FLSA Tide Continues to Turn in Favor of Employers as SCOTUS Puts an End to the Narrow Construction of FLSA Exemptions

By Arthur W. Brumett II

Over the last year and a half, employers have been the beneficiary of several favorable developments from the Department of Labor, National Labor Relations Board, and now the United States Supreme Court in Navarro v. Encino Motor Cars, LLC.  In a 5 - 4 Opinion written by Justice Thomas, the Court rejected the position of several federal appellate courts that the exemptions in the FLSA must be “construed narrowly”.  Rather, the Court held that the exemptions should be fairly interpreted based upon the plain language as written.  While employers should continue to take great care when classifying an employee as FLSA exempt, the case does provide employers with more definite guidance and allows reliance upon the plain language of the statute, rather than having to wonder just how narrowly a particular federal court may construe the exemption. 

The Supreme Court’s decision was a reversal of the Ninth Circuit decision in Navarro v. Encino Motor Cars, LLC.  The question in that case was whether car dealership “service advisors” are salesman primarily engaged in servicing automobiles and therefore exempt from the FLSA’s overtime requirement under 29 USC §213(b)(10)(A).  The Ninth Circuit rejected the exemption for service advisors, holding that the exemption should be “construed narrowly,” and that the service advisors were not primarily engaged in servicing automobiles as required by the exemption. 

In reversing that decision, the Supreme Court noted that “a service advisor is obviously a salesman,” and they are “primarily engaged in servicing automobiles.”  The Court reasoned that they are a direct line of communication between the customers and service providers, and engaged in advising customers on necessary repairs and explaining the work to be done.  The Court acknowledged that service advisors do not spend most of their time physically repairing automobiles, but the “statutory language is not so constrained.”  Service advisors are integral to the servicing process.

As stated above, Justice Thomas noted in his Opinion that the FLSA “gives no textual indication that its exemption should be construed narrowly.”  Accordingly, he held that there is “no reason to give [them] anything other than a fair (rather than a “narrow”) interpretation”.  He continued “We thus have no license to give the exemption anything but a fair reading.”

This case is a great victory for thousands of car dealerships nationwide, and provides substantial clarity regarding the exemptions applicable to that industry.  However, the decision may also have a greater effect on the FLSA as a whole.  While this decision interpreted a statutory exemption under §213(b), it is likely that the Supreme Court would also apply its fair interpretation standard to the regulatory exemptions, such as administrative, executive, professional, outside sales and computer employees.  While this specific issue is yet to be litigated, based upon the Court’s current makeup, it is probable that the Supreme Court will reject narrow construction of those regulatory exemptions as well.

Again, employers in all industries should continue to take great care and consult with an employment law attorney experienced in wage and hour matters before classifying any employee as exempt.  Legal advice is necessary not only for the classification decision itself, but also the accompanying documentation such as employee handbooks, policies and procedures, and job descriptions.  All of these documents can either bolster an exemption, or destroy it.

If you have any questions or concerns regarding these issues.  Please call one of our Employment Practices Liability Practice Group members.