10 Oct Supreme Court Reverses Longstanding Rule That FLSA Exemptions Are Narrowly Construed
MASUD LABOR LAW GROUP
By: Brian Boyd
The Fair Labor Standards ACT (FLSA) is the dominate law requiring employers to pay their employees a minimum wage and overtime pay when they work over forty hours in a given work week. However, not all employees are subject to these protections as the FLSA has expressly carved out a number of exemptions for various workers, including the so-called “white collar” exemptions for executive, administrative, and professional employees. Employers routinely identify one or more employees as salaried exempt workers. Disputes over whether a given employee qualifies for an exemption under the FLSA have traditionally been narrowly construed with the burden falling on the employer to defend its position that the employee is exempt. With back wages going back two years (potentially three years if the error is found to be willful) coupled with the doubling effect of the FLSA’s liquidated damages (which provides an amount of damages equal to the amount of owed back wages), an employer’s miscalculation on the front-end could wind up being terribly costly in the long run.
In a recent decision, Encino Motorcars, LLC v. Navarro, 138 S.Ct. 1134 (2018), the United States Supreme Court expressly disavowed the former narrow construction rule and signaled that FLSA exemptions would be more liberally construed going forward. In deciding that these employees fell within the FLSA exemption for “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm equipment,” the Court took the bold step of upending the longstanding principle that FLSA exemptions are to be narrowly construed. In fact, the Court outright rejected this rule on the grounds that the FLSA gives no “textual indication” that its exemptions should be construed narrowly, there was simply no reason to give them anything other than a fair reading. Based on this newfound rejection of the narrow construction rule, the Supreme Court found the services advisors at issue fell squarely within the meaning of the exemption.
The Supreme Court’s ruling in Encino Motorcars is poised to have a lasting impact on how employer identify their employees as exempt under the FLSA. While this decision does not grant an employer a license to freely classify an employee as exempt at their unfettered discretion, it does provide a level of flexibility in making this determination. With this in mind, every job description should be tailored to the actual on-the-ground job duties of a given classicization and identify whether the position is exempt or nonexempt. Of course, our office can assist employers in reviewing job description and make an assessment of whether or not any of their positions qualifies for an exemption. With an accurate job description in place, employers can be confident in their determination that an employee fits within an FLSA exemption and, perhaps more importantly, this job description will provide a line of defense against future disputes over employee status.
Under Encino Motorcars, employers can breathe a sigh of relief knowing that the Supreme Court has ruled that the FLSA is to be construed in a more employer-friendly manner than in the past.
Please contact the Masud Labor Law Group should you have any further questions regarding job descriptions or any of the Exemptions to the FLSA.