Supreme Court Rejects Principle That FLSA Exemptions Must Be Narrowly Construed, Granting A Victory To Employers
On April 2, 2018, in Encino Motorcars, LLC v. Navarro, the United States Supreme Court rejected the longstanding principle that exemptions from the Fair Labor Standards Act's (FLSA) overtime pay requirements should be construed narrowly, granting a victory to employers.
In Encino, a majority of the Court held that service advisors at car dealerships are exempt from the FLSA's overtime pay requirements. While this holding directly applies only to a particular segment of workers in one industry, the Court's overall decision has much broader implications.
Traditionally, courts have operated under the principle that FLSA exemptions are to be narrowly construed against the employer asserting them. Indeed, the lower courts in Encino invoked that very principal. The Supreme Court, however, stated that "[w]e reject this principle as a useful guidepost for interpreting the FLSA." The Court explained that:
The FLSA's language gives no indication that exemptions should be construed narrowly;
The narrow construction principle relied upon the flawed premise that the FLSA " 'pursues' its remedial purpose 'at all costs.' "; and
"Exemptions are as much a part of the FLSA's purpose as the overtime-pay requirement" noting that the section at issue contained over two dozen exemptions alone.
The rejection of the longstanding narrow construction principle should make it somewhat easier for employers involved in FLSA litigation to demonstrate that an exemption is appropriate. Nevertheless, given the significant financial liability employers face for the misclassification of an employee, employers should continue to take great care to ensure that employees are properly classified within the applicable statutory requirements.
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