The Supreme Court recently increased the number of employees who are exempt from overtime pay under the Fair Labor Standards Act by adopting a new relaxed standard of construction, a significant move favoring business. See Encino Motorcars, LLC v. Navarro, 584 U.S. (2018). The question before the high court was whether service advisors employed at a car dealership were exempt from overtime pay requirements. For decades, the United States Department of Labor had determined that service advisors at a car dealership were “salesm[e]n . . . primarily engaged in servicing automobiles” and thus not entitled to overtime pay. In 2011, the Department reversed itself and issued a rule that service advisors were not included in the “salesman” exemption, and thus were entitled to overtime pay.
In the case below, the Ninth Circuit Court of Appeals agreed with the Department’s position that service advisors were not “salesm[e]n” noting among other things, the high court’s longstanding principle that FLSA exemptions are to be narrowly construed against employers and limited to cases “plainly and unmistakably within their terms and spirit.” For over 70 years, exemptions have been narrowly construed resulting in a strong presumption in favor of nonexempt status and entitlement to overtime pay.
In a 5-4 decision authored by Justice Clarence Thomas and issued on April 2, 2018, the Supreme Court reversed the Ninth Circuit, eliminated the narrow construction principal, and replaced it with “a fair reading.” While the holding was limited to the salesman exemption, the decision is much broader in impact as it eliminates the narrow construction principal historically applied to all exemptions. This approach makes it easier for employers to persuade courts that an exemption applies simply by showing the employer’s position is “a fair reading” of the statute of regulation. The decision’s impact on pending and future exemption cases, particularly in Florida which does not have pro-employee wage and hour laws, is expected to be substantial.