Employers, Rev Your Engines: SCOTUS Rejects Narrow Construction of FLSA Exemption in Encino Motorcars, LLC v. Navarro

by Littler
Contact

The Fair Labor Standards Act (FLSA) requires employers to pay overtime compensation to covered employees, but exempts from overtime numerous categories of workers.  Traditionally, these exemptions have been construed narrowly against the employer asserting them.  Not anymore.

In its second look at this particular exemption in recent years, the U.S. Supreme Court in Encino Motorcars, LLC v. Navarro considered whether the automotive sales exemption “applies to service advisors—employees at car dealerships who consult with customers about their servicing needs and sell them servicing solutions.”1  But in deciding that the exemption does apply to service advisors, the Court dropped a true bombshell with respect to FLSA jurisprudence: it rejected the longstanding principle that exemptions are to be construed narrowly.  As a result, going forward, courts will need to place exemptions on the same statutory and interpretive footing as the substantive overtime requirements in the statute. 

Background

Current and former service advisors of a car dealership sued for unpaid overtime, alleging they were misclassified as exempt employees.  Service advisors “interact with customers and sell them services for their vehicles.” Specifically, they “meet customers; listen to their concerns about their cars; suggest repair and maintenance services; sell new accessories or replacement parts; record service orders; follow up with customers as the services are performed (for instance, if new problems are discovered); and explain the repair and maintenance work when customers return for their vehicles.” The service advisors premised their argument for overtime on a 2011 Department of Labor rule that expressly excluded service advisors from the definition of “salesman.”  The district court found instead that the exemption applied to service advisors. The Ninth Circuit reversed, deferring completely to the 2011 DOL rule.  The Supreme Court rejected this conclusion, holding that the regulation was procedurally defective and courts should not defer to it or rely upon it.  The Supreme Court remanded the case to the Ninth Circuit for reconsideration. The Ninth Circuit again found that service advisors were entitled to overtime because they do not fall within the exemption.

The Supreme Court again reversed, basing its conclusion on what it called a “best reading” of the statute’s text.  The text exempts “any salesman, parts-man, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements.” §213(b)(10)(A).  The Court noted that service advisors are “salesm[e]n,” and they are “primarily engaged in . . . servicing automobiles.” First, because salesman is not defined in the statute, the Court looked to the word’s ordinary meaning as found in two commonly used dictionaries, and determined a salesman to be “someone who sells goods or services.” The Court found that service advisors “obviously” meet this requirement because they sell customers services for their vehicles.  Second, the Court found that even though the service advisors do not spend their time repairing cars, they do spend their time “servicing” automobiles because they are integral to the servicing process. 

The Court disregarded the Ninth Circuit’s use of the distributive canon of statutory construction2 under which the Ninth Circuit linked salesman to selling, and partsman and mechanics to servicing.  The Court found that this analysis ignored the plain  meaning and usage of the word “or” in the exemption.  Thus, a salesman could either sell or service automobiles and fall within the exemption.  Interestingly, the Court noted that the Ninth Circuit’s “narrow distributive phrasing is an unnatural fit here because the entire exemption bespeaks breadth.” (emphasis added).

Finally, and most significantly, the Court rejected the Ninth Circuit’s reliance on the commonly held principle that exemptions are to be narrowly construed.  Noting that nothing in the FLSA’s text demands a narrow construction of exemptions and that the FLSA contains “over two dozen” exemptions, the Court reasoned that exemptions are as integral to the statute as are the overtime and minimum wage requirements.  Thus, quoting language from a decision from last term that “it is quite mistaken to assume . . . that whatever might appear to further the statute’s primary objective must be the law,” it held that courts “have no license to give the exemption anything but a fair reading.” 

In dissent, Justice Ginsburg, along with Justices Breyer, Sotomayor, and Kagan, sought to emphasize how the majority’s holding was a stark departure from precedent. Underscoring the importance of the Court’s holding regarding the interpretation of FLSA exemptions, Justice Ginsburg wrote that the Court was overruling “half a century” of precedent by rejecting the narrow construction principle. 

While the Court’s ruling is no doubt welcome news for any automobile dealers that wish to rely on the automotive sales exemption for their service advisors, the Court’s decision could have broader implications for all employers that rely on any FLSA exemption for their employees.  Going forward, individuals challenging the application of an exemption will no longer have the advantage of arguing that FLSA exemptions must be narrowly construed.  Rather, courts must now analyze exemptions through a “fair reading” of the statute, taking into consideration the plain, ordinary meaning of the words on the page.  The Court’s ruling will have an impact on every case involving the application of FLSA exemptions to employees, whether those cases are brought by individuals or as collective actions on behalf of similarly situated workers.  Indeed, it will be worth watching whether the decision might also affect how courts going forward adjudicate motions for conditional certification involving these exemptions. 

 

Footnotes

1 Section 213(b)(10)(A) exempts from the overtime requirement of the FLSA “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.”

2 The distributive canon links “each expression to its appropriate referent.”  Slip Op. at 4-5.  As noted by the Court, “[w]here a sentence contains several antecedents and several consequents,” courts should “read them distributively and apply the words to the subjects which, by context, they seem most properly to relate.” Id. at 8 (citing 2A N. Singer & S. Singer, Sutherland Statutes and Statutory Construction §47:26, p. 448 (rev. 7th ed. 2014)).

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Littler | Attorney Advertising

Written by:

Littler
Contact
more
less

Littler on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.