Thousands of cases are appealed to the U.S. Supreme Court every year, but usually fewer than 100 get a full-blown hearing and ruling. One case that made it through in the current court term is Encino Motorcars v. Navarro. On the surface, this case looks at whether car dealer service advisors are exempt or nonexempt. But the larger issue affecting jobs of all kinds involves just how narrowly the relevant law — the Fair Labor Standards Act (FLSA) — can be interpreted when determining between exempt status and nonexempt.
The case was brought by service advisors at a Mercedes-Benz dealership in Los Angeles. They worked from 7 a.m. to 6 p.m. five days a week, which is well over 40 hours, and sought overtime pay for the difference.
A careful reading of the FLSA reveals an exemption for "any salesman, 'partsman' or mechanic primarily engaged in selling or servicing automobiles" at a dealership. In this case, Encino Motorcars argued that the service advisors fell under that exemption. The service advisors countered that they were merely a "communications channel," not actual salesmen, and therefore not covered by the exemption.
When the appeals court first took on the case, the U.S. Department of Labor (DOL) was subject to Obama-era regulations which seemed to suggest that, in many situations, workers claiming to be nonexempt should be given the benefit of the doubt. On that basis, the appeals court upheld the service advisors' claims. But in 2016, the Supreme Court shot down those regulations.
After another round, the Supreme Court ruled on the side of the dealership. Even though the FLSA didn't precisely state that service advisors are exempt, the language made that clear enough, the court said. "A service advisor is obviously a salesman," and therefore exempt, the opinion states. There's nothing in the FLSA that declares that "its exemptions should be construed narrowly," therefore "there is no reason to give them anything other than a fair, rather than a 'narrow' interpretation," Justice Thomas wrote for the majority.
Even so, the ruling was close — 5 to 4. "By removing a heavy judicial thumb from the workers' side of the scales in FLSA exemption litigation, [Encino Motorcars v. Navarro] is likely to figure prominently in many pending and future exemption cases," according to one labor law expert.
Still, your goal is probably to avoid being the next Supreme Court test case. Even if you're ultimately vindicated, the legal bills alone are daunting. Since the Supreme Court is saying that the law doesn't precisely spell out an employee's classification status in every instance, you need to exercise some judgment.
As a reminder, the basic categories of employees deemed exempt from FLSA overtime requirements fall under the executive, administrative, professional, computer, "outside sales" and highly compensated categories. Here's a streamlined set of standards for those job categories, courtesy of the DOL:
For each category, you can find more detailed standards at www.dol.gov. And, stay tuned for possible changes in that $455 weekly salary threshold standard. When in doubt, check with a labor law expert.
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