Supreme Court Overtime Ruling Signals Favorable Shift to Employers

A recent Supreme Court decision may signify a favorable shift for employers when it comes to overtime-related lawsuits. Throughout numerous overtime cases, the courts have historically leaned in favor of employees when interpreting the Fair Labor Standards Act (FLSA), which protects nonexempt workers. Although employers always strive to remain FLSA compliant, there is always continual worry about potential overtime lawsuits that could arise from unnoticed violations or from gray areas in the language of the law. The recent decision in the Encino Motor Cars, LLC v. Navarro, which ruled in favor of the employer, could be slight sigh of relief for employers and an indicator of what’s to come in future overtime cases.

Background

Current and former service advisors sued Encino Motorcars, LLC, for backpay, alleging that the employer violated the Fair Labor Standards Act (FLSA) by failing to pay them overtime. Encino Motors argued that service advisors are exempt from the FLSA’s overtime-pay requirement which applies to “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements.” After a series of appeals and hearings, the Supreme Court finally decided that service advisors fit within the FLSA exemption. It stated that “a service advisor is obviously a salesman.”

Significance of Case

As Foley & Lardner LLP, a firm focusing on Labor & Employment explains, “…anyone who has dealt with an overtime lawsuit knows that whether or not your employees are going to be deemed to satisfy exemption criteria in a given case is often a wild card.  This is because courts have generally ‘narrowly construed’ exemptions, or applied them sparingly.  By narrowly construing the meaning of the words used to describe each exemption, courts have often decided that exemptions do not apply in circumstances that, on their face, appear to fit well within the exemption.  The approach of narrowly construing exemptions has caused significant uncertainty for employers who want to follow the law, but do not know whether a court would agree that a particular exemption applies to a certain job position.”

Although the courts have historically used the “narrowly construed” approach, this closely watched labor and employment Supreme Court case has veered away from the precedent. This case could signify what’s to come in future overtime-related lawsuits and companies could potentially see a pro-employer shift as the courts continue to hear and make decisions on these cases.

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