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Supreme Court Interprets FLSA Overtime Exemption Fairly, Not Narrowly

by Martin Salcedo, Esq. - The Human Equation on 5/9/2018
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Employees of a Mercedes-Benz dealership in California filed a lawsuit to collect unpaid overtime compensation under the Fair Labor Standards Act. They took their case all the way up to the United States Supreme Court. In April 2018, the Court issued its 5-4 decision. The employees lost.

Encino Motorcars v. Navarro was easy to overlook because the case dealt with a relatively narrow, industry-specific overtime exemption. But, the manner in which the Court interpreted and applied this exemption may extend well beyond auto dealerships.

The plaintiffs were Service Advisors who worked at a Los Angeles area car dealership from 7 a.m. to 6 p.m. at least five days per work. They worked a minimum of 55 hours per week. Their job was to interact with customers and sell services for their vehicles. It involved:

  • meeting customers and listening to their concerns;
  • suggesting repair and maintenance services;
  • selling accessories or replacement parts;
  • recording service orders and following up; and
  • explaining the repair and maintenance work done on their vehicles.

The employer responded to the plaintiffs’ lawsuit by asserting a specific overtime exemption under the FLSA that applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.”

In applying this exemption, the Court noted that Service Advisors are not partsmen or mechanics, nor are they primarily engaged in selling automobiles. However, the 5-4 majority concluded that Service Advisors are “salesmen primarily engaged in servicing automobiles.” That was good enough for the majority to hold that these Service Advisors are exempt from the FLSA’s overtime compensation requirement.

The four dissenting justices stated that the majority improperly ignored the longstanding principle that FLSA exemptions must be construed narrowly. As a result of this error, a fourth occupation (automobile service advisors) was added to a federal statute that explicitly exempts only three (salesmen, partsmen and mechanics).

The majority, however, expressly rejected this longstanding principle because it relies on the flawed premise that the FLSA’s remedial purpose must be pursued at all costs. According to the majority, FLSA exemptions should be given a fair (rather than a ‘narrow’) interpretation.

The longstanding principle of narrowly construing FLSA exemptions against employers has been challenged in recent years. However, the Court’s unequivocal rejection of this principle in Encino Motorcars v. Navarro is likely to affect how other FLSA exemptions are interpreted in the future.

Stay tuned!

Our online FLSA course lets you earn HRCI and SHRM recertification credits as you learn more about wage and hour regulations. You can also contact us to learn more about training designed to reduce the likelihood of employment-related liabilities.

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Categories: Human Resources, Risk Management

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