In Encino Motorcars, LLC v. Navarro, decided on April 2, 2018, the United States Supreme Court held that service advisors at a California car dealership are exempt from the overtime pay requirements of the Fair Labor Standards Act (FLSA), 29 U.S.C. §231(b)(10)(A). In a more far-reaching pronouncement, the Court also held that FLSA exemptions would no longer be narrowly construed against employers seeking to use them.
Under the FLSA, “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” is exempt from the statute’s requirements. In the Encino opinion, authored by Justice Thomas, the Court held that a service advisor “is obviously a ‘salesman’” because they “‘sell [customers] services for their vehicles’” and “are integrally involved in the servicing process.” It is irrelevant that the service advisors do not physically repair automobiles themselves for purposes of the exemption.
More significantly, the Court rejected the principle that exemptions to the FLSA should be construed narrowly. Because the FLSA gives no indication that exemptions should be construed narrowly, and features more than two dozen exemptions in Section 213(b) alone, the Court held that exemptions should receive “a fair reading” instead of the more restrictive “narrow” interpretation. The dissent noted that in a single paragraph the majority rejected the longstanding principle without acknowledging that doing so “unsettles more than half a century of our precedent.”
While it is difficult to accurately predict the practical impact of any court decision, the Supreme Court’s opinion in Encino is a positive development for employers arguing in favor of an FLSA exemption which may now be examined under the less restrictive “fair reading” standard.
