[.]” 29 U.S.C. § 213(b)(10)(A).  Petitioner moved to dismiss the suit, arguing that the service advisors were exempt from the FLSA’s overtime – pay requirement under the statute.  The District Court agreed and dismissed the suit.

On appeal, the Ninth Circuit reversed and held that FLSA exemptions should be construed narrowly and determined that the service advisors were not exempt under the section.  The service advisors appealed to the Supreme Court.  In a 5-4 decision, the Supreme Court held that the service advisors were exempt from the FLSA’s overtime pay requirement. 

The Supreme Court’s holding is not as important as its rationale.  The Supreme Court rejected the “narrow construction” principle for FLSA exemptions which has been subscribed to for the better of 70 years stating that the principle was no longer a “useful guidepost for interpreting the FLSA.”  The Court reasoned that “the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, [and] ‘there is no reason to give [them] anything other than a fair (rather than a narrow) interpretation.’” 

The previous, “narrow construction” principle created a strong presumption of non-exempt status unless an employer could demonstrate that an exemption “plainly and unmistakably” applied.  The Supreme Court has now lessened the burden on employers requiring only that employers show that a “fair reading” of an FLSA exemption shows that an employee fits within an exempt status.

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