WAGE AND HOUR UPDATE: Supreme Court Reverses Long-Standing View on Interpretation of FLSA Overtime Exemptions

by Matthew E. Kreiser
April 12th, 2018

In a 5-4 decision last week, the Supreme Court in Encino Motorcars, LLC v. Navarro departed from its long-standing view that the exemptions from the Fair Labor Standards Act’s, (“FLSA”), overtime requirements are to be narrowly interpreted.  The FLSA contains a number of exemptions from its requirements that employers pay overtime premium pay to certain non-exempt workers for all hours worked in excess of forty hours per week.  See 29 U.S.C. § 213(b).  Importantly, if an employee is exempt from the FLSA’s overtime requirements, their employer does not have to pay to them overtime premium pay for any hours worked in excess of forty hours per week. 

The underlying lawsuit was filed by current and former service advisors of Encino Motorcars, LLC, a California car dealership.  The service advisors alleged that their employer violated the FLSA by failing to pay to them their proscribed overtime rate for any hours worked in excess of forty hours per week during the term of their respective employment.  Encino moved to dismiss the service advisors’ action arguing that the aggrieved service advisors were exempt from the FLSA’s requirements.  

The District Court agreed with Encino and dismissed the plaintiffs’ claims. However on appeal, the Ninth Circuit reversed the District Court’s decision, which was then summarily appealed to the Supreme Court. On a grant of writ of certiorari, the high court reversed the decision of the Ninth Circuit and ruled that the car dealership service advisors are exempt from the FLSA’s overtime requirements.

In reaching its decision, the Supreme Court rejected its long-standing, and frequently stated, view that the FLSA’s exemptions should be interpreted narrowly because the FLSA is a “remedial statute.” Reasoning that “[b]ecause 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.’”  Thus, the FLSA’s exemptions should be given “a fair reading.”  In further support of its decision, the high court reasoned that the FLSA also contains over two dozen exemption from the statute’s overtime requirement, which “are as much a part of the FLSA’s purpose as the overtime-pay requirement.”

The Supreme Court’s decision in Encino, without question, clarifies whether automotive service advisors are exempt from the FLSA’s overtime requirements; however, the ruling may also extend to employers outside of the automotive industry.  While it remains to be seen how the Encino decision is applied by district courts facing FLSA exemption (both overtime and minimum wage) lawsuits, it is fair to say that employers are no longer facing an uphill battle when combating an employee’s claim to overtime premium pay.  However, employers must still take care to ensure, given a fair and plain reading of the FLSA, that a particular employee’s position is indeed exempt from the overtime requirements and not attempt to unreasonably interpret the statute to shoehorn employees into the FLSA’s exemptions when a fair reading of the statute would not support such failure to pay overtime.

Matthew (Matt) Kreiser is an associate in the Firm’s Appellate and Labor and Employment practice groups.  Matt represents employers and private individuals in complex commercial disputes, appeals, and labor and employment-related disputes before federal and state courts and administrative agencies throughout Maryland and the District of Columbia.

Contact Matthew Kreiser

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