Supreme Court Rejects Narrow Interpretation of FLSA in Overtime Case

The U.S. Supreme Court’s 5-4 ruling in a case directly affecting employers of auto service advisers is expected to have implications for employers of other kinds of workers as well since the Court rejected the notion that exemptions to the Fair Labor Standards Act (FLSA) must be construed narrowly.

The Court’s April 2 ruling in Encino Motorcars, LLC v. Navarro changes how exemptions to the FLSA have been viewed by other courts. The case was to decide whether auto service advisers should be eligible for overtime pay. The FLSA says “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” at covered dealerships are exempt from the overtime requirement.

The Court was to decide whether service advisers­—who greet customers, listen to their needs, and sell services—should be considered exempt and therefore not eligible for overtime pay. The U.S. 9th Circuit Court of Appeals had ruled that exemptions to the FLSA should be construed narrowly in keeping with a 2011 rule from the U.S. Department of Labor (DOL) that said service advisers were not “salesmen” under the FLSA.

When the Supreme Court first heard the case, it found that the DOL’s 2011 rule, which changed how the DOL had considered service advisers previously, was “procedurally defective” and therefore wasn’t owed deference. At first, the Supreme Court justices didn’t rule on whether service advisers should be exempt, but they did rule when the case made its way back to the Supreme Court.

The ruling likely will have repercussions beyond employers of auto service advisers, according to Sean D. Lee, a contributor to Federal Employment Law Insider and an attorney with Fortney & Scott, LLC, in Washington, D.C.

“Beyond its obvious impact on auto shops, the real value of this case for employers is that it directly rejects the common argument that the FLSA’s exemptions—and there are many—must be ‘construed narrowly,’” Lee says. “The 9th Circuit relied on this very argument earlier in the litigation in finding that service advisers were nonexempt.”

But in the April 2 ruling, the majority of the Supreme Court justices “flat-out denied that this principle was a useful guidepost for interpreting the FLSA,” Lee says. Instead, the Court’s opinion says the proper standard is that FLSA exemptions should be given “a fair (rather than a ‘narrow’) interpretation.”