SUPREME COURT REJECTS LONGSTANDING “NARROW CONSTRUCTION” RULE FOR FLSA EXEMPTIONS
May 14, 2018
The U.S. Supreme Court has, since 1945, narrowly construed exemptions to the Fair Labor Standards Act (FLSA), which in turn created a strong presumption that an employee was non-exempt unless an employer could demonstrate that an exemption “plainly and unmistakably” applied. The Court’s longstanding “narrow construction” rule was overturned this month, in Encino Motorcars, LLC v. Navarro, when the high court held in a 5-4 decision that the specific employees at issue—service advisors at an automobile dealership—are exempt from the FLSA’s overtime requirement. In Encino Motorcars, the Court considered the question of whether current and former service advisors in a California car dealership were non-exempt under the FLSA and therefore entitled to overtime. The most significant aspect of the ruling is not whether the service advisors were in fact exempt or non-exempt under the FLSA, but that the Court rejected the Ninth Circuit’s reliance of the longstanding “narrow construction” principle for FLSA exemptions, stating “the Ninth Circuit also invoked the principle that exemptions to the FLSA should be construed narrowly. We reject this principle as a useful guidepost for interpreting the FLSA.”
The Court’s holding in Encino Motorcars will affect many industries. As noted above under the now defunct narrow construction rule, there was a strong presumption of non-exempt status, absent a showing by the employer that an exemption “plainly and unmistakably” applies. The practical effect of the Court’s ruling is that employers should have an easier time persuading courts that employees fall within overtime exemptions. Now, employers must merely show that their reading of the exemption is more consistent with the statutory and regulatory text, rather than showing that there is little or no doubt about the matter.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com, 202-659-6622) or Drew Derco (dderco@eckertseamans.com, 202-659-6665).
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