Monday, April 9, 2018

Supreme Court rejects pro-employee statutory construction in FLSA cases

The Supreme Court has narrowly construed the Fair Labor Standards Act, ruling that service advisors for car dealerships are exempt from the overtime rules, which apply to "any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements." In reaching this holding, the Court rejects the principle that courts should narrowly interpret FLSA overtime exceptions.

The case is Encino Motorcars, Inc. v. Navarro, decided on April 2. The service advisors "consult with customers about their servicing needs and sell them servicing solutions." As the Court further describes these employees, service advisors "meet with costumers; 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 . . . ; and explain the repair and maintenance work when customers return for their vehicles." These are the people who want you to dump your wallet on the table for services and products you did not know you wanted or needed. Think Puddy, from Seinfeld.

As the Supreme Court sees it, service advisors are salesmen primarily engaged in servicing automobiles. Justice Thomas continues, "A service advisor is obviously a salesman." They also service vehicles. The Oxford Dictionary says  that servicing can mean either "the action of maintaining ore repairing a motor vehicle" or "the action of providing a service." Service advisors fit both definitions, as they are "integral to the servicing process" and, "If you ask the average customers who services his car, the primary, and perhaps only, person he is likely to identify is his service advisor." This means that "'primarily engaged in . . . servicing automobiles' must include some individuals who do not physically repair automobiles themselves but who are integrally involve din the servicing process."

The Ninth Circuit, in ruling otherwise, invoked the principle that exceptions to the overtime rules must be construed narrowly. The Court says, "we reject this principle as a useful guidepost for interpreting the FLSA." Quoting from a book written by the late Justice Scalia, the Court says,

Because the FLSA gives no “textual indication” that its exemptions should be construed narrowly, “there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation.” Scalia, Reading Law, at 363. The narrow-construction principle relies on the flawed premise that the FLSA “ ‘pursues’ ” its remedial purpose “ ‘at all costs.’ ” American Express Co. v. Italian Colors Restaurant, 570 U.S. 228, 234 (2013) (quoting Rodriguez v. United States, 480 U.S. 522–526 (1987) (per curiam)); see also Henson v. Santander Consumer USA Inc., 582 U. S. ___, ___ (2017) (slip op., at 9) (“[I]t is quite mistaken to assume . . . that whatever might appear to further the statute’s primary objective must be the law” (internal quotation marks and alterations omitted)). But the FLSA has over two dozen exemptions in §213(b) alone, including the one at issue here. Those exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement. See id., at ___ (slip op., at 9) (“Legislation is, after all, the art of compromise, the limitations expressed in statutory terms often the price of passage”). We thus have no license to give the exemption anything but a fair reading.
Justices Ginsburg, Sotomayor, Breyer and Kagan dissent. Ginsburg writes in part:

This Court has long held that FLSA “exemptions are to be narrowly construed against the employers seeking to assert them and their application limited to those [cases] plainly and unmistakably within their terms and spirit.” Arnold v. Ben Kanowsky, Inc., 361 U. S. 388, 392 (1960). This principle is a well-grounded application of the general rule that an “exception to a general statement of policy is usually read . . . narrowly in order to preserve the primary operation of the provision.” Maracich v. Spears, 570 U. S. 48, 60 (2013) (internal quotation marks omitted). In a single paragraph, the Court “reject[s]” this longstanding principle as applied to the FLSA, without even acknowledging that it unsettles more than half a century of our precedent.

In the FLSA world, this is a major case, rejecting what everyone thought was a pillar of statutory construction under this remedial labor law. I have not seem much commentary on this point, but a management-side law firm has pointed out the implications in rejecting the narrow exemption rule. In a blog post entitled, "Employers, Rev Your Engines," these lawyers note that "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. . . . 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."

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