Supreme Court Ruling Broadens Interpretation of FLSA Exemptions

When I saw that the U.S. Supreme Court had ruled that service advisors at automobile dealerships were exempt employees under the Fair Labor Standards Act (FLSA), I have to admit I was not very excited.  That would be a narrow ruling, and I don’t represent any car dealerships. 

But, there is something important in the decision – the five conservative justices of the court (Justices Thomas, Roberts, Kennedy, Alito and Gorsuch) expressly rejected the idea that the FLSA exemptions are to be narrowly construed.  This is a big change from how the FLSA has been applied by the Department of Labor. The other four justices (Justices Ginsberg, Breyer, Sotomayor, and Kagan) sharply dissented.

An exempt employee is not entitled to overtime pay and, in a few limited professions, the employee is also exempt from minimum wage requirements. The case, Encino Motorcars, LLC v Navarro, ___ S. Ct. ___ (2018), will be helpful to employers when they defend the exempt status of an employee. This case may also provide insight into the high court’s rulings in future employment cases.

However, employers located in Michigan, Ohio, Kentucky and Tennessee are also subject to the rulings of the U.S. Court of Appeals for the Sixth Circuit which requires employers to bear a “heightened” burden of proof, more than a preponderance (or a mere tipping of the scales of justice), when proving an employee is an exempt employee. So, while the exemption itself is no longer to be narrowly construed, the burden of proof still remains high for employers in the Sixth Circuit.

Job descriptions should be reviewed every few years because duties change and positions morph. For example, a manager who was previously classified as exempt under the executive exemption may now only manage one full time employee and is no longer eligible for the exemption.  Some positions are easily assigned the status of exempt or non-exempt, but some are more difficult. Those positions should always be reviewed with experienced employment counsel.

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