FLSA Exemptions: The U.S. Supreme Court Just Changed the FLSA Exemption Paradigm
What happened? On April 2, 2018, the United States Supreme Court issued its opinion in Encino Motorcars, LLC v. Navarro. The primary issue in the case was whether service advisors at car dealerships are “salesm[e]n . . . primarily engaged in . . . servicing automobiles” and therefore exempt from the Fair Labor Standards Act’s (“FLSA”) overtime-pay requirement. The Court ultimately decided that the service advisors do fall within the exemption. But this case has FLSA implications far beyond the service advisor exemption.
What broader change does this signal? While the case focused on the particular exemption relating to service advisors, in reaching its conclusion, the Supreme Court made paradigm-shifting statements about the interpretation and application of FLSA exemptions from overtime pay requirements. Before the Navarro opinion, the Supreme Court and other federal courts generally construed FLSA exemptions narrowly, on the theory that the FLSA is intended to protect employees and exemptions should be interpreted to protect employees.
This opinion rejects that principle of narrow construction, signaling a tide change in how FLSA exemptions are interpreted by courts. The Navarro opinion explicitly says that a majority of the Supreme Court justices “reject this principle as a useful guidepost for interpreting the FLSA,” and that “the narrow-construction principle relies on the flawed premise that the FLSA ‘pursues its remedial purpose at all costs.’” The Navarro majority further opines that because “exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement [the court has] no license to give the exemption anything but a fair reading.”
What does this mean for employers? In light of Navarro, Federal courts are more likely to construe FLSA exemptions in favor of employers because they will follow the Supreme Court’s lead and no longer construe FLSA exemptions so narrowly. This will be most helpful for employers making close calls about whether a particular position is exempt or non-exempt, since interpreting the exemption will no longer require presuming it will be interpreted in an employee’s favor. It does not mean, however, that employers can now classify clearly non-exempt positions as exempt. Employers must also remember that Navarro does not change state laws with respect to minimum wage requirements, exemptions, and court interpretations of those state requirements. So, depending on state law, Navarro may not allow for changing many non-exempt classifications.
For more information or for assistance making exempt/non-exempt classification determinations, email MEA’s Member Legal Services (MLS) at email@example.com. Counseling from MLS on the issue of exempt/non-exempt classification is included as part of membership at no additional cost.
Ciana Williams, Esq., SPHR
MidAtlantic Employers’ Association
*This Alert is provided for general informational purposes only and does not constitute legal advice.