Supreme Court Rejects Narrow Interpretation of FLSA Exemption

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje & Ladik, PLLC.

Federal jurisprudence under the Fair Labor Standards Act (“FLSA”), which requires employers to pay overtime compensation to covered employers, has historically mandated that exemptions to this requirement be narrowly construed against the employer.  A 5-4 opinion this week from the U.S. Supreme Court, however, may indicate a shift to a more employer-friendly treatment of FLSA exemptions.

The FLSA exempts from its overtime-pay requirement “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a non-manufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.”  The issue in Encino Motorcars, LLC v. Navarro was whether service advisors at a Mercedes-Benz dealership in Los Angeles qualified for this exemption.

The service advisors argued they did not fit within the exemption because they did not sell or service automobiles; instead, they sold repair services. In rejecting this argument, the majority stated: “A service advisor is obviously a ‘salesman.'”

Perhaps more significantly, the majority opinion cited and then rejected the historic axiom that “exemptions to the FLSA should be construed narrowly.”  The opinion elaborated: “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.”

To be sure, Encino Motorcars analyzed one of the lesser-used FLSA exemptions.  Considerably more employers rely upon the exemptions applicable to executive, administrative, professional, outside sales and computer employees. Still, if the mandate going forward is that these exemptions be give a fair (rather than a narrow) interpretation, close cases which may have been decided in favor of employees may now be decided in favor of employers.

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