After effectively “punting” on the issue last year, the U.S. Supreme Court has again granted certiorari to resolve a circuit split regarding whether “service advisors” at automobile dealerships are exempt from receiving overtime under an exemption for “salesmen, partsmen, and mechanics” under the FLSA. Encino Motorcars, LLC v. Navarro, No. 16-1362 (U.S. Sep. 28, 2017). In 2016, the Supreme Court ruled that the Ninth Circuit had wrongly relied on a 2011 Department of Labor regulation in concluding that such service advisors were not exempt from overtime under the FLSA. Because the DOL’s position on the exempt status of service advisors vacillated over time and the 2011 regulation, which found service advisors to be non-exempt, had without justification reversed the Agency’s position established just three years earlier, the regulation was not entitled to deference under the standards established by the Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Therefore, held the Court, the Ninth Circuit should not have relied upon the regulation in reaching its decision.
However, rather than proceeding to resolve the split established by the Ninth Circuit’s decision, which conflicted with prior decisions by the Fourth and Fifth Circuits, the Supreme Court remanded the case to the Court of Appeals to re-evaluate the application of the exemption without reference to, or consideration of, the 2011 regulation. On remand, the Ninth Circuit reached the same result, again holding that service advisors are not covered by the exemption but now relying on an examination of the statutory text and legislative history. Navarro v. Encino Motorcars, LLC, 845 F.3d 925 (9th Cir. 2017). This time around, the Supreme Court is expected to resolve the underlying issue of whether the service advisers are entitled to overtime, providing needed certainty to employers.
Having even greater implications than resolution of the applicability of the automobile dealer exemption to service advisors, however, may be the Ninth Circuit’s continued reliance on the “narrow construction” principle when it comes to interpreting FLSA exemptions in general. In ruling service advisers were not covered by the exemption, the Ninth Circuit relied on the alleged “longstanding rule that the exemptions in § 213 of the FLSA are to be narrowly construed against employers seeking to assert them.” But in the 2016 decision remanding the case, Justices Thomas and Alito criticized the Court of Appeals for using this to put a thumb on the scale, referring to it as “made up canon” of construction and instructing the Ninth Circuit “not to do so again on remand.” The Ninth Circuit ignored this warning. The arrival of Justice Gorsuch to the Bench may finally provide the votes needed to address the validity and scope of the “narrow construction” principle, often a plague for employers.
We will continue to follow developments in this case. If you have any questions regarding the FLSA’s exemptions or any other wage & hour questions, please contact the Jackson Lewis attorney(s) with whom you work.