Blog

Apr 09 2018

Supreme Court declares exemptions to FLSA no longer narrowly construed against the employer

By: Maria Garcia-Quintner

Posted in: Fair Labor Standards Act

 

Owners of car dealerships around the country are celebrating the Supreme Court’s ruling in Encino Motorcars, LLC v. Navarro, No. 16-1362. The question before the Court was whether service advisors, are exempt from receiving overtime compensation under 29 U.S.C. § 213(b)(10)(A) of the Fair Labor Standards Act.The exemption covers “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles”, but does not expressly mention service advisors. Up until 2011, service advisors were considered exempt from overtime; however, in 2011 the Department of Labor reversed course and issued a rule that interpreted “salesman” to exclude service advisors.The issue finally made its way to the Supreme Court. In a 5-4 decision authored by Justice Thomas (Chief Justice Roberts and Justices Kennedy, Alito, and Gorsuch joined), the Court held that “service advisors” are salesmen primarily engaged in the servicing of automobiles and are therefore exempt from the FLSA’s overtime pay requirement (Justice Ginsburg filed a dissenting opinion joined by Justices Breyer, Sotomayor, and Kagan).

While the direct holding of Encino is of somewhat limited impact (Sorry, service advisors), the Court’s rejection of the longstanding “narrow construction” rule for exemptions under the FLSA is not. Rejecting the Ninth Circuit’s interpretation of the exemption, the Supreme Court noted “We reject this principle as a useful guidepost for interpreting the FLSA.” It then underscored, “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.’”

The Supreme Court backpedaled from decades of precedent where it narrowly construed FLSA exemptions against the employers.  Without question, Monday’s ruling gives employers legal ammunition to better challenge the many overtime exemptions under the FLSA, particularly as US Department of Labor regulations and decisions read them, which the Supreme Court has held should now be construed by Courts neutrally.

The open question of importance to employers and employees in Connecticut is whether Connecticut will follow the Supreme Court’s lead in its interpretation of Connecticut’s minimum wage and overtime exceptions, set forth in Conn. Gen. Stat. § 31-76i.  Since as early as 1955, the Connecticut Supreme Court in West v. Egan, 142 Conn. 437 (1955), declared that “Like our workmen's compensation and unemployment compensation laws, the minimum wage law should receive a liberal construction in order that it may accomplish its purpose.” Later in 1960 in Shell Oil Co. v. Ricciuti, 147 Conn. 277 (1960), the Connecticut Supreme Court, citing to Egan and U.S. Supreme Court cases, stated that in “furtherance of that principle, it is essential that exemptions or exclusions be strictly and narrowly construed”.What, if any, change will the Supreme Court’s decision mean for our State counterpart and how it is interpreted by the Courts and our Department of Labor remains to be seen.


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