High Court Rejects “Narrow Construction” Principle for FLSA Exemptions

    This week, the United States Supreme Court issued a much-anticipated decision regarding whether service advisors working at a car dealership were exempt from the overtime pay requirements of the Fair Labor Standards Act (“FLSA”).[1]  In a 5-4 decision, the Court in Encino Motorcars, LLC v. Navarro ruled that service advisors are exempt from overtime pay requirements under the “salesman, partsman, or mechanic” exemption to the FLSA, and thus rejected the Department of Labor’s Obama-era interpretation of that exemption.[2]  In making this decision, the Court rejected the long-standing “narrow construction” principle that the FLSA’s exemptions should be interpreted narrowly, ruling instead that such exemptions should be given a “fair reading.”[3]

Practical Takeaways

    The Supreme Court’s historic ruling that courts must give FLSA exemptions a “fair reading,” rather than interpret them narrowly, potentially affects a wide range of FLSA exemption issues. In the past, the “narrow construction” principle acted as a presumption against exemptions in all but the clearest cases. Now that the Court has rejected the “narrow construction” principle, employers may find it easier for courts to agree that their employees fall within a FLSA exemption and thus are exempt from overtime pay requirements under the FLSA.

[1] Encino Motorcars, LLC v. Navarro, et. al, 584 U.S. ___ (2018), 2018 WL 1568025. The FLSA requires employers to pay minimum wage and overtime compensation to covered employees, and also sets forth recordkeeping and youth employment standards. See https://www.dol.gov/whd/flsa/. The “salesman, partsman, or mechanic” exemption at issue in Encino is codified at 29 C.F.R. § 779.372(c).

[2] 76 Fed. Reg. 18832, 18859 (2011) (codified at 29 C.F.R. § 779.372(c)).

[3] Encino Motorcars, 2018 WL 1568025, at *7.