On April 2, 2018, the United States Supreme Court issued a decision on the Fair Labor Standards Act (“FLSA”) exemption that provides the FLSA’s overtime pay requirement does not apply to any salesmen, partsmen, or mechanics primarily engaged in selling or servicing automobiles, trucks or farm implements. This exemption had long been understood to include “service advisors”: employees of car dealerships who consult with customers about their service needs. Several service advisors sued their employer, Encino Motorcars LLC, and claimed that they were entitled to overtime pay pursuant to the FLSA. The lower court found that the FLSA was ambiguous as to service advisors and that the service advisors therefore should be entitled to overtime pay.
The Supreme Court reversed. In Encino Motorcars, LLC v. Navarro, No. 16-1362 (Apr. 2, 2018), the Court concluded that service advisors sell service related to automobiles and that the FLSA exemption applied to them. In reaching this conclusion, the Supreme Court rejected the lower court’s narrow reading of the exemption and noted that “there is no reason to give [the exemptions] anything other than a fair (rather than a narrow) interpretation.”
For employers outside of the automobile sales and repair industry, the Court’s analysis signals that the Supreme Court may begin to apply a broader and more pro-employer approach to other FLSA exemptions, which in previous years have been narrowly construed both by the Department of Labor and the federal courts.
Encino Motors also confirms that all employers must carefully weigh whether a specific employee falls into a specific FLSA exemption. While Encino Motors ultimately won this case, it came at the cost of years of expensive litigation. The lengthy travel of this case-all the way to the Supreme Court-highlights the risk to employers if they misclassify an employee or take a debatable position when classifying an employee as exempt.
For more information on the FLSA concerning your organization or other employment law issues, please contact PLDO Partner Matthew C. Reeber at 401-824-5100 or email [email protected]. We welcome your comments, questions or suggestions.