Supreme Court Ruling Could Broaden FLSA Overtime Exemptions

Author: Michael Cardman, XpertHR Legal Editor

April 2, 2018

For several decades, federal courts have followed a principle that the exemptions from the overtime requirements of the Fair Labor Standards Act (FLSA) are "to be narrowly construed against the employers seeking to assert them and their application limited to those establishments plainly and unmistakably within their terms and spirit."

Today, in a 5-4 ruling, the Supreme Court rejected that longstanding principle.

"Because the FLSA gives no 'textual indication' that its exemptions should be construed narrowly, 'there is no reason to give [them] anything other than a fair (rather than a 'narrow') interpretation,'" the Court ruled in Encino Motorcars, LLC v. Navarro.

This change unsettles more than half a century of Supreme Court precedent, Justice Ruth Bader Ginsburg noted in her dissent. It remains to be seen exactly how this shift will play out, but it appears certain to make it easier, not harder, for more employers to claim overtime exemptions for more employees. It certainly did so with regard to the employees at issue in the Encino Motorcars case.

"Fair Reading" Supports Exemption for Auto Dealership Service Advisors

The 9th US Circuit Court of Appeals had cited the "narrow construction" principle in support of its 2017 ruling that an FLSA overtime exemption for "salesmen, partsmen or mechanics" does not encompass "service advisors," the employees at car dealerships who consult with customers about their servicing needs and sell them servicing solutions.

The 9th Circuit's reasoning turned on a strict interpretation of the grammatical construction of the exemption. But the Supreme Court rejected that narrow interpretation in favor of a broader reading that favored the employer.

Since the term "salesman" is not defined in the statute, the Supreme Court applied the dictionary definition of "someone who sells goods or services." Service advisors do precisely that since they sell customers services for their vehicles, the Court concluded.