WAGE AND HOUR UPDATE: Supreme Court Reverses Long-Standing View on Interpretation of FLSA Overtime Exemptions

by Matthew E. Kreiser
April 12th, 2018

In a 5-4 decision last week, the Supreme Court in Encino Motorcars, LLC v. Navarro departed from its long-standing view that the exemptions from the Fair Labor Standards Act’s, (“FLSA”), overtime requirements are to be narrowly interpreted.  The FLSA contains a number of exemptions from its requirements that employers pay overtime premium pay to certain non-exempt workers for all hours worked in excess of forty hours per week.  See 29 U.S.C. § 213(b).  Importantly, if an employee is exempt from the FLSA’s overtime requirements, their employer does not have to pay to them overtime premium pay for any hours worked in excess of forty hours per week. 

The underlying lawsuit was filed by current and former service advisors of Encino Motorcars, LLC, a California car dealership.  The service advisors alleged that their employer violated the FLSA by failing to pay to them their proscribed overtime rate for any hours worked in excess of forty hours per week during the term of their respective employment.  Encino moved to dismiss the service advisors’ action arguing that the aggrieved service advisors were exempt from the FLSA’s requirements.  

The District Court agreed with Encino and dismissed the plaintiffs’ claims. However on appeal, the Ninth Circuit reversed the District Court’s decision, which was then summarily appealed to the Supreme Court. On a grant of writ of certiorari, the high court reversed the decision of the Ninth Circuit and ruled that the car dealership service advisors are exempt from the FLSA’s overtime requirements.

In reaching its decision, the Supreme Court rejected its long-standing, and frequently stated, view that the FLSA’s exemptions should be interpreted narrowly because the FLSA is a “remedial statute.” Reasoning that “[b]ecause 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.’”  Thus, the FLSA’s exemptions should be given “a fair reading.”  In further support of its decision, the high court reasoned that the FLSA also contains over two dozen exemption from the statute’s overtime requirement, which “are as much a part of the FLSA’s purpose as the overtime-pay requirement.”

The Supreme Court’s decision in Encino, without question, clarifies whether automotive service advisors are exempt from the FLSA’s overtime requirements; however, the ruling may also extend to employers outside of the automotive industry.  While it remains to be seen how the Encino decision is applied by district courts facing FLSA exemption (both overtime and minimum wage) lawsuits, it is fair to say that employers are no longer facing an uphill battle when combating an employee’s claim to overtime premium pay.  However, employers must still take care to ensure, given a fair and plain reading of the FLSA, that a particular employee’s position is indeed exempt from the overtime requirements and not attempt to unreasonably interpret the statute to shoehorn employees into the FLSA’s exemptions when a fair reading of the statute would not support such failure to pay overtime.

Matthew (Matt) Kreiser is an Associate in Joseph, Greenwald & Laake’s Labor and Employment Law Practice Group. Matt represents employees in disputes involving workplace discrimination, retaliation, and unlawful termination.

Contact Matthew Kreiser

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Disclaimer

The JGL Law Blog is made available by the Firm and/or the law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law. The JGL Law Blog is not designed to and does not provide specific legal advice. Use of, or comments on, this Blog does not create an Attorney Client Relationship with the Firm or any of the authors of the Blog Posts.

This blog is for general informational purposes only. Joseph, Greenwald & Laake, PA is a law firm and some of the information on the blog relates to legal topics. Joseph, Greenwald & Laake, PA does not offer or dispense legal advice through this blog or by e-mails directed to or from this site. By using the blog, the reader agrees that the information on this blog does not constitute legal or other professional advice and no attorney-client or other relationship is created between the reader and Joseph, Greenwald & Laake, PA or its attorneys. The blog is not a substitute for obtaining legal advice from a qualified attorney licensed in your state. The information on the blog may be changed without notice and is not guaranteed to be complete, correct or up-to-date. While the blog is revised on a regular basis, it may not reflect the most current legal developments. The opinions expressed at or through the blog are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney. The JGL Law Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

To ensure compliance with requirements imposed by the U.S. Internal Revenue Service in Circular 230, we inform you that any tax advice contained on this site (including any links provided) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the U.S. Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.

˅