By Jennifer B. Hagedorn, Esq.

On April 2, 2018, the United States Supreme Court made an important ruling in the case of Encino Motorcars, LLC v. Navarro, et al, which will have a positive impact for employers in interpreting exemptions under the Fair Labor Standards Act (“FLSA”). The FLSA requires that employers pay covered nonexempt employees a minimum wage of at least $7.25 per hour and overtime pay at a rate of at least one and one-half times the regular rate of pay for all hours worked in excess of 40 hours of work in a workweek, unless an exemption applies. The exemptions to the FLSA allow various categories of employees to be paid on a salary basis without regard to the overtime pay provisions. The manner in which exemptions are interpreted by our court system is why this recent decision of the United States Supreme Court is so important.

In the Encino Motorcars case, the issue involved the interpretation of the exemption for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles.” The plaintiffs in the case claimed that they were improperly classified as exempt and were therefore entitled to overtime pay under the FLSA. The U.S. Court of Appeals for the 9th Circuit ruled that the plaintiffs were entitled to overtime pay based on the fact that the exemption should be “narrowly construed” and, as such, the plaintiffs did not fall within the exemption.

On appeal, the U.S. Supreme Court found “[b]ecause the FLSA gives no textual indication that its exemptions should be construed narrowly, they should be given a fair reading.” This is a departure from previous rulings of the Court that the exemptions should be narrowly construed, which would favor employees. Given the finding that the exemptions should be “given a fair reading,” employers will now benefit from a broader interpretation of the exemptions which should allow more employees to be classified as exempt from the overtime pay provisions of the FLSA. Only time, and more decisions, will tell what the lower courts, and eventually the U.S. Supreme Court, deem a “fair reading.” In the meantime, the departure from the narrow interpretation of the exemptions is clearly a win for employers.

For more Information:
To learn more, contact a member of the Bowles Rice Labor and Employment Law team.

About the Author:
Jennifer Hagedorn practices in the areas of employment law and health care law. She focuses her practice on contracts, employment and personnel matters, asset and real estate sales, and other related matters.